Iran - A new El Dorado?
Iran offers investors excellent opportunity for new growth in what must surely be one of the world's fastest growing emerging markets. However, Foreign Direct Investment initiatives are certain to be fraught with dangers and challenges.
It is estimated that around 70% of the economy is controlled by the state. Iran is emerging from a long period of isolation due to economic and political sanctions, led by the United States of America. Investors will likely find that the country's public servants and officials have little or no experience of receiving and handling FDI related requests. Add to this the amount of unknowns about the various industry sectors and key players within them, businesses will need FDI plans that are supported by a strong Go-to-Market Strategy and comprehensive competitive intelligence. Ipsos Business Consulting’s Iran industry guide, authored by the team that we have put together to assist you with your market entry plans, highlights some of the potential that Iran can offer to foreign investors.
Iran has a large, diversified economy and a stock market. Whilst there are still restrictions on US companies investing in Iran, the country is now open to European investors as well as those from other major economies across the Middle East and the Asia Pacific. With Iran having several similarities to Turkey, such as population size, the country offers significant potential that needs serious examination by Foreign investors. But there are also pitfalls to be wary of. In our latest investor's guide, we look at the opportunities and challenges when investing in Iran.
Investment growth
Iran’s financial sector, with its reintroduction into the SWIFT banking network, will greatly change the investment and trading atmosphere in the country. Iran’s authorities believe the lifting of this and other financial and investment related sanctions will lead to foreign direct investment (FDI) inflows of close to US$50 billion a year by 2020, an almost vertical increase when compared to the US$2.1 billion Iran attracted in 2014.
$25 billion investment in infrastructure over the next decade
Another key infrastructure project in Iran is the 10,223km long rail network supporting both industrial and commercial corridors. The network, which is state owned and operated, is expected to expand to over 25,000km by 2025.
All 54 airports will require significant upgrades and expansions. Iran is planning to build 7 new international airports over the next decade. Iran’s state carrier, Iran Air, has already placed orders with Airbus for 114 new aircraft. It is estimated that another 600 new airplanes will be needed in the next decade.
An educated workforce
Iranians also have a strong background in math, science, information technology, and engineering, with nearly 44% of all university enrollments in these fields. Roughly 70% of science and engineering enrollments are women.
Of the 78 million population, 87% are literate. Two-thirds of Iranians are under the age of 35 and literacy in this age bracket is 100%. Iran is also a highly urbanized state, with more than 70% of its citizens living in urban centres.
Reasons for caution
Most sanctions imposed by the US remain in place, which discourages American companies from doing business in Iran.
Iran currently ranks 118 out of 189 in the 'ease of doing business' rankings.
Iran is currently ranked 111 out of 131 countries in terms of protecting property rights.
Iran is currently ranked 136 out of 174 countries on Transparency International’s 2014 corruption perception index.
