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Iran remains open to reconnecting to world economy

08 November 2017 [12:37] - TODAY.AZ

By  Trend

Despite years of sanctions and the fact that Iran was isolated from the international trade, Iranians managed to survive, where many others would not have managed.

Thanks to the Iran deal, aka Joint Comprehensive Plan of Action (JCPOA), the lifting of sanctions against Iran has drawn the attention of foreign companies that want to enlarge market.

The United States’ recent strategy to the Iran deal, which allowed the removal of sanctions, does not translate into big challenges in the economy sector and should not concern foreign companies seeking ties with Iran, according to Dr. Siamak Goudarzi, the CEO of Open Iran Group, an investment consultation firm.

However, foreign investors need to be assisted by lawyers who not only provide basic legal assistance, but offer business advice too in the Iranian market which is like a new world and has remained less explored, Goudarzi told Trend November 5.

Right now, in Iran there are various areas that welcome foreign investments, i.e. energy, industry, mining, telecommunications, urban services, tourism, etc., Goudarzi noted.

He said companies that provide the financing will most likely win the market.

According to the business advisor, Chinese companies are entering the Iranian market with an advantage over their European competitors since their bids include financing.

The Europeans are also starting to enter this trend gradually and there is so much happening in many sectors, such as the oil and gas, energy, agriculture, construction, manufacturing, tourism, health, insurance, banking, and general trade, all promising signs, he said.

Goudarzi believes what attracts the foreign interests to Iran despite the threats from the US administration are a combination of certain socio-economic factors that in a way can push towards outweighing the risks.

One of these factors, according to the Open Iran CEO, is the sheer potential for consumption. "80 million people is the population of Iran, expanding by almost 1 million every year. If its neighboring markets are included in the count, Iran can become the center-point in the region, with an untapped market of 450 million people. Moreover, most of these people are 30 years old on average, consisted of thirsty consumers that will absorb plenty of goods and services, for many years to come."
Strong industrial foundation, less dependent on oil and gas, is another factor that contributes to the profitability of investment in Iran, Goudarzi stated.

"Iran has a strong, diversified economy and new, globally-accessible investment funds focused on Iran have already been created. When considering investment in Iran or selecting Iran as a new export market, one may think that Iran has growing economic prosperity thanks to its world-leading gas reserves, but this is a common misconception. The oil and gas industry accounts for only 10 percent of Iran’s GDP. The automotive, metallurgical, agricultural, and technology sectors would continue as the country’s primary economic drivers even if its oil and gas reserves were entirely depleted. There are around 30 other sectors listed on the stock exchange. From the status of oil-dependent and massive importer, Iran is on its way to become an industrial and exporting player, less oil-dependent." Dr. Goudarzi believes that things do not end here, citing encouraging socio-economic factors.

"The literacy rate is over 85 percent, with 68 percent of university entrants being women and some 234,000 new engineers graduating every year. The young are also very ‘IT savvy’. Think of an interesting IT firm in the West and you can be sure it is already replicated in Iran. 74 percent is the urbanization rate of Iranians. They are a consuming population with an entrepreneurial mindset. 77 percent of Iranians own a phone, and 58 percent use the Internet. Iran has a very low-debt: net government debt to GDP is a mere 4 percent (this is the kind of figure that George Osborne fantasizes about) and its companies and consumers are all but debt-free too. Labor and infrastructure costs are low, and local competitors are inexperienced."

He went on to note that attitude is what matters. "Due to being on a very important part of the Silk Road, Iranians do have a trade spirit, and they want to help foreign businesses invest in their country. Although, much more improvement in communication, speedier decision-making and more targeted negotiations are required. The Iranian government is also interested in joint production in Iran, export to neighboring countries, and partnerships related to technology in the petroleum and energy industries because Iran needs a $50 billion yearly investment in order to achieve its economic development goal of 8 percent growth rate."

According to Goudarzi, investors in Iran are supported. Certain governmental policies – already in place– can save investors from some headaches, and facilitate their entry into Iran.

"FIPPA (Foreign Investment Protection and Promotion Act) is an example. The creation of seven free trade zones and 19 special economic zones (introducing in these zones tax incentives) is another, not to mention the setting up of an Investment Service Center as a help desk for queries."

"One can add a privatization and demilitarization culture, inflation and currency control, anti-bribery measures (new income tax laws), globalization culture (WTO membership application is in process), and extra benefits of doing business in free zones."

Goudarzi says that in Iran, free zones provide attractive platforms for many foreign entities, "and from experience, we witness that it works for them. It is because of extra values Free Zones offer, such as: A 20-year tax exemption on all business ventures started in a free trade zone, free flow of capital in and out of the country, strong rule of law along with protection for foreign investments, transfer of partially-manufactured goods out of the free trade zone without customs duties, as well as elimination of customs duties payable on imports and exports to and from the free trade zone."

Elsewhere in the interview, the chief business advisor said "Even if the US pulls out of the deal, which is unlikely, and imposes new sanctions on Iran, the EU is very reluctant to follow suit as already indicated by them. Russia and China have joined Iran in a strong political and business partnership. This partnership has inspired closer ties between Iran and European countries as well."

"Europe no longer follows the American lead as closely and is it interested in improving economic and political relations with Iran. Pulling out of the agreement by the US will only eliminate the uncertainty that has been hanging around for a long time, and this will certainly be a second best option for Iran.
"In other words, those who have been waiting to see what the US decides, will start making decisions, one way or another, and due to many benefits of investing in Iran, there will be enough brave and wise investors from the rest of the world who will make moves to take their slice out of the 400 billion market, which is said to be the last emerging market."


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