For businesses that debate whether it’s time to invest in Iran, the answer is “yes”. Following the lifting of sanctions, the country has seen an impressive comeback from years of isolation. Many of the complexities surrounding trade with Iran are being addressed as it opens for business with the rest of the world.
Ongoing compliance with the International Atomic Energy Agency (IAEA) and other governing bodies has helped to open Iran’s economy. This has availed a plethora of opportunities to invest in Iran and its impressive list of bustling industries. The Persian state offers far more than oil reserves in terms of doing business in Iran. Import figures rose to nearly $60 billion in 2012, while exports reached nearly $40 billion in non-oil products. Compare these figures to 24% and 14% in 2002 respectively, and the indicators to invest in Iran and its post-sanctions economy are positive. The growth in the country’s economy is partly attributable to large-scale conversion of its oil into industrial products such as urea fertiliser, polyethylene and other products.
Iran’s isolation means in the country relies heavily on internal agriculture produce. This makes its agricultural industry a very productive and stable one. In post-sanctions Iran, farmers see an increase in demand for products such as pistachio nuts and the high value spice, Safron. General agricultural exports also see year on year growth in figures.
In 2015, Iran nearly fifteen folded its exports of the pistachios nuts, to the tune of $1.2 billion to over 40 countries. It surpassed its old foe, the U.S as the biggest exporter of pistachios in 2017. It’s figures such these that are making the decision to invest in Iran a viable option for countries looking to broaden their portfolios.
President Hassan Rouhani’s progressive government is helping to lift the veil on the once isolated nation. His administration is making continued efforts to engage countries for doing business in Iran. Among European nations, Germany stands out as a major trading partner with the Persian state. Sectors ranging from renewable energy, infrastructure and tourism are seeing huge benefits as a result.
In fact, German exports to Iran increased by 15 percent (totalling 1.13 billion €) in the months following the lifting of sanctions. Trade between Germany and Iran raked in 2.9 billion € in 2016. This is up from 2.4 billion € in the previous year, according to the Federal Statistics Office. And with Germany’s Chamber of Commerce and Industry’s goal to boost trade to 5 billion € by 2018, the opportunities are promising.
Other European nations, such as the UK and France are also stepping up moves to invest in Iran and improving overall relations. This is thanks to abundant opportunities for exports and employment for foreign nationals. Moreover, with companies such as Airbus signing huge local manufacturing deals, Renault seven-folding its production figures and Swiss pharmaceutical giant, Novo Nordisk, investing more than $70 million in a new factory, the tide from isolation to open engagement is gaining momentum.
The Iranian government is giving more than verbal support for foreign trade and investment opportunities. This is evident through incentives it provides to companies considering doing business in Iran. According to the statistics published by Iran’s Chamber of Commerce and Industry more than 300 commercial delegation companies have paid a visit to Iran in search of investment opportunities.
Iran’s “100 Hotels, 100 Businesses” incentive plans to accommodate over 20 million annual foreign visitors by 2025. The project will take advantage of cultural heritage sites, modern cities and exotic allure to attract visitors from abroad.
Iran is ideal for investment of this kind, thanks to its security, political and social stability. Fast-growing economic and social infrastructure are also bolstering its standing as a prime region for investors. Further, the already impressive 10% growth in foreign visitors since 2016 is set to increase over the years.
While the local tax rate comes in at 25%, foreign investors can take advantage of a whopping 0%, guaranteed. This applies to industries ranging from mining, tourism, medical technology and infrastructure. Foreign investors are also eligible for a 100% tax exemption during the first 5 years of engagement. This is extendable to 20 years if the investment is located in regions that fall under economic growth zones and under-developed areas. Also, income from agricultural activities and export of services and non-oil goods is 100% tax exempt. Incentives such as these make not investing in Iran a risky bet as pragmatic companies enter the market.
Companies considering to invest in Iran renewable energy projects stand to receive a tax holiday of 5-13 years. The government has also agreed to a guaranteed 20-year output purchase agreements with investors. Further, equipment used in this sector may be imported duty-free if they meet certain quality standards. The Energy Ministry also announced that projects using local equipment would be allowed to charge 30% more than the standard rate paid by the government for electricity consumption. And the timing couldn’t have been better for investors. Iran plans to increase its output of renewable energy from 240 MW to 5,000 MW by the end of 2020.
The country’s automotive industry is seeing impressive growth, too. Iran has signed deals with companies such as the PSA Groupe and Renault. These agreements are intended to allow for the manufacture and selling of the brands locally. The government also decided to increase the number of certificates issued to foreign manufacturers. These certificates allow the companies to produce an unlimited amount of cars in Iran.
And its local manufactures are doing quite well on their own. The Iran automotive industry has been dominated by Saipa and Iran Khodro, for over 50 years now with an impressive range of vehicles being produced annually.
Many of the locally manufactured cars are exported to countries across the globe, thanks to Iranian car manufacturers having a reputation for building quality vehicles. Iran Khodro, the country’s biggest manufacturer, projects a 15% increase in sales, with a large portion of it attributed to exports. The manufacturer has been in production since 1966 and boasts a wide range of vehicles in its fleet. And Iranian consumers are proud to own.
The automotive industry is very important to the stability of the Iranian economy. It employs nearly 1 million Iranians and is the country’s second biggest sector. Other local car manufacturers, such as Azhitechs, Bahman Group, Rakhsh Khodro, Kerman Motors produce around 10% of Iran’s total output. These manufacturers build a range of motorbikes, passenger cars, vans, mini trucks, medium-sized trucks, heavy duty trucks, minibuses and more.
With the lifting of sanctions, recent and future developments makes the outlook for the economy a very promising one. As companies consider investing in Iran, those that are seizing the opportunity stand to gain immeasurable benefits. Even American companies are considering doing business in Iran as the country opens up to the world. With zero restrictions on the U.S., the only hurdle between its companies investing in Iran is American stubbornness.
Iran’s Deputy Oil Minister for Trade states, “Iran has not imposed any restrictions on the U.S. companies, but they cannot participate in our (oil and gas) tenders due to the U.S. laws,”. With Trump’s hard stance against the Persian state, U.S. companies considering to invest in Iran are losing out on opportunities. Companies such as Chevron and Exxon face restrictions from bidding on projects to invest in Iran. Which would otherwise be a profitable venture to them.
Navab Trading, is helping companies take advantage of countless trade and investment opportunities in the Persian state. To invest in Iran may seem complex due to differences with the U.S. primarily, but it’s far from impossible. We understand the challenges in breaking ground in Iran’s fast-changing economy.
If your company is considing to invest in Iran, make sure you speak to us. We’ll ensure that you maximise your investments in the Persian state. We operate in total transparency and advise you on the best way to engage Iranian opportunities. Let us help you partner with businesses and government agencies that are ready to take Iran into the 21st century. Contact us for more information today.