The Moscow School of Management SKOLKOVO Studies Business Opportunities of Iran

25.11.2016

Moscow, November 25, 2016. – The SKOLKOVO Institute for Emerging Market Studies presented a new study about business opportunities for companies working with Iran.

SKOLKOVO: The Moscow School of Management SKOLKOVO Studies Business Opportunities of Iran

According to the study “Iran: Business Opportunity of the Decade”, during the last year, the country has become one of the most popular topics in Western media. “After Iran, there are only the Moon and Mars left”—this was the reaction of a European businessman to the news that after the lifting of international sanctions in January 2016, his company could return to Iran’s market. Throughout last spring, front pages of business newspapers regularly reported news about multi-billion dollar deals made between Western companies and the Islamic Republic of Iran. The largest of them all concerned the delivery of more than 100 Airbus planes amounting to nearly US 25 bln.

Further still, the topic of doing business in and with Iran merged from front-page splashes into real business actions. “What do we expect to get from Iran’s market and how do we produce the right strategy for working in it?”—this is the question that more and more companies, both in Russia and Europe, now ask themselves. The SKOLKOVO Institute for Emerging Market Studies offers its own perspective on opportunities and challenges of Iran’s market in its study.

“The window of opportunity that is now opened for international companies has only one historical precedent: the return of East European countries to the global market. In terms of its volumes (population of 80 million, GDP per capita US$ 17 thousand), Iran is roughly equal to Poland, GDR, Czechoslovakia and Hungary at the end of the 1980s put together. The countries are also similar when it comes to the economy structure and the degree of development of science and technology. Although Iran is among the top ten countries with the largest share of oil and gas rent in GDP (about 29%), its economy is diversified to a far greater degree than that of most of its oil-producing neighbours. In terms of vehicle manufacturing volumes, it surpasses Italy, there are companies from 37 sectors of economy trading at the Tehran Stock Exchange, and the country is the largest global exporter of a dozen crops,” notes Vladimir Korovkin, one of the authors of the study.

Researchers suggest that for international businesses, it makes sense to invest not in status quo, but in the future development of the market: Iran’s economic plan provides for GDP growth by more than 7% a year, the consumer goods market will expand almost by one third annually during the next several years, the portfolio of feasible infrastructure projects costs billions of dollars and is meant to help the country return to its historical role of a trade crossing between Europe and the East.

The country’s unique features, however, call for a rigorous risk analysis before any business opportunities could be considered. A fundamentally unique state, its involvement in many conflicts in the “hottest” region on Earth, fast modernisation of the society, complicated relationships with major players in global and regional politics—all these factors are analysed in the study. In the short run, next spring will be a very difficult period for international businesses in Iran’s market—from the transition of power in the USA (Donald Trump has proclaimed himself a firm opponent to the nuclear deal and the relief of sanctions) to the May presidential elections in Iran itself where reformists will have to fight hard to stay in power.

The authors of the report believe that the focus on integration into the global market and on openness to international businesses is a long-term strategic choice of just about all the branches of government of the Islamic Republic of Iran. The country is aiming to be not only an influential political player in the region, but also its largest economy that can meet competition in manufacturing, finance and modern technology, and provide ever-increasing standards of living for the young population (60% of Iranians are currently under 25 years old). This strategy allows international companies to develop realistically long-term plans in order to leverage this new business opportunity of the decade.

The complete English and Russian versions of the report are available at SKOLKOVO Business School website

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