Domestic Economy

10 Top Investment Magnets

10 Top Investment Magnets
10 Top Investment Magnets

Investors often look at sectors to determine the best performing areas of the economy. By providing them insight into areas potentially worthy of investment, investors would be able to study the market performance of individual companies within a high performing sector.

A report in the Persian economic daily, Forsat-e Emruz, investigates the top ten most suitable sectors for investment in Iran, with focus on market requirements and unused capacities.

1. Petrochemical and Oil Refineries

A dramatic decline in global oil prices in 2014 left negative impacts on Iran's economy, which has been heavily dependent on oil revenues, but what it also did was to force the country into searching for solutions to help the economy move away from its age-old dependence on oil and look for ways to increase value-addition in the petroleum sector rather than relying on oil exports. The situation provides a favorable opportunity for investors in the petrochemical and petroleum refining industries, the report suggests.

High value-added, profitability and suitable markets are seen as other advantages in the sector. Moreover, government incentives and financing could be expected by investors in the sector given the high priority for development. The relatively low level of risk and high domestic demand make the sectorlucrative.    

2. Renewable Energies

Renewable energies are globally considered as one of the most important and profitable areas for investment. They provide clean sources of energy with far less adverse environmental impact than conventional energy technologies,  using resources which are naturally replenished on a human timescale such as sunlight, wind, rain, tides, waves  and geothermal heat.

The government plans to increase the national renewable energy capacities through generation of electricity from solar, wind and biomass power plants. In 2012, Iran allocated around $550 million from the National Development Fund for renewable energy projects. Also supporting the solar industry is the state-sponsored Renewable Energy Organization of Iran (SUNA), which is attached to the Energy Ministry.

While the high cost of renewable technologies might lead to lower profitability in the sector, the renewable energy sector enjoys advantages in government subsidies and incentives, creating enormous potential for investors.

3. Food Processing

The term 'food processing' is mainly defined as a process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging. In other words, it is a technique of manufacturing and preserving food substances in an effective manner with a view to enhance their shelf life.

The food processing sector in Iran has not grown in par with the other sectors, thus leading to creation of vast investment opportunities. Moreover, the sector provides a vital linkage between agriculture and industry, helping to enhance value-addition in the agricultural sector and reducing export of farm products.

4. Tourism

Iran has significant untapped potential for tourism activities considering the myriad tourism attractions including many UNESCO world heritage sites, a unique nature and a varied terrain. For the first time since the Islamic Revolution of 1979, Iran recorded a greater number of inbound tourists than the outbound during the second quarter of the previous Iranian calendar year (June 22- September 22, 2014), according to the head of Iran's Cultural Heritage, Handicrafts and Tourism Organization, Masoud Soltanifar.

The relatively low risk, high value-added and short-term investment return make the tourism sector suitable for investors who seek profit through creative ideas and innovative ways.

5. Pharmaceutical and Medical Devices

Iran’s pharmaceutical market, comprising of both imported and manufactured drugs, is worth more than 80 trillion rials ($2.35 billion at market exchange rates) per year, according to the head of the Iranian Pharmaceutical Importers Association, Nasser Riahi.

The priority given by authorities to development of high-tech drugs and medical equipment in light of current barriers to import of foreign products and technologies arising due to sanctions – imposed against Iran by the West over its nuclear energy program – creates a favorable market for domestically manufactured pharmaceutical and medical products. Considerable government incentives also make the sector a lucrative area for investment.

6. Recycling Industries

Recycling is a process to change waste materials into new products to prevent waste of potentially useful materials, reduce the consumption of fresh raw materials, reduce energy usage, reduce air and water pollution by reducing the need for 'conventional' waste disposal.

The industry offers many advantages in terms of diversity, low risks and high employment and value addede, while at the same time reducing environmental damage and carbon emissions. The potential for investment in the sector remains largely untapped.

7. Industrial Equipment

The industrial equipment manufacturing industry produces machines and parts which are used in other sectors, making activities across many industries possible. High profitability, attractive government incentives and high demand in other industrial sectors make investment in the industrial equipment sector rational.

8. Electronics Industry

The electronics industry, especially consumer electronics, emerged in the 20th century and has now become a global industry worth billions of dollars. Considering that most electronic equipment used in the country are imported, investing on research and development in the sector is vital for changing this trend and beginning to manufacture domestically.

While the risks associated with investing in the sector are relatively high, the technical capacities and infrastructure required for developing the electronics industries are currently available in the country, creating suitable potential for future investments.

9. Modern Agriculture

The agricultural sector in Iran currently suffers from difficulties ranging from low crop yield, water shortage and lack of modern technologies. But the sector also provides advantages in terms of low-cost and high investment return in areas such as livestock and fish farming as well as growing greenhouse vegetables and flowers, which could attract investors.

10. Service Sector

The service sector consists of the "soft" parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability. The basic characteristic of this sector is the production of services instead of end products.

While some economic experts believe the service sector in Iran has experienced substantial growth in recent years, the Forsat-e Emruz report suggests that there is still huge potential for new demand in the sector, paving the way for investors and entrepreneurs to cater to these needs through innovative ideas.