Economy, Business And Markets

Iran Market Rewards Outweigh Risks

Iran Market Rewards Outweigh RisksIran Market Rewards Outweigh Risks

With significant oil and gas reserves, a well-developed stock market and a population almost equal to that of Germany, Iran is an attractive prospect to many.

Experts say Swiss high-tech firms in the services, industrial and agricultural sectors could find a huge upside if the nuclear deal goes through, wrote Swissinfo.

The Swiss government estimates that Swiss exports to Iran, which were CHF610 million ($630 million) in 2014, could double or triple within a decade. Though that would still only amount to about 1% of Swiss exports, there’s much longer term potential in a domestic market of almost 80 million people–10 times the population of Switzerland.

One company preparing the ground for a possible expansion into Iran is V-ZUG Ltd., a Swiss manufacturer that specializes in household appliances.

“We are of course looking at different business opportunities in different countries and Iran has been talked about [as] kind of a reemerging market with huge potential”, said Jean-Luc Bühler, an international sales manager for V-ZUG Ltd. “We are planning to first of all look at the market, look at the potential; we are in contact already with potential Iranian partners.”

 Iran’s Promise

The Iranian economy is focused 45% on the services sector, 44.5% on industry and 10.5% on agriculture, according to Switzerland’s State Secretariat for Economic Affairs, or SECO. Swiss direct investment in Iran has significantly increased in the last few years and three Swiss-Iranian economic treaties already exist for investment protection, double taxation and aviation.

“Now is a good time to study the Iranian market … and to position yourself by making contacts,” Sonja Hürlimann, head of SECO’s Middle East and Africa section, told a government-sponsored luncheon forum that drew hundreds of business leaders in Zurich last week. “Other competitors are not sleeping.”

Iran’s exports to Switzerland came to just CHF30 million last year, but the Islamic Republic holds 11% of the world’s oil reserves and 15% of the world’s proven gas resources, enough to alter Swiss reliance on North and West African crude oil and Dutch, Russian, Norwegian, German and Algerian gas.

“It’s not an easy market, we all know that, and a successful market entry has to be prepared,” Daniel Küng, CEO of Switzerland Global Enterprise, which helps clients develop new potential for international business, told the forum.

“We do hope this will be a starting point for a long journey together.”

 Exciting But Challenging

Iran is going to remain a challenging environment for business but “it doesn’t take a rocket scientist to figure out this is one of the big opportunities”, said Barthelemy Helg, an entrepreneur and founder of Swiss biotech AB2 Bio Ltd. It also has a surprisingly well-developed stock market in which more than 500 companies trade, he said.

Other experts, such as Gholamreza Rafiei, an attorney in Iran, said Swiss companies send him daily requests for information about the market. The biggest possibilities, he said, are in areas such as foods, sanitary products, pharmaceuticals, cosmetics, insurance, banking and aviation.

Sharif Nezam-Mafi, who chairs the Iran-Switzerland Chamber of Commerce, described Iran as “set to rejoin the international community” but warned against a myriad issues throughout its vast bureaucracy.

Ali Amiri, an entrepreneur and founder of ACL Asset Management advises Swiss business community to be brave and take a bet on Iran despite the risks because the opportunities are so large. And Iran is “a walk in the park” compared with many other places, he said.

For example, Iran has 55 million cellphone subscribers, nearly the size of those in France or Britain, he said, while Iran’s GDP is about the same as Switzerland’s and its labor force is similar to France with labor costs as cheap as those in Vietnam.

The successful nuclear talks between Iran and the US and other major powers concluded 12 years of negotiations, including many late-night sessions held in Geneva and Lausanne. The Swiss also have represented the interests of the United States in Iran for the past 35 years since the two countries broke off formal relations.

At the luncheon forum in Zurich, Switzerland’s ambassador to Iran, Giulio Haas, called Iran a “pole of stability in a very, very unstable region” and urged Swiss business leaders to set aside any common stereotypes about the country that they might have.

“From an economic standpoint Iran already is quite a well-developed market,” said Haas, the go-between for official contact between the US and Iran.

The new deal seeks to curb Iran’s nuclear program in exchange for lifting United Nations-authorized sanctions imposed by the United States and European Union, which have seriously hampered Iran’s economic development.

US President Barack Obama appears to have clinched the votes he needs to ensure that Republicans cannot block the deal in the US congress when a disapproval resolution comes up for an expected vote later this month.

But even if the Congress were to pass such a resolution, it cannot halt the deal that Iran reached with the five permanent members of the 15-nation UN Security Council–the United Kingdom, China, France, Russia and the United States–plus Germany.

The Security Council unanimously endorsed the nuclear deal in July in a resolution to lift the international sanctions in 90 days.

Philippe Welti, a former Swiss diplomat who served as ambassador to Iran and India, predicts a major shift in regional powers.

“Once the sanctions will be lifted, this will unleash the whole potential of Iran’s economy and society,” he said. “This does not mean more peace or war in the region but … Iran could be the dominant regional power returning to the scene.

“Iran will become a stronger industrial economy and will be able to reach out to its neighborhood as a market. Its capacity to project stability will increase.”