Economy, Business And Markets

Iran’s Reentry Into Global Economy

Iran’s Reentry Into Global EconomyIran’s Reentry Into Global Economy

Chris Parker is the CEO of Iran Business Hub, a London-registered, international, British and Iranian partnership that specializes in large corporate entry into Iran.

The Iran Business Hub provides confidential advisory, strategic planning and operational services.

Parker sat down with Global Risk Insights—a leading online publication that provides analysis on political risk and geopolitics for the business community–to discuss Iran’s reentry into the world economy and the future of economic investment in Iran.

GRI: With Iran’s reentry into the global economy and the possibility of economic opportunities for trade and foreign capital, what do you see is the future for Iran regarding economic investment? What does Iran offer for future investors?

CHRIS PARKER: I was just talking to former deputy governor of the Central Bank of Iran, Kamal Seyyed Ali, who aptly pointed out that “Iran is in a period of transformation.”

What this statement means is that there is a sense that there is great momentum building up and an enormous appetite from western businesses and their Iranian counterparts to engage with each other.

However, there is a significant gap in information on how to facilitate this. Despite the appetite from international credit organizations, national banks and sovereign wealth funds, there needs to be patience and clarity before real economic engagement occurs.

Notwithstanding this gap in information, there is support from all sides in making sure that this change and tempo continue. The necessary international frameworks and regulations are being established as we speak to facilitate these processes, but EU and US financial institutions need to help promote this further.

However, we must remember the significance of how big the potential market is in Iran. It is a consumer-driven market, which has been short of branded and luxury goods for some time and this presents an opportunity for importing and rebuilding consumer confidence in these areas.

Of course, external influences such as the continuing OFAC (Office of Foreign Assets Control of the US Treasury Department) sanctions and regional instability will drive uncertainty in these relations, but the unstoppable momentum and interest that is there between the private sector and the Iranian government can only bring around positive outcomes. It is not so much a question of how this economic engagement will happen, but when.

What future investment do you see for the Iranian oil and aviation industry? What other industries do you see substantial growth in and the potential for foreign capital investment?

The Iranian oil industry is in need of substantial investment. Some international oil companies, as well as their shareholders, will want to help Iran back onto its feet in reentering the hydrocarbon market. Iran has the potential to dominate the oil sector and it is a growth economy. Regarding the aviation industry, growth is moving at a rapid pace and is fastest in terms of domestic aviation.

Besides this, let’s not forget that it is far easier in Iran to invest large amounts of capital compared with other Middle Eastern countries. Iran is a signatory to The New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. This allows transparency and significantly reduces political risk, as there is a final court of arbitration and court-enforced decisions if anything does go wrong. However, all such legal frameworks, of course, remain recently untested.

Iran presents a safe place to invest large amounts of capital investment, therefore the drive for international investment in these primary industries.

In terms of other sectors as I mentioned previously, consumer goods will be one of the most major areas for investment and economic opportunities in Iran. However, what is also needed (and I can see exponential growth in), is “soft infrastructure” such as in traffic control operation procedures, railroad systems and integrated logistics.

Iran has a very well-educated population and the drive for innovation and design in population’s centers will see the potential for technological investment as well.

Don’t forget that visas into Iran are easier to obtain now and it will become a very attractive international tourist destination, especially in the north of Iran. There is no significant resort-based tourism yet but with ski-fields and scenery that is second to none, international tourism is on the up and up, and will no longer be exclusively for adventure travelers.

However, despite international investment, it must be made clear that Iran will dictate its own growth with the help of these international and regional companies.

What possibilities does Iran’s reemergence in the global economy present for regional economic prospects?

Iran is an island of stability in an ever uncertain and unstable region. It has the required institutional processes and security needed to provide a stable political and economic environment. This is why there is this thirst to invest because there is the potential as well as a secure environment for business.

Concerning regional integration, the political rapprochement and lifting of sanctions has also seen Iran play a potentially larger role in the region. The economies in the [P]GCC are in trouble due to the drop in the price of oil and the social tensions that are caused by this.

Iran, however, has opened its doors to investment from regional players and vice-versa. It is easy to obtain a visa for business purposes, as Iran seeks to play a wider part in the economic integration of the region.

Despite the political situation in the Middle East, there is an excellent opportunity for economic integration with other [Persian] Gulf States as is demonstrated by Iran’s relationship with Oman. Iran can and will become a new trading hub just like Dubai.  

Which countries are most interested in investing in Iran? Do you see potential investment from international economic players such as the United States and other developing powers?

In terms of investment and finance, there are still many primary sanctions holding back companies from investing in all sectors such as banking. Leading the way, however, is Turkey that sees the opening up of the Iranian economy as an enormous opportunity. Turkey will dominate in terms of hard infrastructure, such as in construction industry due to its regional proximity and expertise.

On the other hand, the EU and the UK will lead the way in “soft infrastructure”, which I mentioned previously. Most of these investments will take the form of joint ventures that will develop not only these industries but also provide essential expertise.

Iran, however, needs to work out a robust regulation model–whether it follows the path of Dubai in terms of high standards or follows the quick build model with a lesser standard. However, this decision will be crucial if Iran wishes to attract and establish solid business investment.

Iran has now attained an unstoppable momentum. It is this rate of change that we need to observe and watch.

For us in the business world, this tempo and rate of change must also come hand in hand with quality, safe infrastructure, and regulatory development. It must also be linked to political assistance from the international community and international business sector.

The possibilities for the future are endless, but Iran cannot do this on its own.

Chris Parker is also chairman of Charmogen Group, an international consultancy network, and has also been an operations director with Hyder plc in London, and was project director for the successful $1.3 billion Burj Dubai infrastructure mega-project in the UAE.

Parker has served on UK’s government trade missions to the MENA region and frequently speaks at international trade conferences and comments live on Sky News and international media.