Economy, Business And Markets

Iranian SMEs Reaping Benefits of JCPOA

Finance Desk
Iranian SMEs Reaping Benefits of JCPOA
Iranian SMEs Reaping Benefits of JCPOA
As a last-known frontier market blocked to the outside world for many years, Iran is a hotspot for foreign investment

One year after Iran's historic deal with major global powers, a vigorous debate has surfaced over whether the country has benefited from the accord based on what it was promised.

While skeptics decry the meagerness of achievements, especially in the banking sector, other facts indicate that many sectors of the economy have gotten a new lease of life ever since the Joint Comprehensive Plan of Action came into force. In fact, Iranian SMEs have been gradually nurturing their business in the new climate.

For Farid Dehdilani, a US-educated young entrepreneur who has recently returned home to help reboot his family business, the new opening has proved to be a seismic shift.

Only recently, his firm reached an initial agreement with the Italian company Dierre to launch an assembly line in Tehran. The giant European firm is the largest manufacturer of security door, interior door and window globally with annual gross sales of €300 million.

In his endeavors to make inroads into the US, Dehdilani has won the approval of the US Treasury Department’s Office of Foreign Assets Control to sign an distributor agreement with Honeywell, a US multinational industrial behemoth, and a similar agreement with Immune Tree, an American drug and supplement maker.  

"As a company that has been in business for a long time, things have changed dramatically," he said.

"Before the sanctions were removed, we could only work with the Chinese and Turks but now an American company like Honeywell, which only a year ago, would not even respond to our emails, is choosing us as its channel partner."

Dehdilani said Honeywell, a company almost the size of General Electric, has been surveying the Iranian market even before the JCPOA was officially implemented in January.

"The company is now planning to open an office in Iran and hire a team of locals to operate its Honeywell Iran business," he said.

The CEO of the office would probably be a Turkish citizen so as not to run afoul of US sanctions.  

The remaining US sanctions do not allow US entities and individuals to make Iran-related investments.

Dehdilani said they could bypass this hurdle by partnering with the Turkey-based Honeywell.

Apart from the pharmaceutical companies exempted from Iran embargo, the entrepreneur noted that the pending deal with Boeing could be another game-changer.

"This is because some large bank will have to eventually finance the deal … If that banks happens to be an American one, then it could mark the end of US financial restrictions and if that bank happens to be a European one, that would dispel all the remaining fears on the part of big European lenders," he said.

Surmounting the Challenges

As with other businesses, small and big, Dehdilani said a lack of effective banking relations remains the main road block for the expansion of trade with Iran. Big banks, once bitten by heavy US penalties for violating its sanctions against Iran, are twice shy to reengage with the country despite apparent reassurances from the American and European politicians.

"Although as a medium-sized holding group that has less than €5 million in annual turnover, we may not be that dependent on banking links but big dealings require LCs to be open and for a bank like Italy's UniCredit, that is not currently an option," he said.

"Lower dependence on banking transactions is what has given small- and medium-sized enterprises an edge over their bigger peers."

Dehdilani points to anti-Iran lobbyists in the US and the serious differences between the Obama administration and the Republican-controlled Congress as other challenges contributing to uncertainties in the way of trade.

When asked about the possibility of a Donald Trump's presidency in 2017, the entrepreneur referred to a commonly-held belief among Iranian business community that Trump is not a serious threat to the future of US relations with Iran.

"However, uncertainty is the ultimate poison for the business climate and Trump's vitriolic remarks about the nuclear deal is only adding to that uncertainty," he said. "And as for a Clinton presidency, although she is no friend of Iran, her views about adhering to the nuclear agreement are reassuring."

US primary sanctions are also keeping the vibrant Iranian-American diaspora from full participation in post-JCPOA Iran, which Dehdilani believes is eager to invest in their motherland now that the old obstacles are no longer there.

As for ways to ease the current barriers, the entrepreneur believes that "raising awareness" about the real picture of Iran would be the best strategy to dispel fears and debunk the myths about the country.

Dehdilani declared that as a last-known frontier market blocked to the outside world for many years, Iran is a hotspot for foreign investment.

Other advantages include its large youth population–over 60% of its 80 million population are under the age of 30–35, the high rate of Internet penetration–which is over 50% in Tehran–and cheap, skilled workforce.

"We need to present ourselves to the world … by disseminating transparent information about the country. Doing business with Iran is first and foremost to the benefit of foreign investors themselves," he said.

"As a stable island amid regional mayhem, Iran's diverse economy has a lot to offer to the world."