Economy, Domestic Economy

Time for Asean-Iran Partnerships

Time for Asean-Iran PartnershipsTime for Asean-Iran Partnerships

Iran’s Parliament has ratified the nuclear deal with the West, which initiates steps toward the sanctions relief within, by most estimates, the first half of next year.

Southeast Asian nations have, in general, been less than willing participants in the US-led sanctions regime. Indeed, many in the region—having had their own struggles with colonialism—sympathize with Iran’s economic plight, read an article in the Singapore-based daily The Straits Times.

Iranian traders have been present in the region for centuries—fifth-century Persian coins have been found in southern Thailand—and continue to live and work in Southeast Asia today, with more than 100,000 Iranians living in Malaysia alone. This has created longstanding political, economic and cultural ties that sanctions can never erode completely, as evidenced by the foreign ministers of Indonesia and Iran, who recently reinforced bilateral ties and celebrated their mutual participation in the Non-Aligned Movement.

The time between the acceptance of the P5+1 nuclear agreement and the official lifting of sanctions next year is a unique window of opportunity for the Association of Southeast Asian Nations and its largest companies to get a head-start in Iran and thereby make an important contribution to the country and the region.

Southeast Asian companies can move faster than their American or European competitors, which will undoubtedly be more conservative in their approach.

Asean businesses will be warmly welcomed by the authorities and businesses hungry for investment, expertise and new ideas.

On a recent trip to Iran at the invitation of the Isfahan Chamber of Commerce—the second-largest business chamber in the country—a group of executives on a study mission led by the “Global Institute for Tomorrow” were struck by the open enthusiasm for foreign expertise by the business community there. This openness is backed up by the Foreign Investment Promotion and Protection Law, which provides assurance that there are no limits on equity investments for foreign companies.

Capital repatriation is more flexible than what one might expect in a long-isolated country. Liberal tax holidays exist in key sectors, such as agriculture, tourism and export manufacturing. The Foreign Investment Services Center provides support, coordination and services, all accompanied by the famed Iranian hospitality.

“Foreign investments are protected from political risks by law, like the risk of nationalization,” said Abolfazl Kodehi, director of Iran Foreign Investment Services Center, in the Second International Catalyst Conference on Tuesday.

“There is intense competition to attract foreign direct investment in the world. We have the needed incentives and the structures to attract FDI.”

Established half a decade ago to facilitate investment in Iran, IFISC has allowed for various forms of foreign investment contracts and partnerships.

“We are also giving three-year multiple-entry visas to investors and easing visa restrictions,” he said.

Iran’s opening presents another opportunity for Southeast Asia: providing much-needed management and technology expertise in the oil, aviation and automotive industries among other sectors.

Iranians are well aware that they need to improve the branding, marketing and sale of their products. This was clear when the visiting group in Isfahan worked with producers and processors in the abundant apple-producing region of Semirom. Local exporters have been unable to leverage on the exceptional sweetness, aroma and color of Semirom apples.

Most exported apples—often branded in Arabic and destined for Persian Gulf countries-make no mention of their specific origin. The foremost need, however, is more effective organization and business models that better support key stakeholders while remaining aligned with Iran’s particular institutional frameworks.

Furthermore, general awareness of regional differences and effective communications remain important areas for improvement.

Southeast Asian companies are in a unique position to offer their experience and expertise. Chinese brands, perhaps due to their presence in Iran during the sanctions regime, are now unfortunately associated with low quality.

In contrast, Asean is relatively unknown and can take advantage of older economic and cultural connections.

There are numerous opportunities for Thailand to contribute its experience in the automotive and manufacturing industries, agriculture and tourism, areas where it has become a regional and global leader.

Malaysia, as one of the world’s largest and most developed centers for Islamic banking, has much to share with Iran about Sharia-compliant financial products and services, such as its sukuk bond market.

Indonesia is more than just a large customer for Iranian oil, but can also provide lessons on agricultural business, processing and exports.

Singapore has much to offer in terms of public-sector management, financial services, infrastructure development, water management, tourism, high-technology sectors and more. The city is also a model for how to structure an economy with a strong and significant government presence.

Iran is rich, stable and welcoming. Years of grinding western sanctions have heavily discounted what it has to offer: one of the most diversified industrial and agricultural sectors in the Middle East; a large, developed domestic market; a young, educated population; and the largest proportion of educated women in the Middle East (more than 60% of university students in Iran are female).

The country is also hungry for funds, ideas and potential partnerships with knowledgeable parties. This presents a unique opportunity for Southeast Asian countries and companies—a window that will close as western corporations eventually overcome politically motivated hesitation.

Asean leaders need to look beyond current headlines in western media and make the pragmatic and practical choices toward mutually beneficial engagement in an opening economy that is destined to be the largest in the region.