Economy, Domestic Economy

Call for Doubling India’s Engagement in Iran

Call for Doubling India’s Engagement in IranCall for Doubling India’s Engagement in Iran

Decades of economic restrictions have strained Iran’s ability to finance its growth and to trade with the world. Now this market of 80 million is ready for–and can afford–everything from airplane spare parts to container ports, consumer goods to technology products, wrote "Gateway House: Indian Council on Global Relations"–a Mumbai-based foreign policy think-tank established in 2009.

A recent weeklong policy trip by Gateway House members to Iran revealed the intense desire of Iranians to reengage with the world.

“Let’s not call it a ‘deal’," says Moustafa Zahrani, director general of IPIS, the Foreign Ministry’s think tank, of the nuclear negotiations. “A deal has winners and losers. The nuclear agreement is a political decision by wise actors for the sake of humanity. All will benefit.”

A major benefit will be a strategic one. Since October 2015, Iran has been fighting along with Russia to root out the self-styled Islamic State militants in Syria and Iraq, a war that the West has been steadily losing. Iran’s participation, its superior intelligence and focus, will pose a formidable challenge for IS plans, which include the submission of India.

This is why India must double up its diplomacy and commercial engagement with Iran and move boldly beyond the curtain of "civilizational" ties. Those exist: The Persian culture is so embedded in the language and culture of India; Iran is hardly a foreign country for Indians.

But that natural advantage has not been put to good commercial use. The more worldly and profitable presence instead is, despite the crippling sanctions, western brands; from Schindler elevators and Bosch microphones, to Pepsi and Coke in hotels and cafes across the country. Boeing already has a $7 billion order for spare parts for Iran Air. Hotels in Tehran are packed with American, European, Chinese and Asian businessmen, and the schedules of Iranian officials and entrepreneurs are overbooked by visiting foreign delegations.

A brand new Novotel hotel stands opposite Tehran’s airport and SWIFT is already active in 12 Iranian state-owned banks. New domestic investment banks like Turqoise Partners are much in demand and are flooded with investment inquiries, as is Tehran Stock Exchange.

Iran’s many business chambers are fully prepared for the rush: “We are ready to take up any action of any nature and any value,” says Kamaleddin Sahlabadi, the international counselor for the Isfahan Chamber of Commerce.

Taking him up on the offer should be a priority. The India-Iran $15.7 billion trade must move beyond the old-style oil and fertilizer, cereals and chemicals export basket. Those are necessary of course, given India’s dependence on Iranian oil and Iran’s dependence on those revenues.

But providing modern amenities that are robust and affordable for a youthful, tech-savvy population can ensure that India leapfrogs to the front of Iran’s mind and market share. This means rolling out India’s IT, pharmaceuticals, automotive, agri-business and financial services for Iran, and stepping up the private sector engagement.

India’s private industry will understand Iran easily enough: It is like India circa 1991, removed from global markets and making do with import substitution.

Iran has used the years under the sanctions to develop internally, with good roads, water and housing supplies and an education system where women predominate–nearly 70% of Iranian science and engineering students are women. Close to 300,000 engineers in Iran have built home-grown replacements not just for nuclear technology but also for Internet and mobile applications.

Iran’s young, 20-something IT community has created Cafe Bazaar in place of Google Play; Bamilo instead of Amazon; Taxi Yaab instead of Uber, Mazando instead of Ebay. Since June 2012, Iran has held 62 "startup weekends", there are innovation accelerators and banks like Turquoise Partners are seed-funding this e-commerce takeoff. This year, Germany played tech godmother, hosting the iBridges tech conference for regional startups where Iranian players made a spectacular appearance.

Alas, India does not figure in this new picture. Bangalore, with its large entrepreneurial community should loom large in Tehran, but apart from Flipkart, even superstar Hessam Armandehi, the young CEO of Cafe Bazaar, is unfamiliar with India’s startup scene. They look instead northwards.

Alireza Jozi, the co-founder of TechRasa–the Iranian version of Bangalore’s Your Story–is an emigre from Austria who returned two years ago to build Iran’s tech ecosystem. His ambition for Iran’s tech talent? To surpass Turkey and “become the tech hub of the region.”

This is possible, given Iran’s aspirations and Turkey’s downward geopolitical spiral. India’s private sector must actively contribute to the Iranian dream.

So far, our engagement is largely through government, with the signature bilateral Chabahar Port project caught in India’s baroque inter-ministerial rivalries, and the Iranians losing patience. If New Delhi does not move decisively, Chabahar may, like Sri Lanka’s Hambantota Port, become a Chinese project and a critical link, through Afghanistan and Pakistan, to its One Belt-One Road initiative.

There’s a market craving credit and investment. Under sanctions, Hawala financed Iran’s economy. Now Tehran is offering generous incentives to foreign investors to formalize its economy: Equal access to the home market, taxes of 10% or less, 100% repatriation of profits, special economic export zones. India’s private sector can offer consumer credit, factories for auto parts and electric vehicles, a pharma base and technology investments.

New Delhi’s trade engagement with Iran can enable India to become a regional goods and services supplier to the entire Persian Gulf region from a stable West Asian base.