Economy, Domestic Economy

Iran Preparing for Economic Takeoff

Iran Preparing for Economic Takeoff Iran Preparing for Economic Takeoff

Sometime in the next few days, Iran’s “Implementation Day” is almost certain to be declared. All nuclear-related sanctions, including the freezing of $100 billion of Iranian assets, will be lifted.

One obvious consequence of the deal will be economic. Unlike its richer Persian Gulf neighbors, Iran is not an oil-soaked rentier state, but a regional power with an industrial economy and lots of educated people who work. It manufactures (and even exports) its own cars.

However, mismanagement under former president, Mahmoud Ahmadinejad, as well as corruption, sanctions and the collapse in oil prices, have shrunk economic output. The introduction of crippling oil sanctions cut export revenues by a third, wrote The Economist.

Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei has set a target of 8% average annual growth for the next five years, up from its current 2.5%. Some western diplomats and financiers in Tehran reckon that, within a decade, Iran’s GDP might surpass that of Saudi Arabia and Turkey, the regional economic powerhouses.

The prospects in a post-deal Iran are vast. It is the world’s 18th-largest economy. The population of 80 million is well-educated; the country’s oil and gas reserves are huge.

Tehran Stock Exchange is the second biggest in the Middle East, with a capitalization of about $150 billion, according to Turquoise Partners, the first foreign investment fund dedicated to Iran.

But at the end of 2014, foreigners owned only 0.1% of listed companies’ shares, compared with 50% on Turkey’s main exchange in Istanbul.

Iran ought to be able to attract much more foreign direct investment, given its size. One estimate puts Iran’s pent-up need at over $1 trillion.

In the next five years, the country needs an estimated $230 billion-$260 billion of investment in oil and gas, according to analysts. And Iran Air, starved of investment since the Islamic Revolution in 1979, wants to buy several hundred planes.