Sci & Tech

Iran as Mideast's IT Hub

Iran as Mideast's IT HubIran as Mideast's IT Hub

Iran could quickly become the regional leader in terms of technological take-up and sales, an international research firm said.

Computer Weekly, quoting analytics firm Interactive Data Corporation, reports that after the historic nuclear deal between Iran and six major world powers last year, Dubai Computer Group, a regional computer player, hailed the development as positive, but urged members to wait for official guidelines on when they can resume trading with technological companies in Iran.

For information and communications technology suppliers, distributors and channel partners, it could mean a new era and a much needed boost for computer businesses inside the country, which have previously struggled to have sufficient supply lines.

The lifting of various United States, United Nations and European Union sanctions could shake up the ICT market of Middle East, Turkey and Africa and radically realign the way people see and do trade with Tehran, IDC added.

The company notes that the development will potentially see Iran emerging as the fastest-growing ICT market in Middle East, Turkey and African regions over the next five years.

“At present, the supply of consumer hardware to Iran is largely driven by reexports from IT traders based in the UAE, but the easing of sanctions will enable suppliers to start building the official supply systems in Iran, ultimately leading to a decline in the import of grey market goods,” said Jyoti Lalchandani, group vice president and regional managing director of IDC META.

In its report "Understanding the Iran opportunity: Where it stands as of October 2015", IDC said it expects demand for enterprise hardware in Iran to be fueled by the public, telecommunications, energy, finance and manufacturing sectors.

  Transform Industries

“Once sanctions have been terminated, Iran can move forward in using ICT to transform industries across the country,” said Lalchandani.

“The extent of these projects will depend largely on whether global oil prices rebound in the coming years. If they do, the increase in petrodollar revenues will help drive considerable transformation initiatives in the public sector, as well as significant modernization efforts across the energy, manufacturing, telecommunications, finance, transportation and retail verticals.”

Meera Kaul, CEO at regional value-added IT distributor Optimus Technology and Telecoms, agreed, saying this is a big opportunity for the regional IT supply channel.

"With the sanctions lifted, the $420-billion Iranian economy could open up for regional businesses. This is not only a game-changer but also opens up access to educated and talented human resources from Iran," she said.

“The opportunities are immense. Iranians are a major resident population of the UAE already and traditional ties to the UAE are extremely strong. There is no reason why Dubai shouldn’t be the largest benefactor of the demand of the Iranian economy.”

But Kaul urged Dubai-based IT suppliers to be cautious, pointing out that the guidelines, especially from the banks and other financial institutions, need to be seen before IT sales are targeted.

Hesham Tantawi, vice president of IT distributor Asbis Middle East and board member of DCG, said, “Until the ban imposed by banks operating in the UAE and other parts of the Middle East is lifted, it will be extremely difficult for anyone to do business with Iran-based IT partners."

  Market Shrinking

Tantawi said a high growth in the regional channel is not expected in the second half of 2016, because the market has been shrinking, compounded by declining PC sales, dropping oil prices, regional instability in some countries in the Middle East and currency volatility, especially in emerging economies in Africa.

"Channel partners in the Middle East are developing business in their existing markets, but are not cultivating new markets," he said.

Shailendra Rughwani, president of DCG, said the organization had been monitoring the Iranian negotiations very closely and as soon as a deal was announced, the trade body contacted all members to urge caution.

“We are in contact with all our members and have already issued a statement advising them to wait until they receive official communication from the suppliers, relevant industry trade bodies and banks on when they can start supplying IT products and solutions to Iran,” said Rughwani.

“We will confirm with all our principal IT suppliers with whom we have a commitment, on when DCG members can start trading with companies in Iran. For now, we are urging our members to start preparing and be ready to move once the market opens.”

Iain Stewart-Linnhe of Capital Club, a private city club whose members include UAE government officials and senior executives of the country’s private sector industries, said that because Iran’s legal mechanisms remain immature compared to international markets, the onus is still on companies looking to do business with the country to show within all “reasonableness” that they have taken all measurable precautions and sought adequate advice.

On a positive note, Stewart-Linnhe said that with the various risk factors taken into account, Iran offers many opportunities.

  Strong Backdrop for Growth

With a population of almost 80 million, Iran is the Middle East’s second most populous country after Egypt. Its young demography–64% of the population is below the age of 35–creates a strong backdrop for economic growth. The population is well educated, with more than 4 million university students, over half of them women.

Ashish Punjabi, chief operating officer at Jacky’s Group—a company that specializes in consumer electronics and business-to-business IT, said the Iran agreement is a deal-changer for the entire Middle East, particularly the UAE, in its role as a logistics and financial hub.

“When the official guidelines are issued after the lifting of the embargo, channel partners will be able to access a market of 80 million consumers,” said Punjabi. “We saw the same thing happen when the Russian markets first opened up when the USSR collapsed.”