Iran: Land of Immense Current OpportunityBy Micheal Wyatt - Senior Consultant
Iran is a dominant power broker in the Middle East, vying with Saudi Arabia and Turkey for influence across the Middle East. Despite its reputation, it is a reasonably stable country and enjoys friendly relations with its immediate neighbors, although not of course with the other main geo-political players in the region.
According to 2014 GDP data from the World Bank, Iran ranks 28th of 193 countries, just behind Norway and Austria, and just ahead of Thailand and the UAE – and that was with crippling sanctions in place until only recently. Iran’s ranking amongst nations for per-capita GDP (based on 2015 purchasing power parity) stands at 70th, between Belarus and Botswana, clearly an indication of ample room for improvement and the likelihood of a host of business development opportunities for this resource-rich country. With its large population of 80 million mainly educated (85%) urbanites (70%), 52.4% of which are working aged between 25 and 64, Iran appears well poised to realize its vast commercial potential and possibly even replicate the remarkable economic development that Turkey enjoyed beginning in 2002.
Due to sanctions previously in place, Iran was forced to organize its economy around reduced trade in oil and petrochemicals, and so it stands to reason that it will weather the current downturn in global oil prices better than other oil exporting nations which are only now implementing economic reforms and putting in place emergency restructuring mechanisms. In stark contrast with many oil-rich nations, Iran is currently targeting an economic growth rate of 8% and expects to achieve 5% in 2016-17.
The recent adoption of the terms set forth in the JCPOA has resulted in a warming of relations with the West, ushering in several high-dollar contracts which are currently serving to further integrate the country into global trade alliances while also exposing its workforce to new and improved business practices. Iran recently gained access to more than $150 billion worth of frozen assets as well as permission for its banks to reconnect to the international SWIFT banking platform, thereby taking a crucial and significant step forward in reconnecting to the world’s finance and trade network. Many international airlines, include British Airways, have resumed direct flights to Iran, and even the US has permitted a resumption of Iranian imports such as Persian carpets.
Despite the warnings from some pundits who see the next US president withdrawing the US from the JCPOA, it is not logical to expect the US to seek to sever an increasingly popular international agreement. We can therefore reasonably anticipate that Iran will enjoy a continuation of the recent wave of trade deals and inward investment.
Unlike many of its neighbors which are nearly entirely reliant on oil and gas revenues, Iran boasts a more diversified economy. In an astonishingly short period of time since the recent sanctions relief came into effect, the country is now basking in the attention of, and attracting inward investment and lucrative contracts from, many of the world’s most powerful and influential players. The Economist recently reported that Iran is “preparing for takeoff.” Judging by many standards, it has already taken off and is rising fast.
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