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Iran 18 months after Implementation Day
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September 23, 2017
Written by:
Afshin Ghassemi

Interview with Afshin Ghassemi, Head of GERMELA Iran

The Iran Deal has sparked much interest in investment opportunities in Iran. However, some observers find it difficult to actually assess the impact of the deal. So honestly, which consequences did the lifting of sanctions bring for business development in Iran?

 

Parts of the international business community seem somewhat disenchanted looking at the economic development of Iran after Implementation Day. To be honest, I find this surprising. Yes, the Iranian economy has not skyrocketed and reached double-digit growth rates overnight. And only a few sectors of the Iranian economy have grown extraordinarily yet, but people – in Iran as well as in the West – seem to forget the importance of time. After decades of international isolation, there was little trust in the market and few points of contact between Western and Iranian businesses. So, business relations had to be built pretty much from scratch. Taking these factors into consideration, the economic growth of 7.2 % in the Iranian calendar year 2016/17 is already pretty remarkable.

 

How is the atmosphere among German business in Iran?

 

As first German consultancy with an office in Tehran, we experienced a change of attitude among many businesses. At first, companies were merely on fact-finding missions in Iran. Our new clients are generally much better informed, they already know the market and have specific business targets. Midterm, this development will further reflect the growth rate in Iran and exacerbate German-Iranian exports that have already grown by 25 % last year. In addition, the availability of Hermes covers for Iran and simplified payments are significantly smoothening Iran-German trade already.

 

Market interest in business consulting has grown to such an extent, that we actually just moved to a more spacious office in Teheran. After years of investment backlog in several sectors, the need for Western products is still tremendous, specifically in infrastructure, renewable energies and petrochemicals.

 

What are the current challenges?

 

The main challenge for foreign investors is still financing. As long as Iran is not fully integrated into the international banking system and banks continue to be reluctant financing ventures in Iran, many international companies will continue to hesitate to enter the market.

 

The political will in Washington in order to smoothen Iranian bank operations is currently lacking. However, this should not obscure the fact that Iranian banks need to do their homework as well. Too often, international standards of accounting and controlling are not met by Iranian banks. There can be little doubt that further professionalization in the Iranian banking sector is necessary, and this professionalization needs to come from within.

 

Other key challenges include the often dubious ownership of Iranian companies and the apparent corruption. The recent elections gave the moderates under Rouhani a strong public mandate despite mediocre improvements in the quality of life of most Iranians.  The smashing defeat of the reactionary candidate Mr. Ebrahim Raisi leaves the hardliners in a position of unprecedented weakness. This will equip the Rouhani administration with more leverage for necessary economic reforms in order to make Iran even more attractive to foreign investors.

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