This publication aims to provide a commercial overview of this unique economy, focusing on key areas important for traders and investors alike, not only offering practical information on doing business with Iran but also providing up to date statistics and other key facts required for dealing with this unique country.
"Iran Business Guide" is published by Iran Chamber of Commerce, Industries and Mines for guiding of foreign businessmen and investors which has the chapters as follows:
1- A General Overview
2- The Geo-Economic Positioning
3- Industry and Hydrocarbons
4- Mining and Agriculture
5- Finance and Investment
6- Business Navigator
7- An Overview of Trade in Iran
Pundits have increasingly labeled the Iranian economy as a “transition economy”, as evidenced by the fact that in the last few years, a massive economic liberalization program has been underway.
The removal of resource sapping subsidies in all sectors of the economy, lifting of price controls on a number of goods, and the removal of tariff and non-tariff barriers in key sectors are all indications of these steps.
Complementing these steps however, has been the implementation of the largest privatization directive in Iranian history. In accordance with a privatization decree issued by the highest authority in Iran, combined with a ground breaking reinterpretation of Article 44 of Iran’s Constitution, which, in past readings, was deemed to limit private sector participation in key sectors of the economy, Iran’s economy has indeed been undergoing a major ‘transition’.
The effects of these steps can be seen in a broad cross section of the Iranian economy. In the past, state entities were responsible for over 60% of Iran’s GDP. By the year 2010, this figure has fallen to less than 45%. During the same period, Iran’s GDP increased from $361.2 billion in 2009 to $416.1 billion in 2010 and is predicted to reach $449.1 billion in 2011.
The Tehran Stock Exchange, the main conduit for the privatization process, with a valuation of over $81 billion, and 1.2 billion shares traded daily, in 2010, reached its highest growth level in the forty three years since it was established, in the process, becoming ranked by the World Federation of Exchanges (WFE) as the world’s second best performing equity index. At the present time, companies encompassing over forty different industries are listed on the Tehran Stock Exchange.
A key element of Iran’s economic strategy has been the development of non-oil exports. In the year 2005, non-oil exports generated only $7 billion in income, whereas in 2010 this figure was just under $30 billion, reflecting an annual increase of nearly thirty percent per annum.
However, all of these achievements would not have been possible, had there not been the development and active presence of a thriving private banking sector facilitating macroeconomic stabilization and private banking. Following ground breaking legislation in 1998, allowing the private sector to establish private banks for the first (since the 1979 Revolution), sixteen private (and privatized) banks are now active in Iran, with a further forty applications now under review. With over $100 billion in hard currency reserves and record levels of gold deposits, Iran has been ranked 14th among 138 countries in foreign exchange reserves, ranking Iran 17th globally based on gross domestic product.
The ‘transition’ in the Iranian economy however is much more far reaching than the simple implementation of privatization measures and the execution of broad based macro-economic policies.
Following a demographic population boom between the years 1976 to 1986, Iran’s population of seventy five million is now symbolized by its youth, with some 45% of the population under the age of fourteen and a further 26% between the ages of fifteen and thirty years of age.
As a result of this demographic shift, Iran is now reaping the benefits of a “demographic dividend”, the economic theory that when young working age adults comprise a disproportionate percentage of a country’s population, the national economy is affected in positive ways, as was the case in East Asia when the demographic dividend drove one third of the region’s economic growth between 1965 to 1990. One of the key elements of a demographic dividend are innovation and rapid growth. As can be seen in Chapter One of this publication, scientific output in Iran has grown eleven times faster than the world average. Concomitantly, with over eight hundred thousand people entering the work force each year, demand for all manner of capital goods, ranging from cars to house hold appliances are increasing rapidly every year, enabling Iranian companies to reach economies of scale which afford them the opportunity to compete globally, as evidenced by the global rankings of two of Iran’s automobile companies and the recent takeover of a leading Korean electronics group by an Iranian company. As a result of the composition of Iran’s demographics, it is foreseen that by the year 2050, the bulk of the Iranian population will reach their peak purchasing power, resulting in an almost linear demand curve for all manner of goods for years to come.
As with the transition that the Iranian economy is experiencing, the Iran Chamber of Commerce of Commerce, Industries and Mines is also experiencing a major transition. As we celebrate our 127th year of existence, the Chamber is now becoming directly involved in the national economic decision making process, as highlighted by, inter alia, the fact that the Chamber is now a member of the General Assembly of the Central Bank of Iran.
It is within this context that we are pleased to provide this publication at such a unique juncture in Iran’s economic history. Not only are many of the points in this introduction highlighted in the publication, but, as one will see, Iran’s locational attributes, skilled manpower, rich resources and geo-economic positioning all serve to highlight Iran’s position in the global economy.
Dr. Mohamad Nahavandian
President of Iran Chamber of Commerce, Industries & Mines