Beyond oil, Investment in Iran

When discussing investment opportunities in Iran, the focus is nearly always on the petrochemical sector, primarily because that is seen as the biggest market in the country. However, Iran has a much more diverse economy than that, and in fact, there are opportunities for investors, entrepreneurs and innovators throughout the economy.

The problem for many is that it is sometimes difficult to know where those opportunities are, and for western businesses in particular, a culture that is drastically different from their own can be a challenge to fully analyze. By assessing the Iranian economy in more detail, we can see a clearer picture of where those opportunities are, and give a clearer representation of the diverse range of options there are in Iran.

In 2017, the Iranian economy grew overall, but there are some industries growing exponentially more than the average, and they obviously represent real opportunity for those looking to enter the Iranian markets. The biggest growth in the markets during 2017 was actually enjoyed by the sugar industry. In fact, it saw a remarkable 73% year-on-year growth, but is that sustainable, and does that mean it’s a prime opportunity for entrepreneurs and investors?

If we look at why there was such growth, one of the contributing factors was a temporary cancellation of all taxes on imported sugar, which reduced material costs for companies and led to huge growth. However, those temporary tax removals have now expired, and the focus is on increasing local production, with the aim of being self-sufficient for the country’s sugar needs moving forwards. Here is where the opportunity lies today, with projected global sugar prices set to rise consistently to 2026, and proven internal demand for the product, there is potential in Iran for both supply and export of refined sugar production.

The second largest growth in 2017 was seen in the construction industry, with a still remarkable 55% year-on-year growth, largely driven by the government infrastructure program, particularly a number of large dam construction projects. For investors, focusing on the contractors that have been awarded contracts for these large projects is a good way of getting involved with the opportunity, with several performing well on the Tehran stock exchange. In particular, SDRP1 and BLSZ1, with a string of government contracts between them, offer an interesting alternative.

The third largest growth in the economy, 46%, came in the communications industry, and this has been driven by the widespread adoption of 4G as it has become available, with consumer’s appetite for fast communications that is unlikely to slow down any time soon.

One thing to note is that for market performance, the petrochemical industry is not in the top 3, and is in fact outside the top 5, so when looking for opportunities in Iran, it is definitely worth looking beyond oil, Iran has so much more to offer.