Iran at a glance:
Iran is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia, with an estimated Gross Domestic Product (GDP) of US$D 406.3 billion in 2014. It also has the second largest population of the region after Egypt, with an estimated 80.8 million people as of individuals in July 2014. Iran’s economy is characterized by a large hydrocarbon sector, small scale agriculture and services sectors, and a noticeable state presence in manufacturing and financial services. Iran ranks second in the world in natural gas reserves and fourth in proven crude oil reserves. Aggregate GDP and government revenues still depend to a large extent on oil revenues and are therefore intrinsically volatile.
The Iranian economy rebounded out of recession, with growth estimated at 3.0% in 2014 compared to a contraction of 1.7% in 2013. This comes as a result of the temporary and partial easing of sanctions imposed on Iran’s oil exports, on the supply chain in key sectors of the economy—such as in the automobiles industry—and on the transactions of international and domestic banks, as well as a rise in consumer and business confidence that a comprehensive agreement between Iran and the P5+1 is within reach.
Iran’s non-oil exports rose 24.2 percent% in the first ten months of the current Iranian calendar year (i.e., March 21-January 20, 2015) compared to the same period last year. Furthermore, the depreciation of the real exchange rate has improved the competitiveness of the agriculture, manufacturing, and non-oil exports sectors, as well as of the hydrocarbons industry. Inflationary pressures on the economy have eased from a year-on-year peak of 35% in 2013 to 15% in 2014. This was facilitated by a number of factors including the appreciation of the Iranian Rial, the decline in global prices for key staples, and the easing of international sanctions.
Iran | Economic Forecasts | 2015-2050 Outlook
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Investment in Iran:
However, the big question for foreign companies and especially for small and medium-size enterprises is how to turn this potential into concrete business.
Foreign companies that have experienced Iran can tell many stories. The common theme in all these stories is that Iran is, in many ways, different from other markets – even different from other markets in the Middle East. However, foreign companies generally have not understood the peculiarities of doing business in Iran exactly.
Every foreign company is in a different situation and there is no one universally applicable rule on how to start and how to develop business in Iran. nonetheless, there are a number of common themes that apply to many small and medium-size foreign companies. The most important of these common rules is: Take one step at a time!, test the market and don’t believe those who swear they can perform miracles and get you into business in a blink of an eye .
Iran is certainly a unique market in the Middle East. It is populous, rich in natural resources and apt to technological progress and international developments. The country’s natural resources create a significant wealth. In fact, based on a resource-based evaluation, the Iranian economy is the 20th strongest in the world.
Some of the features are highlighted below:
Market Potentials and Proximity:Vast domestic market with a population of 65 million growing steadily as well as quick access to neighboring markets with approximately 300 million inhabitants.
Labor Privileges:Large pool of trained and efficient manpower at very competitive costs in a diversified economy with an extensive industrial base and service sector.
Low Utility and Production Cost:Diversified range of energy, telecommunication, transportation, as well as public utilities.
Climatic Characteristics:A four-season climatic endowment as a privilege to agricultural activities throughout the country and throughout all seasons.
Fiscal Incentives:Reduced tax rates from 65% to a flat fixed 25% rate of tax income despite various tax holidays highlighted as follows: