LONDON – Despite Irans disappointing economic performance since international economic sanctions were lifted last year, foreign companies could still reap the benefits of doing business in the country, Geeta Agashe told attendees at an industry conference here earlier this month.
During a seminar ahead of the ICIS World Base Oils & Lubricants Conference, the consultant pointed out that Iran has the largest population in the Middle East with around 80 million people, more than 60 percent of whom are 30 years of age or younger and over 70 percent of whom live in urban areas. Its economy is diversified compared to other oil-rich countries in the region, with major potential for tourism around its 21 UNESCO World Heritage Sites.
Further, Iran holds great promise as a global trade hub, Agashe stated. Nearly 20 percent of oil trade makes its way through the Strait of Hormuz off the countrys southern coast – the only sea route out of the Persian Gulf. Iran is also strategically placed along the International North-South Transport Corridor connecting India, Russia, Iran, Europe and Central Asia by ship, rail and road. China has included Iran in its plan for a modern Silk Road, which could boost trade between the two. This creates enormous opportunities, she emphasized.
Citing conversations with multinational companies focused on Iran, Agashe outlined five challenges that foreign businesses must address in order to succeed in the country.
First, companies must strictly follow both their national and internal sanctions compliance policies. Agashe recommends hiring experienced compliance professionals and consulting with an external compliance lawyer. U.S.-based companies ought to be extra vigilant due to the heightened tensions between the two countries, she cautioned.
With inconsistent market data among different sources, players must invest in securing quality insight into the Iranian market, Agashe advised. She also recommended partnering with local distributors when taking the first step into the market. Distributors in Dubai and Istanbul can be good resources for connecting with Iranian businesses.
Companies must find banks that are willing to do business with Iran. Without access to the United States financial system, Iranian companies often spend weeks waiting for foreign currency to pay for goods from their nonnative partners. This problem is likely to persist, Agashe predicted, as Iran is unifying dual currency exchange rates while also seeking to protect local producers from volatility. For several years Iran has had an official exchange rate, to which access is limited, and a floating open market rate used by those who lack access.
Once marketers are operating in the country, she continued, they will likely find it necessary to reclaim brand equity from counterfeit products and develop strategies to combat the underground lubricants market.
Iran represents an important opportunity for multinational companies that operate in emerging markets, Agashe concluded. A smart approach will find the sweet spot – advancing ahead of competitors while sidestepping first-mover mistakes.