Five tips for doing business in Iran

Following the recent nuclear agreement, a significant number of EU and US-based companies have started reassessing their strategy towards Iran. There is a growing consensus among their senior executives that any market share gain or profitable growth in the short to medium-term would only materialize from effective strategic planning that must take place right now.  In prioritizing ready-to-execute Iran plans, foreign companies are advised to:

1. Remain mindful of sanctions: Companies worldwide with significant assets and operations in the United States and that are contemplating doing business with or reentering Iran will want to draw upon broad sources of expertise as they consider their strategy in this new environment. Engaging legal counsel will, of course, be essential. But knowledge of the legal situation and regulatory environment alone will not be sufficient. The future of U.S.-Iran political and economic relations will be determined through a complex process involving interplay among the U.S. Administration; Congress; America’s many private political and policy organizations and politics of the November 2016 American elections. Sanctions policies and regulations of the European Union and other countries will need to be considered and evaluated. Accurate information and interpretation of developments in these areas will be critical to avoid reputational harm, forecast risk and seize early-mover opportunities when legally permissible.

2. Understand the Iranian Mindset: Iran has the ambition of becoming the economical and technological powerhouse of the region. Although the imposition of sanctions has had a significant negative impact on reaching this objective, the ambitions remain in place. It should be noted that key economic indicators such as inflation and unemployment have been improving in spite of sanctions and although economic size and growth are below benchmark peers such as the UAE, given the economic diversity and abundance of natural resources of the country, Iran is poised for significant growth in the post-sanction area, helping it move closer to realizing its vision.

 

Iran also aims to develop a knowledge-based economy and as such is looking for the two important elements of skill and technology transfer in its partnership with foreign entities. According to the latest estimates, Iran is in need of $2,000 bn of industrial investment over the next 10 years. It should also be added that the country is moving away from an import-based mentality to one based on the development of its manufacturing base and export potential. As such entities that opt for the establishment of either independent or joint production units will be preferred over those seeing Iran as just an export destination.

3. Take one step at a time: In order to match corporate strengths and market opportunities, foreign companies need to identify their key target sectors, conduct thorough research on what is happening in those sectors and ensure full justification for entering those markets. Once business justification has been established, the most appropriate market entry strategy must be selected. This could either be direct or indirect. Given that Iran has just started emerging from international isolation, the latter option seems to be favored as a first step in order to minimize risks. Local partner selection is also a key exercise that will have to be diligently undertaken in indirect entries.It is worth mentioning that Iran has significantly reduced foreign investment risks through the introduction of the Foreign Investment Promotion and Protection Act (FIPPA), which allows the repatriation of foreign capital and corporate profits as well as providing protection against any loss as a result of direct action by the government that may lead to disruption in the business activities of the foreign entity. Iran has also taken serious steps in encouraging foreign presence through allowing 100% foreign ownerships of companies and offering competitive corporation tax rates.

 

4. Act early & show commitment: In the past few months, Iran and Iranian managers have seen many foreign businessmen coming into the country either on their own or as part of delegations. The trips on their own are considered insufficient and superficial. Iran is keen on concluding business negotiations and witnessing actual investment and physical presence as soon as possible. Experience shows that those foreign entities that entered the Iranian market during relatively risky and unstable periods, have benefitted from their first mover advantage. In contrast, those business partners that left the Iranian market as a result of the imposition of sanctions now find themselves in unfavorable situations in their attempt to re-enter the Iranian market. Without visible action and commitment, no foreign entity is likely to be taken seriously.

5. Get the right advisors: In devising strategies and implementation plans for Iran, it is highly recommended to make use of reputable local consultants who can bring significant value to the table though their local knowledge and deliver huge time and cost savings through lessons learnt from past relevant experiences.
   

Mehrdad Parhizkar, a partner at Frontier Partners, has 25 years of consultancy experience gained in the UK and Iran. The UK experience has mainly revolved around public sector consultancy with a specialization in undertaking feasibility studies, business case preparation and project management of the procurement processes for major private finance and public private partnership projects. In Iran, Mehrdad has advised many multinational clients on the identification of investment opportunities, market entry and risk management strategies as well as local partner selection in relation to emerging markets. He has also helped many regional and domestic clients in the preparation of full business plans in order to attract investment or secure financial loans

Mehrdad has held senior managerial positions within a variety of consultancy firms where he has significantly contributed to their growth and financial performance. In 2006, Mehrdad founded a consultancy firm servicing multinationals wanting to enter the Iranian market. Mehrdad has spoken at many international and regional conferences where he has provided expert opinion on trade and investment opportunities related to the Iranian market

Mehrdad holds a BEng (Honors) in Civil Engineering from Oxford Brookes University, an MSc (With Distinction) in Construction Management from the University of Reading and an MBA from the University of Warwick (UK)

-END-

About Frontier Partners: Frontier Partners is a specialist professional services firm providing Consulting, Financial Advisory, Transactions Support and Investment Services to multinational corporations and diversified conglomerates with respect to their entry strategy into Iran.

Our partners and directors are Western educated, dual Iranian/Western citizens and bring decades of senior level professional services and industry experience attained in the Big4 and other Tier-1 consultancy firms in North America, Europe and the Middle East.

Frontier Partners was setup by its founders in November 2014 and currently encompasses a total of 30 partners and associates across offices in Tehran and Dubai, with representatives in London, Munich and Paris.

In a short period since inception Frontier Partners has been successful in advising a large number of prominent European, GCC and Far Eastern clients and is known to be the only credible professional services firm to provide end to end advisory services for client on their Iran focused investment agenda. With its highly qualified bi-lingual team of experts it differentiates itself from the competition by having a proven track record and in-house capability to advise on and close complex transactions with respect to Iran.

Official website – www.frontierpartners.co

For all media inquiries and any further information please contact:
Anastasiya Golovatenko
Dubai, UAE
+971 55 40 40 239