Now that the nuclear deal has been reached, many foreign investors (FIs) are seriously considering tapping into Iran. Before the deal – which is yet to be finalised – many came to the country and negotiated with governmental authorities, especially with the Oil Ministry. Some may have talked with current FIs active in Iran despite the sanctions. Some have met with consultants, both in Iran and outside the country, to check the risks and opportunities of their potential investment. Others are waiting for the deal to be finalised and the sanctions lifted completely. More still are monitoring the movement of their competitors. The question is, are FIs really ready to come to Iran?
Due to its rich natural resources and consuming market, Iran is a very tempting country to
invest in
Due to its rich natural resources and consuming market, Iran is a very tempting country to invest in. However, entering a country without extensive research, in particular one that has seen its economy weaken and received minimal foreign investment in recent years, is not, typically, a wise decision.
The risks
The country has been under heavy sanctions and the economy has suffered as a result. Just as an example, the exchange rate fluctuation is very high and making deals in foreign currencies can impact businesses, especially in transactions with high amounts.
Moreover, and to briefly assess how foreign investment is treated; some governmental authorities have not properly prepared the ground for the arrival of FIs. For example, FIs may face one-sided contracts or conditions, and changing them can be very hard. In addition, staff of governmental authorities are not familiar on how to behave and negotiate with FIs.
In some governmental authorities, the decision-making process is very complicated and has many layers. Personnel do not accept responsibility and finding the person in charge is difficult.
And, more importantly, some laws and regulations are vague or interpretable which may impact businesses legally and financially.
The above are just some of the risks of investment in Iran. Although such risks can be found in other countries as well, they appear to have unique characteristics in each country.
The preparations
Therefore FIs should prepare themselves for such issues, which require great experience and knowledge of Iran. To make such issues easier to navigate, FIs should consider Iran-based consultants or at least consultants having connections and/or experience in Iran.
Iran’s great business opportunities are undeniable and it should certainly be considered now that the unstable political situation in the country has almost been resolved. Although, there are many issues related to the economy, culture, law, the government and other areas, which all need to be considered and assessed with great care.
Risks are inevitable in investments and are an integral part of them, however the duty of any FI is to recognise such risks and then to solve or to absorb them.
Any FI wants to earn returns on their investments and Iran is one of the best places to realise this. The country welcomes your investment, but come to Iran with open eyes.
