Economic difficulties faced by many emerging markets starting with China, is bringing Iran to the forefront as an attractive and virgin market for international investors. Many countries, including Turkey, are seeking to carve out a space in the Iranian market for their own companies. Iran offers fascinating opportunities for Turkish companies that have been struggling for some time to find markets abroad, due to the two country’s physical and cultural proximity. But, which markets exactly offer opportunities for Turkish companies, and which ones are harder to crack? A recent report prepared jointly by the Foreign Economic Relations Board (DEİK) of Turkey and the Turkish Exporters’ Council (TİM) tries to answer that question. The two bodies have recently released a report titled “Post Sanctions Iran Economic and Commercial Impact Analysis,” prepared ,n consultancy with the KPMG Turkey Management Counseling.
Turkish exports can go up by 13.7 percent
According to the report, although the falling oil prices in the wake of the lifting of the embargo against Iran have created an expectation for weaker growth in the country, analysts still expect the Iranian economy to grow by 4 to 5.5 percent in 2017. Over the next five years, Iranian imports are expected to grow by 9.3 to 11.6 percent, with experts saying that Turkish exports to the country can grow as much as 13.7 percent annually. The report, which presumes that Iran’s integration with the global economy and particularly its integration into western markets will be realized through Turkey, states that the positive impact will be felt in the energy, automotive and machinery industries.
The end of sanctions have created the opportunity for Iran – which is not a member of the World Trade Organization (WTO) — a neighbor to the region’s largest economy, to fully integrate into the global economy. The report says: “Iran’s integration into the global economy and particular into western markets will occur through Turkey. As long as no major risk that might affect regional trade and investments arises, Turkey will be the leading actor in this process. Turkish companies will turn Iran’s business potential into profitable investments through investments, trade and services. Turkey’s exports to Iran will post an increase in the double digits in a relatively short period, given the two countries’ past business relations and the $USD 30 billion exports target will become even more achievable.”
The report, which recalls that Turkey was the top third exporter to Iran in 2012, before the sanctions were imposed, notes that Turkey’s loss in exports to Iran amounted to $5.7 billion between 2013 and 2015.
$250 billion in foreign investment
The report warns that it is highly important that professional business organizations and public authorities work in tandem to take the right steps and take sound measures to increase and preserve Turkish companies’ competitive power in post-sanctions Iran.
It also notes that Iran needs foreign investment to capture its growth goals, noting that the Iranian government will be evaluating foreign investments by considering three crucial points. Firstly, Iran needs support to foster economic growth and technology transfer, and the amount of investment needed in these areas is about $250 billion. Secondly, investors that are stronger in the transfer of technology and technical know-how have the upper hand in the race for investments in that area. Lastly, investors who will offer employment to locals also seem to have a better chance.
12 prominent sectors
The report recommends Turkish investors to understand this unique market well and make enough time for Iranian decision makers to improve right relations, noting that the country is a challenging market. It notes that an initial analysis of the tax load involved, supply-chain management, approval and permit processes and access to technology before laying out their investment strategy.
