Doing Business in Iran

Business and Economic Overview

Iran was previously subject to international sanctions, lifted in 2015, which significantly hindered the potential of its economy. Since the lifting of the sanctions however, economic growth has increased, and Iran was brought out of a deep recession; nevertheless, the annual growth of 4% is lower than the 8% target Iran had.

The Iranian Rial has also lost much of its value against the dollar in the past year, resulting in the Iranian government banning the exchange of foreign currency. This combined with high inflation, at 12%, the below target GDP growth and high corruption levels mean that Iran is ranked 124 of 190 in the World Bank’s Ease of Doing Business Index, and 97 of 190 in the Starting a Business Index.

Currently, owing to the US’ withdrawal from the Joint Comprehensive Plan of Action, the future of the deal is uncertain, and the US has declared it will impose sanctions. Nevertheless, Iran has many traits which make it an appealing location for investment and business.

Iran has a large, young population, a highly educated workforce, numerous mineral resources and a strategic location on the old ‘Silk Road’.

Whilst the Iranian government and state entities control much of the market, and the true private sector accounts for 20% of activity, many opportunities exist across the public and private sectors.

Iran’s vast oil and gas sector is mature but has potential for further expansion, and the Iranian government seeks to increase production: US$105 billion are needed to replace old extraction technology.

Iran’s infrastructure also presents opportunity for investment as the state has ambitious plans in transport, water and power infrastructures, estimated to require US$1 trillion over the next decade. The growing middle class has also driven a growth in demand for premium, and indeed, Western retail goods and brands. 

The re-imposition of US sanctions, may have implications for companies of other nations dealing with Iran, and further advice should be sought on this. Some sanctions also remain in place, such as anti-terror and human rights sanctions.

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