Conexio consulting

IRAN ECONOMY: ANALYSIS BY SECTORS

IRAN ECONOMY: ANALYSIS BY SECTORS

Oil and Natural Gas

These two resources are main natural income for Iran. After the end of the embargo the oil exports are expected to increase more. Investments are needed for the refineries in Iran and especially in upstream sector technology transfers, that need to be updated. The production can not meet the needs of the domestic demand but it keeps growing. Iran will offers significant opportunities for Turkish companies especially in the downstream sector.

Petrochemicals

This sector has a big contribution to Iranian economy. Especially in the last 15 years, even with the embargo, the production capacity reached 60 million tones. During the embargo, the exports used to be to the regions China and India. In the upcoming period, new ethylene production investments and the development of polymer production capacity are on the agenda of the Government. The growth of Iran sub-sectors such as plastics, rubber, fiber and packaging will also increase imports in terms of raw materials such as Turkey.

Tourism

For the last 30 years, the tourism sector was under the dominance of local hotels but now, it has attractred the international hotel chains with the rising visitor number. But there are some sets for this sector. The restriction of the alcoholic drinks and not available to pay with credit card can effect the growth. After the withdrawal of the regulations and the increase in the wealth, more tourists are coming to Turkey from Iran.

Construction and Infrastructure

Embargo has weakened the sector, as consumers have been suffered the impact on purchasing power and housing prices. There is a need of infrastructures and low-cost houses. With the Mehr project the government, which has built a large number of houses especially for the low income group, has not received intense demand. With the signing of the JCPOA, Iran has signed agreements with foreign companies and some other countries to attract construction projects in the country. The leading projects will be airport, railway and subway modernization projects.

Textile

Turkey is coming after UAE and China as 3rd in exporting countries to Iran. In terms of Turkish textile producers, low tariffs on some textile products as a result of the Preferential Trade Agreement are the most important opportunities to increase exports in the short term. But, generally the custom tariffs in textile products are so high that it will be more logical to do the production in Iran.

Construciton materials

Construction materials sector has a big share in Iranian economy. With the rich natural resources and cheap labour cost, Iran has very low production costs in cement and ceramic sectors comparing to other producers. Iran can be a strong competitor in the region for Turkey.

Energy

Iran produced 272 terawatt hours (tWs) of electricity in 2014/15 and is a net exporter if energy. The government is planning more than 800 projects for the next 20 years and is encouraging renewable energy investors to reach the target of 100 GW by 2021. In terms of Turkish investors, the average consumer price of electricity (Iran: about $ 8 / MWs, Turkey: $ 85 -144 / MWs) is the main investment opportunity.

Automotive

Iran has the biggest automotive industry in Middle East and ranked as the 20th biggest automobile manufacturer of the world. It is the second biggest sector of the country and represents 10% of gdp. It is expected that the sales can reach to 2 million in 2020.  Local players (IKCO and Saipa), which own 90 percent of the domestic market, have partnerships with Chinese manufacturers. But in the mid-term, the Iranian market can be an attractive market for Turkish automakers, also for spare parts and accessories.

Iran needs support of 250 billion $ foreign investment to achieve success in terms of economic growth and technology transfer, which is about.

It may be suggested that Turkey’s logistics policies should be re-evaluated and Iran as an important regional player in order to increase the transit trade volume.

Conexio is a consulting firm in Turkey based in Istanbul that can provide you services and support you in your activities in the region both in Turkey and in Iran.

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