Iran: doing business in a frontier market

September 29, 2016 Taylee Lewis 0 Comments

Proceed with caution

The easing of economic sanctions placed on Iran presents Australian businesses with the opportunity to enter perhaps one of the global economy’s last frontier markets.

After years of isolation, both politically and economically, Australian businesses now have the opportunity to penetrate a market of 80 million people and a GDP of nearly $US390 billion.

In an op-ed in The Australian, Minister for Trade, Tourism and Investment, Steven Ciobo, said the reintegration of Iran into the global economy is significant, with business opportunities for a variety of sectors from food and healthcare to technology and vocational training.

Australian companies like Blackmores, Qantas, GrainCorp and Cochlear are Tehran-bound this week as part of a business delegation led by the Minister. The Turnbull Government is clearly making strides, having re-opened an Austrade office in the capital. Multinationals like Boeing, Airbus, Total and Peugeot-Citroen are also eyeing the market.

But Iran is a classic exemplar of the risk versus reward conundrum. While there are positives, like enviable demographics whereby over half of the population is under 30, there are challenges.

Australian businesses will need to understand how to operate in the face of the remaining sanctions. Businesses will also need to identify appropriate opportunities and develop the means to access them.

What also needs to be remembered is that the recently lifted sanctions could again be applied if Iran’s adherence to the nuclear deal falls short.

Another, and extremely pertinent consideration for Australian businesses, is to remain conscious of domestic sentiment. Think back to ASX-listed milk processors entering the Chinese market via Diagous shoppers. While the trend excited shareholders, Australian consumers voiced concern over local product availability.

Nonetheless, if Iran is going to achieve a 4.6 per cent GDP growth rate in 2017 as forecast by the World Bank, it is going to need foreign expertise. And as the economy grows, it’s going to need the products and services to sustain and service it.

There are many risks involved with entering this market, but the rewards are enticing. Australian businesses are leaders in their fields, and with the right adviser, can manage Iran’s complexities and reap the rewards.

By Taylee Lewis, Senior Consultant