Doing business is a challenge

The lifting of economic sanctions has provided a boost to the image of Iran as a business destination. However, substantial challenges remain for companies looking to set up shop in the country.

According to the World Bank’s Doing Business report, the country ranked 120 among 190 nations in terms of ease of doing business in 2017. This was a decline from the 117th rank it was placed at a year ago.

Trading across borders, protecting minority investors, and resolving insolvency remain the biggest issues facing Iran.

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When it comes to trading, the time and cost to both import and export, relating to border and documentary compliance is quite high as compared to the Middle East & North Africa (MENA) region in general. There has been a marginal improvement from a year ago, as the country has made across the border trading easier “by improving and expanding the services offered by the national single window,” the World Bank notes.

Hesitancy shows in business deals

Though several companies have signed deals with the country, some of them remain in the preliminary stage, and are yet to be finalized. Most of these are from the energy sector.

The primary reason for this hesitancy by global companies is due to worries that the US administration may take steps which could harm their business interest if they finalize their accords. During an interview in February, Total SA chief Patrick Pouyanné had informed that it would await clarity of stance from the Trump administration before completing its South Pars offshore gas field deal.

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Another reason for caution by some firms is the steep learning curve that they need to undergo in order to be successful with their business. Alike several other emerging and frontier markets, Iran presents a challenge in terms of getting work done smoothly and on time due to the slow political and bureaucratic machinery.

Providing an instance of this, The Wall Street Journal reported the case of Apple Inc, which tried to enter Iran in 2013 after the existing US government had permitted the export of personal-communications devices to the country. However, it had to abandon its plans “because of banking and legal problems.” Apple has not ratified this incident though.

Some of the companies which have given Iran a near complete miss are from the US. Let’s look at why this is so in the next article.

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