Reform election

Businesses Confident Over Iran Vote

(150506) -- TEHRAN, May 6, 2015 () -- A man visits the 20th Oil, Gas, Refining and Petrochemical Exhibition in Tehran, Iran, on May 6, 2015. Iran opened its international oil exhibition in Tehran on Wednesday to attract investment in its energy sector. (/Ahmad Halabisaz) [ Rechtehinweis: Keine Verwendung in China, Taiwan, Macao und Hongkong, No usage in China, Taiwan, Macao and Hongkong ]
A visitor at the 20th Oil, Gas, Refining and Petrochemical Exhibition in Tehran in 2015.
  • Why it matters

    Why it matters

    The parliamentary elections will provide strong indicators of Iran’s future economic and political direction. A hardline resurgence would dampen Western business optimism.

  • Facts

    Facts

    • Iran has an 80 million-strong market with a per capita income of about $17,000 (€15,400), making it similar to Turkey.
    • Experts say German exports to Iran could reach the €4 billion mark in the next two years.
    • German companies are popular in Iran, with senior representatives from Daimler, Volkswagen and Siemens visiting this month.
  • Audio

    Audio

  • Pdf

 

Hardliners and reformers are competing for Iran’s electorate Friday when Iranians vote for a new parliament. They will also vote for new members of the Assembly of Experts, the clerical body that appoints the country’s all-powerful theologian, the Supreme Leader.

President Hassan Rouhani ushered in a new era in 2013 when fairly moderate ministers gained key cabinet positions even while conservatives dominated parliament. However, he faces a difficult election. So far the signs of the economic upswing, promised after the signing of a deal in July that ended Western sanctions in exchange for Iran ending its nuclear program, have been few and far between.

Iran’s return to the world market promises German companies golden business opportunities. Managers and investors are delighted and Payam Afzali, a Tehran-based investment banker is already celebrating, as there is a “huge need for investment” with great potential in consumer sectors.

While ten years of isolation and sanctions were tough, Iranians are not without economic clout. This vast, 80 million-strong market has a per capita income of around $17,000 (€15,440), making Iran like Turkey. While the reformers do not expect to win the elections outright, a large voter turnout will prove whether their policies are popular.

“Growth rates of 8 to 9 percent in the coming years are realistic.”

Helga Kern, KK Research, Zurich

With Mr. Rouhani hoping for $50 billion in foreign direct investment within a year, German companies are more than welcome. Last week, Wolfgang Bernhard, head of Daimler Trucks, came calling, as did Herbert Diess, chairman of Volkswagen cars, and Joe Kaeser, chief executive of Siemens.

Commenting on the popularity of German businesses in Iran, Michael Tockus, a representative of the German-Iranian Chamber of Commerce, noted: “Germany remains Iran’s preferred trade partner”. He believes German exports could top the €4 billion mark in the next two years alone and “could even double in the long term”.

This is echoed by Helga Kern, of the Zurich-based consultancy KK Research. Growth rates of 8 to 9 percent in the coming years are realistic, she says. But those keen to do business in Iran must be tolerant, she warns. Every official conference begins with a movie that praises the country’s political and religious leaders as well as Iran’s natural beauty.

Should Mr. Rouhani make gains Friday, this would further open up the path to his long-awaited economic reforms. Since he took office in 2013, German tourist numbers have grown to 50,000 annually. Munich-based tour operator, Studiosus, has noted “a two-digit increase in turnover each year.” TUIfly, owned by the TUI Group, is considering operating flights together with an Iranian airline. And Lufthansa wants to add flights from Munich to Iran, in addition to daily routes from Frankfurt.

But business in Iran is not without risks. Large banks in the U.S. are risking their reputations if they do business there. But many German companies are unfazed by this possibility.

Since 2015, Merck has had a “good experience” producing medication that helps measure glucose in blood, together with an Iranian company, said Paolo Carli, who is responsible for Merck’s business in the Middle East.

Because business is weaker elsewhere, Siemens is also eyeing business opportunities in Iran, ranging from power engineering and subway trains to medical technology. Sources in Munich note Iran’s huge potential demand in the oil, gas and petrochemical industries. Siemens signed a declaration of intent for several big contracts in January, including contracts for the electrification of the Tehran-Mashhad rail route, the building of a high-speed track to Isfahan and for 500 passenger trains for Iran’s railways, Iranian media reported.

BASF and Linde are also allegedly prepared to invest billions in new plants, Iranian reports say. While both companies have declined to comment, BASF is apparently prepared to invest up to $6 billion in the Parsian Special Energy Zone in the south, said Marzieh Shahdaei, project director at the National Petrochemical Company, in early February. Linde is also keen to invest in several petrochemical plants, she added.

Meanwhile, Daimler wants to reopen a rundown plant together with the Iran Khodro Industrial Group. Mr. Bernhard remarked: “All we need to build trucks is still there”. In the medium term, the Iranian market could equal the Turkish market, with 40,000 truck sales per annum, he noted.

But the Germans are not alone in their enthusiasm. Chinese competitors are hot on their heels and are also eyeing up opportunities in this potentially wealthy market, Mr. Bernhard said. Business rivals from the Far East with cheaper products have tended to fill the void left by Western companies, absent due to sanctions, and doubtless they will continue to try and increase their influence there.

 

Pierre Heumann reports on the Middle East from Israel. Bert-Friedrich Fröndhoff leads a team of reporters covering the chemicals, healthcare and services industries. Editor Axel Höpner writes about technology, lighting and Osram. Markus Fasse covers the aviation and automobile industry and Christoph Schlautmann covers the logistics and waste management sectors. To contact the authors: heumann@handelsblatt.com, froendhoff@handelsblatt.com, hoepner@handelsblatt.com, fasse@handelsblatt.com, schlautmann@handelsblatt.com.

 

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!