Worldwide recession in oil and natural resources, obstacles on international banking transactions, credit rating, privatisation, heavy recession etc. are key factors that have slowed down the pace of investment in Iran. An annual investment of USD 150 billion reflects huge opportunities in large sectors such as Oil & Gas, Petrochemicals, Mining, Healthcare & Infrastructures. However, boost in key industries in Iran requires three to four years’ time subject to a proper strategy and ease of doing business by the government.

Ali Mirmohammad

Ali Mirmohammad

The Joint Comprehensive Plan of Action (JCPOA) of Iran has brought significant opportunities to boost foreign investment. A new route to enter the Iranian market could be to look at the untapped opportunities that are still not considered seriously. Tapping into free manufacturing capacities,partnering with Knowledge Oriented Enterprises (KOE) and acquiring equity shares of active companies in special sectors can be a couple of immediate strategies to strengthen footprint in Iran with the lowest risk.

Promotion of SMEs through foreign partnership is a key solution for the country to lift the economy from the current recession. The manufacturing sector is mainly dominated by SMEs (over 91%), where more than 70% of them are private. However, lack of liquidity, weakness in marketing & distribution strategies, obsolete technologies etc., has led to less than 50% utilisation rate. Development of foreign investment in this sector will not only help sustain the economy but also boost non-oil exports.

The government plans to finance over USD 5.3 billion of 10,000 existing SMEs to upgrade their technology and, importantly, to complete about 2,000 under-construction projects with over 60% physical progress.This will bring a couple of opportunities for technology providers and foreign investors as well.


Utilisation of free capacity by foreign parties is a key success factor, which offers many opportunities for global players. This will allow global players to utilise existing facilities and local skilled labour to manufacture low-cost products under their management. Global players can benefit from export incentives and some preferential tariff agreements to export their products out of Iran. Importantly, since the government is trying to cut the import of many products in line with a resistance economy through ongoing restrictions, hiring local capacities will allow International brands to acquire a good share of the domestic market in line with affordable sales prices.


Most of the SMEs in Iran have at least 40% free capacities.For example, the installed capacity in Food & Beverage is over 96 million tonnes while the actual production is not more than 40 million tonnes. Other example can be the plastic industry where the install capacity is 15 million tonnes while actual production is close to 3 million tonnes. By utilisation of such capacities, the country can create at least 300,000 jobs without significant investment.

The other opportunity for foreigners can be partnering with SMEs even with non-financial resources, such as technology, machinery & equipment, management etc. Moreover, partnership in expansion plans, where 70% of the project has been already financed by the local bank, can be another option.


 Knowledge Oriented Enterprises

Development of Knowledge Oriented Enterprises (KOEs) is another untapped opportunity Iran. The government aim is to generate over USD 500 billion GDP from medium & high technologies over the next decade. To reach this goal, development of KOEs from less than 2,000 to over 16,000 is on agenda.


The government has called for many incentives to boost KOEs in the country in order to not only create jobs for new graduates but also boost high technologies, such Nano Technology, Bio Technology, IT/ICT and robotics. Free/low-cost facilities, long-term loans with low interest rates, tax exemptions are a couple of incentives. International companies can opt for joint ventures, consider very small financial investments or even through non-financial resources. Manufacturing new products with lowest R&D expenses and then benefitting from governmental support to come up as mass producers is a key opportunity in this sector.

The overriding idea is looking at Iran in another way rather than only focus on key strategic projects. Attracting foreign investment in SMEs & KOE sectors will boost production capacity, export, R&D and, importantly, open up new markets and create many jobs.


Ali Mirmohammad is a Sr. Consultant & Business Development Manager for Frost & Sullivan in MENASA&Iran

The manufacturing sector is mainly dominated by SMEs (over 91%), where more than 70% of them are private. However, lack of liquidity, weakness in marketing & distribution strategies, obsolete technologies etc., has led to less than 50% utilisation rate