About a year ago, all eyes were on Iran. In the realm of negotiations, the burning question was: would they sign a nuclear deal and so have sanctions lifted? And they did. A year down the line this month and, enriched by my many more visits to the country, I think it is time to pause, draw lessons and share lessons, good and bad!
Lesson 1: There is a massive perception gap when it comes to Iran. It plays out at many different levels from society to the investing landscape. These are the facts.
Life is not under constant scrutiny, full of pressure or fear in the country. With 50% of the population below 35 years old, how can it be? People work, dream, have fun in Iran. Yes, there is a lingering ‘’end of an era’’ feeling in the city, but the energy is real and palpable. Everything seems possible.
Iran is much more favourable towards foreign direct investment than Russia, China or last year’s darling Nigeria.
There is a guarantee not to impose capital controls. A foreigner can own 100% of a company. The central bank guarantees availability of foreign exchange at any time. Yes, one cannot yet play in the upstream oil and gas and security-related industries. This is a rather progressive way of reopening the country highly dependent on oil and in a currently turbulent region.
So what to advise all you sceptics or enthusiasts, risk-takers or contrarians? Move away from the further-and-unknown-equals-more-risk mindset so engrained in sophisticated financial centres such as London, Singapore, Geneva and even Paris. Get on a plane. Go see for yourself. If this is still too much for you, sign up for one of the burgeoning number of conferences on the topic and take it slowly.
Lesson 2: There is a gold rush mentality in the country. We are all savvy investors and pragmatic on top of that. We are talking about the last frontier market with a real potential to be a game-changer for the region. Everyone locally would want to have a slice of the pie, just like Russia in the 1990s. But when it comes to Iran, there are two additional intricacies – lack of information and a highly layered and network-based society for you to navigate.
How does this translate into practise? You need very quickly to develop your own local contacts, people who will not treat you as a complete neophyte, to save you from totally unrealistic financial demands.
What to do? Follow a proven methodology. Invest time in building your own networks – at the business level and, if you are not risk-averse to military networks as well, inside and outside the country.
Focus on one industry or something you know the country needs.
Perform extensive due diligence, and there is something unique in Iranian communities. They are vast and small when it comes to business. Once plugged into the right networks, you will be in a position to cross-reference easily and find the right entry points or bridges.
Stay alert, keep focused. Dealing with Iran is like playing a multidimensional chess game, where no one shares all the rules with you and the unsaid matters at times much more than the said.
What else to share with you? The country is still in a fragile state, at the crux of several opposing forces. Saudi Arabia has the real ambition to keep its predominance in the region and is playing on all possible fronts – oil price, religious beliefs and huge economic transformation.
The US is in an election year that could lead to bad or worse for the country and the world. They are still heavily influencing how and when Europe will be playing its cards with Iran – hence the delay in plugging the country back into global financial systems.
In Iran, people are anxious to see real traction from the “joint plan of action” – an agreement with the UN over Iran’s nuclear program. People are flying to the country, memorandums of understanding are being signed, but funding remains an issue. Next year is a presidential election year in Iran. President Hassan Rouhani’s bid for re-election will be tied to his ability to deliver on some of the promises that led to accepting the joint plan of action in the first place. If not, all bets are off.
So what to take away from an investor standpoint? Iran is a one-of-a-kind market, sophisticated yet re-emerging. The country is a land of opportunity, today and tomorrow. It will remain so for years to come. Getting an entry ticket is possible today with the right people and the right mindset.
Do not believe anyone who tells you it is too late to start. Timing is everything, but go and see for yourself, experience, suffer – and then get in touch and we can swap notes.