Booth Emerging Markets Summit is fast approaching and one of the noteworthy panels of the summit is “Conducting Business in Iran”. The event, which is held on April 30th, promises to be unique among top ranked MBA programs, as it will be the first at a major American business school to openly discuss investment and business opportunities in what was previously an off-limits market. To explore these opportunities, we are bringing panelists such as the IMF senior economist working on Iran and an American startup founder trying to enter the Iranian pharmaceutical market to the Harper Center for a discussion on what it means to enter the Iranian market as the country re-enters the global economy. As a fellow Iranian Boothie, here are my thoughts on the topic and your “Iran as an emerging market” 101 overview:
Post-sanctions Iran is projected to be the world’s biggest emerging market for years to come. The crippling international sanctions were lifted in January 2016, following Iran’s verification by the International Atomic Energy Agency that it had completed the necessary steps that will ensure Iran’s nuclear program remains exclusively peaceful.
The nuclear deal with Iran will open up the world’s fourth-largest oil reserves and second-largest natural gas reserves, along with an outdated energy sector that will require hundreds of billions of dollars in foreign investment. But it is not just Iran’s energy sector or its vast natural resources that has excited Western business leaders. The deal could also open up Iran’s underserved population of 77 million to multinationals and smaller businesses.
Unlike other oil producing countries in the Middle East, Iran’s economy is much more diverse. Iran has a strong agricultural export sector as well as a potentially lucrative auto sector. For instance, Iran’s pistachio industry competes directly with the US to dominate the world market. Moreover, Iran’s demographics are promising; Not only is the majority of the population under 35 years of age, but the labor force is highly skilled: Iran’s a literacy rate is 98%, and women now make up more than 60% of the university population. Moreover, the country’s 2,500 year old history and untapped tourism potential has made Iran one of the most talked about tourist destinations.
Iran’s recent elections were another promising sign for the strengthening of the country’s moderate faction who are eager to steer Iran towards the global economy. Despite this progress, however, several major problems loom on the horizon. An economic system largely controlled by state institutions remains in place, while corruption and nepotism present enormous challenges for many foreign firms looking to enter the market. Also, Iran’s domestic political system remains fragile and in the event that Iran does not hold up its end of the nuclear deal, international sanctions could snap back in place, isolating the economy once again. As one commentator has noted, the central question that remains unanswered is whether this will be a Deng Xiaoping moment – in other words, will the Iranian government use this opportunity to open up to the world and integrate into the global economy, or will it close up once again?
The Chicago Booth Emerging Markets Summit will be covering this topic and many more in depth. Please join us at the conference on April 30th, and visit groups.chicagobooth.edu/ems to learn more.
Hoda Gerami Booth'16 is a contributing writer for ChiBus and has both visited and studied the culture and economics of Iran.