By Roopen Roy Feb 02 2016
Year 2016 has started with ominous signs. China’s economy is slowing down, the commodities market is in turmoil, oil prices have plummeted, the US is showing symptoms of growth moderation, India’s exports are sputtering and the stock markets are in a bearish mood. There is one good news, which is a bright spot in the otherwise gloomy financial climate: Iran, a country with GDP in excess of $1 trillion (purchase-power parity basis) and a population of 80 million is open for business.
Iran and India have a long and historic relationship. Iran is a large supplier of crude oil to India. With the economic sanctions, the footprint of the mutual trade became narrow. Yet trading continued. Because of the support that India gave to Iran during the times of her crisis, Iran has declared India as a priority partner in trade. On February 1, Iran has confirmed that it now has access to more than $100 billion worth of frozen overseas assets following the implementation of a landmark nuclear deal with world powers.
Iran’s government spokesman Mohammad Bagher Nobakht said much of the money had been piling up in banks in China, India, Japan, South Korea and Turkey since international sanctions were tightened in 2012 over Tehran’s nuclear programme. Iran’s central bank official Nasser Hakimi has claimed that nine Iranian banks are now reconnected to SWIFT, a Belgian-based cooperative that handles wire transfers between financial institutions. It is, therefore, time for Indian banks to begin opening offices in the major Iranian cities that are of commercial importance e.g., Mashhad, Tehran and Isfahan.
While stepping up its import of crude oil from Iran, India has the opportunity of exporting large quantities of rice, soya, orthodox tea, sugar, fruits and flowers. Iran also imports engineering products, automobiles, farm equipment, pharmaceuticals, gems and jewelry, iron and steel and textiles. We should aim at a bilateral trade of $20 billion to $30 billion, once the indirect trade through the UAE is disintermediated. Iran has already expressed much enthusiasm about expanding trade and mutual investments with India.
Iran is expected to be the new boom-country for construction and modernisation of ports, railways and airports and Indian companies should bid for a fair share of the new business. Because of the sanctions, Iran’s businesses do not have state-of-the-art IT systems in place. The government IT systems also needs to be modernised. If Indian IT companies move in fast, a large market for IT services is waiting to be won. Partnerships with local Iranian entrepreneurs should be forged to penetrate this large and lucrative segment.
Iran has an estimated 300,000 engineers who are creating home-grown start-ups. The Sharif University of Technology is often called the MIT of Iran and has produced fine engineers, some of whom have migrated to the US and are working in tech companies there. Iran has a strong diaspora in the US.
Internet and smartphone penetration is extremely high in Iran, where 70 per cent of the 80 million population is under 35. At least half of Iranians have access to a smartphone. There are conflicting reports about the number of internet users, but according to Internet World Stats, Iran has more than 46 million internet users (57 per cent penetration), which is almost half the total number of internet users in the whole of West Asia.
In Iran, Twitter, YouTube and Facebook are among many sites blocked by the authorities. And as in China, it has motivated a new generation of young entrepreneurs to invent their own versions. But with sanctions lifted and the world lining up to invest in the tech sector, how will the future play out? Iran has spawned its own startups. The Google Play equivalent of Iran is called Café Bazaar, they have Bamilo instead of Amazon, Taxi Yaab for Uber and Mazando for Ebay. A partnership with India in the hi-tech and startup space can spark boundless innovation.
Iran could be a destination of India’s investments, which would pave the way for exports. Iran is offering generous incentives to foreign investors to attract investments and managerial talent to transition and globalise its economy. It is guaranteeing, at least on paper, equal access to the home market, taxes of 10 per cent or less, 100 per cent repatriation of profits and special economic export zones. India’s private sector can offer consumer credit, manufacturing technology for auto parts and electric vehicles, generic pharma and IT services.
We should take steps to renew our links of learning and education. At this time, about 8,000 Iranian students are studying in India. India provides 67 scholarships every year to Iranian students under various schemes. Every year around 40,000 Iranians visit India for various purposes, including medical treatment. These exchanges should be increased by four or five times in the next two years.
Rabindranath Tagore visited Persia (now Iran) in 1932. One evening, religious leaders came to visit him and asked which was the right path among many religions. Tagore answered this question in his own inimitable way, “Supposing one closed all the windows of a room, and then asked how one could get some light, then someone may find an answer by striking flint stones, another by lighting an oil lamp, yet another by a wax candle, and someone else by switching on an electric light.”
Now that the doors and windows of Iran have opened after 36 years, it is time to let the natural sunlight stream in.
(The author is founder and CEO of Sumantrana, a
strategy advisory firm)