Weeks after the historic deal with the west was struck, CEOs and key decision-makers mainly from Europe flocked to Tehran to negotiate agreements and make sure they too get a piece of the pie. Amid ongoing global economic uncertainty, Iran is proving increasingly attractive for those willing to take risk. Iran’s huge domestic market with a 79-million strong population, its advantageous location and access to strategic maritime passages, make it one of the top investment destinations on the globe. Furthermore, its young, well-educated and comparatively low-paid workforce present a significant advantage over its Middle Eastern neighbours, where the high cost of foreign labour and need to train and develop local talent often act as a barrier to foreign investment.

Iran is expected to see high real GDP growth of between 6-7% in the next years. Demand for quality products and brands is also likely to increase as the nation’s purchasing power improves, while its geographic reach to 400 million people make it the perfect gateway for the export of services and goods.

According to a recent report by Frost & Sullivan, now is a good time to invest in Iran’s energy industry as the country seeks to develop its non-oil segment and diversify its economy away from crude oil export. In the past, over 75% of foreign investment on average went to projects for the exploration and production of oil and gas. However, Iran is now planning to divert investment into refining and petrochemicals, the report said.

Under Vision 2025, Iran plans to emerge as the largest producer of petrochemical products in the region, with plastics, rubbers, paints, resins and fertilisers among the array of products the country plans to develop over the next 10 years. On the back of growing domestic demand, Iran also plans to invest in chemicals, solvents, medicines, cosmetics, composites and detergents.

However, in order to realise its plan to become the region's largest petrochemical producer, Iran would need at least $70bn to develop its petrochemical sector. Frost and Sullivan estimate that an investment of this size would help petrochemical exports grow from at least $12bn in 2015 to over $40bn by the end of 2025. But none of these mammoth figures would ever be achieved without the help of foreign expertise and cutting-edge technology, which in turn presents lucrative opportunities for European investors.

“Abundance of feedstock, relatively suitable infrastructure, low cost of production and access to skilled labours are key factors that make Iran interesting for investors in the petrochemical space. The country’s natural reserves of Ethane, Propane and Naphtha are sufficient to set up new petrochemical complexes within the next ten years,” said Ali Mirmohammad, senior consultant and business development manager - Iran, Frost & Sullivan.

Switzerland is among a long list of companies to have already inked contracts with Iran after the sanctions were lifted. Marking the first deal between the Islamic Republic and Bern in over a decade, Swiss Engineers Welding agreed to construct and operate a new petrochemical complex on the Persian Gulf coast. The agreement is likely to set the scene for more investment from Switzerland, which is now being encouraged by the country’s political elite too. The Swiss President Johann Schneider-Ammann was in Tehran this February where he agreed on an investment roadmap with Hassan Rouhani that would include cooperation in different fields. Six Memoranda of Understanding (MoUs) were signed in the field of science and technology, and a decision was made to work to improve tourism ties.

Pounded by years of sanctions, Iran’s local infrastructure is rapidly deteriorating and therefore needs significant foreign investment to renovate and rebuild. Suhail el Obeid, senior consultant for Africa, Middle East, Iran & Turkey at Switzerland Global Enterprise, is of the opinion that key sectors such as construction, utilities, housing and transportation present various opportunities for collaboration between Tehran and Swiss investors. Furethermore, Iran’s promising but neglected industries for specialised components, automobiles, specialised medicines and medical devices, key raw materials and retail hold significant opportunities for collaboration between the two states. Financial services and insurance are also expected to attract the interest of Swiss-based companies which specialise in the field, as more and more investors from around the globe choose to do business in Iran. 

However, challenges related to money transfer, customs and taxes, which can be aggravated by corruption and bureaucratic setbacks, continue to trouble investors. For all its skilled and well-trained workforce, Iran is missing much needed marketing and management professionals, who would need to come from abroad. It would also need to provide higher economic planning reliability and better market transparency. With some banks still cautious about financial transactions to and from the country, finding alternatives to a bank transfer, e.g. via money exchange offices might be the most viable option, according to Obeid.

“I think banks and insurance providers are very cautious and tier one banks will be back at the earliest in one and a half to two years. They are all preparing themselves for this event, but none of them wants to make the first step. Thereafter, a boom can happen, since Iran traditionally was a big market for them,” he said.

Some of the risks for Swiss investors in Iran include potential snap-back of sanctions, general political risks and working with the wrong partners, Obeid added. In giving a few tips on how to work when entering the market, he advised investors to look out for a reliable partner, ensure continuous and personal follow-up, focus on training and knowledge transfer, and last but not least, follow the ‘Three Cs’ -- Control, Coordinate and Cooperate.