MFA: Strategic opportunities for foreign exporters
The Iranian economy has remained in recession since 2018, which results mainly from the termination of the nuclear agreement (the so-called JCPOA) by the US and the subsequent imposition of US economic sanctions on most of Iran’s key industries. The coronavirus pandemic has further deepened this crisis, although due to the longer-term nature of the country’s problems, it has not hit Iran’s economy as hard as, for example, some neighboring countries.
The high rate of inflation (over 30% year-on-year in 2020) and the continued depreciation of the national currency, the rial (IRR), remain a chronic problem in Iran. Both Iran’s political negotiations with the new US government and the outcome of the country’s presidential elections planned for June 2021 will have a major impact on the further development of the economy this year. part of Iran’s state revenues, would undoubtedly have a positive impact on the country’s economic situation and its foreign trade opportunities.
Foreign business partners, including Czech companies, will be impatiently waiting to see if financial and banking restrictions on Iran will be lifted this year, which would significantly facilitate the execution of payment transactions with Iranian entities.
Due to the economic recession it is going through independently of the pandemic, Iran was forced to reduce the coronavirus restrictions to a minimum time in 2020. Already 4 weeks after the declaration of the national quarantine, the government started the revitalization of economic activities in the whole country and subsequently during the year restricted the operation of the economy only locally in case of worsening of the epidemiological situation in specific provinces.
Due to the longer-term economic crisis, the total government coronavirus support reached a maximum volume of 7% of GDP. At the same time, it was not a matter of support in the form of stimulus packages intended for individual sectors, but mainly only of support to companies through government loans with a three-year maturity and a preferential 12% interest rate. The effects of the pandemic are currently manifested in Iran in particular by a sharp increase in unemployment (some current estimates speak of an unemployment rate of up to 25%) and the impoverishment of the lower strata of the population.
Post-COVID-19 opportunities
Water management and waste industry
The poor availability of drinking water in Iran affects at least 18 provinces covering about 60% of the country. In the southern provinces (Sistan-Baluchistan, Hormozgan, Khuzistan and Bushehr) in the line of the Persian Gulf, massive construction of desalination stations is taking place, which should help solve the deepening problems with the lack of drinking water. There are currently 72 desalination stations in the country with a total daily processing capacity of 600,000 m 3 of salt water (approx. 211 million m 3 /year).
In the last 10 years alone, 54 desalination plants have been put into operation, and dozens more are under construction. The construction of wastewater treatment plants is also progressing rapidly in the country. Among other things, these should enable the further development of the south-eastern part of the capital city of Tehran, which is currently fully dependent on underground sources of drinking water, which, however, are rapidly depleting with advancing urbanization.
In the capital with 9 million inhabitants (without agglomeration), 7 to 8 thousand are produced daily. tons of waste, of which only 200 tons go to waste energy processing. In total, there are only five municipal waste power plants active in Iran, located in the cities of Tehran, Shiraz and Mashhad, with a total capacity of only 11 MW. At the same time, Iran has a huge untapped potential to produce electricity from biomass, as well as from solar and wind energy.
The pressure on water will continue to increase in Iran also with regard to the obsolescence of technologies that the country has not been able to continuously renew due to sanctions. With regard to the permanent validity of sanctions, domestic production in a number of sectors is being strengthened in the long term, which entails an increase in pressure precisely on water resources, which are a necessary prerequisite for the development of Iran’s energy industry or agricultural sector.
The potential for Czech suppliers appears especially in the supply of equipment for the disposal and processing of municipal and industrial waste (construction waste, contaminated sites, hospital and toxic waste, technology for reducing the proportion of heavy metals in industrial waste), and in the field of monitoring the current quality of purified water and air quality.
Healthcare and pharmaceutical industry
According to allcountrylist, the healthcare and pharmaceutical industries are permanently excluded from the sanctions list as “humanitarian areas”. Nevertheless, Iran has a long-term problem with medical and pharmaceutical supplies, and last year it was able to import them in a relatively limited volume (the so-called essential supplies of medical and pharmaceutical materials subsidized by the state were worth billion USD). It is all the more obvious that the Iranian market will have an increased need for imports from abroad in the future in this area. European countries now often focus on importing pharmaceuticals for organ transplants or cancer treatment in Iran.
However, the main opportunities for Czech pharmaceutical companies are rather the import of raw materials for Iran’s own pharmaceutical production (Iranian manufacturers cover 96% of domestic market consumption). These are, for example, vitamins and their derivatives or blood plasma. However, antisera, vaccines, contrast agents used in radiology or reference standards for the quality of pharmaceutical preparations are also requested.
Regarding medical devices, which are being emphasized in connection with the coronavirus pandemic, it should be noted that the Iranian market is already largely saturated in this area. Based on government incentives, immediately after the outbreak of the covid-19 infection, Iranian producers began to focus on the domestic production of lung ventilators, test and diagnostic devices, respirators, masks and disinfectants on a large scale. However, there is still a demand in Iranian hospitals for oxygen concentrators (PSA technology), biopsy needles for soft tissues or parts of portable defibrillators.
Agricultural and food industry
Every year, a significant amount of funds are allocated in the Iranian state budget, which are allocated to Iranian companies at a state-favored exchange rate for the purchase of essential commodities in non-sanctioned sectors. These are the food industry, agriculture, healthcare and the pharmaceutical industry, while last year the state released over USD 11 billion for imports in these sectors. The main part of this subsidy aid went to Iranian importers of agricultural products and food, which in 2020 included mainly corn and animal feed, seeds, edible oils, grains, rice, soybeans and barley.
For Czech suppliers, among the subsidized products, the segments of veterinary preparations for farm animals, insemination doses for bulls, the segment of nutrition, feeding and food supplements for domestic and farm animals (80% of production raw materials are imported), stable technologies (stalls, waterers), means for treating bee colonies and subsequent processing of bee products (honey, wax, royal jelly) or segments of food machinery, fishing technologies and aquaculture.
In the agricultural sector, Iranian companies will inevitably have to continue to focus on increasing the yield of the land, both with the help of high-quality artificial fertilizers and, above all, by introducing less energy-intensive irrigation systems, the so-called “pressurized irrigation systems”. There are around 8.5 million hectares of farms and orchards in the country that could be irrigated in this way. In the same way, the areas of meat processing of farm animals, preservation, pasteurization and packaging of food or processing of dairy products are highly promising.
Embassy of the Czech Republic in Tehran
e-mail: [email protected]
www.mzv.cz/teheran
