GDP – USD$987 billion (2013)
GDP growth – 1.5% (2013)
GDP breakdown – Services: 44.5% / Industry: 44.9% (2013)
Inflation rate – 42.3% (2013)
Pros: Large Farsi-speaking market/ Useful geographical position/ High education/ Influential diaspora/ Economic liberalization/ Low cost of living
Cons: Competing with entrenched government sector/ No platform for bank transfer/ Brain drain/ Visa difficulties/ Language problems
Iran entrepreneurship in the Iranian market
Thinking of expanding into untapped markets? Be sure to have a good analysis of what exactly are the different advantages and disadvantages of the startup scene before diving into Iran. Here, we look into some of the pros and cons:
Market Analysis – Pros:
- As the birthplace of Farsi, Iran with a Farsi speaking population of 80m is just a part of the overall Farsi speaking market of about 120-130m.
- Iran has always historically been able to play a significant role economically and politically, largely in part of its geographical position, straddling large parts of the Middle East. What this means for businesses in Iran is an enormously useful springboard into a melting pot of untapped markets; Afghanistan, Kurdistan, Uzbekistan, Central Asia and Iraq. Many of these markets share many cultural and linguistical similarities with Iran, easing the process of business.
- Gaining access to the Iranian labor market would be extremely useful for tech-heavy startups given the high level of education in Iran. Besides a mandatory 8 years of education, Iran enjoys one of the highest rates of graduates entering the work force, with over 5000 new engineers every year. With a current 10% unemployment, this would imply a large pool of cheap and highly talented work force.
- Iran is positioned strategically in the Middle East, bordering countries like Turkey, Iraq, Afghanistan and Pakistan. Alongside its proximity to Dubai and UAE, Iran has acted as a useful regional hub for the Middle East.
- As mentioned earlier in our article (insert article link), there exists a large Iranian diaspora of about 4-6m with influential positions in Western and MENA tech, business and banking industries. Many of these diaspora still retain useful contacts back home and may be immensely useful in helping you to start your business in Iran.
- Cost of living in Tehran is extremely cheap, as Tehran is rated by the Economist as the 7th cheapest city to live in. Due to high inflation however, purchasing property in the capital city is starting to grow expensive ($450k for a 100sq. Meters middle-class area flat) Overall, however, Tehran is definitely a cheap alternative for growing startups.
- With the recent 2013 election of moderate leader Hassan Rouhani, the Iranian government has since initiated several liberal policies, such as the general easing of nuclear tensions. This has resulted in the steady loosening of economic sanctions by the Western governments, good news for Iranian businesses and an indicator of potential boom to come.
Market Analysis – Cons:
- Due perhaps to the young age of the startup industry, it is struggling to compete with the entrenched government sectors, who can offer salaries of up to $10k/month to their employees as compared to the $2k/month generally expected in young tech startups.
- Ironically, one of its greatest indicators of success, its well-established diaspora, has resulted in a brain drain of talent. Despite the recent liberalization of the Iranian economy, there are still rare instances of relocations to Iran.
- With existing European and US sanctions, there is no market for payments between Iran and foreign businesses. With an enclosed market for payments, you cannot pay an Iranian company through bank wirings. Many Iranian companies are currently relying on an old system of Hawala, an honor-based remittance system.
- Given the politically complicated nature of Iran, obtaining a visa can be tedious. This is even more so for citizens of the UK, US, Israel, which can expect longer waiting times for their visa approval (2 weeks for UK/Canada and up to 45 days for US citizens). To obtain a business visa, one must have an Iranian sponsor in Tehran. It is much easier to get a tourist visa through various tourist agencies.
- Although English not a common language for business and the use of Farsi (via an interpreter) is expected, many Iranians are familiar with some English as it is the first foreign language many have to learn throughout their years of schooling.