A NEW DAWN FOR SWEDISH BUSINESS IN IRAN Business Sweden A NEW DAWN FOR SWEDISH BUSINESS IN IRAN Graphic design: Jonas Sahlström, Business Sweden Communications Infographics: Cia Otterström, Co-Design Photos: iStockphoto.com Photo of Ylva Berg: Anders Thessing Print: Vitt Grafiska, 2016 FOREWORD .......................................................................................5 SUMMARY ..........................................................................................8 INTRODUCTION ............................................................................. 12 GOVERNANCE FRAMEWORK ..................................................... 15 IRAN’S ECONOMY ......................................................................... 18 TRADE AND INVESTMENT ........................................................... 22 ECONOMIC SECTORS ................................................................... 24 INVESTMENT OPPORTUNITIES .................................................. 29 TRANSPORT ................................................................................... 31 MINING ............................................................................................ 33 HEALTHCARE ................................................................................. 37 ENERGY AND ENVIRONMENTAL TECHNOLOGY .................... 39 ECONOMIC ZONES........................................................................ 43 BUSINESS CLIMATE ...................................................................... 44 EXPORTS ..........................................................................................47 SETTING UP A COMPANY .............................................................61 OPPORTUNITIES AND CHALLENGES FACING SWEDISH COMPANIES .................................................. 63 BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN 3 4 | BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN FOREWORD On 16 January 2016, the EU lifted most of its sanctions against Iran. Coupled with the limited easing by the US of its trade embargo, this move ended Iran’s international isolation and has paved the way for rapid modernisation. Many of the conditions required for economic prosperity are already in place. A commercial centre dating back thou- sands of years, Iran has a rich tradition of trade and business. Today’s large, young population is eager to improve its standard of living. Knowledge and education are prized assets. A substantial industrial base and acknowledged expertise in engineering sit alongside Iran’s strategic location and its abundance of natural resources in the form of oil, gas and minerals. At the same time, Iran is in many respects a conservative society YLVA BERG where openness is limited. Human rights abuses are rife. Influential President & CEO groups exercise control over key parts of the state-run economy. Corrup- Business Sweden tion is widespread and infrastructure underdeveloped. Women have a subordinate status in society in general – notably in the labour market – even though they account for a majority of university-level students. Oil exports will give Iran the necessary revenue to embark on over- hauling its infrastructure and modernising its economy. However, what are needed most are new trading partners and foreign investment – a fact that is widely appreciated in Iran. Only time will tell whether the country truly does open its economy to international trade and industry. This report by Business Sweden shows Iran’s special place in the world economy and highlights its ability to take a giant step forward in its economic development. As a result, a large market is now opening up for international businesses. Iran was an important export market for Swedish companies before the imposition of sanctions. Business Sweden hopes this report will help to rebuild and restore business relations between Swedish enter- prises and their Iranian counterparts. Ylva Berg President & CEO Business Sweden BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN 5 CHECKLIST FOR SWEDISH BUSINESSES IN IRAN SWEDISH COMPANIES Is the export in compliance with the company’s own statutes and EXPORT 1 guidelines for doing business in Iran? EXPORTS TO IRAN Inspectorate of Strategic Products (ISP) Potential areas of conflict with EU export controls and sanctions Scope of EU sanctions against Iran a. Classification b. Due diligence of of product business partner Scope of EU Defence material and export controls missile technology Products subject to Dual-use products 2 sanctions Unauthorised business Sensitive products Are exports Are exports affected partners affected by EU by EU sanctions export controls? against Iran? Office of Foreign Assets Control (OFAC) Scope of US Possible areas of conflict with US sanctions against Iran Scope of US sanctions against Iran sanctions against Iran US currency US territory and citizens (USD) US owners and interests 3 US content in exports US banks and financial Unauthorised business institutions Are exports affected by US partners sanctions against Iran? Swedish Customs Questions regarding exports Customs and Payments, financing Export declaration terms of trade and logistics 5 What product How can secure requirements apply payment for the export to the export? be guaranteed? 4 What terms of delivery What documents and mode of delivery are are required for the are appropriate for the export? export? THE IRANIAN MARKET 6 | BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN SWEDISH COMPANIES Is the venture in line with the compa- OR ESTABLISH ny’s own statutes and guidelines for A BUSINESS? ESTABLISH A 1 doing business in Iran? BUSINESS IN IRAN What type of company is appropriate What is required to for establishing a business? 2 register the company? How is the protection of intellectual property rights guaranteed? Is the company entering into a contract COMPANY with the Iranian government regarding 3 an investment project? PROJECT COMPANY THE IRANIAN MARKET Sources: Inspectorate of Strategic Products, Baker & McKenzie, Iranian legal experts, Business Sweden (2016). BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN 7 SUMMARY This report by Business Sweden, The international economic sanctions that A New Dawn for Swedish Business in targeted Iran’s nuclear energy programme Iran, sets out the political, economic during the last decade hit the economy hard. and legal parameters for Swedish Since 2006, Swedish companies have gradu- companies in the Iranian market. It ally scaled back their business operations or shows the steps Swedish companies else have left the country. In early 2016, the need to take to manage export activ- EU and the US partially lifted sanctions in ities in Iran and to establish business the wake of an international accord on Iran’s operations there. It also points up nuclear programme. If the Iranian govern- market opportunities and incentives ment opens up to international business, the provided by the Iranian government economy could see rapid growth over the next to foreign investors across multiple few years thanks to rising foreign investment sectors. and the resumption of oil exports. Potential Swedish exporters to Iran have a Iran has a long history as a political and number of obstacles in their path, however. cultural power in Central Asia. It stands today Companies interested in exporting to Iran as the world’s 28th largest economy, with a need to examine whether their trade is sub- young population of 80 million people, a ject to the EU’s export controls and the EU significant and relatively advanced industrial sanctions still in place against Iran. To ensure base, and sizeable assets in the form of oil, gas sanctions compliance, companies should clas- and minerals. sify their export products and establish more Since the revolution of 1979, Iran has closely the identity of their Iranian busi- been an Islamic republic and operates as a ness partners. Here, businesses can receive strong, centralised state in which ultimate assistance from the Swedish Inspectorate of political and religious power rests with the Strategic Products or consultants. US sanc- supreme leader. There is an ongoing tug-of- tions remain far-reaching and may also affect war within the state between various formal exports by Swedish companies. Questions that and informal centres of power, and this also businesses have regarding US sanctions are has a significant impact on the economy. The best referred to the US embassy in Stockholm dividing line politically is between conserv- or consultants. atives on one side and reformists, who have The next step is for Swedish companies to seen their influence grow in recent times, on address export-related issues such as customs the other. and terms of trade, payments, financing and 8 | BUSINESS SWEDEN | A NEW DAWN FOR SWEDISH BUSINESS IN IRAN logistics. Iran is not a member of the World ful trade relations. This is a large and inter- Trade Organization (WTO) and is there- esting market that is now opening up to fore not bound by international trade agree- international commerce. However, the busi- ments. Iran’s foreign trade takes the form of ness climate is challenging and corruption a substantial exchange of goods with China, is rife. Considerable uncertainty surrounds onward export via the United Arab Emirates political and economic developments. Swed- (Dubai), and widespread smuggling. Iranian ish companies that aspire to be successful in customs lag behind in terms of technology, Iran need to have