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Five reasons why Iran is the next China

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I am a 80-year-old business man who makes a living by exporting to emerging markets. I recently attended the 2015 Tehran International Industry Exhibition, and I believe that Iran could be a world power in as little as six months.

There are already plans to expand Tehran’s metro, and to electrify the 500-mile Tehran-Mashhad railway. And because Tehran already has an expansive infrastructure system, including a huge four lane motorway, we should have no difficulty in supplying the heavy equipment necessary to make such improvements.

And that’s the thing with Iran – the opportunity and the potential has always been there. The only thing that’s been holding us back have been the sanctions.

Since 1979, Iran has been subjected to a number of severe economic sanctions designed to pressure the country into abandoning its uranium enrichment program. 

But on 14 July 2015, Iran met with a group of six world powers – China, France, Russia, Germany, the US, and the UK, collectively known as P5+1. A comprehensive agreement has finally been reached regarding Iran’s nuclear programme, concluding over a decade of negotiations.

Once Iran instigates a number of restrictions on their uranium enrichment program, the economic sanctions that have held the country back since 1979 will finally be lifted. 

As a result, many economists view Iran as a coiled spring. They believe that as soon as the sanctions are lifted, Iran could become a major world power in a matter of months.

I feel confident in describing Iran as “the next China” – that is, the next global superpower. Here are my reasons why:

(1) Iran has always had potential

In 2005, Goldman Sachs identified Iran as one of the “Next Eleven” – a group of countries that they believe have high development potential. To be included, a country needs to demonstrate high macroeconomic stability, political maturity, openness of trade and investment policies, and a high quality of education.

Iran was chosen in recognition of its upper-middle-income economy, its high human development, its status as an Islamic republic, and its status as a founding member of ECO, OPEC, and GECF.

With 10 per cent of the world’s proven oil reserves and 15 per cent of its gas reserves, Iran is classed as an energy superpower. Its oil-based economy is worth around $400bn, and because the country was relatively isolated from the global financial markets, Iran was able to avoid recession in the aftermath of the 2008 global financial crisis.

However, the economic sanctions have had a punishing effect on Iran’s economy, resulting in mass inflation, mass unemployment, and an unfortunate “brain drain”, with many of Iran’s brightest minds emigrating to less restrictive markets.

Iran has significant economic potential that has so far been kept in check by sanctions. So once these sanctions are lifted, Iran can immediately begin to engage economically with the world once more.

(2) The mass unfreezing of global assets

When the sanctions were first imposed, up to $100bn of Iran’s money became frozen in foreign banks. In 2013, for example only $30-50bn of Iran’s foreign exchange reserves were readily accessible. 

But as part of the sanction relief scheme, Iran’s frozen funds will be released, freeing between $29-100bn. Crucially, though, it’s specified that these unfrozen funds are to be used to finance Iran’s domestic investments. To encourage a steady and sustainable financial recovery, they’ll be kept abroad until required.

Oil – and the price of oil – will, of course, play a role. What effect will the lifting of sanctions have on the world markets? And how will Iran rise to the challenge of becoming a global trading partner? Continue reading on page two to discover why Iran is a goldmine for foreign investors.

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