Many foreign investors are interested in investing in Iran today. As an expert in Iranian investments, I can guide you towards making successful investments in Iran.
The report by the “McKinsey” Research Institute highlights six key strengths of Iran’s economy: “economic diversification,” “scientific education,” “growing consumer class,” “high urbanization rate,” “entrepreneurial culture,” and “strategic position for cross-border issues.” To leverage these advantages, four driving forces are essential: “optimization of natural resources’ efficiency,” “competitiveness of big industries,” “modernization and expansion of physical and digital infrastructures,” and “strengthening sectors like ICT and financial services for growth.”
According to the report authors, achieving a trillion-dollar economic growth potential and creating 9 million job opportunities in Iran require strengthening key factors such as “increasing attractiveness for foreign investors,” “ensuring macroeconomic stability,” and “strengthening financial systems and international relations.” The McKinsey Research Institute detailed Iran’s economic potential post-Joint Comprehensive Plan of Action, highlighting six specific strengths that could lead to reaching a trillion-dollar GDP and 9 million jobs in the next two decades. Economic diversification, scientific education, a growing consumer class, high urbanization rate, entrepreneurial culture, and strategic cross-border positioning are identified as advantages for Iran’s economic growth. The study suggests activating four driving forces in addition to macroeconomic adjustments: optimizing natural resource efficiency, enhancing competitiveness in local manufacturing industries like automotive, raw materials, and consumer goods, transitioning to a knowledge-based economy, and modernizing physical and digital infrastructures.
McKinsey’s reports on the Iranian economy *** Investing in Iran
McKinsey Global Institute, a leading consulting and private research organization, has conducted an analytical study titled “Iran: a trillion-dollar growth opportunity” to evaluate Iran’s economic position and potential. The report highlights Iran’s economic vision post the nuclear deal and emphasizes the country’s chance to reconnect with the international community by lifting sanctions. It raises questions about economic opportunities following the Joint Comprehensive Plan of Action and how Iran can leverage this moment. The report notes that economic marginalization due to sanctions has led to imbalanced growth in Iran, causing it to fall behind in productivity and globalization compared to Turkey. Despite this, the study suggests that Iran has the capacity to boost its GDP by a trillion dollars and generate 9 million new job opportunities across 18 economic sectors. McKinsey Institute emphasizes the importance of both domestic and international companies in driving future growth through investment, technology transfer, and knowledge management to enhance productivity. Realizing Iran’s economic potential necessitates bolstering key factors such as attracting foreign investors, ensuring macroeconomic stability, strengthening the financial system and international relations, boosting productivity, and enhancing industrial infrastructure. The study refrains from delving into political matters, focusing solely on economic and strategic aspects.
Six strong points of Iran’s economy
According to the report, to achieve its goals of reconnecting to the global economy, accelerating GDP and employment growth, and meeting the demands of its young and urban population, Iran can benefit from six key strengths outlined below:
Economic diversification: “Iran’s economy extends well beyond oil and gas.” With vast reserves of oil and gas and the cost-effective extraction of fossil fuels, the authors highlight Iran’s economy as highly diverse and not overly reliant on oil and gas. They point to sectors like retail, real estate, and professional services making a significant contribution compared to oil and gas. The report also notes a unique aspect of Iran’s economy: “its strong dependence on domestic producers across various industries, from cosmetics to pharmaceuticals and electronics.”
Scientific education: Iran produces as many engineers as the United States. McKinsey states Iran’s second strength is high participation in higher education, surpassing the UK, France, and Germany. Over a third of students graduate in engineering, placing Iran in the top five globally, nearly on par with the US. Technical knowledge significantly boosts productivity and employment, as per the report.
The expanding consumer class: “Over half of Iranian households earn over 20 thousand dollars annually.” This study highlights the significance of the consumer class size and behavior in forecasting emerging economies’ growth. Approximately 56% of households fall into the category of “consumer households” with an annual income of 20 thousand dollars (based on purchasing power parity). This percentage is double that of China and India. Among the BRIC nations, only Russia matches this level.
High urbanization rate: “Tehran’s GDP rate exceeds that of Rio de Janeiro.” The report highlights the significance of vibrant cities for economic advancement, projecting that half of global growth will stem from emerging economies in the next 25 years. With 8 metropolitan cities boasting populations exceeding a million residents, Tehran stands out for its dense population and elevated production levels in comparison to Rio de Janeiro. The report underscores Iran’s elevated urbanization level surpassing Rio’s GDP rate, indicating substantial growth prospects in this area.
Entrepreneurial culture: “Iran has a long-standing business culture that remains vibrant.” This report takes a favorable view of entrepreneurship, highlighting the innovative spirit of Iranian entrepreneurs across different sectors. It also notes that the restrictions on international companies operating in Iran have encouraged local entrepreneurs to start their own businesses to fill the voids.
Strategic location for cross-border matters: “Iran has the potential to re-emerge as a key player in regional trade.” The sixth favorable aspect highlighted in McKinsey’s report regarding Iran is its geographical advantage (size and location), historically positioning the country as a significant hub on both East-West and North-South trade routes. With shared borders with 7 nations totaling 430 million people and 40 million households, Iran’s unique geographical features could position it as a pivotal player in regional trade.
A trillion-dollar growth opportunity
The report highlights four key drivers for achieving a trillion-dollar growth in GDP and creating job opportunities for 9 million people. It emphasizes optimizing natural resource efficiency, enhancing competitiveness in manufacturing industries, transitioning to a knowledge-based economy, and upgrading infrastructure. McKinsey’s analysis suggests that Iran could achieve 3.6% annual economic growth over the next two decades by implementing these strategies and enacting macroeconomic reforms. This growth is expected to be distributed across various sectors, enhancing Iran’s economic resilience. The report proposes a $3.5 trillion investment, with a significant portion sourced from other countries to realize this growth.
If you are interested in investing in Iran, you can download the report for free.