Iran Holds Huge Promise — And It’s Not Just In Energy, Says This London-Based Investor

Iran actually has a host of other opportunities in less obvious areas even though the country has piqued financial interest throughout the world for its massive energy reserves, according to one global investor.

The cheap labor, abundance of natural resources, and well-educated youth are among the promises that Tran holds for Clemente Cappello, CIO of London-based Sturgeon Capital. While Iran could also grow its technology sector, there are specific sectors that could benefit from this mix which includes glass, manufacturing and petrochemicals, he explained.

In fact, local versions of Uber, Amazon and eBay is already present in the country.

He thinks “equity opportunity is the easiest and most profitable” option in the country, in addition to that, Cappello mentioned.

While interest rates could soon be cut in half, dividend yields are “well into the double digits” and stocks are trading on average of six times price-to-earnings ratio, he said.

Following with his domestic economic reforms, especially in the troubled banking sector, and continuance with a foreign policy of re-integrating Iran’s economy with the rest of the world, are possible for President Hassan Rouhani to continue with after Iran’s recent election in May.

Service providers such as banks are the “real obstacle” for foreign investors, said Cappello, who launched Sturgeon Capital’s Iranian fund. Those banks “are not keen to do business with Iran,” he said.

The investor that lack understanding about the changing Iranian business dynamics was also highlighted by the investor in terms of the risk faced by foreign investors. He said that not understanding the stakeholder structure of entities is among the other risks associated with doing business in Iran.

The U.S. signed a waiver extending sanction relief a week before the Iranian election. French energy giant Total has stated that it will resume investments in Iran in a statement that followed the above development.

And in terms of attracting foreign investments in 2016, the United Nations Conference on Trade and Development has put Iran among the successful countries.

And noting a 63 percent increase from the previous year was Iran attracted $3.372 billion worth of foreign investments, the World Investment Report said in its 2017 report.

As s President Donald Trump’s administration has said it is “putting Iran on notice”, it is plausible that the prospect of new sanctions could scare off foreign investors.

Nonetheless, “the continued aggressive rhetoric clearly does not help sentiment and makes perceived risks higher than what they actually are”, Cappello said and the U.S. cannot legally alter the international agreement with Tehran on its own.

He said that it will depend on continued reforms when it comes to Iran developing a fruitful economic relationship with investors.

“Our hope is that … deals such as the one Total signed will set a precedent that doing business with Iran is okay and encourage the global business community to re-engage the country.”

(Adapted from CNBC)


Categories: Economy & Finance, Entrepreneurship, Sustainability, Uncategorized

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