S.E.A.View

Now's the time for Asean-Iranian partnerships

Shoppers at the Grand Bazaar in central Teheran. Iran has a large, developed domestic market and a young, educated population, factors that make it an attractive proposition to South-east Asian businesses looking for new markets or to expand abroad.
Shoppers at the Grand Bazaar in central Teheran. Iran has a large, developed domestic market and a young, educated population, factors that make it an attractive proposition to South-east Asian businesses looking for new markets or to expand abroad.PHOTO: REUTERS

Iran's Parliament has ratified its nuclear deal with the West, which initiates steps towards the relief of sanctions within, by most estimates, the first half of next year.

South-east Asian nations have, in general, been less than willing participants in the US-led sanctions regime. Indeed, many in the region - having had their own struggles with colonialism - sympathise with Iran's economic plight.

Iranian traders have been present in the region for centuries - fifth-century Persian coins have been found in southern Thailand - and continue to live and work in South-east Asia today, with more than 100,000 Iranians living in Malaysia alone. This has created longstanding political, economic and cultural ties that sanctions can never erode completely, as evidenced by the foreign ministers of Indonesia and Iran, who recently reinforced bilateral ties and celebrated their mutual participation in the Non-Aligned Movement.

The time between the acceptance of the P5+1 nuclear agreement and the official lifting of sanctions next year is a unique window of opportunity for Asean and its largest companies to get a head start in Iran and thereby make an important contribution to the country and the region. South-east Asian companies can move faster than their American or European competitors, which will undoubtedly be more conservative in their approach.

Asean businesses will be warmly welcomed by the authorities and businesses hungry for investment, expertise and new ideas. On a recent trip to Iran at the invitation of the Isfahan Chamber of Commerce - the second-largest business chamber in the country - a group of executives on a study mission led by the Global Institute For Tomorrow were struck by the open enthusiasm for foreign expertise by the business community there. This openness is backed up by the Foreign Investment Promotion and Protection Law, which provides assurance that there are no limits on equity investments for foreign companies. Capital repatriation is more flexible than what one might expect in a long-isolated country. Liberal tax holidays exist in key sectors, such as agriculture, tourism and export manufacturing. The Foreign Investment Services Centre provides support, coordination and services, all accompanied by the famed Iranian hospitality.

Iran's opening presents another opportunity for South-east Asia: providing much-needed management and technology expertise. Local Iranian business leaders accept that the world has left Iran behind in both technology and management practices. This is not only the case for the oil, aviation and automotive industries, but across all sectors. Many of Iran's best and brightest have sadly departed and there is a noticeable need for upskilling and technology transfer.

Iranians are very aware that they need to improve the branding, marketing and selling of their products. This was clear when the group worked with producers and processors in the abundant apple-producing region of Semirom. Local exporters have been unable to leverage on the exceptional sweetness, aroma and colour of Semirom apples. Most exported apples - often branded in Arabic and destined for Gulf countries - make no mention of their specific origin. The foremost need, however, is more effective organisation and business models that better support key stakeholders while remaining aligned with Iran's particular institutional frameworks. Furthermore, general awareness of regional differences and effective communication remain important areas for improvement.

South-east Asian companies are in a unique position to offer their experience and expertise. Western brands are highly valued in Iran, but this may be an inflation caused by sanctions in a case of "wanting what you can't have". Chinese brands, perhaps due to their presence in Iran during the sanctions regime, are now unfortunately associated with low quality. In contrast, Asean is relatively unknown and can take advantage of older economic and cultural connections.

There are numerous opportunities for Thailand to contribute its experience in the automotive and manufacturing industries, agriculture and tourism, all areas where it has become a regional and global leader. Malaysia, as one of the world's largest and most developed centres for Islamic banking, has much to teach Iran about Syariah-compliant financial products and services, such as its sukuk bond market. Indonesia is more than just a large customer for Iranian oil, but can also provide lessons on agricultural business, processing and exports. Singapore has much to offer in terms of public-sector management, financial services, infrastructure development, water management, tourism, high-technology sectors and more; the city is also a model for how to structure an economy with a strong and significant government presence.

Iran, in spite of news stories describing it as a "troubled region", is rich, stable and welcoming. Years of grinding Western sanctions have heavily discounted what it has to offer: one of the most diversified industrial and agricultural sectors in the Middle East; a large, developed domestic market; a young, educated population; and the largest proportion of educated women in the Middle East (more than 60 per cent of university students in Iran are female). The country is also hungry for funds, ideas and potential partnerships with knowledgeable parties. This presents a unique opportunity for South-east Asian countries and companies - a window that will close as Western corporations eventually overcome politically motivated hesitation. Asean leaders need to look beyond current headlines in Western media, and make the pragmatic and practical choices towards mutually beneficial engagement in an opening economy that is destined to be the largest in the region.

  • The writer is managing director of the Global Institute For Tomorrow, Hong Kong.
A version of this article appeared in the print edition of The Straits Times on November 26, 2015, with the headline 'S.E.A.View Now's the time for Asean-Iranian partnerships'. Print Edition | Subscribe