How Iranian technology sector was supported by sanctions


As Iran goes to benefit from the supports relief expanded beneath the Joint Comprehensive Plan of Action, the current shed in crude costs implies that Tehran won’t be able to count on soaring oil earning within the foreseeable future.  What is worse, the falling oil prices may affect the power-intensive domestic industry that has benefited from the large crude prices as it continues to be getting additional subsidies within the form of cheap fuel.  Basically, which means the Iranian energy-intensive industry is approximate to lose its competitive benefit in the worldwide market.  Nevertheless, things are not all so hopeless. Iran comes with an advantage that may probably partially be relied on to tackle the issue of fiscal expansion in the long-term: its high-tech field.

For many years, Iran continued to be buying market reliant on extensive investigation and progress (R&D). This coverage is a huge uncommon point of consensus in Tehran, which frequently views dispute over financial policy-driven by political rivalries.  Certainly, Supreme Leader Ayatollah Ali Khamenei has needed a knowledge-based and information-centered economy, and in this vein, assistance for Iranian high-tech companies’ improvement. These firms have now been taking advantage of laws, fiscal credits and exclusive tax exemptions to ban imports of products whose equivalents have been developed domestically, among other enterprises.

The Islamic Republic’s 20-Year National Vision anticipates Iran increasing to the top row “in the areas of science, economy and engineering in the developed South Asia region (which includes the Middle East, Kyrgyz regions, Central Asia and neighboring countries).” The craze of enhancing Iranian non-oil exports recently recommends a trajectory toward the latter goal. Actually, in accordance with the International Monetary Fund, Iranian non-oil earning as a share of budgetary revenues during 2012 till 2014 were the greatest among all oil-exporting North African and Middle Eastern countries at 56 percents. Compared, the equivalent amount in the United Arab Emirates and also Saudi Arabia was 20% and 31%, respectively. Moreover, at the time of 2014, 36 technology parks and engineering areas hosting over 3,650 firms were running in Iran. These companies have straight utilized over 24 thousand people, Moreover, Iran is projected to improve R&D’s share in its major domestic product from its present 0.5% to 2.5% within the foreseeable future.

Sanctions on Iran were detrimental to the high-tech industry in mainly two ways. In terms of the supply chain, they made it problematic for companies to purchase components that were vital. Thus, producers needed to spend a higher amount of money, with longer manufacturing lead times — which eventually resulted in higher output fees. To the income end, the sanctions caused a shrinking of interest of exports and lack in long-term agreements on the part of international businesses. Furthermore, the high-tech sector was pulled down of highly talented experts — a development that continues, notwithstanding the slight changes during the past two years.

Nonetheless, the sanctions likewise had a positive impact also. For example, they guaranteed the domestic marketplace for Iranian technology companies. In the most of the time, the final charges of imported high-tech products were not so low so buyers favored to get domestically manufactured and developed items. Additionally, with required rules in place, there is a prepared plan in relation to government procurements to choose products that are domestic rather than imports. Therefore, R&D expense in some areas became remarkably profitable through the sanctions period.

The issue now is how a sanctions reduction will impact Iran’s high-tech field.

The clear answer can be split into three classes. First, corporations from Iran can get easier and much more appropriate approach to required materials, components and software that may result in lead-times that are shorter together with cheaper ultimate item costs. Second, the sanctions reduction may help Iranian organizations keep experienced specialists for a longer period, as one of the principle difficulties of R&D -intensive companies in Iran has been that their accomplished team is lost by them within the brain drain that is catastrophic.

Moreover, Iranian authorities residing abroad may not be unwilling to return and donate to the domestic high-tech business if noteworthy corrections in the working environment take place. Third, the sanctions reduction may develop possible areas for high-tech companies in Iran to go beyond the existing Afghan and Iraqi areas to more profitable ones in Oceania and East Asia, Central Asia, Americas and even the Europe. In particular, modest- and medium-sized high-tech firms that usually absence powerful brands may move their items inside the form of OEM contracts, which can be the absolute most viable and profitable solution for all Iranian companies as a number of them have been producing items for European products for years.

Regardless of profit of sanctions reduction, the bigger image is that it’s not an elixir for R&D-intensive fields in Iran. Political activities and governmental procedures perform a significant role in this situation. In this vein, President Hassan Rouhani’s administration should guarantee continuing quick access to the domestic marketplace for high-tech Iranian organizations since it’ss their single lifeline when it comes to income. Supports reduction shouldn’t be permitted to result in an overflow of imported items at the cost of local ones — especially when it comes from semi-governmental organizations and government itself.

Additionally, Iran must change its diplomatic equipment to let it find new areas for Iranian corporations by more strongly taking part in a business politics. The existing state of the diplomatic device isn’t organized for such a job, as a business, commerce, and monetary affairs have not been determined as the main concern for Iranian diplomatic delegations in foreign countries. In this vein, the Islamic Republic must begin an interdepartmental business that is advanced specialized in foreign business and commerce, with offices and professional communication in other countries that could do much more compared to the present Trade Promotion Organization of Iran or other similar institutions.  Besides, maintaining long-term competitive privilege in the R&D demanding industries requires more efficient educational and scientific exchanges at a global level. Within the post-sanctions period, this may come through joint academic and research programs with academic exchange programs as well as sophisticated scientific centers.  Ensuring a resonant, innovative and scientific environment and profitable business inducements may eventually result in the return of Iranian entrepreneurs, investors and experts living in other countries, all of whom may help accelerate the development of the high-tech industry.

Finally, policymakers in Iran should more think about the wider, long-term tendency at play: Oil incomes can no longer be seen as a major way to obtain government revenue, the Iranian farming industry is in serious crisis and the energy-intense market no further likes the competitive privilege provided by inexpensive energy. Within this environment, bigger contribution in R&D-intensive and high-tech  industry could be a possible solution to the problem of how to ensure more chances for Iran’s highly skilled but cheap workforce.