Iranian E-Commerce Unionist Reviews US Sanctions: Interview

EghtesadOnline: In an interview with the Financial Tribune, secretary of Iran E-Commerce Union Shayan Shalileh has discussed the impact of US-imposed sanctions on local startups and online businesses and reviewed the performance of ICT Minister Mohammad Javad Azari Jahromi.

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08 January 2019

The secretary of Iran E-Commerce Union says the new US sanctions have had an impact on local startups and online businesses.

“US sanctions have impacted Iranian startups and the local e-commerce sector in three ways: harmed the people’s purchasing power, forced local and foreign firms to put their operations in Iran on hold and barred local startups from using online services sold by international firms,” Shayan Shalileh told the Financial Tribune.

Admitting that Iran’s economy is facing challenges due to the US restrictions, Shalileh says, “Purchasing power of the people has taken a hit. As such, households are cutting unnecessary spending. Due to this bitter fact, revenues of many local startups have also plummeted.”

Startups active in the fashion sector have been impacted the most.

Giving another example, he says, “While the number of orders online food delivery services get daily has not declined, the amount of money people spend through these platforms is declining. This will certainly undermine the income of online businesses.”

“Some 15 startups have gone bankrupt since US President Donald Trump abandoned the Iran nuclear deal in May and re-sanctioned Tehran.”

While revenues of digital marketplaces selling new products have stumbled, online shops offering second-hand products have expanded.

“When you can’t afford brand new products, you will make do with second-hand,” he said adding, “In order to protect their interest, companies will develop new business methods that are more compatible with the sanctions.”

Investments on Hold

“Foreign investors, who had made a foray into Iran’s online business sector after Tehran signed the historic nuclear deal in 2016 with the six world powers, have walked away,” fearing the US wrath, Shalileh said without naming the companies.

He noted that due to the ongoing economic difficulties most local investment firms and venture capital funds have also suspended their operations. “Literally, everything has been put on hold.”

Shalileh pointed to the recent “Slack Ban”. In late December, citing the US sanctions, workplace chat app ‘Slack’ banned Iranian users, the move was widely criticized on social media platform with the hashtag #SlackBan.

Referring to the unprofessional ways of the company, Shalileh says, “Iranian startups are being barred from online services offered by international firms. The Slack ban is just one example.” Many local firms have been barred from using services offered by Google Inc. and Apple Inc.

Possible Countermeasures

The union member discussed measures the government can and should implement to support the dynamism of Iranian startups.

He is strongly against “cash handouts and loans” rejecting such policy as the “worst nightmare for Iran’s startup ecosystem.”

“With government-sponsored loans startups will get diverted from the right path. Over time they will get deep in the red and instead of relying on their own resources and capabilities, they will seek more and more of the same.”

Instead of loans the government should focus on taming the bloated bureaucracy, cut insurance costs for startups and offer tax holidays, he told the Tribune.

Entrepreneurs have often criticized the government for the drawn-out legal procedures, which they insist are heavy on bureaucracy and torpor and apparently discourage private enterprise.

A Question of Priorities

After winning a second and last term in the 2017 presidential election, Hassan Rouhani appointed Mohammad Javad Azari Jahromi as ICT minister.

Born in 1982, he is the youngest to be appointed as minster after the 1979 revolution. Since taking office, Jahromi has been an active Twitter and Instagram user.

His presence on the social media platforms, while commended by some, has attracted its fair share of criticism. Furthermore, many have point out that during his time in office, the ministry has focused largely on startups when enhancing national information and communication technology infrastructure should be high on the government agenda.

Shalileh agrees with the critics and is of the opinion that while Jahromi’s support for startups is welcome, the ministry should focus more on infrastructure development.

“We have brought up this point with Jahromi and his men over the past several months. In response, they say they are working also on infrastructure. However, such endeavors hardly get as much news coverage as the ministry’s support for startups.”

The young unionist (born in 1983) says, “Appointing Jahromi to the top ICT job was a step in the right direction. He has provided startups and e-commerce firms the opportunity to communicate with a part of the state apparatus that for years was unreachable.”

“I’m not in a place to comment on Jahromi’s technical knowledge in the ICT field. I’m just saying one of the perks of working with Jahromi and his men is that they are young enough to understand the concerns of our generation. We have been able to establish a discourse with them. This makes work easier.”