From Rhineland to Tehran

EghtesadOnline: Tehran has seen more than a few new faces ever since the lifting of sanctions imposed on Iran over its nuclear energy program and the reopening of the country to global trade.

News ID: ۷۷۳۷۶۲

07 February 2017

To the global community, a reopened Iran means an untapped, potentially strong market ready to spend and expand.

Now more than a year later, the affluent Zafaraniyeh neighborhood in northern Tehran was host to a business dinner on Sunday held by the Ministry of Economic Affairs, Transport, Agriculture and Viniculture from Rhineland-Palatinate state of Germany.

“Iran is definitely worth setting up production in because of its population. There are about 80 million people here and some 300 million in neighboring countries,” Joe Weingarten, the head of the Department of Innovation, Medium-Sized Enterprises and Telecommunications of the ministry, told Financial Tribune.

Rhineland-Palatinate is one of the most advanced industrial states of Germany. With an export rate of roughly 50%, the state ranks first in this category in the whole country, according to the state’s governmental website.

“Iran has the potential to become one of the main production hubs of the region,” said Weingarten, adding that the delegation is here to survey the country’s business opportunities and seeks long-term economic involvement.

The German state’s economy is remarkably diversified. Rhineland-Palatinate is a major wood producer, one of the primary hubs of the German chemical industry and a leading supplier of automobile parts.

The delegation was made up of 13 SMEs from a wide range of sectors, including chemical, electrical and mechanical engineering and business consulting, according to Dawood Nazirizadeh, a management consultant and organizer of the business trip.

“The companies here have different goals. Some want to hire staff, some want to open up a branch and some just want to start selling,” he added.

The Germans, in line with their industrious business-centered spirit, had wasted no time ever since arriving in Tehran.

According to Nazirizadeh, the delegation’s first meeting was with officials at the Department of Environment at 7 a.m. He described the talks as “very constructive” and said agreements were made to transfer German environmental technologies to Iran.

A second meeting was held with the Renewable Energy Organization of Iran, followed by a visit to the Ministry of Agriculture, German-Iranian Chamber of Commerce and Industries for a business-to-business meeting with more than 40 Iranian companies, and finally a meeting with officials at Iran Chamber of Commerce, Industries, Mining and Agriculture.

Nazirizadeh added that the delegation was to visit the city of Tabriz located in East Azarbaijan Province from February 6 to 8 on the last leg of their visit.

Optimistic Outlook

The Germans’ optimistic outlook toward the Iranian economy was further expanded upon by Andreas Schmitt, CEO of PLT Networks GmbH.

“What we feel about the Iranian market is that a lot of potential is around. It has been around a year and a half that our company is trying to win a project here. It is taking time, but we understand the process and the system here: It is a culture we need to be a part of. We need to build a relationship and build customer confidence,” he said.

PLT Networks is a process control engineering solution company.

According to Schmitt, the company delivers control systems for sectors such as oil and gas, power generation and chemical plants.

“What we do differently [compared to other companies] is customer-centric solutions. We deliver what the customer needs, not what the OEM tells them,” he said.

This resynchronization and life-cycle extension can be a boon for cash-strapped Iranian companies that are unable to purchase new production machinery and want to drive their system for longer.

“Also, people here are very well-educated and very smart. From the technical level, you can say they are actually the same and comparable to Europe. We believe the mentality of Iran and German businesses are quite the same,” he said.

Schmitt noted that they can use Iranian experts if certain specialized staff are required for production, adding that even if they are not trained in a certain field, “they are very much apt and willing to learn”.

PLT Networks is currently working with Non-Ferrous Mines and Metals Commercial Services Company on a copper project in Kerman Province, with Tavanir Company on power plants using Siemens technology, and on a few petrochemical downstream plants in Hormozgan Province with the private sector.

Risks and Rewards

Germany is willing to provide Iran with modern production technologies on a long-term basis, said Joe Weingarten.

However, he emphasized that the image of Iran as a risky business environment must change.

“What people in Germany hear about Iran mostly has to do with troubles in Iraq, Syria or Afghanistan. We do not know if this is true or not, but this is the impression German businesses get. And I think it will be very good for Iran to try and change that impression.”

The other thing that has to change, he noted, is the issue of banking relations and money transfer.

“Right now, it is very difficult for German companies to get money out of or into Iran.”

Banking relations have not been fully restored following the lifting of sanctions.

According to Weingarten, one currently needs “someone in Dubai” to have any financial transactions with Iran.

Schmitt also doubled down on this issue, but noted that business is still doable and that the market’s potential rewards outweigh risks.

“There are always options and methods [to do business]. We do not want to be restricted as long as there is any assurance, or if the risk is mitigated through the letters of credit or the [Iranian] banks themselves,” he said.

The business CEO also pointed to the lack of liquidity in the Iranian economy as a limitation to business growth. “There is no money with Iranian companies and customers, but that does not leave us disappointed … We are highly motivated,” he said.