Agribusiness to Iran

(Last updated: 18 Jul 2007)

Trends and opportunities

The market

While the Iranian Government policy is aimed at self-sufficiency, it’s unlikely the country will produce enough agricultural products in the short- to medium-term to meet that goal. Iran has struggled to provide enough basic food commodities to its local market demands, following a significant population increase over the past two decades. For example, annual wheat production ranges between six and 10 million tonnes, yet the government currently imports between three and four million tonnes to meet demand.

The focus areas for agriculture are:

• Financing and low-interest loans for investment in agriculture and agro-industrial projects
• Ensuring self-sufficiency in the provision of national food requirements
• Budgets for agro-industrial projects in the food processing, packaging and irrigation sectors
• Provision of agricultural machinery and equipment with emphasis on local production by making transfer of technology a required clause in foreign contracts
• Allocation of government loans and financing for agro-industrial projects

Opportunities

Opportunities for Australian agricultural exports to Iran include:

• commodity products such as wheat, rice, sugar and canola
• feed barley, soy and corn
• beef, lamb, mutton and chicken

The focus on food processing and packaging will provide opportunities for equipment supply and technical consultancy.

Other agribusiness opportunities exist in irrigation, education and training, consultancy and the supply of fertilisers, pesticides, herbicides, education, training and consultancy services.

In the livestock sector, Iran has a large poultry and dairy industry and imports close to two million tonnes of feed grain annually.

Opportunities in the dairy sector are limited, but there are possibilities for export in the areas of processing, production, packaging and storage of all dairy products.

Tariffs, regulations and customs

It’s illegal to import any product to Iran that is manufactured locally. Imports of essential items are often subsidised by the government to ensure the general population can afford to buy staples such as wheat, meat, cooking oils, rice and sugar.

Meat and dairy products are considered strategic items and are imported by the Government Trading Corporation or the Ministry of Jihad and Agriculture at favourable exchange rates to regulate the market.

Strict import regulations are getting more relaxed and the private sector involvement in the field is increasing.

Industry standards

Iran is signatory to bi-lateral protocols that set the standards for many of its agricultural imports including meat and wheat. The protocols are usually negotiated on a country-by-country basis and it’s commonplace for Iran to inspect produce prior to shipment.

Iran Customs and the Iran Veterinary Organisation are the policing bodies for imported food products, including dairy.

Meat imports require written authorisation from the Ministries of Commerce and Construction Jihad. The Iranian Government insists on the presence of Shiite clergymen and inspections by the Veterinary Organisation during any livestock slaughter.

Marketing your products and services

Market entry

Australia is considered a very reliable supplier and enjoys good political relations with Iran. Australia continued to finance and supply some essential commodities to Iran during the Iran/Iraq war. Iran sees Australia as a source of more than just agricultural commodities but also as source of agricultural technology, techniques and training.

The Government Trading Corporation (GTC), State Livestock Affairs Logistics (SLAL), and private companies purchase agricultural commodity products. Most bulk purchases of essential or strategic goods are conducted through GTC – where dealing direct with suppliers of a reputable nature and size is the preferred option.

It’s essential to establish a relationship with the key decision makers in GTC, although price is the key determinant. SLAL imports mainly feed stocks and meats, and again, relationship is as important as availability.

For ongoing sales it may be advantageous to appoint a distributor to handle relationships with the local purchaser. The stronger the local presence, the better the chance of finding the right contacts in the Iranian hierarchy who facilitate the awarding of projects and purchases.

The main barrier to entering Iran is the difficulty in financing the proposed projects. Most financiers have adopted a wait-and-see approach citing:

• political uncertainty
• legal uncertainty
• dispute resolution
• structuring of contracts
• opportunity costs
• multiple exchange rates
• ownership of oil and gas fields
• US sanctions (Iran Libya Sanction Act)

Unless authorised by Iran’s most powerful economic body, the Economic Council, all foreign contracts and transactions with state agencies valued at more than US$1 million must be undertaken through limited or international tender. A commission composed of the Ministers of Economic Affairs and Finance, Information Ministry, the Head of the Plan and Budget Organisation and two members of Parliament monitors all contracts with foreign companies.

Due to the existence of parallel forces and institutions within the Islamic regime of Iran, the actual power and influence of no person or organisation can be judged solely on the basis of position, but rather on the person or organisation’s contacts and position in the complex network of informal organisations. Therefore, care must be taken in approaching different bodies in the distribution network.

To date, doing business in Iran has had political overtones. In this regard, Australia has an advantage since it maintains an impartial political image in the Middle East. Multinational companies should use this knowledge when deciding under which flag they will enter Iran.

General marketing advice regarding business in Iran:

• Be flexible, adapt, but don’t conform
• Be patient, but not passive
• Be locally active
• Have finance available
• Be fair with profits
• Maintain a long-term commitment through times of profit and hardship
• Comply with the Iranian business customs
• Get to know the key people
• Choose a compatible local partner
• Your primary project is always your primary reference. if you win the project, you have more chance of winning future extensions/amendments
• The technical winner is not necessarily the final winner
• Business in Iran needs to be conducted in a ‘hands-on’ manner

Due the difficulties in negotiating with Iranian government organisations and the disorganised nature of the private sector, Australian exporters (even experienced ones) are urged to make contact through Austrade in Tehran.