Iran: Tech industry Growth During Sanctions!

Last Updated: 2 August 2017
Article by Shanda Consult Ltd

The economic sanctions imposed on Iran, damaged the country's high-tech sector in primarily two ways. In relation to the supply chain, purchase of required components was difficult for manufacturers. Consequently, they had to pay higher amounts with longer production process time which eventually resulted in higher production costs. On the sales end, the sanctions caused a decrease in exports and lack of the possibility of long-term contracts with foreign companies.

However, the sanctions also had positive impacts in some sectors such as Technology and Research & Development by securing the domestic market for Iranian tech firms and giving a free run to domestic start-ups to recreate their services.

According to The UNESCO report "Towards 2030," published in 2015, "the sanctions have accelerated the shift from a resource-based economy to a knowledge economy by challenging policymakers to look beyond extractive industries to the country's human capital for wealth creation. Between 2006 and 2011 the number of firms declaring R&D activities has been doubled."

Iranian researchers and scientists discovered creative solutions for industrial and software equipment  in many sectors, for example:

  • Iranian researchers at Babol University of Technology have managed to synthesize a nanostructured membrane that allows for the desalination of seawater.  This method is not only more efficient, but also leads to reduce costs.
  • At Tehran University, researchers have created a Nano-absorbent that can remove uranium from nuclear industry wastewater in an economic and efficient manner. According to the aforementioned UNESCO report, Iran ranked seventh worldwide for the volume of scientific papers related to nanotechnology. 
  • Iranian researchers at Sharif University of Technology have created solar cells with lower production costs compared to old cells, using a kind of protein found in jellyfish.  These cells also have a much higher energy conversion efficiency.

Even after the 2015 nuclear deal, Iran remains cut off economically from the rest of the world in many ways and famous brands decided not to enter the market of Iran because of the fear of violating sanctions that remain in place. For instance, there is no KFC in Iran but a local upstart called "Iran Fried Chicken", or there aren't credit cards connected to the international banking networks and visitors must carry in thick wads of money. Also, there isn't possibility to order from Amazon or similar websites.

In their place, a surprisingly active tech start-up scene has arisen. It's run by a growing number of talented Iranian youth who don't see their country of 80 million people as an isolated outcast but as a high potential market with many opportunities.

Iran's leading tech start-ups

A few of the fastest-growing companies in the digital transformation are as follows:

Snapp, launched in 2014 by the Iran Internet Group, has emerged as one of the leaders in the country's start-up scene. Snapp offers premium rides as well as female-driven vehicles for women and families. Currently it is active in Tehran, Karaj, Shiraz and Esfahan.

Zoodfood, is a food-ordering app, launched in 2009, providing information about more than 1300 restaurants throughout Iran. People can find menus, place order and be delivered through the ZoodFood website and mobile application.

Pintapin, founded in 2015, is the first and only hotel booking site which allows travellers to book and pay for Iranian hotels from outside of Iran. Pintapin is based in Tehran and is certified by the Iranian Ministry of Tourism.

Digikala, founded in 2006, is the biggest ecommerce start-up in Iran which is ranked as Iran's 3rd most visited website, according to Alexa. The company was reported to be valued at $150 million in 2014, and $500 million in late 2015, according to Wikipedia. Digikala is based in Tehran and offers services to all over Iran.

Bamilo, offering ecommerce services for fashion, electronics and general merchandise since 2014. The company is a competitor of Digikala. Bamilo also operates a technology hub in India.

Central bank of Iran announced 34% growth in online shopping market in Iran, in May 2017. The CBI, also reported 370 billion dollars online sales during the last Persian year, ended in March.

Elecomp 2017 in Tehran

Recently, the 23rd International Exhibition of Electronics, Computer and E-Commerce, named Elecomp 2017, was held in Tehran on 24 – 27 July. Although, famous International brands were absent due to the US sanctions, however, more than 800 local and foreign companies mostly from China, South Korea and Taiwan, attended the exhibition.

According to Press TV's report, Elecomp's tech start-up section related to apps, online shopping and games, had a rapid growth to more than 400 participants compared to 80 participants of three years ago.

Iran has more than 2,700 knowledge-based companies which worth $6.6 billion and this number is expected to surpass 3,000 by 2018, according to the latest report of the UN trade and development agency (UNCTAD).

Although Iranian technology and science community have been underestimated internationally, they have attempted to remain at the forefront of the technology and science industry even in the face of sanctions.

The international sanctions imposed to Iran, accelerated a shift from resource-based industry to a knowledge-based industry.

Shanda Consult covers various aspects of Business and Tax Consulting, emphasising on assisting investors to find the right Joint-Ventures partners, to decide on the best suitable corporate structure, tax consulting, country-specific coaching, corporate services, business location consulting, and others.

If you would like to gain your share in the opening market of Iran, or to find the best JV partner in Iran, don't hesitate to contact us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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