Dubai: Iran’s economic resurgence may come sooner than expected as US politicians signal they could lift sanctions in January rather than spring.

World Bank growth predictions for Iran, last updated in September, indicate the country’s growth is expected to remain at 1.9 per cent until March, when it is expected to accelerate to 5.8 per cent, reaching 6.7 per cent in 2017.

But last week US Secretary of State John Kerry declared Iran was in compliance with US requirements and Senator Ben Cardin, a Democratic member of the Senate foreign relations committee, told a senate hearing, “Now we understand it is likely that Iran will be in compliance and entitled to sanctions relief as early as January.”

A report by the Innovation and Knowledge Centre, the intelligence hub of marketing consultancy Frost & Sullivan, noted Iran has already jumped 9 places to 74th place on the World Economic Forum’s global competitive rankings.

Iran is the Middle East and North Africa’s second largest economy after Saudi Arabia, and was worth $415 billion (Dh1.5 trillion) in 2015. Its sixth five-year-development plan, covering 2016 to 2021, anticipated 8 per cent annual growth and prioritises reforms in state-owned enterprises, banking and finance, and the management of oil revenues.

“Multiple initiatives and strategic plans are being drawn to promote industrial development and growth across a multitude of industries,” the firm said in press statement.

Automotive hub

Frost & Sullivan predicts further growth in the automotive industry, Iran’s second-largest sector after oil and gas, which contributes 10 per cent of GDP, due to the planned creation of the third automotive hub at Chabahar, Iran’s only port on the Indian Ocean.

“Iran used to be the 10th largest market for cars and trucks in the world. Since the lifting of sanctions the country has been gaining keen attention from Peugeot, which used to be a dominant player in Iran, as well as Renault and General Motors,” Frost and Sullivan noted.

The country’s oil and gas sector is expected to draw foreign investment. “The country needs cash and cash will only come from oil and gas,” Naveed Ahmad Jeddy, a partner at Ernst & Young (EY) in Bahrain, said at the China-Middle East business forum in Dubai earlier this month.

Frost & Sullivan also highlighted the steel industry and the banking sector as areas of growth. “The lifting of sanctions is expected to turn the Iranian banks to positive credit,” the firm noted. “Significant new business opportunities are expected to arise from increased trade and investment in the sizeable Iranian economy. This would, in turn, boost growth in the banking sector and support the performance of their loans.”

The firm added: “Banks and financial institutions have a huge opportunity with the Government planning almost $40 billion of infrastructure development, which would require significant bank financing.”

Hurdles

The ending of sanctions will also allow frozen overseas assets to be brought back into the country.

But there are concerns foreign investors may find hurdles in their path.

Shahbiz Shafee, managing partner of a law firm in Tehran, told the China-Middle East business forum that companies entering Iran will need to be prepared for “transitional period” of the countries regulations. “Iran has a very complicated legal system,” he said.

He noted that although it was supposed to take only 3 or 4 days to set up a company in Iran, in reality it took up to 5 weeks.

And William Hague, the former British Foreign Secretary, told the Arab Strategy Forum, also held in Dubai earlier this month, that “foreign direct investment will not flow into Iran as they might hope, due to political uncertainty, poor economic policy [and] weak rule of law”.