“Iran-Luxembourg: Partners in a Changing World”

Business Opportunities & Cultural Approach

Bahador Baradari

Chambre de Commerce, Luxembourg

30th June 2016

Hamedan Province

Overview

Why Iran

Market Segments & Opportunities

Cultural Understanding

Way Forward

Persepolis, Fars Province

Why Iran?

Re-opening Frontier Market

Dasht-E-Kavir

Physical Capital

A strong combination of human & physical capital

offer strong fundamentals…

Human Capital

98% youth literacy rate

60% below age of 30

5000 year old civilization

233,000 annual

graduates in Engineering,

Manufacturing & Construction

80mio population

$425 Bn GDP

output despite sanctions, places

the country 2nd market in the

region after Saudi Arabia

# 1 proven gas reserves in

the world, 18% of total

# 2 largest OPEC oil

exporter

$180 Bn Consumer

Spending

Mount Damavand, Mazandaran Province

And sophistication via strong established industries, a

well educated & engaged population

1,000,000+ cars produced annually

319 companies listed

8,000,000 Iranians own shares

58% university enrolment

#16 on global output of

academic articles

#43 on availability of

scientists & engineers

55% internet penetration 126% mobile phone

penetration

100Bn Tehran Stock Exchange

46mio internet users

Gate of All Nations, Fars Province

The prospects for

opportunities are promising

Affinity for Western Goods- young

population prefers European & American brands

$180Bn – annual consumer spending

Upgrade Needed – for all industries, ranging

from car manufacturers to banking

$17,300 GDP per capita PPP – despite

sanctions, which puts the Iranians ahead of many

emerging consumer markets

($, 000)

India

5,70

South

Africa

13,05

China

13,20

Brazil

15,80

Iran

17,30

Turkey

19,20

IndonesiaMexico

10,50

17,10

Egypt

10,53

9% CAGR* - growth of imports 2000-2014

despite sanctions

Note: * Compound Annual Growth Rate

Source: World Bank 2014

Zahhak Castle, East Azerbaijan Province

The latest financial sanctions resulted

in a ~55% drop in foreign investment

3,0

4,0

5,0

1,0

3,5

4,5

2,5

1,5

0,5

0,0

2,0

3,04

2003

2,88

2002

3,52

2001

3,02

2010

3,65

2009

2,98

2008

1,98

2007

2,02

2006

2,32

2005

2,89

2011

FDI ($, Bn)

4,66

2012

0,83

3,05

4,28

2013

2,11

2014

-54,7%

-72,5%

2004

FDI (US$, Bn)FDI (% GDP)

• Not only has FDI nominal value dropped by ~40% but more

importantly the % FDI as per GDP has steadily reduced over 11

years by ~73%

• In comparison with Turkey (2013) which stands at 1.56% and

$13 billion in FDI or similarly Saudi Arabia (2013) with 1.24% of

GDP respectively $8 billion in FDI

Economic Rebound since sanction lifting

Climbing regional FDI Ranking

Clearly, once money flow issues are fixed, the

upward potential for investments in the

country are tremendous

Ranking Market ShareIn the Middle-East

Between Jan 2013

& Dec 2015

Since sanction

lifting, Q1 2016

12th /

141.62%

11%3rd

(behind UAE & Saudi Arabia)

“Iran is Back in Business”

Tehran

Market Segments

Opportunities

Badab-e-Surt Springs, Sari Province

Fundamentals are right

Diversified Economy

(O&G, Construction, Service Industries,

etc)

High Consumer Purchasing

Young & Talented

Workforce

Critical Mass of 80mio people

High Affinity for Foreign Goods & Services

All parameters seem in line for sound and progressive Growth Potential

Still managed to develop impressive local capacity

and achieve innovation

Main Issue:

Access to international

financing/investment

Financial Sanctions have crippled

the economy and natural course

of progress

Socio-economic aspects present

remarkable opportunity for

international companies achieve

great success

Badab-e-Surt Springs, Sari Province

Direct Focus Markets for Luxembourg

BANKING &

FINANCE

CONSULTING

& LEGAL

SERVICES

ICT /

TELECOM

TECH / VC

Other

SECTORSTRANSPORT

CONSUMER

GOODS /

F&B

Overview: Banking, Finance, Services

BANKING &

FINANCE

CONSULTIN

G & LEGAL

SERVICES

Banking, Finance, Services: Opportunities

Opportunities

Corresponding/Depositary Banking

Relations between Iran and Luxembourg

Iranian Clientele looking to diversify, both

Private and Corporate

Funds a strong target (PE, Tech, ETFs,)

Luxembourg Banking Hub for Iranian

Branches

Related Services such as Legal,

Consulting, Tax, Audit are highly needed

International standards need to be

adopted by Iranian Institutions and

companies in general

Focus to get back in line with global best

practices

Overview: Telecom & ICT

ICT /

TELECOM

TECH / VC

Iran is the largest mobile market in the Middle East

MCI dominates 70% of the telecom market

Listed, worth over $4.3 billion on TSE

17 million postpaid and 49 million prepaid subscribers

2nd largest operator MTN Irancell has 28% of the market share (MTN

South African company’s third largest market)

Iran’s other mobile phone operators are Taliya and Right Tel.

Since launch of 3G & 4G, the Iranian

mobile market is expected to reach

152mn subscribers in 2020, up from

137.7mn in 2016.

152mio subscribers by 2020

Telecom & ICT: Opportunities

Opportunities

Customer base is remarkable and very active

Ecosystem has developed throughout sanctions, investments

made to build infrastructure

Mobile Apps & Internet of Things taking over

Undervaluation of Mobile & Telecom Companies due to

sanctions

Unique opportunity for market entry & key positioning

Fiber Optic is a strong target

Datacenters and related services

Consulting services for Best Practice Application

Digitisation

Two leading European

companies are set to buy

stakes in Iran’s biggest

cellular operator, Mobile

Telecommunication

Company (MCI)

Overview: Start-ups / VCs

“There is potential unlike anything I’ve seen to date in emerging markets,”

says Chris Schroeder, U.S.-based angel investor

Tremendous

Potential for

Synergies

between Iran &

Luxembourg

2ndMarket for Peugeot

100-150% taxes on

imports

2ndMarket for Peugeot

Overview: Transport

Most airports in the Middle East at 54, 8 international

Biggest road network in the Middle East at 215,000 Km

Most Marine Ports in the Middle East at 15 / 2,700 Sea boundaries

Biggest railway network in the Middle East at 12,000 Km (25,000 Km

by 2025)

Biggest car manufacturer in the Middle East at 1 Mio + units (3 Mio by

2025)

17Local Airlines

21Mio Passengers

220 New Planes committed

$50bn Investment

TRANSPORT

Transport: Opportunities

Opportunities

AVIATION

Tehran-Luxembourg flights to deserve the Region

Cargo Connections an obvious Target

Maintenance & Training Services

AUTOMOTIVE

Technologies, Products & Services Transfer

Iran will need to go through an important Upgrading of Quality &

Standards

Manufacturing Companies

Overview: Cosmetics

‘ New Cosmetics Eldorado ’

Iran represents 29% of the beauty market in the Middle East

Annual Market Value of cosmetics is around $3.5 bn

Iranian females ages 15-45 make up 1/3 of cosmetics consumers in the Middle East

Beauty & Personal Care market expected to treble in the next five years to more than $10 bn

CONSUMER

GOODS / F&B

Opportunities

FRANCHISE MODEL – well developed and sought

WOMEN & MEN – Both client groups expanding steeply

LOCAL PRODUCTION – lower production costs

RAW MATERIAL – Iran is leading Aromatics producer

REGIONAL DISTRIBUTION – strategic location

Price is key to cover a mass clientele

‘Western’ Quality, Reasonable Price

Main brands have their niche clientele

Cosmetics: Opportunities

Overview: F&B

Iranians love to eat, and a lot!

Highest retail value sales for packaged food in the Middle East, worth US$30.36

billion in 2015 (during sanctions)

Growth of 30% YoY

3rd highest packaged food sales in 2015, expected to achieve the highest

growth in the Middle East, with a 33% CAGR over the forecast period

Iran expected to achieve 2nd highest disposable income/capita in the Middle East,

after the United Arab Emirates, illustrating the country’s high spending power

CONSUMER

GOODS / F&B

F&B: Opportunities

Opportunities

Iran’s consumer culture heavily influenced by Western trends

Western-style grocery stores & shopping malls popping up

Bootleg versions of restaurants and coffee shops show huge

potential for such business models ( “Mash Donald’s” to “Pizza Hat”)

There is a massive affinity for foreign brands and products

High Tax on imports supports local production but creates difficulties

for foreign brands to enter the market if purely based on imports

Mainstream Brands enter rapidly

Multiplier effect throughout cities

Grow your business in line with market dynamics

Overview: Hotels

Annual Visitors expected to grow from 5 million to 20 million per year

by 2025

1,100 hotels in the country only 130 properties belong to the 3/4-star

segment

96 are housed in the capital Tehran

most of existing hotels are in need of renovation and/or refurbishment

Increase in occupancy rates from 2013-16 from averaging 40% to

85% plus, increase in rates of 100%)

Rotana, Accor and Melia Group main foreign brands to hav entered

rapidly

‘ Taking into consideration the huge potential of Iran and

underdeveloped hospitality industry, I could foresee

AccorHotels opening not less than 80 to 100 hotels within

the next 15 years. ‘

Christophe Landais, CEO MENA Accor Group

Other

SECTORS

Hotels: Opportunities

Opportunities

MASSIVE NEED - 1000s of hotels are required (1-5 stars)

SERVICE MANAGEMENT PARTERNSHIPS

INVESTMENT OPPORTUNITY

RELATED ACTIVITIES - restaurants,etc

LOCAL WORKFORCE – in need of jobs

Brands are moving in fast

Important to ‘lock in’ suitable locations, gem spots available

Strategic developments close to infrastructural projects (airports,

ports,etc)

8 cities with above 1 mio inhabitants should be main targets to start

presence

Tourism sector the target for economic growth of country

South Pars, Iran

IPC Projects on Offer

49 projects

28 billion boe of reserve

USD200bn of investment

opportunities

20 Gas Projects

12.5bcfd

of potential production

29 Oil Projects

1.2mio b/d

of potential production

Overview: Energy & Resources

Biggest Natural Gas Reserves (15.3%

Global)

4th Biggest Oil Reserves worldwide (11%

Global)

Biggest exporter of Cement worldwide at 20

Million tons/ year

Biggest producer of Electricity in the Middle

East at 73,000 MW

Biggest Mineral reserves in the Middle East

at 60 billion Mt (7% Global)

Other

SECTORS

South Pars, Iran

Energy & Resources: Opportunities

Opportunities

$200Bn worth of projects, from upstream to downstream

Financing is a major obstacle for developments

Very lucrative projects can be negotiated, directly with end-

clients, as well as grab projects under construction which have

stopped

Engineering companies and Technology Licensor have

exceptional value to add, combined with the financing

Overview: Art

Mix of rich local culture, spiritual lenience and socio-political trends

have given rise to exceptional artists throughout Iran’s history

New age artists have gained considerable attention in the past 10

years

A lot of galleries opening throughout cities

Art Auctions such as ‘Tehran Auction’ selling important pieces and

values (2016 at $ $8,328,880 total sales, 20% increase from previous

year).

Tehran Contemporary Museum holding ‘gems’ from Picasso, Warhol,

Bacon,etc

Connecting people and a way of public expression

‘Tool’ to engage internationally and be heard

Highest single Sale at $985’200 (artwork by

Sohrab Sepehri)

‘ Tehran Auction 2016

breaks sales record ‘

Other

SECTORS

Mount Damavand, Mazandaran Province

Essential Aspects to Success

Added Value to Success

Financing / Investment

M&A, PE Activity

Synergies / Partnerships

Transfer of Technology / Know-How

Export of Products/S

ervices

Badab-e-Surt Springs, Sari Province

Legal Framework for Investments

The FIPPA authorises foreign investors to import

capital into Iran in the form of cash, machinery,

know-how, brand names, and other types of

capital or specialized services.

a) National treatment (non-discrimination) of

foreign investment and investors

b) Protection of capital against expropriation and

nationalization

c) Repatriation of the capital and profits in

foreign currency at official exchange rate

through the banking system

MUDAM Museum, Luxembourg

Cultural Understanding

Mars Mountains, Isfahan Province

However, challenges remain in place

Building up Trust - Need for face to

face interactions & establishing anchor on the

ground

Decision Makers - Centralization of

decision making & consensus at senior

management level

Blurred Boundaries - Borders

between personal relationships & business

tend to overlap

Red Tape Bureaucracy - lack of

transparency with regard to companies

#118 in Ease of Doing Business - amount of time spent on filing & rigid labor

laws are very employee friendly

Corruption – 136/174

Melting Pot of Culture & Business

PATIENCE TRUST PLANNING

ENJOY FOODLEARN SOME

WORDS

CUSTOMS &

VALUES

FACE-to-FACEWHO DOESN’T

LIKE

PRESENTS?

TAROF

GRADING

BSc

MSc

PhD

Philharmonie, Luxembourg

Way Forward

Vianden Castle, Luxembourg

How to plan your Market Entry

Develop a physical presence in Iran

Due Diligence & Risk Management, KYC

Undertake Market StudiesFinding the right local

partners

Reclaiming Brand EquityStrongly envisage to invest /

finance

Professional Consultants & Advisors

Villa Vauban, Luxembourg

Contact

www.gravity.partners

Luxembourg: +352-691 401 113

Iran: +98-912 0711 506

baradari@gravity.partners