Baku, Azerbaijan, Aug. 13
By Fatih Karimov - Trend:
While all sectors could benefit from an opening up of the economy due to achieved nuclear deal between Iran and P5+1, the automotive and pharmaceutical industries are expected to get a significant boost.
Iran's car industry, comprising the major companies of the Bahman Group, Iran Khodro and Saipa, is one of the largest industrial sectors, accounting for more than 10 percent of GDP, World Bank reported.
"After the tightening of sanctions in 2012, the production of cars declined sharply and reached 700,000 cars annually compared to 1.6 million prior to the sanctions (Figure 5). The main reasons for the slowdown in the auto industry were the depreciation of the national currency, which increased the cost of imported parts and components, and the ban on imports of material and equipment. Car sales revenues fell by half, costing the industry billions of dollars annually. Data are not available but estimates show that
the decline in auto production led to layoffs in this sector, which accounts for 4 percent of the workforce and is considered one of the main job-creating sectors in Iran".
WB says that if sanctions are lifted and international companies resume cooperation with Iran, the expectation is that automobile production will get a boost and reach somewhere close to its pre-sanctions level within the next two years.
"Production in the pharmaceutical industries will also rise, as these firms will now be able to import parts and machinery that have been subject to sanctions in the past two years. It is expected that pharmaceutical exports to Europe, which were worth $2.5 billion prior to 2012, will resume after sanctions are removed. Exports to Asia and Africa have not suffered a substantial decline as a result of sanctions, but even exports to these continents are expected to increase with the reduction of restrictions on sea cargo transportation and cargo insurance".
Until last year, the Iranian economy had been in recession for more than two years. Growth dropped to negative 6.8 and 1.9 percent in 2012 and 2013, respectively.
The Islamic Republic and the group P5+1 (the US, UK, France, Russia, China, and Germany) reached a long-awaited comprehensive deal called the Joint Comprehensive Plan of Action (JCPOA) on July 14. It's expected that the deal will be commenced in 2015, limiting Iranian nuclear activity in return for lifting all international sanctions that were placed on Iran.
Edited by CN