A big country, with healthy demographics. Very low debts. Plenty of room to catch up with the rest of the developing world and a ton of oil in the ground. This surely is one emerging market that everyone wants to invest in.
Except so far it has been completely ignored. Why? Because it’s Iran
Now, however, that could be about to change.
Iran has a reformist government. It is making peace with its old enemies, and opening up to foreign investment. It already has one of the best-performing stock markets over the past year, but still has only a fraction of the valuation of other frontier bourses.
Thirty-five years since it seemed to turn its back on modernity now it is starting to re-connect with the rest of the world. f that continues, Iran could very quickly turn into one of the hottest investment opportunities of the next two decades.
True, there are plenty of challenges ahead. The political situation remains delicate. There are plenty of local conflicts it could get dragged into. The economy could still collapse and sanctions have yet to be completely lifted.
But the gradual emergence of Iran as a major new economy is a reminder that, for all the problems the global economy faces, there is still plenty of growth ahead as new countries join the ranks of developed nations.
“It’s like Turkey but with 9% of the world’s oil reserves,” argued Charles Robertson of the investment bank Renaissance Capital in a recent note on the country.
He has a point. The fundamentals of the Iranian economy look as attractive as any emerging market, and arguably more so. Iran has a population of 78 million, about the same as Turkey, and more than any of the emerging economies of Eastern Europe. Add in the numbers of people, and the amount of oil, however, and Iranian gross domestic product is already substantial. At $437 billion, it is the 27th largest economy in the world, roughly similar to Argentina and Taiwan, and ahead of Austria or Thailand.
But it still has the potential to double that at least, and could do so in a relatively short space of time. The country it most resembles is Turkey, and until the trouble that hit that country this year, that was one of the big economic success stories of the last decade.
Iran has an excellent geographical location, sandwiched between Europe, Russia, the booming markets of the Gulf, and close enough to much of Asia to trade with that region as well.
It has decent levels of education — roughly the same as Turkey — and the added advantage of oil. Its energy resources are rich enough to fuel the economy, without being quite so large relative to its population that it turns into a petro state such as Saudi Arabia. There are not many other frontier markets with that kind of profile.