Fecc informs on Brexit and outlines Opportunities for “Doing Business in Iran”
Last week Fecc – The European Association of Chemical Distributors (Brussels, Belgium) hosted a meeting of its International Trade Committee (“ITC”) in Brussels. ITC Chairman Peter Bigler (Omya AG) could welcome ca. 40 participants from industry, trade associations, the EU Commission and advisory firms. These executives and specialists had gathered to be briefed on the impact of Brexit, particularly regarding compliance with chemicals regulations such as REACh and on the opening up of Iran, following the lifting of sanctions as part of the nuclear deal with the EU and the U.S. signed in spring.
Together with Past ITC Chairman Franz Saif (BTC Europe), Fecc staff had set up a comprehensive program, which provided exclusive insights and practical advice regarding a broad range of aspects relevant to chemical Distribution:
- Brexit: Impact and consequences for EU chemicals compliance
Craig Simpson, Senior European Legal Advisor
Steptoe & Johnson LLP
- Trading with Iran
DG Trade – European Commission
- Iran: Trading Opportunities / Potential / Macroeconomics
Martin-Christoph Gahbauer, Strategy EMEA
- Focus Iran: Legal issues, trade and eport controls
Jasper Helder, Partner & Chair EMEA Trade & Commerce Practice Group
Baker & McKenzie Amsterdam N.V
- Doing Business in Iran: Iranian Perspective
Navid Alzadeh, Vice President
PasAddak Co. (Tehran, Iran)
- Status Quo: Iran sanctions
Ozgur Yer, Head of Global Trade Control
- Chemical Distribution in Iran: Iranian perspective
Ramin Ershadi, Managing Director
Nickelfrayand Co. (Tehran, Iran)
With almost 80 mn inhabitants (median age 29 years), Iran’s population is about the same size as Turkey’s. The overall GDP of USD 377 bn translates into a per capita level of USD 4’772. For comparison, Turkey is at USD 11’537, Korea at USD 11’142. Average GDP growth since the 1980s has been around 3% per annum, although with a high degree of volatility. GDP growth is forecasted at a level of 4 to 5% per annum by organisations such as the IMF. The country has the world’s third largest oil reserves and the largest gas reserves. Iran also has an established manufacturing base, including Automotive, Chemicals, Food and Consumer Goods.
EU exports in 2015 were EUR 6.4 bn, imports EUR 1.5 bn. Per end September 2016 the levels are EUR 5.7 bn and EUR 1.2bn, respectively. While the EU has lifted some sanctions earlier in 2016, contact with certain companies, organisations and persons is still prohibited. For certain product categories, export permits are required. The sale of nuclear, missile or armament related products is prohibited.
U.S. sanctions are still in place, transactions in USD are still restricted. U.S. persons (i.e. passport and green card holders) cannot engage in business activities with Iran. This continues to put some limitations on the business with Iran and requires carefully designed and applied compliance measures. Medium-term the country provides significant growth potential.
Are more practical issue, addressed in one of the papers, is trade financing, as the cash cycle (from payment in advance for purchases in Europe to collection after 6 to 9 months in Iran) can be quite long. Local debt financing is virtually impossible to obtain and current interest rates in excess of 20% per annum are prohibitive. Particularly the opening and the administration of Letters of Credt (“L/Cs”) poses some challenges, although there are some banks in a number of European countries that are more experienced than others and have shown their capability to support businesses.
Source: Fecc communication and company presentations at the event
HGE / DCG – 28.11.2016