Over the course of nine months, since Latvian logistics company Pro Logistic Services opened an office in Iran, the volume of cargoes and the number of serviced clients has grown by 15%.
«The long period of economic blockade makes Iran’s market a very attractive destination for representatives of different industries in Europe and Latvia. Exports and imports are on a rise, and with them – cargo volumes. The opportunity to transport cargoes through Iran is a major step forward on the international logistics market – it opens the way for the resurrection of the Silk Way,» says Pro Logistic Services commercial director Dmitrijs Babaks.
Approximately 50% of export-import flow in Central Asia is performed through Iran’s ports, explains the company’s representative. Iran’s main import products from the Central Asian market include steel wire, iron and steel products, as well as barley, wheat and rape seed. Iran’s main export products include pistachios, dates, raisins, white cement, paint and varnish, Twine and foil, marble, travertine, synthetic and natural polymers. The first cargoes transported by Pro Logistic Services through Iran were mineral fertilizers and sulphur. The company does see potential in transit of raw materials and petroleum products, cotton, fertilizer, and bulk cargoes, says the company’s representative.
As for problems present on the market, Babaks says: «Any new market that remained isolated for a long time is complex. The main problems at the moment include monetary transactions between banks in Iran and Europe, as well as enormous bureaucracy and tax burden. For example, company registration and opening a regional office take up several months. There are also difficulties with attraction of foreign labour force and acquisition of work permits. Businesses are cautious because of geopolitical reasons – relations between USA and Iran remain fragile. There are also positive aspects that could prove very interesting in a long-term perspective. Unlike Europe, where we find silver economy, Iran’s population is very young. 32% of residents or 23.7 million are aged 15-30. This means the country’s GDP and purchasing power, as well as demand will grow significantly in the next several years. The situation with education is also much better than what we had expected. There are 2,500 higher education institutions and 4.8 million students. Many study in Europe and USA and know foreign languages.»
Considering that infrastructure development in the world is largely influenced by technologies created in USA and Europe, the long years of economic blockade have delayed the development of Iran’s infrastructure. The lack of proper port infrastructure and cargo transshipment terminals is especially felt.
«We look at Iran as transit territory. Foundation of a subsidiary is the first step towards working with Iran’s railway and ports. The first investment projects for the development of terminals to handle chemical products are planned to be performed in the next two years. We also see investment and business development opportunities for the future. These opportunities will benefit Latvian and Iranian ports,» Babaks says.
The company’s representative reports about last year’s cargo volume: in nine months of 2016 the total volume of cargoes transported by railway in Iran had reached 30 million tonnes, which is 14% more than one year before. The Iranian government plans to increase the volume of cargoes transported by rail to 30% by 2021. Considering that the Central Asian region, which includes Kazakhstan, Uzbekistan, Tajikistan and Turkmenistan, has no open sea port, the turnover of goods between this region and Europe is performed mainly through ports in the Baltic or Black Sea, or Persian Gulf ports in Iran. The latter is one of the most important transit gates for exports of chemical goods from Uzbekistan and Turkmenistan and exports of cotton from Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan.