Project Management Institute

After the sanctions

Iran has opened up to the world -- and organizations are rushing to tap the project potential

 

With a population of 8.3 million, Tehran is the largest city in Western Asia.

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Iran is rejoining the global economy—and on its way to becoming a project hot spot. With the lifting of international economic sanctions this year following a landmark nuclear agreement, a project bonanza across a wide swath of industries is emerging to meet the country's pent-up demand. The nuclear deal gives Iran access to foreign investment—which means organizations around the world are eyeing opportunities to help finance and execute major projects.

“Huge opportunities are available for foreign investors,” says Saied Yousefi, PhD, PMP, assistant professor of project management, University of Tehran, Tehran, Iran.

A US$100 million project to build caviar farming and production facilities aims to restore Iran's former position as the world's primary exporter of the luxury food.

For instance, the German tunneling company Herrenknecht has said that if, as expected, Iran's government puts up new projects for tender, it will jump on them. The sectors with the biggest potential seem to be oil and gas, mining and transportation (see sidebar, “Three Sectors to Watch”). Iran has the world's fourth-largest oil reserves and the second-largest gas reserves. Anglo-Dutch behemoth Shell, Italy's Eni and Norway's Statoil have expressed interest in new project opportunities in Iran, and France's Total signed an energy deal with the country early this year.

But “there is more to Iran than oil and gas,” says Erik Arvnes, director, PMI Global Executive Council member KPMG Forensic Services, Oslo, Norway. Automobiles are a growth area, he notes, and the country is already the largest producer of vehicles in the region. Even the seafood industry is looking to get in on the action. A US$100 million project to build caviar farming and production facilities aims to restore Iran's former position as the world's primary exporter of the luxury food.

Yet foreign organizations interested in capitalizing on new Iranian opportunities must conduct careful due diligence to determine the appropriate local and investment partners prior to entry, Mr. Arvnes says. For U.S.-based organizations, risks remain high. While their foreign subsidiaries can now engage with Iran, U.S. organizations still have to navigate remaining U.S. sanctions and clear many regulatory hurdles. And the risk of a future U.S. president reneging on the deal makes U.S. executives wary of long-term projects.

Any foreign project sponsor must also weigh the risk of “snapback” provisions that would reinstate economic sanctions if Iran violates the terms of the pact, effectively pausing or killing projects. “This is a risk that organizations have to consider in their contracts and when structuring any investment,” Mr. Arvnes says.

There's yet another major risk to contend with in the future, too. “Project management is fairly new here in Iran,” Dr. Yousefi says, adding that projects in Iran regularly struggle to come in within schedule and budget. “With lots of projects waiting to be started or to be completed on time and on budget, the concepts of project management and standards need to be implemented.”

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“With lots of projects waiting to be started or to be completed on time and on budget, the concepts of project management and standards need to be implemented.”

—Saied Yousefi, PhD, PMP, University of Tehran, Tehran, Iran

The removal of sanctions will benefit not only domestic and foreign project sponsors, but also the country's own project management culture, Dr. Yousefi says. As project practitioners from other countries travel to Iran, they will bring knowledge of project management standards and practices with them. And Iranians will welcome being part of multinational project teams, he says.

The impact of knowledge transfer from foreigners is especially notable given the country's youthful makeup. Three-fifths of Iran's 80 million residents are under 30 years old.

“If people understand and apply project management when they're young, they will transfer that knowledge to the next generation,” Dr. Yousefi says. “Once the big barrier of the sanctions is removed, you will see a bright future for the application of project management in this country.”
—Novid Parsi

Three Sectors to Watch

OIL AND GAS

Not surprisingly, Iran's large oil and gas deposits attract global energy companies.

Italy's Eni plans to invest US$4 billion in a 36-month project to get an Iranian gas field up to production capacity.

The world's largest chemical company, Germany's BASF, announced plans to invest US$6 billion in Iran's petrochemical sector.

Another German company, Linde AG, has partnered with Japan's Mitsui & Co. to invest US$4 billion in petrochemical projects, although schedules have not yet been set.

TRANSPORTATION

From planes to trains to automobiles, Iran's transportation sector is on the move.

The Iranian government has invited Indian organizations to invest US$8 billion in transportation infrastructure projects—including the expansion of Tehran's international airport and a 220-kilometer (137-mile) railway linking Iran with Central Asia.

Siemens signed deals worth US$1.7 billion for projects that will bolster Iran's railway infrastructure. And Iran and Russia have signed US$40 billion worth of contracts in part focused on railway projects.

Automaker Daimler AG is partnering with Iranian companies on a project to start local production of Mercedes-Benz trucks and powertrain components.

MINING

One of Iran's least-developed sectors, mining promises to pull in plenty of investments. It's already started.

A consortium of Iranian, Omani and Australian organizations won a contract for a US$1 billion zinc production project in an area considered to hold the largest deposit of zinc in the region.

India's national aluminum company, NALCO, is mulling a partnership on a new US$2 billion smelter complex project.

Top technologies for increasing stakeholder engagement:

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1. Data and analytics (68%)

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2. Customer relationship management systems (65%)

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3. R&D and innovation (53%)

WHAT KEEPS CEOs UP AT NIGHT

Top threats they see right now:

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TALENT TROUBLES

Top ways CEOs look to overcome talent management challenges:

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1. Focusing on pipeline of future leaders (49%)

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2. Changing workplace culture and behaviors (41%)

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3. Effective performance management (38%)

Source: 19th Annual Global CEO Survey, PwC (Methodology: 1,409 CEOs in 83 countries were surveyed in the third and fourth quarters of 2015.)

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK JUNE 2016 WWW.PMI.ORG
JUNE 2016 PM NETWORK

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