UAE logistics players to benefit from Iran’s re-entry into global markets

Iran’s re-entry into global markets following its recent nuclear sanctions deal will provide a big boost to regional supply chain providers, a report has found.

Supply chain risk in the Middle East and North Africa region stood at historically high levels in the fourth quarter of 2015, according to the Chartered Institute of Procurement & Supply Risk Index produced by Dun & Bradstreet.

But Iran’s imminent re-introduction to global supply chains is encouraging cautious optimism for its logistics partners. It will add both benefit and uncertainty to supply chain risk in the region, the report said.

In the short term, the country’s long-standing logistical partners such as the United Arab Emirates will benefit from an increased flow of goods and services in and out of the country.

With $600bn worth of trade expected between Iran and China alone over the next 10 years, the UAE is likely to be one of the trading hubs to benefit, it said.

Sector-wise, suppliers contributing goods and services to the civil aviation or automotive industries will be the first to feel the advantages.

But working with Iran will also pose unique challenges to supply chain managers, the report cautioned.

“The domestic market in Iran is dominated by the influence of the clergy, the Revolutionary Guard and state institutions while binding business agreements in Iran are traditionally made in person which may therefore have consequences for international trade through the country,” it said.

General manager of CIPS MENA Sam Achampong explained: “Dealing with a business culture which has been cut off from the world for so long, requires a set of skills often absent from procurement departments.

“Supply chain managers will need to understand the Iranian way of doing business and develop trusting relationships, often over an extended time period.

“Iran represents a once in a generation opportunity for supply chain managers to break into a new market. Ultimately, it will be having professionals with the right soft skills in the right places at the right time which will determine whether Iran’s re-introduction to the global trade flows will reduce or increase supply chain risk.”

The index found that global supply chain risk in Q4 rose for the second quarter in a row, standing at 79.3 – almost twice the pre-financial crisis high of 40.7 at the end of 2002.

The MENA region provided 9.1 per cent of this risk, a number which has stayed relatively consistent since the start of 2014.

Deputy chief economist of Country Risk services at Dun & Bradstreet Warwick Knowles said: “The lifting of sanctions on Iran has arrived earlier than many thought possible but western businesses have been jostling for position since July.

“Significant trade and investment opportunities are on offer but risks remain high. The outcome of presidential elections in the US in December and Iran in 2017 could see the nuclear deal unravel.”