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(EDITORIAL from Korea Herald on Jan. 20)

All News 07:03 January 20, 2016

Persia rush
-Iran investments require risk management-

Measured in terms of purchasing power parity, Iran’s gross domestic product surpasses that of Australia and the Netherlands, indicating the enormous scale of its economy.

Given this, it is not surprising that South Korean policymakers are calling on local enterprises to actively tap the second largest economy in the Middle East, as the international community has finally lifted its sanctions on Tehran.

Government officials expect the lifting of decades-long sanctions will benefit Korea’s construction, petrochemicals, shipbuilding and shipping sectors on the back of large-scale infrastructure investment.

Vehicle parts manufacturers are forecast to bolster strategic partnerships with Iran, the largest automobile producer in the Middle East, and IT-related industries can also expand their presence, according to state-run think tanks.

Korean exporters need to urgently map out strategies to grab a larger market share in their keen competition with counterparts from the eurozone, China and Japan.

Iran’s comeback to the global community is undoubtedly a favorable factor for local businesses in terms of diversifying export destinations amid a slump in their overseas shipments.

On the other hand, there is a need to closely monitor the geopolitical risks in the region, given the intensified friction between Iran and Saudi Arabia.

Over the past few decades, the Middle East was ? and still is ? a primary growth engine for Korean builders. But many of them have suffered a liquidity crisis due to payment delays or sudden withdrawals of development projects due to unforeseen tensions in the region.

Armed conflicts, if any, between Iran and Saudi would deal a serious blow to some industries. Korean firms should factor in the worst-case scenario including possible insolvency of the bilateral projects.

Seoul should also be alert to the situation that Israel and the U.S. Republicans are still skeptical over the reconciliatory mode initiated by the Obama administration and the United Nations.

Some global investment banks cite severe corruption as a factor hampering transparent and open competitions.

In addition, the critical slide in crude prices is fueling uncertainty. Korean developers of oil refineries should do a thorough cost-benefit analysis, rather than recklessly making inroads into the market in a servile welcoming of the resumption of Iran’s oil exports.

In any case, there are plenty of other opportunities for Koreans businesses. It goes without saying that cultural exchanges with the region would help them get closer to Iranian officials and businesses.

In this context, a fair in Seoul for Persian literary masterpieces hosted by the Iranian Embassy holds public interest.

The event at the Seoul Metropolitan Library ? which opened early this month and will run through Jan. 24 ? is a collection of Iranian finest books, poems and folktales, as well as handicrafts and calligraphy. Korean businesses can capitalize on this event to prepare for their foray into Iran.
(END)

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