The iPhone Wars of Iran

Leila Piran

Last week, the Wall Street Journal published a news story about Apple’s on-going talks with Iran about selling its products to Iranian costumers. Because of the international sanctions imposed on Iran, American companies including Apple cannot do business with Iran yet. However, that has not stopped enthusiastic companies from going to Iran and examining the opportunities and obstacles of doing business there. Domestically, there are hurdles to doing business in Iran as well. Even if the sanctions were lifted, bureaucratic and political issues may seem overwhelming to foreign companies, at first.

One of the most striking issues remains competition. Apple has fierce competitors that have easily used the company’s logo and reputation to make profits from selling counterfeit Apple products that are manufactured in China. Several days after the news announcement of Apple’s talks with Iran, a businessman posed as the official Apple representative in Iran. Then, he coordinated a press conference and invited several journalists to attend the event. Furthermore, he gave each of them an IPhone as a gift of appreciation for promoting his new store. Ultimately, he had the audacity to contact the local police department in Tehran, complaining that his competitors were selling Apple products illegally. Consequently, the police responded by going to several electronic stores, arresting the confused owners, and shutting down their stores. In turn, the outraged business community filed a complaint with the National Imports Forum whose head, Mohammad Hossein Barkhordar, responded to them via Payesh, a television talk show, that the Forum does not have the mandate to prevent and penalize opportunists who make profits by engaging in bad business practices.

To be fair, the Iranian market is full to the brim with both genuine and counterfeit products as much if not more than its neighbors, Turkey. At least, that has been the trend since the early 1980s when Iranians experienced shortage of various goods including foreign-made products because of the Iran-Iraq War and the sanctions. As a result, a lucrative black market emerged whose strength has withstood the test of time. In the past decade, a constant flood of cheap imports particularly from China has continued to drive up the costs of domestic manufacturing in Iran. In addition, the final stage of the smart sanctions that became effective in November 2011 dealt significant blows to many manufacturers who also believe that the country’s labor laws protect workers at the expense of businesses’ productivity and profitability. Until a few months ago, the status of Iranian economy was grim as the country faced hyperinflation and recession.

Recently, however, the Iranian economy has shown positive signs of recovery, partly because of the interim agreement reached between Iran and the P5+1 last November. Undoubtedly, Iran needs more foreign direct investment to spur positive and sustained economic growth. Indeed, the possibility of American and European companies doing business on Iranian soil remains promising, especially since Iran’s 76 million population provides potential as both tech-savvy customers and highly skilled labor. In 2012, Iran scored 67 among 177 countries according to the Global Entrepreneurship and Development Index which is not bad, considering the above-mentioned challenges that Iran has faced in the past four decades. Above all, the future of Iran rests in the hands of its educated and capable youth whose entrepreneurial spirit and technical knowledge have enabled them to overcome various obstacles and start their own companies