How Sanctions helped Iranian Tech Industry

Indeed, according to the International Monetary Fund, Iranian non-oil revenues as a share of total fiscal revenues during 2012-14 were the highest among all oil-exporting Middle Eastern and North African countries at 56%. In comparison, the corresponding figure in Saudi Arabia and the United Arab Emirates was 20% and 31%, respectively. Furthermore, as of 2014, 36 science and technology parks hosting more than 3,650 companies were operating in Iran. These firms have directly employed more than 24,000 people. In addition, Iran is projected to increase the share of R&D in its gross domestic product, from the current 0.5% to 2.5% in the near future.

Sanctions were detrimental to Iran’s high-tech sector in primarily two ways. In relation to the supply chain, they made it difficult for manufacturers to purchase necessary components. Hence, manufacturers had to pay higher prices, with longer production lead times — which ultimately resulted in higher production costs. On the sales end, the sanctions caused a shrinking of exports and lack of interest in long-term contracts on the part of foreign companies. Furthermore, the high-tech sector was stripped of highly talented technicians — a trend that continues, notwithstanding the mild improvements during the past two years.

However, the sanctions also had a positive impact. For instance, they secured the domestic market for Iranian tech firms. In many cases, the final prices of imported high-tech goods were so high that customers preferred to purchase domestically designed and manufactured goods. Moreover, in relation to government procurements, there was a deliberate policy with compulsory regulations in place to prefer domestic products over imports. Hence, R&D investment in some fields became highly profitable during the sanctions era.

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