weighted score 3.8 · ten dimensions
Sourcing Attractiveness Index · ten dimensions
Iran
Labour cost, supply base depth, logistics infrastructure, trade access, and innovation scores for Iran as a sourcing destination.
Labour cost competitiveness
6
Rial collapse makes dollar costs very low. But 60% inflation creates volatility. Sanctions make accessing Iranian labour market impossible for Western companies.
Supply base depth
5
Diversified manufacturing by regional standards — automotive, petrochemicals, steel, pharmaceuticals. But all sectors degraded by sanctions and underinvestment.
Logistics & infrastructure
4
Domestic infrastructure functional but degraded. Bandar Abbas primary port. Chabahar (Indian-developed) alternative. International shipping and insurance unavailable under sanctions.
Workforce skills
6
Well-educated population. High university enrolment including women. Strong STEM capacity. But severe brain drain — hundreds of thousands of educated Iranians leaving annually.
Scalability
4
Population ~88 million provides large theoretical market and labour pool. But sanctions, IRGC economic control, and international isolation prevent practical scaling for foreign buyers.
Ease of doing business
1
Effectively impossible for Western companies under comprehensive sanctions. IRGC economic dominance. Banking isolation. TI CPI 23/100. Most sanctioned major economy.
Trade access & tariffs
1
Comprehensive US, EU, and UN sanctions prohibit most trade. Secondary sanctions deter third-country engagement. SWIFT disconnection. Near-total trade barrier for Western supply chains.
Sustainability baseline
2
Severe air pollution. Water crisis. Gas flaring. Environmental governance weak. No meaningful ESG reporting. Sanctions prevent international environmental cooperation.
Innovation & IP
5
Significant scientific talent and high publication rates. Nuclear engineering capacity. But sanctions restrict international collaboration, equipment access, and technology transfer.
Quality standards
4
Petrochemical and pharmaceutical quality functional domestically. Automotive below international standards. International certification largely irrelevant under sanctions.
Labour & Cost Competitiveness
Labour & Cost Competitiveness
- Wage levels
- Labour costs are moderate by regional standards but rial collapse (halved in value) makes dollar-denominated costs very low. However, 60% inflation creates extreme wage volatility and purchasing power erosion for workers.
- Total cost of ownership
- Sanctions make normal commercial operations effectively impossible for Western companies. Banking restrictions, insurance unavailability, and shipping embargoes negate any labour cost advantage.
- Labour market dynamics
- Population ~88 million with a well-educated workforce by regional standards. Iran has one of the highest rates of university-educated women in the Middle East. However, brain drain is severe — estimated hundreds of thousands of educated Iranians leave annually.
- Sanctions impact
- Comprehensive sanctions have created a dual economy — formal sector shrinking, informal and IRGC-controlled sectors growing. Foreign companies cannot practically access the Iranian labour market.
Supply Base & Infrastructure
Supply Base & Infrastructure
- Manufacturing base
- Iran has a relatively diversified manufacturing base by regional standards — automotive (Iran Khodro, SAIPA), petrochemicals, steel, cement, food processing, and pharmaceuticals. However, all sectors are degraded by sanctions-related underinvestment and technology access restrictions.
- Automotive sector
- Iran is a significant automotive producer (primarily for domestic market). However, quality standards are far below international norms due to inability to import modern components and technology under sanctions.
- Petrochemicals
- Iran has significant petrochemical production capacity. Some petrochemical exports continue despite sanctions, primarily to China and other non-sanctioned buyers. EU sanctions prohibit petrochemical imports.
- Infrastructure
- Domestic infrastructure is functional but degraded. Road and rail networks exist but maintenance is deferred. Bandar Abbas is the primary port. Chabahar (Indian-developed) provides alternative access but remains under sanctions scrutiny.
Trade Access & Business Environment
Trade Access & Business Environment
- Sanctions barrier
- Comprehensive US, EU, and UN sanctions create a near-total barrier to Western trade. Secondary sanctions deter third-country companies from engaging with Iran. The sanctions regime is the defining feature of Iran's trade environment.
- China trade channel
- China is Iran's primary trade partner, purchasing discounted oil and providing manufactured goods. This trade channel operates through sanctions evasion mechanisms including ship-to-ship transfers, shadow fleet, and non-dollar payment systems.
- Banking isolation
- Iran is disconnected from SWIFT (partially). Most international banks will not process Iran-related transactions. The rial is not freely convertible. These restrictions make normal commercial payments impossible.
- Business environment
- IRGC economic conglomerates dominate major sectors. Private sector operates under severe constraints. Foreign investment is effectively impossible under current sanctions regime. TI CPI 2025: 23/100.
Innovation, IP & Quality
Innovation, IP & Quality
- Scientific capacity
- Iran has significant scientific and engineering talent — high publication rates in chemistry, engineering, and medical sciences. However, sanctions restrict access to international research networks, equipment, and collaborative programmes.
- Nuclear technology
- Iran's nuclear programme demonstrates advanced engineering capacity. Nuclear deal with Russia (4 reactors) reflects continued investment in nuclear technology. However, this capacity is primarily state-directed and sanctions-constrained.
- IP framework
- IP protection framework exists but enforcement is weak. Under sanctions, IP considerations are secondary — foreign companies cannot operate in Iran to have IP concerns in the first place.
- Quality standards
- Quality standards in petrochemicals and pharmaceuticals are functional for domestic market. Automotive quality is below international standards. International certification is largely irrelevant under sanctions.