Since January this year, Iran has experienced frequent withdrawals of foreign capital, and international giants in many industries have withdrawn from the market, further exacerbating outsiders' concerns about Iran's business environment.
Foreign-funded enterprises play an extremely important role in the Iranian market. They not only bring funds and advanced management experience, but also promote the development of the local supply chain to a certain extent. However, the recent wave of divestments suggests that multinational companies are waning in their confidence to continue operating in Iran.
According to reports, investors in Turkey's "V One" chain stores have been removed from the list of shareholders; Middle East food industry giant“Savola Group” of Saudi Arabia announced that it will end its two decades of business operations in Iran and withdraw from the Iranian edible oil market. In addition, the two leading companies in Iran’s retail and e-commerce industries, Hyperstar and Digikala, are also facing the challenge of foreign investment withdrawals. UAE company Majid Al Futtaim no longer holds shares in Hyperstar, and European investment company IIIC, which owns about 33% of Digikala, also plans to exit the Iranian market in the near future.
Although the companies have not officially announced the reasons for their withdrawal, domestic media experts have warned that Iran will be further economically isolated in this difficult situation.
The exit of the Saudi Savola Group is quite symbolic. As a leading company with a market share of over 40% in Iran's edible oil market, its parent company relied on its controlling stake in Behshahr Industrial to still hold its ground in the 1990s when the conflict between Iran and Saudi Arabia worsened.
However, the departure of this "evergreen" company marks that foreign investment's confidence in the Iranian market has been fundamentally shaken. Moreover, these evacuation decisions all took place under a seemingly contradictory background - Saudi Arabia and Iran showed signs of easing diplomatic relations, and high international oil prices should have been good for the energy giant.
This contradiction just shows that corporate decision-making has moved beyond pure political risk considerations to comprehensive avoidance of systemic risks, such as the macroeconomic environment, investment return expectations, and supply chain stability.
The continued withdrawal of foreign-funded enterprises will undoubtedly have some knock-on effects on the local Iranian market. In the short term, industry competitiveness may decline, and consumers may have fewer goods and services to choose from; in the long term, domestic companies may need to fill the market vacancies left by foreign investment, but whether they have sufficient capital and technical support is still unknown.
At the same time, Iran's ability to attract new investors in the future will also depend on the improvement of its overall business environment. If Iran hopes to restore the confidence of foreign investors, it may need to make more in-depth adjustments in the business environment, foreign investment policies, and financial systems to improve market stability and predictability. Otherwise, the wave of divestments may continue, and the competitiveness of the Iranian market may be further weakened.
