EghtesadOnline: The United Nations Educational, Scientific and Cultural Organization has recently released a comprehensive report on Iran’s technological and scientific growth in the past five years.
Based on the report, knowledge-based firms and startups in Iran have registered exponential growth.
UNESCO’s previous science report detailed Iran’s plans for gradually weaning its economy off oil resources to accelerate transition toward a knowledge economy.
Events over the intervening years have encouraged the government to pursue this transition with greater ardor.
The most visible expression of this policy is heightened support for startups and other tech-based firms, which has stimulated innovation amid restrictions posed by US sanctions against Iran.
Perhaps the immediate impact of the reimposition of US sanctions on science and engineering has been the body blow delivered to Iran’s burgeoning export market for medium- and high-tech products.
Between 2014 and 2017, exports of knowledge-based goods from Iran’s science and technology parks and incubators had grown by a factor of five, before slumping in 2018.
This decline in export is associated with economic problems encountered by companies and their difficulty in importing raw materials and exporting products due to the US sanctions on Iran.
The restoration of sanctions in 2018 has motivated companies to use local suppliers of knowledge-based goods and services.
The past five years have seen a boom in endogenous innovation. In 2015, Iran launched its first public innovation centers and accelerators to empower startups.
By 2020, 49 innovation accelerators had been established with private equity and 113 innovation centers had been set up in partnership with science parks and major universities.
Technology incubators, meanwhile, have been providing graduate entrepreneurs with co-working spaces and mentoring on campus to help them launch their own startup.
The government has been encouraging startups to diversify into various knowledge-based fields, with emphasis on developing local solutions and addressing the needs of industry.
Since 2018, the Vice Presidential Office for Science and Technology has recommended that entrepreneurs find innovative solutions in waste management, agriculture, water management, air pollution, sports, digital health, energy, tourism, insurance, education and mining.
Even some large private companies have diversified their investment portfolios and established 20 startups in such strategic fields.
By 2019, Iran had risen through the ranks from 106th (2015) to 61st out of the 129 countries featured in the Global Innovation Index.
A Short-Lived Economic Rebound
Endogenous innovation has been supported by the economic rebound triggered by the lifting of international sanctions in 2016.
According to UNESCO, Iran posted a growth of 13.4% that year and 3.8% the following year, equivalent to about $447.7 billion.
In the first quarter of 2017, recovery extended to the non-oil sector, facilitated by astute monetary and fiscal policies and a boom in the services and construction industries.
According to the Statistical Center of Iran, the unemployment rate had fallen to 10.6% by March 2020, showing a decline of 1.7% over the previous year, although the rate remained higher for youth and women at 25.7% and 17.2%, respectively.
Four out of 10 university graduates are unemployed (39%), up by five percentage points since 2019.
Mobilization Against Covid-19
In 2020, the Iranian economy was ravaged by the Covid-19 outbreak.
Iran has since scaled up its initial response to the crisis and improved coordination between government agencies and municipal bodies.
In late March 2020, Iran began repurposing the country’s production capacity for the manufacture of domestic personal protection equipment such as masks and hand sanitizer to meet the shortfall.
The Vice Presidential Office for Science and Technology and its affiliated Iran National Innovation Fund also provided support for knowledge-based companies’ Covid-19 response.
Within a few weeks, the number of its Covid-19 testing laboratories had doubled from 22 to around 40.
However, the government has faced the arduous task of cushioning the pandemic’s economic shocks.
In line with its supportive policy, INIF introduced investment schemes and streamlined its organizational structure and procedures to help the virus-hit businesses revive.
Together with private investments, state resources have played a pivotal role in providing facilities to knowledge-based companies, such as for prototyping, hire-purchase, leasing, working and venture capital, office space, pre-order activities, industrial production plants, issuance of warrants and empowerment programs.
Policies supporting innovation centers in Iran have also contributed to the growth of Iran’s technology ecosystem.
By 2018, universities had hosted 45 active science and technology parks and 193 incubators, of which Pardis Technology Park is the largest. It hosts about 500 companies with more than 6,000 employees.
Creating spaces within large cities where startups, investors and other innovators can mingle and network has been another effective effort.
Abandoned factories have been renovated and rebranded as “innovation factories” to empower this new generation of entrepreneurs. The first two innovation factories are Azadi and Highway, established in Tehran in 2017 and 2019, respectively, which are branches of Pardis Technology Park.
The startups and accelerators at Azadi and Highway are entitled to access facilities at Pardis Technology Park.
Since 2015, many universities and science parks have organized events to help university graduates develop both technical and software skills. Startup weekends, idea shows and bootcamps have become common events.
In 2019, the Vice Presidential Office for Science and Technology advised universities to support bootcamps in fields related to the digital economy.
Some 23 bootcamps on digital economy are planned for 2019–20 for university graduates in digital technologies like artificial intelligence.
The proliferation of these events is a positive sign of Iranian officials’ support for startups.
Effective Coping Mechanism
Although the reinstatement of US sanctions has hit the economy hard, there is also a sense of deja vu.
Iranians had already lived under sanctions for years. In 2014, the country had developed a coping mechanism dubbed “resistance economy”, to wean itself off its hard-hit oil-based economy by seeking local solutions for industries that could no longer count on imports of foreign materials and technologies.
Combined with heightened domestic demand, the multiplication of technology incubators and accelerators since 2015 has led to a remarkable growth in knowledge-based firms and startups.
This proliferation of self-reliant businesses seems to have driven a form of dynamic decentralization that contrasts with the more inert topdown approach to central planning to which Iranians have become accustomed.
Despite the pain inflicted by sanctions, higher domestic demand for innovation and the desertion of Iranian marketplace by foreign technology providers have created a potential opportunity for knowledge-based firms to climb higher in the value chain and gain a bigger market share.