Analysis and review of the challenges faced by Iranian knowledge-based companies

Seyyed Mohsen Mirsadari

Member of the Board of Directors of the Iranian Knowledge-Based Organizations Association

Economic sanctions and exchange rate fluctuations have had a devastating and profound impact on knowledge-based companies. These challenges have not only increased their costs, but have also severely slowed their growth and development. However, by adopting appropriate strategies and targeted support, these challenges can be managed to some extent and pave the way for technology and innovation development. Leveraging domestic capacities, increasing regional interactions, and using new financial solutions are among the measures that can help strengthen the resilience of knowledge-based companies.

In this note, we take a look at some of these challenges and possible solutions to overcome them.

Economic Sanctions

Oppressive economic sanctions are undoubtedly one of the biggest obstacles to the progress of knowledge-based companies and have had a profound negative impact on their activities.

Challenges such as difficulty in securing raw materials and specialized equipment, which have led to increased purchasing costs and, in some cases, lack of access to some key technologies, are the most important issues that knowledge-based businesses face.

Increasing operating costs and decreasing profitability, serious problems in financial transfers, restrictions on scientific and international cooperation that have deprived knowledge-based companies of the opportunity to attend and interact with many scientific and industrial exhibitions, exchange technology, and attract foreign investors, and have slowed progress and development in this area, are some of the existing problems.

Another point is the issue of limited access to international scientific and commercial platforms, because many international platforms that are active in the field of knowledge, technology and trade exchange have blocked access to Iranian companies under the pretext of sanctions. This has deprived these companies of access to valuable scientific resources, international markets and innovative business opportunities.

Exchange rate fluctuations and their challenges

In addition to sanctions, exchange rate fluctuations have also brought several problems to knowledge-based companies. Some of the most important negative effects of these fluctuations include:

Increased production costs: Many of the raw materials, laboratory equipment and technical components needed by these companies are supplied through imports. The sudden increase in the exchange rate has multiplied the costs of purchasing these items and reduced the profitability of these businesses.
Disruption in financial planning: Severe currency fluctuations have made it difficult for knowledge-based companies to predict future costs and have posed serious challenges in determining the final price of products. This has increased investment risk and reduced the financial stability of these companies.
Reduced purchasing power of domestic customers: The increase in prices due to the exchange rate jump has reduced the purchasing power of domestic customers. This has reduced the demand for knowledge-based products and services and has brought some of these companies to the brink of bankruptcy.
Export challenges: Although the increase in exchange rates can create opportunities for exports, in practice, sanctions and money transfer problems have eliminated many of these opportunities. Knowledge-based companies face numerous challenges in receiving their foreign exchange revenues, sometimes even turning exports into a risky and unjustifiable action.

What should be done?

To reduce the destructive effects of sanctions and currency fluctuations, as well as to strengthen knowledge-based businesses, measures such as creating financial incentives and support from the government, such as providing low-cost facilities, reducing customs tariffs for specialized equipment, and supporting domestic production, can be effective and take some of the financial pressure off knowledge-based companies.

Also, developing regional interactions with a focus on Asian, African, and Latin American markets as an alternative to Western markets can reduce dependence on sanctioned economies.

Improving export and financial infrastructure, as well as developing alternative financial systems, using local currencies in trade transactions, and establishing bilateral financial agreements are other solutions that can help reduce dependence on the international financial system and resolve money transfer problems.

In addition to the above, investing in domestic research and development and strengthening domestic production by supplying the necessary raw materials and equipment, reducing dependence on imports and supporting local innovations, in addition to creating new financial and payment solutions such as using blockchain technologies and cryptocurrencies for money transfers, can be a sustainable way to deal with sanctions and also remove some banking barriers.

Publication date: 1404/01/10