After a long period of isolation, Tehran is back on the international stage. Since the announcement of a nuclear deal between Iran and the five permanent members of the UN Security Council plus Germany, numerous international delegations have visited the capital to discuss investment opportunities in the world’s 27th largest economy, with its estimated GDP of $437bn.
Tehran’s population of 8.5 million is mostly young and well educated, and the city itself is not only the political centre but also the economic powerhouse of the country, producing 24% of total GDP in 2012. Despite many decentralisation efforts in recent years, Tehran remains the favourite destination of local and regional companies. It represents Iran’s diversified economy, with a mix of business services (34% of local GDP in 2012), commerce (29%) and manufacturing (15%).
Foreign investment in the post-sanction era is expected to begin tackling the country’s estimated 25% youth unemployment. This may, however, intensify the structural and environmental problems Tehran has faced for decades. One of the most densely populated cities in the world, it suffers from severe water shortage. And the combination of four million old vehicles and aged industry creates choking air pollution responsible for about 3400 deaths every year.
The government is already debating more radical measures to solve the problem. In a conference on decentralisation and reorganisation of the capital in February 2015, Iranian President Hassan Rouhani showed his support for changing Iran’s political and administrative centre to another city.
While such a decision would certainly ease the current social and environmental issues, it is highly unlikely it would change the economic importance of the greater Tehran area with almost a quarter of the country’s population and its most modern infrastructure. The gateway to the country with the world’s fourth largest oil and second largest gas reserves, and a powerful domestic market will remain Tehran, at least for the time being.