During the past years, Iran’s demographic structure has experienced major changes. According to the country’s 1956 census, Iran’s population was 18.95 million, which rose to 33.7 million in 1976. During the decade that followed and after the Islamic Revolution, Iran witnessed a significant rise in its population and with the rate of 3.9% it almost reached the level of 50 million. Within a few years, due the implementation of population control policies, the country’s population growth rate decreased by 1.61 percent in 2011 and as a result the population reached the level of 75 million. This demographic change during the recent years has resulted in raising the young population of the country, which is presently in transition towards their middle ages and eventually their old age.
Predictions regarding Iran’s demographic structure are depicted in the following diagrams:
As seen above, population’s mode in 2011 was in the boundary of 20-30 years, and it is predicted that within a few years population mode will shift to the higher boundary of 30-40 years and over, and during the years 2041-2051 population distribution will become monotonous. This fact has had a major impact on the industries in the stock exchange market and has created various opportunities for them as well as threats. In the sections below, the effect of this environmental factor on a few of these industries has been examined:
Housing and Mass Construction Industry:
During the past years, Iran faced a boost in the demand for housing due to the fact that the people who were born between the years 1980 and 1988 have been added to the demand force in the housing market. Now, the housing market has passed its demand peak and gradually the demand is declining. Therefore, companies that are active in this industry will have a blurred prospect of their future in case they continue their current trend. These companies invest mostly in housing units, so they face a decrease in the demand. In the commercial sector, considering the number of vacant commercial units and also per capita of active commercial units which has been estimated much higher than that of other countries, this sector does not seem that attractive either. It appears that only in the long run and by determining the change in the requirements of the market (regarding a change in the area of the units (squared meters), change in the purchasing power, as well as the quality of construction) these companies will be able to continue their activities.
Presently, in Iran’s capital market, the industry of housing and mass construction constitutes a little over 2% of the market value, and these companies represent a small portion of those active in the real estate market and it seems that these firms can experience a better performance in the future by increasing the productivity of their resources. An important point regarding these companies is the low final price of estate that can be considered as an absolute advantage for these companies compared to others.
In this industry, similar to the housing industry, due to the demographic structure of the past years, there was a high demand which will stay stable at present levels in the future years. In previous years, despite the young population of the country, automobile producers were not able to respond to the specific need of this generation and manufacture sports cars. Now this generation has gradually obtained a monotonous distribution and therefore in order to respond to their needs, producers should consider a vast range of products. An element that can increase the demand for automobiles is the per capita of number of automobiles to the population, which is estimated to be low compared to Western countries. This factor along with the fact that many of the automobiles in the country are worn out and have outdated technology, are the main stimulus for boosting the demand, whose effect can be neglected in the long term.
The rise in the middle aged and old population of the country, strongly affects the pharmaceutical industry which can experience a high boost by taking advantage of existing opportunities. By producing special medications, this industry can realize the requirements of the older generation and by making use of such opportunity it can guarantee a safe profit margin.
Steel and Base Metals Industry:
During the past years, the demand for these products has been higher than the country’s production, but this reality will change as a result of any adjustments in the demographic structure of the country. As mentioned in the sections for automobile and housing, these industries will face a stable demand in the future, a fact that will directly affect the demand for the steel and base metals industry. It appears that in Iran this industry, as in the rest of the world, is approaching its maturity and we cannot expect it to have a considerable growth. Regarding the steel industry, we should notify that companies that produce sheets and billets will attain a better growth compared to producers of girders and round bars.
Looking at changes in the demographic structure of the population that is growing older, it is expected that in the coming years the demand for life insurance and medical insurances will strongly rise. This issue has been particularly perceptible in financial statements of insurance companies. An important point considering the insurance companies is the high profit margin of life insurance for these companies, which currently represents an insignificant portion of their insurance portfolio. In addition, increase in the penetration rate of insurance as well as the impact of cultural changes from changes in demographic structure of the country should not be overlooked.
In view of the topics discussed above, it seems that many of the industries that are affected by demographic changes should modify their methods and pursue new strategies. For some, participation in the international markets and increase in exports might be an appropriate strategy, while for others a boost in productivity and investing in new products can be the solution. As examined earlier, pharmaceutical and insurance industries can experience a suitable growth in the future. Other industries in the country are also affected by demographic and cultural changes, but were ignored in this report.