Iran FTZs' Foreign Trade Track Record Since 2013: Exports Rise Nearly Sixfold

EghtesadOnline: Iran’s free trade zones exported a total of $941 million worth of commodities in the last fiscal year (March 2019-20), which shows a 490% growth compared with 2013 when President Hassan Rouhani began his first tenure.

News ID: ۷۵۰۹۲۶

08 September 2020

Imports from Iranian FTZs, which largely included raw production materials and industrial machinery, decreased by 49% in the past seven years to stand at $718 million last year from $1.45 billion in 2013.

According to an IRNA report, the value of transit though Iran’s FTZs exceeded $4.35 billion in the last fiscal year, indicating a 265.32% rise compared with $1.19 billion in 2013.

Through 2013 to 2019, a total of 62.2 trillion rials ($252 million) worth of investment were made by Iranian free trade zone organizations in the construction and infrastructural projects of free trade zones, including the construction of airports, ports, roads, water and sewage systems, health facilities; preparation of land for industrial or residential purposes; expansion of cultural, religious and tourism centers; rural and urban development; and establishment of energy, electricity and telecommunication facilities.

According to secretary of the High Council of Free Trade Zones, foreign investment in Iran’s FTZs hit $211 million from March 2019 to March 2020, registering a 781% surge compared with $27 million in 2013.

“Foreign investments in our FTZs stood at $113 million in the fiscal 2014-15, $249 million in 2015-16, $349 million in 2016-17, $448 million in 2017-18 and $307 million in 2018-19,” Morteza Bank added.

The official, who doubles as a presidential advisor, noted that local investments over the course of these seven years rose by 397% to reach 107.59 billion rials ($436,000).

“Local investment in Iran’s FTZs stood at 27.91 billion rials ($113,000) in the fiscal 2013-14, 58.63 billion rials ($237,000 million) in 2014-15, 40.96 billion rials ($166,000) million in 2015-16, 58.99 billion rials ($239,000) in 2016-17, 50.15 billion rials ($203,000) in 2017-18 and 68.28 billion rials ($276,000) in 2018-19. Investments have also increased over the first five months of the current Iranian year [March 20-Aug. 21] despite the outbreak of the coronavirus pandemic,” the senior official said.

Nearly 1,400 industrial units are operating in these seven FTZs, Bank said last year.

“Free zones account for 0.3% of total land area of Iran and accommodate less than one million people,” he added.

Debates on the merits of FTZs have been based on their impact on several elements: from social issues like labor rights, environmental protection and urban planning to macroeconomic issues related to their impact on government revenues, employment, trade and foreign exchange earnings.

The primary purpose of a free trade zone is to remove trade obstacles caused by high tariffs and complicated customs regulations applied in a port, airport or border checkpoint. They are also meant to help the government increase exports at a lower cost, create employment, attract foreign investment and help develop deprived regions.

In Iran, free trade zones were first authorized in 1993 in Kish, Qeshm and Chabahar. Later, Aras, Arvand, Maku and Anzali were added to the list of Iranian FTZs.

Anzali: Iran's Only Caspian Free Zone Along INSTC

As the only free zone in the southern part of Caspian Sea and the economic hub of Iran with an area of 9,400 hectares and a 40-km-long shoreline, Anzali is located in the northern Gilan Province. It officially became operational in 2005.

In addition to the legal incentives and exemptions of free zones such as tax exemption for 20 years, plus customs duties and value-added exemptions, FTZ boasts special advantages as it is located along the International North–South Transport Corridor, according to its website.

The strategic location of FTZ also allows easy access to populous markets of the Caucasus and Central Asia countries. It is also home to Anzali Free Zone Mercantile Exchange and Anzali Port.

INSTC is a 7,200-km-long multimodal network of ship, rail and road routes for transporting freight to Iran, Afghanistan, Armenia, Azerbaijan, Central Asia, India, Russia and Europe. The route primarily involves moving freight from India, Iran, Azerbaijan and Russia via ship, rail and road. The objective of the corridor is to increase trade connectivity between major cities such as Tehran, Mumbai, Moscow, Baku, Bandar Abbas, Astrakhan and Bandar Anzali.

Dry runs of two routes were conducted in 2014, the first was Mumbai to Baku via Bandar Abbas and the second was Mumbai to Astrakhan via Bandar Abbas, Tehran and Bandar Anzali.

The objective of the study was to identify and address bottlenecks. Results showed transport costs were reduced by $2,500 per 15 tons of cargo. Other routes under consideration pass through Kazakhstan and Turkmenistan.

Arvand: Gateway to Lucrative Iraqi Market

Arvand Free Trade Zone located in the southwest corner of Iran, bordering Arvand River and southern Iraq, differs from the other free trade zones across the country. It has direct access to the Iraqi market and currently, among all of Iran’s neighboring countries, Iraq remains the largest market for Iranian products.

The FTZ is located on the northern tip of the Persian Gulf and borders Khuzestan Province and its major cities: Khorramshahr and Abadan.

The zone covers 8,600 hectares and includes administrative, tourism and commercial areas. Nearly 3,800 hectares are utilized for warehousing and shipping. The port itself boasts the deep waters of Bahmanshir, Karoun and Arvand rivers. It also has excellent road, rail and air transit facilities.

It was in 2004 when the area began its transformation from a rural to industrial and commercial region. Cabinet members officially demarcated the area by 2005.

Kish: A Major Tourism Hub

Located in southern Iran, Kish Island is one of the most attractive tourist sites in the Persian Gulf and a frontrunner in the country’s tourism industry.

Kish is also among the top tourist destinations for planning and investment. It is the third most-visited vacation destination in Southwest Asia, after Dubai and Sharm el-Sheikh.

Tourists from many—but not all—foreign nations wishing to enter Kish Free Zone from legal ports are not required to obtain any visa prior to travel.

Owing to its free trade zone status, the island is touted as a paradise for tourists, with numerous malls, shopping centers, tourist attractions, beaches and resort hotels.

With about 26,000 residents, the island attracts nearly 1 million visitors each year.

Aras: Gateway to CIS Markets

Aras Free Trade-Industrial Zone is located in northwest Iran at the border point with neighboring Armenia, Azerbaijan and the Nakhchivan Autonomous Republic. It has become the main gateway to mainland Iran from the northern Commonwealth of Independent states.

The FTZ is likely to become a far more central and major player in the years to come, as the area has historical links with its northern neighbors.

Maku: Largest FTZ in Iran

Maku Free Trade Zone is one of the lesser known transit points located in northwest Iran. With just over 20 kilometers from the Turkish border and surrounded by mountains, the FTZ has had one of the best historical trading advantages through the ages.

The small town is separated by Zangmar River, which passes along West Azarbaijan Province. The designated zone itself encompasses 5,000 square kilometers, making it the largest Iranian free zone. The local population includes both Azeri- and Kurdish-speaking people, who can also speak Persian.

Qeshm: The Largest Island in Iran

Qeshm is the largest Iranian island located a few kilometers off the southern coast of Persian Gulf, opposite the port cities of Bandar Abbas and Bandar Khamir.

The island, which hosts a 300-square-kilometer free zone, is 135 km long and lies strategically in the Strait of Hormuz, just 60 kilometers from the Omani port of Khasab and about 180 kilometers from the UAE’s Port Rashid.

Chabahar Free Trade–Industrial Zone was established in 1992, along with the two other free trade zones, Qeshm and Kish Island. It has employed global expertise (mostly from Southeast Asia) for the development of the country, accelerating the development of infrastructure, generation of employment and presence in global markets.

Chabahar: Iran's Only Oceanic Port

The Chabahar Free Trade–Industrial zone achieved its importance mainly from its geographical location as the shortest and the most secure route connecting the Commonwealth of Independent States and Afghanistan to warm waters.

The zone enjoys proximity to one of the largest oil, gas and mineral resources of the world.

Chabahar is Iran’s only oceanic port town and consists of two separate terminals: Shahid Kalantari and Shahid Beheshti. The opening of first phase, namely Shahid Beheshti terminal (out of five phases defined for the project), which has tripled its capacity to 8.5 million tons (equal to that of all the northern ports of the country), allows the docking of super-large container ships (between 100,000 DWT and 120,000 DWT) and increases India’s connectivity with Afghanistan.

The first phase of Shahid Beheshti development project was inaugurated in December 2017 by the Iranian President Hassan Rouhani, opening a new strategic route connecting Iran, India and Afghanistan.

In December last year, India took over operations of part of Shahid Beheshti terminal.