Iran Investment Climate Riskier in Spring 2018

EghtesadOnline: A survey by the Majlis Research Center, the parliamentary research arm, says security of investments declined slightly in the first quarter of the current fiscal that ends in March 2019, compared to the previous winter.

News ID: ۷۸۴۴۳۲

29 December 2018

The report said the investment security index in spring was 6.15 out of 10 (10 being the riskiest), up 0.17 point compared to the previous season when it was 5.98.

According to the influential think tank, safety of investment is maintained in its entirety once macroeconomic variables (such as inflation and forex rates) are stable or at least predictable.

It delineates that for creating a safer business environment, regulations, decisions and procedures should also be consistent, transparent, and easy to implement. And if and when there are changes, everyone concerned must be notified within a reasonable timeframe before implementation, Financial Tribune reported.

Also, a safe investment climate demands that lives and property of all citizens be fully protected and their ownership rights accurately defined and guaranteed.

Second of Its Kind

The study, published on MRC's website, is the second evaluation of the investment security index in Iran. The researchers based the results on the opinions of business owners and data provided by official organizations. Results are available on the basis of provinces and business sectors.

Provincial Ratings

A combination of two sets of data yield results that rate provinces of South Khorasan (5.84), Bushehr (5.91), Zanjan (5.93), Sistan and Baluchestan (5.94) and Hormozgan (5.96) as the most appropriate environments for business. Tehran (6.64), Ilam (6.47), Chaharmahal-Bakhtiari (6.64), Alborz (6.42), and Kohgiluyeh and Boyer-Ahmad (6.36) were the most inappropriate in terms of investment security in the first quarter of the current fiscal.

A comparison of two studies shows that Ilam, which ranked 26th in the winter, declined to 30th place in spring, indicating a riskier climate for investors.

Alborz Province improved two grades over its previous ranking to sit in 28th place.

Different Sectors

In terms of investment security in economic sectors, business representatives from livestock, aviculture and fishery sectors had the worst ratings (6.8) and communication and distribution (including transportation, warehouse management, wholesaling and retailing) sector (6.57), and hospitality (hotels, restaurant and food procurement) sector (6.58) were rated as the best performing sectors.

This is while for business representatives in the previous study, industry, construction, and mining sector (except for oil and gas) were the worst and crude oil, natural gas, and water, electricity and gas distribution were rated as the best performing in terms of security of investments.

The research presents eight instances of “violation” of investment security commonly expressed as complaints to members of the parliaments and its research center by business owners:

1 failure to fulfill business contracts on the part of administrative and executive bodies

2 complicated, cumbersome, and costly judicial proceedings and pursuing rights violation

3 irresponsibility of officials regarding pledges they make on the campaign trail

4 unpredictable laws and executive procedures, such as constant volatility in commercial tariffs

5 instability of macroeconomic variables such as forex, inflation, and interest rate

6 potential of corruption in government interaction with  powerful tycoons

7 legal and illegal meddling of government officers in businesses

8 interpretability of laws and lack of transparency when it come to upholding rights of business owners.

MRC published its report based on the seven indicators drawn from complaints that were voiced by business leaders as evidence of insecurity in their operating environment.

The findings show that microeconomic stability was the worst-performing factor registering 7.25 points (out of 10) followed by the ownership rights protection indicator with 7.04 points.

The immunity of life and property of people indicator contributed most to investment security index and got a score of 4.4 in the first quarter of the current fiscal. It was followed by the stability and predictability of bureaucratic procedures indicator with 6.03 points.

Also, business people who participated in this survey rated undue influences in administrative affairs, and breaches of commitments on the parts of national officials, and failure of provincial officials to fulfill their promises as the most influential factors in creating an insecure business environment.

Also, in their opinion, business disruption due to imposition of sanctions, fraud and cheating in the market, and theft  (including cash, goods, machineries and equipment) as the least important factors in security of business investment.