Iran’s Ease of Doing Business Ranking Improves Slightly

EghtesadOnline: Iran’s ease of doing business ranking has improved by one place to stand at 127th among 190 world economies.

News ID: ۷۸۴۹۷۵

26 October 2019

The World Bank’s Ease of Doing Business Report 2020 shows the country's distance to frontier score saw a decline of 0.1 percentage point, though–from last year’s 58.6 to 58.5 in the new report.

New Zealand tops the list of 190 countries in ease of doing business with the score of 86.8, followed by Singapore with 86.2 and Hong Kong with 85.3, while Somalia was in last place with a score of 20.

According to Financial Tribune, following is an overview of Iran’s rankings and scores in all 10 indexes in the report:

Starting a Business

This indicator records the number of procedures, time, cost and paid-in minimum capital required to start a limited liability company.

Iran is ranked 178th among 190 economies, with a score of 67.8 on ease of starting a business, indicating no change compared with last year’s report. It takes 10.5 procedures, 72.5 days and 1.1% of per capita income to launch a company in Iran, according to WB’s flagship report.

Iran does not require fixed paid-in minimum capital, the amount that entrepreneurs must legally deposit in a bank or with a notary when incorporating a business.

Dealing With Construction Permits

This area pertains to the procedures, time and cost required to complete all formalities to build a warehouse and the quality control and safety mechanisms in the system issuing a construction permit.

Iran’s ranking on ease of dealing with construction permits stands at 73rd with a score of 71.2, indicating a 0.4 percentage point improvement compared to last year’s report.

According to data collected by Doing Business, dealing with construction permits in Iran requires 16 procedures, takes 130 days and costs 6.3% of the warehouse value. The economy scores 13.5 out of 15 on the building quality control index.

Getting Electricity

The Doing Business report records all procedures, time and cost required for a local business to obtain a permanent electricity connection to the electrical grid and the reliability of the electricity supply and the transparency of tariffs.

According to data, getting an electricity connection in Iran requires six procedures, takes 77 days and costs 746% of per capita income, placing the country at 113th position in the global ranking.

The country scores 69.4 in getting electricity, which shows an improvement of 0.1 percentage point compared to last year.

Registering Property

This indicator records the full sequence of procedures, time and cost necessary for a business to purchase property from another business and transfer the property title to the buyer’s name as well as the quality of the land administration system.

Iran ranks 70th on the ease of registering property, its best ranking in ease of doing business indexes in the 2020 report, with a score of 68.1 compared to last year’s 69. The report suggests that registering a property in Iran requires six procedures, takes 31 days and costs 3.8% of the property value.

“The Islamic Republic of Iran made transferring property more expensive by increasing the average taxable land value in Tehran City,” the 2020 report said.

Getting Credit

This area assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions.

Credit information systems enable lenders’ rights to view a potential borrower’s financial history as well as permit borrowers to establish a good credit history that will allow easier access to facilities.

Iran ranks 104th on the ease of getting credit with a score of 50, indicating no change compared to last year.

The economy scores two out of 12 on “strength of legal rights” sub-index that measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders, and thus facilitate lending. It ranges from 0 to 12, with higher scores indicating that these laws are better designed to expand access to credit.

When it comes to “depth of credit information” sub-index, which measures rules affecting the scope, accessibility and quality of credit information available through public or private credit registries, Iran scores highest i.e. eight out of eight.

The average credit registry coverage of the adult population in Iran's economy is 60.3% while 60.7% of the adult population on average is covered by a credit bureau.

Protecting Minority Investors

Protecting minority investors matters for the ability of companies to raise the capital they need to grow, innovate, diversify and compete.

The report measures the protection of minority shareholders’ rights in related-party transactions and in corporate governance through one set of indicators and shareholders’ rights in corporate governance through another.

Globally, Iran ranks 128th on the strength of minority investor protection index with a score of 40 showing no change over last year.

Paying Taxes

Using a case scenario, the Doing Business report measures the taxes and mandatory contributions that a medium-sized company must pay in a given year as well as the administrative burden of paying taxes and contributions.

On average, firms in Iran make 20 tax payments a year, spend 216 hours a year filing, preparing and paying taxes, and pay total taxes amounting to 44.7% of their profit, placing the country in the 144th global ranking among 190 nations. Iran's score in this area is 59.5, registering no change compared to 2019 report.

Trading Across Borders

This indicator measures the time and cost for documentary and border compliance, including the time and cost for obtaining documents (such as time spent to get the document issued and stamped); preparing documents (such as time spent gathering information to complete the customs declaration or certificate of origin); processing documents (such as time spent waiting for the relevant authority to issue a phytosanitary certificate); presenting documents (such as time spent showing a port terminal receipt to port authorities); and submitting documents (such as time spent submitting a customs declaration to the customs agency in person or electronically).

According to data collected by Doing Business, documentary compliance for exports takes 33 hours and costs $60 while border compliance for export takes 101 hours and costs $415.

Documentary compliance for import takes 40 hours and costs $90. Border compliance for import takes 141 hours and costs $660.

Globally, Iran stands at 123rd spot in the ranking of economies on the ease of trading across borders, with a score of 66.2, posting no change compared with last year’s results.

Enforcing Contracts

The World Bank report measures the efficiency of the judicial system in resolving a commercial dispute and the quality of judicial processes.

Iran ranks 90th with a score of 58.2, which indicates no change over last year.

Contract enforcements in Iran take 505 days, costing 19.3% of the value of the claim. The economy scores five (out of 18) on the quality of judicial processes index.

Resolving Insolvency

A robust bankruptcy system functions as a filter, ensuring the survival of economically efficient companies and reallocating the resources of inefficient ones.

Fast and cheap insolvency proceedings result in the speedy return of businesses to normal operation and increase returns to creditors. This area studies the time, cost, outcome and recovery rate for commercial insolvency and the strength of legal framework for insolvency.

Iran ranks 133rd in the ease of resolving insolvency ranking, with resolving insolvencies taking 1.5 years on average and costing 15% of the debtor’s estate.

The economy scores 35.1 in resolving insolvency, indicating a 0.5 percentage point decline compared to last year’s report.