Foreign Investment in Iran’s FTZs Rises by 57% to Over $150 Million

EghtesadOnline: A total of $158 million worth of foreign investments have been made in Iran’s free trade and industrial zones during the first nine months of the current Iranian year (March 20-Dec. 20, 2020), according to the deputy secretary of High Council of Trade and Industrial Free and Special Economic Zones.

News ID: ۷۸۵۷۹۶

20 January 2021

“In the last fiscal year [March 2019-20], the overall foreign investments in the country stood at $1.5 billion. Iranian FTZs attracted $200 million, amounting to 15% of the total sum,” Ahmad Jamali was also quoted as saying by IRNA.

Morteza Bank, secretary of the council, says the nine-month foreign investment volume shows a 57% increase compared with the similar period of last year.

According to the top official, foreign investments in Iranian FTZs amounted to $27 million in the fiscal 2013-14, $113 million in 2014-15, $249 million in 2015-16, $349 million in 2016-17, $448 million in 2017-18 and $307 million in 2018-19.

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.

Bank noted that as many as 2,200 industrial units are operating in the seven FTZs.

“Free zones account for 0.3% of total land area of Iran and accommodate less than one million people. A total of 1,080 trillion rials [$5 billion] plus $28.5 billion have been invested by local investors in FTZs and special economic zones from March 2013 to date,” he said.

“On top of that, investments worth over $5.5 billion have been made by foreigners in Iranian FTZs and SEZs. Exports and imports via FTZs and SEZs during two terms of President Hassan Rouhani hover around $139 billion and $47 billion, respectively, indicating a trade surplus of $92 billion.”

The secretary of the council said exports via Iran's free trade and special economic zones account for 40% of the country’s total exports during seven years since President Rouhani first took office in August 2013.

A total of $941 million worth of commodities were exported from Iran’s free trade zones in the last fiscal year (March 2019-20), which shows a 490% growth compared with 2013 when Rouhani first took office as president.

Imports from Iranian FTZs, which mainly include raw materials and industrial machinery, decreased by 49% over the seven years to stand at $718 million last year from $1.45 billion in 2013, IRNA reported.

According to this report, the value of transit through Iran’s FTZs stood at $4.35 billion in the last fiscal year, indicating a %265.32 rise compared with $1.19 billion in 2013.

SEZ’s Track Record

A total of $37.2 million worth of foreign direct investments were made in Iran’s special economic zones during the last Iranian year (March 2019-20), up by a whopping 1,760% compared with the previous year.

Based on the latest figures released by the Economy Ministry, domestic investments made in rials over the period stood at 89.84 trillion rials ($418 million) to register a 173% year-on-year rise.

Domestic investments in dollar over the period amounted to $4.9 billion, registering a 65% increase compared with year before.

The Economy Ministry figures show that a total of $13.5 billion worth of commodities were exported from the Iranian special economic zones over the year under review, which indicates a 20% YOY decline.

The report attributes the fall to financial and banking sanctions imposed on Iran.

Imports into these zones over the same period saw a 38% YOY decrease to stand at $2.86 billion with the main commodities imported being raw materials and industrial machinery and equipment.

Over the last Iranian year, a total of 599 industrial units were active in Iran's SEZs creating jobs for 205,650 people, which show a 3% and 18% respective rise compared with the preceding year.

There are currently 30 special economic zones in Iran.

A special economic zone is an area where business and trade laws are different from the rest of the country. SEZs are located within a country's national borders and their aims include increased trade balance, employment, increased investment, job creation and effective administration.

To encourage businesses to move to the zone, financial policies were introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labor regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.

The creation of special economic zones by the host country may be motivated by the desire to attract foreign direct investment. The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive.

Fresh Investments in Qeshm

Three industrial and eight fishery and aquaculture projects were inaugurated on Qeshm Island’s Free Trade Zone via videoconferencing by President Rouhani on Thursday.

These projects include a cold storage facility with the capacity of 21,000 tons and investment of 600 billion rials ($2.79 million), which has created 120 jobs, a manufacturing plant with a capacity to produce 1,500 tons of commercial fish feed annually and investment worth 110 billion rials ($0.5 million) created 20 jobs, in addition to a mask manufacturing factory at a cost of $500,000, which has created 15 jobs.

A total of 2,996 billion rials ($13.96 million) have been invested in fishery and aquaculture projects inaugurated on Thursday; these fish farming projects have created 426 jobs, IRNA reported.

“The current administration plans to complete 310 projects worth 620,000 billion rials [$2.89 billion] in Iranian free trade zones prior to the end of its term; 100 of these projects worth over 210,000 billion rials [$979 million] will be launched on Qeshm Island off the Persian Gulf,” said Hamid Reza Momeni, managing director of Qeshm Free Trade Zone Organization.