Safety of investment in Iran improved slightly in the spring of the current calendar year (March-June), according to a quarterly survey by the Majlis Research Center, an influential think tank affiliated to the parliament.
Based on an index developed by the MRC, investment security stood at 6/07 out of 10 (10 being the riskiest) in spring, improving 0.11 (or 2%) over 6.18 reported in winter.
The investment security evaluation is premised on a combination of reports from field surveys across target businesses plus data released by official sources, such as the Statistical Center of Iran.
The index was 6.43 in autumn indicating that business climate and investment security was improving gradually in line with investment security indicators defined by the center.
Investment security is operationally defined by the think tank as environment and circumstance where macroeconomic variables like inflation and currency rates are stable, or at the least predictable.
In a secure business climate “regulations, decisions and procedures must be consistent, transparent and easy to implement.” If and when there are changes “all those affected must be notified” within a reasonable timeframe and before implementing the changes.
From MRC’s perspective, a secure investment climate demands life and property of all citizens be fully protected and ownership rights clearly defined and guaranteed.
In addition, the judiciary and supervisory bodies need to function in a manner that renders encroachment on people’s intellectual and physical property costly and economically unviable.
Seeking the opinion of businesses, the center singled out 21 factors affecting safety in business environments, three of which were seen by business owners to be the most harmful:
- irresponsibility of national officials vis-à-vis the promises they make
- collusion and unwanted interference in government projects
- irresponsibility of local and provincial officials regarding their duties.
The (poor) performance of government officials regarding pledges was rated in five consecutive rounds of the MRC studies as having the most detrimental effect on the business environment.
As per the views of business people in the study, theft ( including cash, goods, and machinery), proliferation of contraband plus unauthorized use of trademarks and violation of intellectual property were among the least influential factors affecting business security.
Regional Safety Levels
In terms of the most and the least suitable regions for business and investment, a combination of data and survey indicates that Tehran Province (6.60), Gilan Province (6.58) and Kohgiluyeh and Boyer-Ahmad Province (6.55) were rated to be the least appropriate regions in terms of investment security during the first quarter of the current Iranian year.
On the flip side, Ilam Province (5.40), South Khorasan Province (5.41) and Qom Province (5.62) had the most desirable environments for existing and potential businesses.
The think tank classified businesses into nine categories and sought the opinion of people active in each business regarding the extent of investment security in their profession.
Accordingly, the industry sector had the poorest rating with a security index of (7.05). Livestock, aviculture and fishery and services (health, education etc.) were jointly rated as the second most insecure at 6.76 followed by hospitality sector (hotels, restaurant and food distribution) at 6.59.
Communication and the goods distribution (transportation, warehouse management, wholesale and retail) sector (6.13), financial services, including intermediation, banking, insurance, real estate etc. (6.27) and energy-related industries like crude oil, water, gas and power distribution (6.39) were the most secure sectors assessed by the business owners.
MRC ascribed the relative improvement in security of business index to improvement in major economic variables, such as stability in the current market, less inflation growth and relative stability in raw material prices, among other things.
The research arm of the legislative branch said fiscal 2018-19 saw inflation jumping from an average 10% annually to 47.5% and more than double price increase of goods along with the negative climate created after the US unilaterally abandoned the Iran nuclear deal in late 2018.
A combination of these factors had created an atmosphere of uncertainly about the future for many businesses in the 2017-18 fiscal year. However, business conditions started to ease slowly as that year drew to a close.
