The National Business Environment Index, measured by the Iran Chamber of Commerce, Industries, Mines and Agriculture, stood at 6.11 in the fourth quarter of last Iranian year (Dec. 22, 2022-March 20) to register a 0.06 percentage point or a 0.99% rise compared with the preceding quarter, and a 0.22 percentage point or 3.73% increase compared with the corresponding quarter of last year.
The index measures business friendliness of Iran’s economy, with 10 indicating the worst grade and a decline showing an improvement in the business environment. Therefore, an increase in the index suggests the deterioration of business environment.
The ICCIMA index is fashioned after the World Bank’s discontinued “Ease of Doing Business” index, a tool formerly used to measure the cost of doing business in countries.
Iran’s National Business Environment index stood at 6.05 in Q3 (March 21-June 21) and 5.88 in Q2 (Sept. 23-Dec. 21, 2022), according to the findings of the 26th edition of this report.
“Unpredictability and fluctuations in the prices of raw materials and products”, “difficulties associated with funding from banks” and “instability of policies, regulations and executive procedures related to businesses” affected Iran’s business environment during the period under review (winter).
The chamber of commerce measures the index for each of the 31 Iranian provinces.
Kurdestan, Sistan-Baluchestan and Gilan had the worst business environment and Markazi, Fars and Semnan had the best.
The average real production capacity of economic enterprises participating in this survey stood at 44.22% in Q4, indicating an increase of 1.63 percentage points compared with the preceding quarter.
The services sector had the worst business environment in Q4 with 6.15 points followed by industry (5.94) and agriculture (5.99).
Among 21 categories of business activities, the worst three business environments were registered for “Water Supply Activities, Waste Management, Sewage and Purification Activities”, “Real-Estate Services” and “Transportation and Warehousing” and the top tier included “Education” and “Administrative and Support Services” and “Mining Extraction”.
Enterprises with 11 to 49 employees had the best business environment with a score of 6.03 while those with 101 to 200 and less than five employees had the worst business environment, each with a score of 6.21.
Businesses operating for more than 16 years had the best business environment (6.04) while those operating for less than two years had the worst business environment (6.17).
World Bank’s Ease of Doing Business Index
In September 2021, the World Bank announced it was “discontinuing” its “Ease of Doing Business” report, which ranks countries on the ease of opening and operating a company.
It cited the outcome of an investigation that found the World Bank had changed the rankings under pressure of funding. This wasn’t the first time the rankings had come in for criticism.
A 2008 internal evaluation report highlighted their lack of transparency, while in 2018 the bank’s chief economist, Paul Romer, resigned decrying data manipulation.
According to Ian Richards, an UNCTAD economist, the Doing Business had become too politicized. It was originally intended as a way to measure improvements in countries’ business environments. It used an index score based on the number of procedures and time to, for example, start a business or get a construction permit; there were 10 indicators.
However, the bank also used it to rank countries, feting top scorers and reformers. Governments soon saw a good ranking as an end in itself, regardless of how it impacted their development. A slip in rank could be politically damaging.
According to Doing Business 2020 published in October 2019, Iran’s Ease of Doing Business ranking improved by one place to stand at 127th among 190 economies.
The report shows the country’s distance to frontier score saw a decline of 0.1 percentage point, from last year’s 58.6 to 58.5 in the new report.
New Zealand topped the list of 190 countries in the Ease of Doing Business with a score of 86.8, followed by Singapore with 86.2 and Hong Kong with 85.3, while Somalia was at last place with a score of 20.
