Security of investment and business in Iran was slightly lower last autumn (Sep. 22-Dec.21, 2019) compared to the summer season, according to a seasonal study by the Majlis Research Center, the research arm of the Iran’s parliament.
Combining hard data released by official sources and the results of surveys of 3,801 business owner across the country, the center has presented the outcome of the study as an investment security index.
The index stood at 6.12 points in autumn out of 10 (10 being the riskiest), compared with 6.07 reported last summer.
The slight decline in business security shows that key factors contributing to a secure business environment were took a turn for the worse last autumn.
MRC attributes the downgrade mostly to the government decision to raise gasoline prices by 200% in mid-November 2019 without prior notice. The controversial decision sparked a wave of social unrest and violence.
This was followed by a nationwide internet blackout for ten days, which disrupted businesses in no small numbers, especially online businesses and startup. Many were forced to shutter their companies.
The influential think tank defines stability and security of investment as conditions where macroeconomic variables (such as inflation and foreign exchange rates) are stable, or at least predictable.
In a safe business environment “regulations, decisions and procedures must be consistent, transparent and easy to implement”. If and when there are changes, those concerned should be notified within a reasonable timeframe before implementation.
Also, a secure investment climate demands that lives and property of all citizens are protected and ownership rights defined and guaranteed in unambiguous terms.
Likewise, the judiciary and supervisory bodies should function in a manner that renders encroachment on people’s intellectual and physical properties costly.
Key Factors
Seeking the opinion of business owners, the MRC singled out 21 factors that contributed the most to the decline in business environment. Three were seen to be the most harmful:
- irresponsibility of government officials regarding pledges and fulfilling their obligations
- collusion and unwarranted intervention of government in managing businesses
- failure to uphold legal rights in government offices.
Moreover, theft, including cash, goods, and machinery, free access to information and decisions made by government officials plus rampant smuggling were rated as other, but less influential, factors undermining business and investment environment.
Government performance regarding fulfilling pledges were rated among the worst aspects that undermined security of business environment in earlier studies.
MRC said pushing through unforeseen and unpredictable policies will indeed pose a big danger to the economy and undermine future growth.
The think tank referred to an independent, dynamic and healthy private sector as the locomotive that will drive the economy forward. It stressed the urgency for creating the right conditions for sustainable private sector growth.
Provincial Ranking
In terms of the most and least suitable provinces for business and investment, data indicates that Hamedan (5.85), South Khorasan (5.87) and Qom (5.93) had the best environment for both existing and potential business.
Conversely, Kohgiluyeh and Boyer-Ahmad (6.46), Tehran (6.42), and Aradbil (6. 29) were rated to be the least appropriate in the third quarter of last year.
MRC categorized nine businesses and sought the opinion of people active in each business regarding the degree of investment security.
On this basis, communication and distribution sector ( transportation, warehouse management, wholesale and retail) had the worst rating (6.68) followed by energy-related industries, including crude oil, water, gas and power distribution (6.67) and the mining sector (6.63).
Businesses like livestock, aviculture and fishery were rated as the most secure (6.52). This was followed by agriculture and horticulture each scoring 6.53 and 6.57 points.
