A survey by the Majlis Research Center (MRC), the research arm of the parliament, says security of investment improved slightly in the fourth quarter of the last fiscal that ended in March compared to the third quarter.
Investment security index in winter was 5.92 out of 10 (10 being the riskiest), up 0.34 points compared to the previous season when it was 6.26, it said.
Safety of investment can be sustained in its entirety, the MRC says, when macroeconomic variables (such as inflation and forex rates) are stable or at the least predictable.
It delineates that for creating a safer business environment, regulations, decisions and procedures should be consistent, transparent, and easy to implement. And if and when there are changes, all stakeholders must be notified within a reasonable timeframe before implementation.
A safe investment climate demands that life and property of all citizens be fully protected and their ownership rights be upheld and defined unambiguously.
The research draws on the opinion of business owners and data provided by official state and government organizations. Results are on the basis of provinces and business sectors.
Provincial Ratings
A combination of two sets of data show that the provinces of Sistan and Baluchestan (2.89), West Azarbaijan (3.20), South Khorasan and Kerman (3.25), Semnan (3.32) and Hormozgan (3.33) have the most business friendly.
Kohgiluyeh and Boyer-Ahmad (5.66), Ilam (5.47), Tehran (5.14), Chaharmahal-Bakhtiari and Isfahan (4.83) and Bushehr (4.80) were a the bottom end in terms of investment security.
A comparison of recent studies and surveys confirms that the two provinces of Sistan and Baluchestan and West Azarbaijan have long been among the less risky provinces for investors. However, Tehran, Kohgiluyeh and Boyer-Ahmad and Ilam provinces have repeatedly ranked among the riskiest.
Sectoral Review
In terms of investment security in different economic sectors, business representatives from the communication and distribution (including transportation, warehouse management, wholesaling and retailing) sector (6.63), industry (6.56) and crude oil and natural gas (6.50) were rated as the worst performing in terms of security.
The mining sector (except for oil and gas), livestock, aviculture and fishery, services sector and production sector were rated as the best performing.
The research presented eight instances of “violation” of investment security commonly expressed as complaints to members of the parliament and its research center by businesses:
1 failure to fulfill business contracts on the part of administrative and executive bodies
2 cumbersome, complex and costly judicial proceedings and hurdles in seeking redress
3 indifference of officialdom regarding pledges they make on the campaign trail
4 unpredictable laws and executive procedures, such as the unending volatility in commercial tariffs
5 instability of macroeconomic variables such as forex, inflation, and interest rates
6 potential for corruption in government interaction with vested interests and caratels
7 legal and illegal interference of the state and government in trade
8 interpretability of laws and lack of transparency when it comes to upholding rights of business owners.
The MRC report is based on seven indices pertaining to complaints made by business leaders as evidence of insecurity in their operating environment.
The findings show that the government's role was the worst-performing factor registering 7.48 points (out of 10) followed by microeconomic stability with 6.52 and transparency at 6.28 points.
Immunity of life and property of the people contributed the most to investment security index with a score of 4.17 in the fourth quarter of last year. It was followed by the stability and predictability of bureaucratic procedures indicator with 5.73.
Businesses that participated in the survey singled out the unwanted influence in administrative affairs, lack of commitment of officials plus the abject failure of provincial officials to fulfill their promises as fundamental in creating an insecure business environment.
Also, in their opinion, business disruption due to the US economic sanctions, fraud and deceit in the market, and theft (including cash, goods, machinery and equipment) as the least important factors in the safety and security of the business environ.
