Iran's top private sector representatives are increasingly focusing on improving the country's doing business ranking of the World Bank and have come up with actionable solutions that will require close government cooperation to implement.
The Ease of Doing Business Report 2019 published by the international financial institution on Oct. 31 shows that even as Iran's overall score improved by 2.34 percentage points to reach 56.98, its ranking among 190 economies fell by four places to 128th.
The private sector has long bemoaned the lack of government attention to this ranking seen as very important toward attracting foreign investments to the country.
ICCIMA has obligated the chambers of Tehran, Tabriz, Isfahan, Mashhad, Kerman and Shiraz to identify and evaluate challenges related to ease of doing business in Iran and offer actionable solutions that will be directly communicated to government entities
Recently, the Iran Chamber of Commerce, Industries, Mines and Agriculture, as a major private sector representative, has redoubled efforts to boost three of Iran's major indices, namely that of construction permits, starting a new business and tax payment index.
According to the official news website of ICCIMA, the chamber has obligated the chambers of Tehran, Tabriz, Isfahan, Mashhad, Kerman and Shiraz to identify and evaluate challenges related to ease of doing business in Iran and offer actionable solutions that will be directly communicated to government entities.
Construction Permits
The Tabriz chamber was tasked this year to focus on several indices, including the construction permits index.
The chamber reported its findings during the latest meeting held earlier this week with top representatives of ICCIMA, the Ministry of Roads and Urban Development, the Presidential Office, Tehran Municipality and the Ministry of Economic Affairs and Finance.
Based on World Bank's reports, the index registers and evaluates all processes required of a business in the construction sector to build a standard store. They include offering all related documents to officials, obtaining all approvals, permits, licenses and certificates, completing all forms and welcoming all inspections. It also takes into account processes related to water and wastewater management and quality of construction.
The latest World Bank report gave Iran a score of 78.07 that equaled a global ranking of 25 in the construction permits index. This indicated an improvement of two ranks.
Times, expenses, number of processes and quality control of construction are the main criteria considered by the institution in this index.
According to Sahand Shahbazi, director of international affairs at the Tabriz chamber, who has been put in charge of evaluating Iran's performance in this index, it takes 99 days and 15 processes to obtain construction permits in the Islamic Republic.
In comparison, in Denmark, which is the top-ranking country in this regard, it takes 64 days and seven processes to get the job done.
Shahbazi noted that improving Iran's construction permits index does not require extraordinary efforts. It only takes an effort by officials to have "an actionable view" to realize infrastructural requirements.
Creating electronic services offices, facilitating the process of verifying the location and finalizing permits, and reducing the time it takes to obtain water and electricity permits were among positive measures already undertaken by Iran.
To promote further reform, Shahbazi proposed that utility services providers in Tehran, for instance, must act through the singular electronic gateway of Tehran Municipality while the Legal Affairs Department of the Presidential Office must work in tandem with the Interior Ministry, Agriculture Ministry and the Department of Environment to issue all related construction permits through the singular electronic gateway of the Interior Ministry.
The report also presented the Ministry of Roads and Urban Development with actionable solutions to reduce five steps off the process to obtain construction permits.
The ministry could also take 10 days off the time it takes to complete the process, it said.
"While it was approved 13 years ago that all construction permits would go through the portal of the municipalities and other executive entities, this has yet to happen," criticized ICCIMA Vice President Perdram Soltani during the meeting.
Earlier, Soltani predicted that Iran's Ease of Doing Business ranking will further drop in 2020 due to the fact that Iran's private sector has been under immense pressure in recent months due to the effects of reimposed US sanctions on the economy. He also criticized the tacit government approach toward the issue of ease of doing business.
Starting a Business
The private sector is also actively striving to improve the country's index of starting a new business. While Iran gained a world ranking of 102nd last year for this index, its ranking fell to a dismal 173rd this year.
The index includes processes, time, minimum capital and expenses that are required for employers to officially commence their business. Starting from 2017, the issue of gender has also been considered in calculating the rankings of this index.
According to World Bank reports, Iran started targeted measures to improve this index, but they fell flat after yielding some initial results.
Mandatory obtaining of a police clearance document that shows the person looking to register a company is not a criminal is still viewed as a major obstacle for businesspeople looking to start a business. At best, the process takes three months and has yet to be removed after many private sector requests.
According to findings of the Tabriz chamber about this index, it takes about 15 days in Iran to start a business. In New Zealand, for instance, the whole process is done electronically in half a day.
Egypt, Indonesia, South Korea, China and many more have improved their starting business ranking by curbing on bureaucracy in terms of registering businesses, improving online processes, reducing minimum capital requirements and boosting trade single windows.
But the Tabriz chamber says in addition to those efforts, Iran must do so much more if it is to meaningfully improve its starting business ranking.
According to the chamber's report, the Iranian National Tax Administration and the Social Security Organization must offer all their related services through an electronic single window.
When a police clearance document is required, the judicial force must act in unison with the law enforcement force to offer the documents online. All entities that need to issue permits must stick to specific time limits and facilitate the process.
The report also said the Deeds and Property Registration Organization must reform its statute concerning registration of noncommercial entities and institutions.
Lastly, the Central Bank of Iran must eliminate required bank payment documents, remove the need to physically present documents concerning minimum capital of enterprises and their subsequent capital boosts, and provide the infrastructures to create an electronic link among their registration system, banks and financial institutions.
Paying Taxes
The Mashhad Chamber of Commerce was tasked with devising actionable solutions to improve Iran's paying taxes index.
Yaser Mehravar, as the representative of the chamber, reported its findings. He explained that the World Bank started using this index as an independent index from 2006 aimed at facilitating payment of taxes. To improve rankings, it asks governments to ease tax regulations.
In the 2019 report, the international institution noted that Iran has introduced an online system to register social security payments, which eased tax payment. The system has also facilitated several tax-related processes for companies online.
According to the Mashhad chamber, Iran needs more measures to improve in this index. They include making electronic payments mandatory, establishing a centralized electronic payments system, allowing nearest tax offices to issue tax reports, reducing social security rates, introducing new rebates in social security and reducing tax on transferring property deeds and corporate incomes.
In the 2019 report, Iran's ranking in the paying taxes index stood at 149th, up from last year's 150th, which in turn signified a steep drop compared to the 2017 ranking of 100th.
Iran fares worst in the region in this index and stands below Iraq with a ranking of 129th, with Lebanon at 113rd, Jordan at 95th, Syria at 85th, Yemen at 83rd and Saudi Arabia at 78th.
In Iran, it takes an average of 159 hours to pay taxes. According to the Mashhad chamber's predictions, if all the proposed private sector reforms are implemented, the country's ranking in this index will significantly improve to 50. This will also improve Iran's overall score and ranking to 59.32nd and 114th respectively.
