Tangled Up in Business Rules and Regulations

Excessive rules and regulations have made investment in infrastructures ineffective and damaged the business environment in Iran.

This was stated by the deputy head of Iran Chamber of Commerce, Industries, Mines and Agriculture, Pedram Soltani, in a write-up for the Persian daily Etemaad. The full text follows:  

The latest World Bank’s Doing Business 2018 report shows Iran ranked 124th among the 190 economies, indicating a four-spot drop in Iran’s regulatory improvement from last year.

Iran’s score does not register a significant decline compared to last year. What is behind the drop in the standing is the progress other countries have made while Iran stayed put.

Last month, the World Economic Forum released “The Global Competitiveness Report 2017–18”, according to which Iran’s Global Competitiveness Index showed an improvement of seven places to rank 69th compared to the past year. So why have Iran’s rankings in these two studies changed inversely?

The Doing Business report is focused on rules and regulations of business environment; any improvement or reforms affecting 10 areas of a business leads to a better ranking.

The Global Competitiveness Report consists of indicators grouped into 12 pillars. A group of these pillars are based on infrastructures (hardware or software) and the rest are reflective of rules and regulations.

A closer inspection of Iran’s standing in these 12 pillars shows the areas in which Iran has gained higher ranks are those pertaining to software and hardware infrastructures; namely infrastructures 57th, macroeconomic environment 44th, health and primary education 50th, higher education and training 51th, and innovation 66th.

This is while the economy has fared poorly in areas involving rules and regulations of the country. In labor market efficiency, financial market development and goods market efficiency, Iran has been ranked 130th, 128th and 100th respectively. Iran’s standing in basic requirements sub-index, where most of its pillars are about infrastructures, is 55th.

In the absence of pillars reflecting the country’s rules and regulations, Iran’s ranking could have been much better in the Global Competitiveness Report.

What is to blame for Iran’s poor ranking in the Ease of Doing Business 2018 report is the sorry state of rules and regulation. Had the country’s rules and regulations been on a par with its infrastructures, the country’s ranking could have improved by 50 places in “Doing Business” report.

Iran’s ranking of 55th among 137 countries corresponds to its standing of 76th among 190 countries in “Doing Business” report. This simple comparison indicates how dysfunctional rules, burdensome regulations and outdated procedures have undermined investments in education, health and higher education infrastructures.