Iran Chamber of Commerce, Industries, Mines and Agriculture has published a report on Iran’s business environment.
The National Business Environment Index stood at 5.88 in the second quarter of the current fiscal year (June 22-Sept. 22) to register a 0.24 percentage point or 4.12% increase compared with the preceding quarter and a 0.19 percentage point or 3.13% decrease compared with the corresponding quarter of last year, according to the report.
The index calculated by ICCIMA measures business friendliness of Iran’s economy, with 10 indicating the worst grade and a decline showing an improvement in the business environment.
The ICCIMA index is fashioned after World Bank’s “Ease of Doing Business” index, a tool for countries seeking to measure costs of doing business.
Iran’s National Business Environment index stood at 6.07 in Q1 (March 21-June 21) and 5.83 in Q4 (Dec. 22, 2021-March 20).
“Unpredictability and fluctuations in the prices of raw materials and products”, “instability in policies, regulations and executive procedures related to businesses” and “difficulties associated with funding from banks” affected Iran’s business environment during the period under review (summer), according to the findings of the 24th round of this report.
The chamber also measures the index for each of the 31 Iranian provinces. The report names Kerman, Ardabil and Bushehr as the provinces with the worst environments to do business in and Markazi, Qazvin and Fars as the best ones.
The average real production capacity of economic enterprises participating in this survey stood at 41.15% in Q2, indicating an increase of 1.64 percentage points compared with the preceding quarter.
The agriculture sector had the worst business environment in Q2 with 5.81 points followed by services (5.78) and industry (5.76).
As for 21 fields of business, the worst three business environments were posted by “water supply, waste management, sewage and refinery activities”, “art, entertainment and recreation” and “construction”, and the top tier included “education”, “finance and insurance”, “real-estate services”.
Enterprises with 6 to 10 employees had the best business environment with a score of 5.57 while those with more than 200 employees had the worst business environment with a score of 5.94.
Businesses operating for less than two years indicated the best business environment (5.67) while those operating for 11-15 years had the worst business environment (5.85).
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, 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.
“After data irregularities on Doing Business 2018 and 2020 were reported internally in June 2020, World Bank management paused the next Doing Business report and initiated a series of reviews and audits of the report and its methodology. In addition, because the internal reports raised ethical issues, including the conduct of former board officials as well as current and/or former bank staff, management reported the allegations to the bank’s appropriate internal accountability mechanisms.
After reviewing all the information available to date on Doing Business, including the findings of past reviews, audits and the report the bank released on behalf of the Board of Executive Directors, World Bank Group management has taken the decision to discontinue the Doing Business report.
“The World Bank Group remains firmly committed to advancing the role of the private sector in development and providing support to governments to design the regulatory environment that supports this. Going forward, we will be working on a new approach to assessing the business and investment climate. We are deeply grateful to the efforts of the many staff members who have worked diligently to advance the business climate agenda, and we look forward to harnessing their energies and abilities in new ways,” the World Bank said in a statement.
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 in last place with a score of 20.
