Iran’s free trade zones (FTZs) today deliver only a fraction of their intended economic role, contributing barely 1% to national GDP—far below expectations and dramatically weaker than regional peers such as the UAE, where free zones generate more than 30% of total output. Years of structural underperformance have now pushed the administration to reassess the foundational purpose of these zones and to initiate a sweeping overhaul of their legal, managerial and strategic frameworks.
Senior officials, including the minister of economy, confirm that restrictive regulations have been identified, and a revised FTZ law is being drafted for submission to parliament. The reform package aims to eliminate long-standing investment barriers, streamline governance, and clarify institutional mandates. In parallel, the government is preparing five-year action plans tailored to each FTZ, requiring them to focus on a narrow set of specialized economic missions aligned with their geographic advantages. Authorities also aim to restore competitive incentives—such as tax benefits and customs exemptions—that have gradually weakened due to overlapping regulations and fragmented decision-making.
Despite their formal privileges, Iran’s FTZs have not fulfilled their policy mandate. Structural inefficiencies have slowed investment activity. A 2022 parliamentary research report highlighted a wider set of challenges: unsuitable site selection, a poor foreign investment environment, weak coordination with central agencies, excessive bureaucracy, financial mismanagement, high infrastructure costs, limited knowledge of foreign capital requirements and inadequate service provision. These weaknesses have prevented FTZs from developing into export-oriented production hubs or participants in global value chains.
The results are visible in the numbers. FTZs account for only 10% of foreign direct investment inflows, 2% of Iran’s external trade and roughly 4% of national employment. Many zones have drifted away from their development mission and evolved into retail-oriented import gateways rather than drivers of sustainable industrial diversification. The plan to establish the Mazandaran FTZ—covering three coastal areas but still lacking a clearly defined economic role—has revived long-running questions about whether further expansion should await consolidation and specialization of existing zones.
Maritime Integration
Seven of Iran’s FTZs—Kish, Qeshm, Chabahar, Anzali, Bushehr, Hormuz and soon Mazandaran—have coastal access and thus the potential to anchor a maritime-centered development model. Yet analysts argue that these zones remain structurally disconnected from the country’s broader maritime strategy. Although Iran’s maritime doctrine emphasizes “agile and efficient maritime governance,” FTZs often face overlapping mandates from multiple agencies, creating operational confusion and lengthy delays. Parliamentary analyses indicate that there is no clear legal mechanism to resolve these institutional conflicts or define the operational authority of FTZ organizations.
Researchers note that, despite significant investment, coastal FTZs have not synchronized with domestic industry or integrated into global maritime supply chains. Many zones have gravitated toward land sales, low-value trade and activities detached from the wider economy. Foreign investment attraction has been hampered by political tensions, infrastructure gaps and the impact of sanctions. Because FTZs remain highly dependent on the mainland economy, sanctions have had a disproportionate effect on their financial stability and operational capacity.
Economic experts specializing in maritime industries argue that Iran’s challenge is not the number of free zones but their strategic purpose. They advocate for assigning each coastal FTZ a distinct functional role—marine technologies, logistics, fisheries, tourism or related activities—based on its geographic and industrial characteristics. Implementing such a strategy would require revising master plans, redefining economic missions and creating stronger alignment with national maritime development priorities.
Better integration with logistics chains is also essential. Analysts argue that FTZs should serve as core nodes along the International North–South Transport Corridor, enabling re-export activity, transit services and door-to-door maritime logistics. Policy specialists stress the need to modernize FTZ governance by creating smart customs systems, digital single-window platforms, improved data management tools and value-added digital services for investors. A three-stage model—integrating single-window systems, building smart logistics structures and developing digital value-added services—could help transition FTZs into “smart free zones” capable of mitigating the operational disruptions caused by sanctions.
Ultimately, experts maintain that Iran needs a coherent, process-driven strategy before expanding its FTZ network. Without a comprehensive value-chain map linking ports, transit corridors, coastal industries and regional markets, new zones risk replicating existing inefficiencies. In some cases, such as the proposal for a ro-ro-oriented FTZ in the Caspian region, expansion may be economically justified—but only after a full assessment of trade flows, logistics capacity and regional demand.
Despite these challenges, analysts view the government’s current policy review as a necessary starting point. The effectiveness of upcoming reforms will depend on whether policymakers move beyond incremental adjustments and pursue a qualitative shift that links FTZs to the maritime economy, regional supply chains and specialized industrial roles. Without such realignment, free zones are likely to remain administratively constrained enclaves with limited contribution to Iran’s broader economic performance.
