Foreign Investment:
A Roadmap

Seyed Mohammad Hussein Adeli, Deputy Foreign Minister for Economic Affairs, addressed the IPF once again this year. Drawing on his former experience as Governor of the Central Bank of Iran and international experience as ambassador to Japan and Canada, Dr. Adeli presented a clear picture of the new draft law for attraction and protection of foreign investment while at the same time the law was being tabled in the Parliament.

Iranian Economy: The Iranian economy is one of the largest in the region with a GDP growth rate of 5.5%. Inflation, which has been checked during the past few years, has come down to 12.8%. Iran has an active stock exchange which is very important for foreign investors because when they are in need of financing, they can go to the stock exchange, register their company and would be able to mobilize enough finance for themselves.
The strategic location of Iran provides foreign investors with the advantage of accessing markets in the region. Iran boasts abundance of energy, skilled labor and educated human capital which are believed to facilitate foreign investment. Iran enjoys high manufacturing capacities, adequate infrastructure, and access to regional markets.

Economic Plans & Policies: Iran is in the second year of the Third Economic Development Plan. The plan calls for even more ambitious reforms starting with privatization, correction of price distortions, competitiveness and countering of monopolies. Deregulation and downsizing of the administration, by merger of some of the ministries, has already taken place. Unification of exchange rates is now in practice and is going to be one of the targets of the Third Plan. It is now 11 years that the Iranian economy has been able to sustain a positive GDP growth rate of 5% despite declines in oil prices.

Long-Term Legal Guarantee: The new draft law calls for the enforcement and application of the law for at least 10 years. Thus, any foreign investment registered under the new law is going to be subject to the same law at least for ten years unless a new law would facilitate the conditions and the various features of the investment. So those subject to the law may rest assured that the various dimensions of bureaucratic activities would remain the same.

Reduced Red Tape: The Supervisory Board, currently made up of 11 members, is reduced in the draft law to three who will represent the Finance Ministry, Central Bank and Foreign Ministry and who will consider foreign investments. This would also expedite the bureaucratic formalities.

Laws on Taxation: The existing corporate tax in Iran is 54% plus flat 10%. The 54% is applied in brackets and the 10% is flat. Altogether it adds up to 64% which is high. But the new amendment which has already been approved by the Council of Ministers and is now being considered by the Parliament calls for only 45% indicating a reduction of 19% in absolute tax. But calculating the new brackets that are applied to this 45%, one would come to the effective rate of reduction of 25%. Therefore, one can count on the fact that the tax is now reduced to 25% of the existing level.