TEHRAN- The establishment of free trade zones (FTZs) in Iran dates back to the Iranian calendar year 1368 (March 1989 – March 1990) following the fall in the country’s oil income in the preceding year which prompted the government to promote non-oil exports.
Considering the significant role of the free trade and special economic zones in the country’s economy, the development of the existing zones and the establishment of new zones has become one of the major economic approaches of the Iranian government.
In order to be informed about the latest status of these zones, the Tehran Times took an exclusive interview with Hojatollah Abdolmaleki, the secretary of Iran’s Free Zones High Council, which comes as follows.
How much was the value of export from the free trade and special economic zones in the past Iranian calendar year (ended on March 20), and what percentage of the country’s total export was this amount?
The value of exports from free trade and special economic zones last year was close to $18 billion and about a third of the country’s non-oil exports value. Of this amount, the share of special economic zones was more, and the share of free trade zones was $1.7 billion, and considering that the value of imports to the free zones was almost $1 billion, then the trade balance of these zones was $700 million positive, and it was the first time that this happened.
This year we plan to have a jump in non-oil exports from the free zones.
How much domestic and foreign investment was made in free trade and special economic zones last year? What are the plans of the Secretariat to attract investment this year?
In the past, the amount of foreign investment made in the zones was very limited and the reason was that the investment opportunities and capacities in these areas were not well introduced. This year, we started a program that, thank God, is working very well, and that is preparing investment packages and introducing them to domestic and foreign investors.
These packages are in fact a preliminary feasibility study plan that shows the profitability of that plan, the amount of capital required, the required raw materials, technical and technological issues, consumer and market, which is actually the feasibility studies of that project and it shows whether the project is profitable or not.
This is the first part of our investment package, and the second part of our investment package is the necessary permits to carry out the work, including the land supply permit, water, electricity, and other infrastructure permits, and the construction permit that we have prepared.
Therefore, a package has been prepared that contains both the economic studies plan and the permits, and this package is anonymous, that is, the entire investment process is ready for an unknown person, and the interested person comes and announces, and if he is qualified, he will receive a license. The name will be given to him immediately and the work can be started from tomorrow. And this is the first time that such work is done in free and special zones.
In the first phase, last month, we unveiled 370 investment packages worth almost five billion euros and presented them at Iran Expo. And in the four days of the exhibition, about one-fifth of these projects, worth nearly one billion euros, reached an initial memorandum of understanding with domestic and foreign investors.
We regularly produce these packages, which are registered online on the secretariat’s website. According to the latest statistics, 528 investment packages worth almost 5.5 billion euros have been registered.
We gave the title of “Safe haven for Investment” to Iran’s free trade and special economic zones because, first of all, the cost of production in these areas is very low, the cost of land, the cost of manpower, the cost of energy and the cost of access to raw materials are very low, and there is appropriate infrastructure in these areas, and they mostly have good access to global markets, in addition to domestic markets. And in these areas, very special discounts and exemptions are offered as well.
Profitability in these areas is very high and our goal with these packages is to make the work of the investor easy.
Please explain about the latest status and the plans to establish new free trade and special economic zones.
According to the law, the establishment of seven new free trade zones and 13 new special economic zones were approved in the parliament in [the Iranian calendar year] 1398 (March 2019-March 2020). We carried out the administrative work of the seven free zones, their statutes were approved by the Guardian Council last winter, the exact geographical boundaries of six zones (except that in Ardebil) have been determined, the master plan studies of all six zones have been started for several months and on average the study plans have more than 50 percent progress and we are currently selecting the members of the board of directors and managing director of these zones.
Please explain about the establishment of joint zones with neighboring countries. Has a zone been created now? Explain the plans of the secretariat in this field.
We have negotiated to set up joint zones with 18 neighboring and non-neighboring countries. These are the new generation of free zones in the world.
Most of the countries are neighbors and some are non-neighbors like China and Uzbekistan.
In relation to these zones, there are two main things: First, the rules of work for the entrepreneurs of the two countries will be the same there; and second, all laws of free zones will be according to international standards.
Meanwhile, exchanging land and services is possible according to the laws.
First of all, this work is an important model in nullifying the sanctions and secondly, it greatly facilitates the trade between Iran and those countries.
Three or four joint free zones will probably be established by the end of this year.
Please let us know about the establishment of the international stock exchange in the free zones.
We have two goals in these zones. One is to popularize them, so that they will benefit the people of the region and the country, and the investors, and two is to globalize them.
In relation to the internationalization of the zones, we say that the free trade and special economic zones are members of the national team of the international economy of the Islamic Republic of Iran, and they are basically our spearheads for the powerful presence of Iran in the world economy.
In the field of globalization of our zones, we follow five policies, one of which is to complete the software infrastructure of the international economy in these zones; part of this infrastructure is in the financial field, such as the international stock market, international insurance, international financial institutions, and offshore bank.
We received the final approval for the establishment of the international stock exchange from the Supreme Council of the Stock Market a week or two weeks ago, and we are entering the process of appointing partners to establish it.
Some foreign and some domestic partners have voiced their readiness, and the first international stock exchange will be hopefully set up in Kish Free Zone (in south of Iran) by the end of the present year.
Please expound upon the plans of the secretariat in relation to the realization of the slogan of the year, “Production Growth”, in the free trade and special economic zones.
We follow the growth of production from two dimensions in these zones. One is the issue of improving the business environment, which will lead to businesses doing their work more easily and reaching their full production capacity, or new businesses wanting to start can do their work at a lower cost and faster.
We started a big and important project called “deregulation” in the zones last winter which required our colleagues in the zones to review all existing regulations and remove redundant regulations. The second phase of this work is already underway this spring, during which business processes are made simpler and faster.
The second task that we are pursuing in relation to the realization of the slogan of the year in the zones is the investment jump, which was mentioned earlier.
The third task is related to export jump and that is the establishment of export companies and export management companies in the zones with the aim of marketing the products produced in the mainland abroad.
We are trying to set up companies for international marketing in the free zones, so that we help to increase production in the mainland.
We expect this year to be a prosperous year in terms of exports
What are the main problems in the way of developing free trade and special economic zones?
One of the main problems is that the economic capacity of these zones is unknown even inside the country and even for the country’s officials.
This weak and incomplete information sometimes causes decisions to be made that are detrimental to these zones.
One of our plans is to make the capacities and potentials of these zones known to both domestic officials and domestic and foreign investors.