Iran’s Competitiveness Index and FATF demands

6 December 2017 17:12 (UTC+04:00)

By  Trend

Competitiveness of Iranian economy has been appraised, as it ranks 69th among 137 countries, according to the Global Competitiveness Report 2017-2018. Iran has made progress in comparison with the previous year, where it ranked 76th among 138 economies.

Three main quantitative components of competitiveness each consisting of several pillars clearly show what is close to be good and what is still to be worked over in the country’s economy.

Iran’s economy demonstrates relative productivity in terms of macroeconomic environment (ranked 44th), health and primary education (50th), higher education and training (51st), and market size (19th).

The weakest indicators include financial market development (128th), labor market efficiency (130th), goods market efficiency (100th), business sophistication (97th), institutions (85th), and technological readiness (91st).

Meanwhile, as is noted in the report, the Executive Opinion Survey, which is used in the calculation of the Global Competitiveness Index and captures the opinions of business leaders around the world, aims to measure critical concepts—such as appetite for entrepreneurship, the extent of the skills gap, and the incidence of corruption—to complement the traditional sources of statistics and provide a more accurate assessment of the business environment and, more broadly, of the many drivers of economic development.

The indicators derived from the Survey captured the views of 14,375 business executives in over 148 economies.

In accordance to the Survey, the most problematic factors for doing business in Iran are (by relevance):

access to financing,
inefficient government bureaucracy,
policy instability,
inadequate supply of infrastructure,
inflation,
corruption,
restrictive labor regulations,
foreign currency regulations,
tax rates

Both quantitative indicators and the Executive Opinion Survey show consensus that financial system has been one of the sorest spots in Iran’s economy, which is proved by poor performance of the financial market’s components, including availability and affordability of financial services, soundness of banks, regulation of securities exchanges, legal rights index etc.

In this regard, one of the crucial factors in improvement the country’s financial system is making it more transparent by fulfilling demands of Financial Action Task Force (FATF) on anti-money laundering and combating terrorism financing (AML/CFT).

On November 3, the plenary meeting of FATF was held in Buenos Aires. Among the issues discussed at the meeting there was an update on Iran’s engagement with FATF. The country’s Action Plan expires on 31 January 2018 and the FATF urged Iran to proceed swiftly on the reform path, to ensure full and accurate implementation of the Plan. At its February 2018 meeting, the FATF will assess progress made by Iran and take appropriate action.

On November 20 President Hassan Rouhani’s official website published amendments to the draft law on AML/CFT – a document that, if adopted - will allow the country’s access to the International Convention. If not, Iran will be pushed back to the Organization’s "black list" with negative consequences for the country including possible disconnection from SWIFT.

However, it has faced an ambiguous reaction in the Parliament and media.

Some of the newspapers close to Iran hardliners commented that putting the country’s banking system under international control was unacceptable and would cause threat to Iran.

Iran’s turning to the world is going hard but the process can’t be stopped. Now the country can make another important step to ensure transparency of some aspects of its national economy and readiness to international cooperation.

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