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Doing business 2018: Iran is behind where it could be

27 November 2017 19:52 (UTC+04:00)
Doing business 2018: Iran is behind where it could be

By Trend

In a new Doing Business-2018 WB Report (DB), according to data benchmarked to June 2017, Iran ranked 124th across 190 economies, going down 4 positions in comparison with the previous report.

Iran’s economic overview:

DB 2018

DB 2017

Region

MENA

MENA

Income Category

Upper middle income

Upper middle income

Population

80,277,428

79,109,272

GNI Per Capita (US$)

4,683

6,019

City covered

Tehran

Tehran

As is known, DB overall ranking provides ten quantitative topics including regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

At the same time, other factors that are important for doing business but that have not been mentioned in the Report shouldn’t be overlooked.

Amongst them, in regard with Iran, are the following (top 5 ranked by relevancy): access to financing, inefficient government bureaucracy, policy instability, inadequate supply of infrastructure, inflation and corruption (Global Competitiveness Report 2017-18).

DB 2017-2018 ranking

(among 190)

DB 2016-2017 ranking (among 190)

Starting a Business

97

102

Dealing with Construction Permits

25

27

Getting Electricity

99

94

Registering Property

87

86

Getting Credit

90

101

Protecting Minority Investors

170

165

Paying Taxes

150

100

Trading across Borders

166

170

Enforcing Contracts

80

70

Resolving Insolvency

160

156

Doing Business also measures features of labor market regulation, which is not included in this year's ranking.

Starting a Business – This topic rose by 5 points due to reduction of days and cost when getting necessary procedures, which concerned both male and female entrepreneurs.

Dealing with Construction Permits is the best doing business topic shown by Islamic Republic (ranking 25 of 190). As is seen from the chart, it went up only 2 points due to reduction of the estimated value of warehouse when building – from IRR 8,730,518,330 for 2017 to IRR 7,237,950,646.80 for 2018, despite the cost of required procedures rose by 0.3% (% of warehouse value). Number of procedures (15) as well as number of calendar days to get them (99) remained unchanged. Building quality control index (12.5) also showed the same figure as for previous year.

Getting Electricity topic is down 5 positions because of the cost of getting electricity which made 1064.9 (% of income per capita) comparing to 828.6% in previous year, whereas number of procedures (6) and number of days to get them (77) and reliability of supply and transparency of tariff index (5) remained the same.

Registering Property topic, one might say, repeated the previous figures.

Getting Credit topic rose 11 positions at once as Iran improved access to credit information by reporting data on credit-based transactions from an automobile retailer, which resulted in its depth of credit information index (measures rules and practices affecting the coverage, scope and accessibility of credit information available through either a public credit registry or a private credit bureau) up one point from 7 to 8. Also, credit registry coverage and credit bureau coverage (% of adults) rose accordingly from 51 to 54.7% and from 50.5 to 55.8%.

Protecting Minority Investors – Economies with the strongest protections of minority investors from self-dealing require detailed disclosure and define clear duties for directors to prevent misuse of corporate assets for their personal gain. They also have well functioning courts and up-to-date procedural rules that give minority shareholders the means to prove their case and obtain a judgment within a reasonable time. Today it is the worst of Iran’s doing business topics (170 of 190).

Paying Taxes – The topic defines how much taxes and mandatory contributions the business must pay, how these taxes are filed and paid, how much time taxpayers spend preparing, filing and paying three major taxes (profit taxes, labor taxes including mandatory contributions and consumption taxes) and how much time taxpayers spend complying with postfiling processes and waiting for these processes to be completed, the report explains. This topic ruined down 50 points and is the worst in regard with regress of evolution in business doing at the expense of postfiling index’s sharp fall – from 78.8 to 26.88 (postfiling index includes time to comply with a VAT refund, time to receive a VAT refund, time to comply with a corporate income tax audit and time to complete a corporate income tax audit).

Trading across Borders is another topic badly influencing Iran’s whole DB ranking (166th from 190). DB records the time and cost associated with the logistical process of exporting and importing goods. The topic consists of 3 indicators - documentary compliance, border compliance and domestic transport. Excessive use of paper documents and burdensome customs procedures especially in import of goods impede this DB topic to be well improved. However, this year the country made a four points progress by reducing some indicators namely time to export: documentary compliance – from 152 to 120 hours and time to import: documentary compliance – from 270 to 192 hours.

Enforcing Contracts - The enforcing contracts topic measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. According to DB 2018 data, contract enforcement takes 505 days and costs 17 % of the value of the claim. The time and cost remained unchanged in comparison with previous year, while the topic has been down 10 positions in the ranking due to rise of a claim value – from IRR 269,622,318 to IRR 349,220,733.00 and worsening of quality of judicial processes index - from 5.5 to 5.

Resolving Insolvency – resolving insolvency takes 4.5 years on average and costs

15.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale. The score fell 4 points as the recovery rate indicator fell from 17.9 to 15.4 cents on the dollar (The recovery rate calculates how many cents on the dollar secured creditors recover from an insolvent firm at the end of insolvency proceedings).

The country has every possibility in doing business much better but the current state of affairs leaves much to be desired.

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