By Mahnaz Abdi

Iran’s FTZs development continues despite sanctions

June 19, 2020 - 16:58

Considering the important role that the free trade zones (FTZs) play in promoting the country’s export and employment, Iran is seriously pursuing development of its existing FTZs and establishment of new zones as well.

More development measures in this field have been taking since the U.S. re-imposition of sanctions on the Iranian economy in November 2018, as Iran is reducing its dependence on the oil income while elevating its domestic production and non-oil exports.

Although the sanctions have disrupted Iran’s economic activities, they could not impede the development of Iranian FTZs; in fact, the development of these zones has been even accelerated.

Many strides made for increasing activities in the free zones have played a significant part in boosting the country’s non-oil exports and brought prosperity in the other economic sectors.

A recent report shows that the exports of commodities from the ports of Qeshm Island have increased by 7.8 folds during the first two months of the current Iranian calendar year (March 20-May 20) compared to the same period of time in the past year.

Qeshm Free Trade Zone, in the south of Iran, is the second FTZ established in the country.

While 676,000 tons of goods have been exported from the island’s ports during the mentioned two-month period, 656,737 tons were the non-oil goods, and the remaining 20,196 tons were the oil products.

Investment making attraction

Establishment of free trade zones 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 the non-oil exports.

The first two free trade zones of Iran were established in the south of the country. The first one was Kish Free Trade Zone established in 1368 on Kish Island in the Persian Gulf and the second one was Qeshm Free Trade Zone established the year after on Qeshm Island in the Strait of Hormuz. 

Development of the existing free trade zones and establishment of new FTZs is currently one of the major economic approaches of Iran and in a bid to attract more investments to these zones Iranian government offers various incentives to the investors.

Tax exemption is one of those incentives which has been offered for more than a decade to the investors in the free zones.

Such incentives have encouraged investment making in these zones.

One of the newly-established zones is Imam Khomeini Airport City (IKAC).

Last December, the managing director of IKAC announced that over 50 Iranian companies have put in requests to invest in the free zone.

Iran’s free zones not only attract domestic investors; they are also attractive for those foreigners interested in investment making in Iran.

Last July, a Turkish company inked a memorandum of understanding with Kish Free Zone Organization (KFZO) to build a big tourism complex on Kish Island with making an investment of $100 million.

More free zones to be established

The significant role of the FTZs in the national economy has prompted the government to establish more free zones throughout the country.

Last December, Jask Port in the southern Hormozgan province became a free trade zone.

Transport and Urban Development Minister Mohammad Eslami said at the time that the program for turning the country’s ports into free trade zones with the aim of facilitating investment and attracting foreign investors is on the government’s agenda.

The parliament has already approved the bill on the establishment of eight free trade and industrial zones as well as 12 special economic zones throughout the country.

 Government’s support

As mentioned above, the government is encouraging investment making in the free zones through offering different incentives. It supports these zone also in other ways.

On May 13, First Vice-President Es'haq Jahangiri said the business units based in the country’s free trade zones can use the 500 trillion rials (about $11.9 billion) of facilities that the government is providing to compensate the economic damages of the coronavirus outbreak.

Jahangiri said that the government has provided these facilities under easy conditions and expressed hope that by the end of the Iranian month of Khordad (June 20), all units affected by the coronavirus crisis will be able to benefit from these facilities.

The official underlined the significance of the free zones in the country’s economy, saying the free zones have been established with the aim of becoming important centers of investment, production and employment in the country.

The first vice-president emphasized that the program prepared by the Secretariat of the Free Zones High Council for the implementation of 310 development and service projects in the country’s free zones by the Iranian calendar year of 1400 (starts on March 2021) must be seriously pursued.

He further mentioned 620 trillion rials (about $14.7 billion) of investment made in the mentioned projects and said: "The implementation of these projects will increase production and employment and will have a [positive] impact on the country's economy."

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