The creation of industrial free trade zones is used as a means to explore economic power. Industrial free trade zones are known as tools that will effectively create a wide market, diversify and attract foreign investment.The motivation to create industrial free trade zones in Iran dates back to 1989, when the need for economic reconstruction of the country was felt. The first step in this direction was the implementation of the first five-year economic, social and cultural development program.
With the implementation of this plan, areas were selected as free trade zones. The goal of accepting the free market concept was to increase non-oil exports and finally attract foreign investment. According to the legal definition, free trade zones are areas of the territorial territory of Iran that are governed by special laws and regulations and are basically exempted from the laws governing the mainland of Iran. These areas are out of the jurisdiction of the customs (customs regulations) and benefit from the freedom of flow and movement of goods inside and outside. Unique geographic locations, developed enough infrastructure and foreign investment incentives have provided many opportunities for domestic and foreign investment in the regions.
At the present time, Iran has eight active free trade zone. The free trade zones of Kish, Qeshm, Maku, Aras, Arvand, Anzali, Chabahar, and the airport city of Imam Khomeini make up the total Iranian free trade zones. The Expediency Discernment Council has recently introduced seven other zones as some new free trade zones through a resolution. Mehran in Ilam Province, Sistan in Sistan and Baluchestan Province, Baneh-Marivan in Kurdistan Province, Bushehr in Bushehr Province, Qasr-e Shirin in Kermanshah Province, and Ardabil in Ardabil Province and Inche Boroon in Golestan Province are some of these zones.
Difference between free trade zones and special economic zones
- Some customs and tax exemptions, which have reduced them to zero or very low costs, have been implemented to encourage businessmen to invest. A 15-year tax exemption is provided in free trade zones, but this exemption is different from special economic zones, as the tax exemption in special economic zones is based on regulations that apply throughout the country. This shows that special economic zones such as free trade zones do not enjoy complete exemption.
- It is possible for both domestic and foreign nationals to retail, while only the foreign nationals can retail in special zones.
- In free zones, some particular facilities have been adopted to provide employment and social security insurance to foreign nationals, but these rules abide by the rules mandated by the labor laws for the foreign nationals that are practiced across the country.
- In the free trade zones, the foreign investors can fully own the production units and they are also free concerning capital inflows and outflows.
- In these zones, there is to limit to the abandonment of goods, but more freedom and fewer strict rules have been adopted in free trade zones.
Investment laws in Iranian free trade zones
According to Article 2 of this resolution regarding investment regulations in free trade zones, all natural and legal persons and institutions, both Iranian, foreign and international, can invest in free zones independently or jointly. Investment can be made through cash in Rials or exchangeable currencies, machinery or work equipment, industrial property rights, all kinds of road, rail and air transport vehicles. In some special cases, raw materials and semi-finished parts may also be considered as foreign capital in some special cases.
Iranian free trade zones
In the following, some of these zones will be introduced:
- Kish free trade zone: Kish Island has the most powerful drilling technology. Kish Island operates in the field of tourism, banking, overseas medical services, and electronic industries and supporting services concerning oil Kish zone has a capacity of $590 million foreign investment.
- Qeshm free trade zone: Most of the activities conducted on this Island are in the field of biological technologies. This Island can provide some advantages for large ships with a capacity of over 100 tons due to its access to international water and large ports.
- Maku free trade zone: Most of the commercial activities in Maku are in the field of transportation and goods transit. This zone has a potential investment value of $210 million.
- Chabahar free trade zone: This zone is known as energy hub, business hub of east of Iran, strategic goods storage site, food industry cluster, Iran’s third pole of the automotive industry, transit axis of Central Asia and Afghanistan, productions based on sea-based economy and services in the field of ICT. Chabahar zone has a potential investment value of $9.3 million.
- Anzali free trade zone: The transportation industry, tourism industry, clean industries, current business and services, processing and agricultural industries are some of the other activities performed in this zone. Anzali zone has a potential investment value of $9.3 million.
- Aras free trade zone: Most of the activities of Aras zone are done in the field of business and business services, super-specialty therapeutic facilities, tourism activities, transportation industry, development of agriculture, animal husbandry, and clean industries. Aras zone has a potential foreign investment value of $82 million and a domestic investment value of $518 million.
- Arvand free trade zone: The main activities in this zone are done in the field of refinery industries. The agriculture and fishery industries, sea installation, clean industries, and tourism industry are also some other activities in this field. This zone has a potential foreign investment value of $53 million. Also, the export volume of this zone may increase up to $1220 million.