Business environment includes all the factors like regulatory stability and quality of infrastructure that influence companies’ performance while these factors are out of managers’ control. Major demand for products in each area and providing necessary resources for initial capital can be considered as the main base of launching a new business. If the process of starting a new business till liquidation of the company become more complicated and expensive, the investors’ investing desires will decrease. In this regard, the World Bank publishes a comprehensive report about the beginning and continuity of a new business condition around the world annually. The indicator used in these reports called “Doing Business” (DB) which is calculated based on 10 quantitative indices to show how easy it is to start and continue a new business in the different countries around the world while ranking ranges from 1 to 190. The mentioned indices include 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. It should be considered that, the other indicator in this field is DTF. “Distance to Frontier” (DTF) shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the sample which has been used in www.doingbusiness.org since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier.
According to www.doingbusiness.org, Iran with a population of about 80 million and GNI per capita of 4,683 Dollars was considered as an upper middle-income country in 2018 report (end of January 2018). Iran’s rank in Doing Business and also DTF for Iran in 2018 were 124 and 56.48 respectively. However, the average amount of DTF in the Middle East and North Africa was 56.72 in this year. The details of all subcategories of Iran’s DB in 2018 are shown in the following:
- “Starting a business” index refers to procedure and cost and time and the minimum capital for launching a limited liability company.
- “Dealing with construction permits” index measures procedures and time and cost of the building construction’s process on one hand and building quality control index on the other hand
- “Getting electricity” index measures procedures and time and cost of getting electricity network on one hand and reliability of supply and transparency of tariff index on the other hand.
- “Registering property” index measures procedures and time and costs related to transfer of capital assets on one hand and quality of the land administration index on the other hand.
- “Getting credit” index measures strength of legal rights index, depth of credit information index, credit registry coverage and credit bureau coverage.
- “Protecting minority investors” index measures extent of conflict of interest regulation index and extent of shareholder governance index.
- “Paying taxes” index measures payments, time, total tax and contribution rate.
- “Trading across borders” measures time and cost related to export and import.
- “Enforcing contracts” index measures time and cost of resolving economic disputes on one hand and quality of judicial index on the other hand.
- “Resolving insolvency” index measures recovery rate, time, cost, outcome and strength of insolvency framework index.
All to all, in Iran major challenges which DB index is facing with are: diplomatic international relations in one hand and economic transparency on the other hand. However, it should be noted that some steps were taken to improve business environment in Iran during recent years that are related to different indices of DB which are as follow:
Starting a new business index:
- Simplification of startups’ business through electronic registration system in 2009
- Facilitation in starting new business through advanced web portals in 2010
- Simplification of companies’ registration in 2014
Getting electricity index:
- Elimination of the drilling permissions to getting power in 2014
Getting credit index:
- Establishment of new private companies in order to access to credit information easier in 2010
- Collecting the automotive retailers’ reports about credit payments in 2017
Protecting minority investors index:
- The necessity of the information disclosure for both parties of transaction in 2012
Trading across borders index:
- Improvement in time required to import and export of products through setting up new equipment in Shahid Rajaee Port in 2009
Paying taxes index:
- Simplification of paying taxes by companies through replacing value added taxes (VAT) instead of tax on sales in 2009
Dealing with construction permits index:
- Facilitation of obtaining construction license in 2009
As it is obvious, there are still lots of untapped potentials in Iran which can lead to better business environment in general in near future.