Decline of Iran's Position in Global Business Environment Ranking

In the World Bank's 2018 report on the 'Business Environment', published on October 31, Iran ranks 124th among 190 countries in terms of favorable conditions for economic activities. Compared to the 2017 report from the same institution, Iran has dropped four places in the business environment ranking. The secret to the wealth of countries and their development lies in the concept of the 'business environment'. This concept and its components contain the answer to a seemingly complex question: why do people achieve progress and prosperity in one country while in another, even with vast underground resources, favorable geographical position, and sufficient population, poverty rises? Even if you are the most competent and skilled employer in the world, with several prominent economic experts among your advisors, you will quickly lose your breath when faced with an unfavorable 'business environment' and will abandon your activities in such a space. If there is no security in your work environment, electricity is constantly cut off, property is not respected, administrative corruption suffocates you, bureaucracy constantly throws obstacles in your path, contracts are not properly executed, and the judiciary itself is a source of lawlessness and corruption... you will have no choice but to prefer fleeing over staying, and even your brilliant advisors will be of no help. With this simple example, we arrive at the definition of 'business environment': it refers to a set of components that affect the activities of economic enterprises but are not within the control of the managers of these enterprises. Economic enterprises naturally suffer from the non-implementation of contracts and corrupt judges and bloated bureaucracy, but the managers of these enterprises do not have the ability to address these calamities, and such actions are not within their mandate. For this reason, investors turn to countries like New Zealand, Singapore, Denmark, and South Korea, which ranked first to fourth in the World Bank's 2018 report on the business environment. Conversely, investors who may be contemplating suicide will choose Somalia, Sudan, Venezuela, and South Sudan, countries that occupy the last four ranks in the same report. The World Bank classifies countries based on their 'business environment' using ten components: starting a business, obtaining construction permits, access to electricity, property registration, obtaining credit, protecting minority investors, paying taxes, cross-border trade, enforcing contracts, and bankruptcy. Each of these components contains several sub-components. In the 2018 'Business Environment' report, we see that an Iranian man needs fourteen and a half days to complete the formalities and go through the stages related to starting a business, while a New Zealander completes all these tasks in half a day. In other words, the average time to start a business in Iran is 29 times that of New Zealand. If you are an Iranian woman, the time required will be one day longer than that of men, while in New Zealand, it remains half a day. To clarify the impact of the 'business environment' on economic activity in Iran, let’s look at the first component related to 'starting a business'. An unemployed citizen wants to start an ice cream shop, a young graduate intends to create a startup in electronics, an investor wants to establish a food production enterprise, or a woman, after years of homemaking, wants to set up a nursing home. The commonality among all of them is that they want to start a 'business'. What stages must they go through to realize their plans, how long do they need on average, and what is the minimum capital required? In the 2018 'Business Environment' report, we see that an Iranian man needs fourteen and a half days to complete the formalities and go through the stages related to starting a business, while a New Zealander completes all these tasks in half a day. In other words, the average time to start a business in Iran is 29 times that of New Zealand. If you are an Iranian woman, the time required will be one day longer than that of men, while in New Zealand, it remains half a day. The missing components in the World Bank report: In this year’s 'Business Environment' report, as mentioned, Iran’s position among the 190 countries studied has worsened compared to last year’s report, dropping from 120 to 124. In the Middle East and North Africa (MENA) region, Iran ranks twelfth. The best position in terms of ease of doing business in this region belongs to the United Arab Emirates, while the worst position belongs to Yemen. What improves countries' positions in the 'business environment' is, of course, reforms in very specific areas. This year’s report shows that India’s position has improved significantly due to reforms, jumping from 130th to 100th place in one year. Similarly, Thailand has risen twenty places due to reforms. However, in Iran, despite all the noise about reforms, nothing has changed, except for the reform reported by the World Bank regarding the 'getting credit' component. It is essential to emphasize that the World Bank report overlooks several key components in its assessment of the 'business environment' of the country, including labor law issues, stability of macroeconomic indicators (including inflation and exchange rates), the general state of the banking system, corruption, infrastructure quality, and more. Another very important issue that has been overlooked in this report is the foreign relations of countries as one of the important components of the 'business environment'. In fact, the absent components in the World Bank's evaluation significantly impact the business environment in Iran. The overall state of Iran's economy is heavily influenced by the country's international environment. The sanctions of recent years, the signing of the 'JCPOA', and the significant ambiguities currently surrounding this agreement have clearly impacted the country's 'business environment', and if we consider these absent components, Iran's position in the global business index would be worse than what is seen in the World Bank report. Iranian manufacturing enterprises must simultaneously deal with economic recession, crushing production costs, corruption, and pressure from entities known as 'quasi-governmental', while also grappling with numerous monetary, financial, and trade obstacles stemming from sanctions and tensions in the country's foreign relations. The 'business environment' and its improvement lie at the heart of Iran's economic issues. Three million three hundred thousand officially unemployed individuals, with the actual number likely around seven million, cannot rely on the government and its employment opportunities to secure their livelihoods. Iran's offices have become a heavy burden on the government's budget due to the pressure of excess employees. The political system and quasi-governmental institutions in Iran must allow people, especially the youth, to use their creativity and dynamism to pull themselves out of the water. In a country where holders of university degrees constitute a significant portion of the unemployed, only by creating a favorable business environment can we combat the scourge of unemployment. The necessary conditions for business arise when a healthy banking system can provide the financial facilities needed for entrepreneurs, cumbersome administrative regulations are removed from private initiatives, corruption and rent-seeking are curtailed, real wealth creators can remain safe from rent-seeking intruders, and the country's judicial system supports those who live through production and commerce. Especially when we can speak of improving the 'business environment' when Iranians have a normal status in the international arena, can travel freely abroad, and have open avenues for trade with the outside world. The domestic 'business environment' is an inseparable part of the international 'business environment'. How can an Iranian engage in real business in the 21st century when they are deprived of opening a bank account in a large part of the world? Fereydoun Khavand, an economist, economic analyst, and professor of economics in Paris, France.