Tehran moves to encourage more inward investment
By GUY DINMORE
Financial Times (London)
August 24, 2000,
Iran's parliament yesterday approved a draft law to encourage direct
foreign investment, a move welcomed by the foreign business community as
a step in the right direction.
However, businessmen warned that a conflict of interests with the Islamic
Republic's constitution could still throw up significant barriers.
Unlike the previous law dating back to 1956, the new law does not impose
restrictions on what sectors are open to foreign investment.
Legal experts said this could lead to the entry of foreign businesses
into such sectors as banking, insurance and telecommunications - all under
state control.
The new law would also appear to allow foreign investors to take a majority
shareholding in Iranian companies. Until recently they have been generally
restricted to a maximum 49 per cent stake.
Experts pointed out, however, that article 81 of the constitution prohibited
the "granting of concessions" to foreign companies dealing in
commerce, industry, agriculture, services and mineral extraction.
The definition of "concessions" has been more loosely interpreted
recently.
The constitution, if rigidly interpreted, also severely restricts the
activities of the private sector by stating that big industries and sectors
such as banking, insurance and telecommunications "will be publicly
owned and administered by the state".
However, the country's central bank is pushing for the creation of private
banks and there is also talk of private entry into insurance and telecoms.
"Until we do something with the constitution, everything is open
to interpretation. How stable is that?" said one Iranian legal expert.
Some members of the minority conservative opposition spoke against the
bill, citing its conflict with the constitution. To become law the bill
must go through further revisions and then be approved by the conservative-dominated
Council of Guardians.
If blocked, the law could go to the Expediency Council, which has tended
to rule in favour of opening up Iran's mostly state-controlled economy.
The sensitivity of the debate was illustrated by the fact that parliament
earlier held a closed session to discuss the bill, attended by Ali Yunesi,
minister for the intelligence services.
One big international company welcomed the move by parliament as a sign
that the administration of President Mohammad Khatami, a moderate, places
a high priority on foreign investment.
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