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Iran official says trade zones to get liberal laws

TEHRAN, March 17 (Reuters) - A senior Iranian official said on Wednesday he expected liberal laws fostering foreign investment in Iran's free trade zones to be passed despite the opposition of a top conservative body.

``The whole thing will be wrapped up in two months. I don't think we will have any problems with laws and regulations in the trade zones,'' said Morteza Alviri, the head of the trade zones.

Alviri told Reuters he expected the bill, blocked last month by the conservative Guardian Council, to end up before the more powerful Expediency Council, which is led by former President Akbar Hashemi Rafsanjani.

``Mr Rafsanjani is a strong defender of foreign banking and I think he will help to undo the knot,'' Alviri said. Iran's parliament on Tuesday made changes to the bill but maintained key measures that would guarantee foreign investment in the zones against seizures and allow majority-owned foreign and private Iranian banks and insurance firms into the areas.

The move came despite opposition by the Guardian Council, which vets parliamentary legislation, and which has opposed the measures as unconstitutional. The Expediency Council has the power to overule the Guardian Council.

``(Parliament's) changes were made in a way not to damage investment operations in free trade zones,'' Alviri said. ``Guaranteeing banking and insurance was critical for us.''

The law, which would also float the Iranian rial in the zones despite strict exchange rate controls in the rest of Iran, has been designed to draw much-needed foreign investment.

Protectionist laws passed after the 1979 Islamic revolution have largely frustrated efforts to woo foreign investment. Officials say the trade zones have only drawn $300 million in foreign funds in the past five years.

Iran's current legislation requires that banks and insurance firms in the zones be 51 percent owned by the government. The laws also seriously restrict the establishment of foreign banks and insurance companies in the country.

The government of President Mohammad Khatami hopes foreign investment in the trade zones will help to stimulate the economy, which has been severely hit by flagging oil prices. Iran's free zones are on the Gulf islands of Kish and Qeshm and at the southeastern port of Chahbahar.


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