Will ‘Free Financial Center’ Lure Foreign Banks to Iran?

There has been no word from any official about how the center would work under current laws and regulations, which have made the investment climate less friendly compared to other regional markets, even after the lifting of nuclear-related sanctions in mid-January. In other words, it is not yet clear what advantages the new financial center would offer to attract foreign investment that would trump existing rules and regulations.

For instance, the Abu Dhabi Global Market (ADGM), the second financial zone established in the United Arab Emirates, the Dubai International Financial Center (DIFC) being the first, offers attractive incentives to investors to act as a catalyst for the growth of the Emirati financial services sector. According to a report released by the Oxford Business Group, a British firm with an office in Dubai that provides intelligence on emerging economies, “Companies established within ADGM can be 100% owned by non-UAE nationals, as opposed to the 49% limit that is currently applied in the emirate; a 50-year tax exemption will be granted on the profits of companies and their employees arising out of their activities in the zone; and customs duty exemption will also be offered to licensed businesses.” The question is what the Iranian government is planning to offer in this vein as incentives to potential investors.

Free financial centers are fundamentally liked by offshore banks, international trade companies, insurance firms, intermediary companies and asset management firms, noted Tejarat-e Farda, the leading Iranian business magazine, in its first issue of the new Iranian calendar year (which began March 20). Potential investors find the centers’ tax holidays and simplified regulations that encourage enterprise attractive.

Ahmad Azizi, a senior adviser to the Central Bank governor, says there must be a “meaningful difference” between the rules applied in the mainland and those in free financial centers. Otherwise, why should Iran spend a lot of energy and time on establishing a center?

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