EfficientEconomy Efficiency is in your hand
Naser Akhondi
Member of the Board and Deputy Director of Management Development of Kish Free Zone Organization
Free zones have created a good platform for all kinds of investments in terms of features and objectives. Based on studies, the goals and philosophy of the formation of free zones in the world can be evaluated in several areas. These goals have always been on the evolutionary path, and for more information, we should pay attention to the issue of generation of these areas.
Therefore, in general, attracting foreign and domestic capital and becoming a bridge between global and domestic markets, creating new job opportunities, earning foreign exchange and increasing exports, which leads to an active presence in global markets, re-export and transit of goods, access to modern technology and knowledge production, promotion and development of value-added production activities with export orientation by foreign investment and domestic capital are the goals.
Increasing the efficiency of the national economy, gradually connecting the national economy to the global economy, eliminating deprivation of areas that have the potential for growth and development, increasing public revenue, regulating the labor market and providing better public services are other goals and functions of establishing such areas.
Considering the passage of nearly three decades since the creation of the first free trade zone in Iran and its increasing trend, the abundant capacities in the free zones of the country can be divided into 8 headings in the use of the mentioned capacities which are able to turn the areas to a developed zones.
World Trade and International Exchange
Attracting foreign investment and exchange requires the provision of institutions, solutions, tools and the reduction of some investment policies specific to the Iranian economy. The most important risks that foreign investors will face in a country are:
1. Risk of currency fluctuations
2. Political, economic and social risk
3. Risk arising from differences in the legal system
4. Low degree of market liquidity risk due to insufficient market depth
5. Risk of lack of necessary tools and institutions in the capital market
6. Risk of underdevelopment of infrastructure
Considering the mentioned risks, factors such as the country’s failure to attract foreign investors and financing, the stock market’s failure to offer shares of Iranian companies in the international stock exchange, the existence of investment risks in Iran, especially exchange rate risk and finally the lack of necessary arrangements to the connection of Iran’s financial system to the international one will eventually lead to an agreement to establish and operate an international stock exchange.
The exchange has provided a bridge between the Iranian capital market and the international stock exchange to facilitate foreign exchange financing for the country’s production and industrial projects by attracting foreign investors according and international restrictions on foreign exchange acceptance of Iranian export companies in the exchange for foreign investors and offering various corporate bonds and foreign exchange Sukuk according to the country’s total budget. The first platform of the new approach connection is prepared by the launch of the Kish International Stock Exchange.
The Capital Market and Financing of Construction and Economic Projects
The role and importance of monetary and financial sectors in playing the role of equipping financial resources and directing and managing them towards high-yield sectors is clear and a new movement has begun to activate the latent capacities in the capital market for financing in recent years.
There are various methods and tools for financing in order to provide equipment, working capital, etc. for construction projects in the capital market, including debt-based instruments (sukuk, corporate bonds, long-term certificates of deposit, Securitized loans and capital-based instruments).
Unfortunately, so far, no organization in the free zones has used this capacity, except the Kish Free Zone Organization. Therefore, it is necessary to act with coherent planning, the formation of financing working groups and taking into account the investment priorities immediately to use these huge resources to develop and solve financial problems in the free zones.
Oil and energy
Encouragement and investing in the development of oil fields through partnership or direct investment, as well as the establishment and equipping of oil, gas and petrochemical storage tanks to create energy security and investment in the gas and oil fields of the Kish Islands such as Qeshm, Arvand, Chabahar, Aras, Mako and Anzali are important and necessary in order to create a stable income for the free zones.
The development of Makran Coast is considered as a potential capacity and important step in the growth of the areas through the development of Jask port, the establishment of industrial estates, the construction of refineries and petrochemical, steel and aluminum industries.
Technology and Telecommunications
Among the important activities in the field of communications, the definition of development projects and strengthening of information and communication infrastructure, the development of the fifth generation of telecommunications and activation of IT and ICT fields can be mentioned. At present, Kish Free Zone, as the owner of the first mobile operator in the country owned by Tele Kish Company, can play a role as a revenue-generating capacity for free zones.
Industry, Mining and Trade
In addition to technology transfer and production of products to be offered in the market by creating production cycles and defining industrial and service projects with the support of private sectors or partnership of free zone organizations by “PPP” method (Presentation, practice and production), and designing industrial estates, especially automobile production, encouraging investment in the production of industrial-mining machinery and exploitation of mines are among the programs that can create appropriate capacities by relying on the laws and regulations.
Transportation
Encouraging investment and financing in the construction and development of airports, the purchase of aviation products and the development of Air transport are very important issues in this field. Moreover, facilitating the implementation and completion of semi-finished railway projects and participation in national and regional railway projects, as well as supporting investors in the development of ports logistics network and construction of logistics terminals in free and special economic zones should be considered.
Science and Innovation
One of the capacities that can be used in free zones is the creation of knowledge villages and the integration of universities in these villages, which are led by some of the leading universities in the region, the country and the world. As a result, majority of leading universities in the village will have branches to get admission to students. Here are its most important mechanisms:
• Establishment of international scientific networks
• Training researchers along with international institutions
• financing of research costs and publication of results of those
• Student and researcher exchange
Tourism
An overview of the revenue generation rate of the tourism industry in the world illustrates that this industry is still on the top five areas of profitability and revenue generation. Free and special economic zones have also provided the base for tourism development by taking advantage of the protective presence of traders and businessmen and economic activists in these areas, the development of accommodation facilities, development of transportation and increase of economic activities
In order to increase the share of tourism in the country through free zones, it should be used with coherent planning through the private sector, both in the field of tourism generally and tourism in the field of health. This will lead to economic prosperity, avoidance of raw material sales, as well as stable incomes.
In this regard, it is necessary the requisite planning to be on the agenda by specialized working groups in each region according to the capacities and potentials of each region and creating synergies with Iranian embassies in other countries.
