Iran - Qatar Joint FTZ

Iran establishes her first bilateral Free Trade Zone (FTZ) with Qatar. It is the first international move by the new administration regarding FTZs.
Under the MoU signed by the Head of Qatar FTZs and Iran's Secretary of FTZs Supreme Council, parts of Al-Ruwais port will be allocated to the Iranian merchants to supply required merchandise by Qatar. In return, Bushehr in Iran will receive Qatari merchants so that the bilateral trade is facilitated and developed.
The discussions on establishing a joint FTZ with a neighbor dates back to 2011 when Deputy Director General of FTZs Organization of Iraq proposed to establish a joint FTZ with Iran in order to boost trade and exports between the two countries. At that time, Shalamcheh in Iran was selected to serve for the purpose however; no further measure was taken to realize the arrangements until recently when the new administration took office with a new approach towards FTZs.

FTZs in quest of freedom
In today's world where economy plays an important role in shaping international relations, various factors link countries to each other. Today, it is not strange to hear in the news that Saudi Arabia is resorting to overseas agriculture or some countries build refineries in oil-producing countries to benefit from their oil. Overseas relations among the countries create a win-win situation for each country in various forms to gain their desired interests.
The industrial revolution emerging needs were the main driving force behind the establishment of the world's first free trade zone in the Port of Hamburg in 1888. In the aftermath of WWII, trade once again topped on the list of priorities and became the core function of FTZs. The same encouraged the establishment of other FTZs, in Ireland in 1958 and later India in 1965. The trend became popular by 1968 and the number of worldwide free-trade zones proliferated extending to the Port of Copenhagen in 1894, Port of Danzig in Poland in 1899, Malmo, Hangue, Fidem and Triast in Europe and Singapore, Hong Kong, Macao in Asia. Until before the WWII, free zones functions were limited to storing, re-exporting, reconfiguring goods and in one word, trade.
The main philosophy behind the establishment of free trade zones was, perhaps, to loosen the regulations set for industrial systems. The management theories of the time had complicated the relations and bureaucracies. The idea to set up free trade zones in Iran also followed the same philosophy to reduce trade barriers and foster an enabling business environment. However, some time ago, Akbar Tokran, Secretary of Supreme Coordination Council for FTZs & ESZs criticized that FTZs that were once established to act as export hubs had turned into mere import channels. Too much regulations have hampered trade to the point where some call for restoring freedom to free zones. Mounting criticism triggered efforts to redesign trade procedures and plans in FTZs as announced by Mr. Tokran. The new administration's different attitude to FTZs could be the reason behind the recent achievement of Mr. Torkan's first foreign mission to clinch an agreement with Qatar to establish a joint FTZ. The new administration seeks to connect FTZs to global trade and industry cycle and facilitate transfer of experience into the country. The ambition requires suitable tools and software of which the tools already exist in the country. What is important now is to see how they can be utilized to push the FTZs into the economic cycle.

New Plans
Currently, there are seven active FTZs in Iran, four of which are located in south shores, one in the Caspian Sea and two in neighboring Azerbaijan and Turkey. Each zone enjoys a special comparative advantage due to its dedication to interact with a certain region or country. In this respect, Anzali Free Trade Zone is assigned to develop trade ties with Caspian littoral states, Aras FTZ with Azarbaijan, Maku with Tureky, Chabahar FTZ to facilitate transit, Arvand FTZ to serve as Iran's oil and gas market hub and trade with Iraq, Qeshm FTZ to develop oil and steel industry and finally Kish FTZ to promote tourism. In addition, According to the secretary of FTZs Supreme Council, Sarakhs, Jask, Mehran, Baneh and Marivan have been labeled as FTZs and Persian Gulf islands will soon join the club. The developments indicate the new administration's different approach towards FTZs with joint FTZs being the new initiative. Although joint FTZs requires countries to invest part of their resources, the benefits outweigh the costs.

Alarming statistics
Busher is currently listed as a Special Economic Zone (SEZ), set to become a free trade zone upon the submission of the official request from the government to the parliament for consideration. As soon as the change come into effect, the cover of tax and custom exemption is extended over the active merchants. According to Mr. Salari, Bushehr governor, sand and gravel are to be exported to Qatar for $27 per ton. As planned, if Iran succeeds to export 20 million tons of construction materials to Qatar via Bushehr, the total revenue generated will surpass 300 million dollars, setting a new record in the history of this region's transaction. Food is another area where Iran can focus in light of Qatar demands.
Unfortunately, Iranian FTZs were totally neglected during the past 8 years ceasing to act as export-import hubs and losing their tourist attraction. Low trade volumes revealed by statistics suggest that Iranian FTZs even failed to build ties with the neighboring countries. In this respect, it is worthwhile to cast a glance at FTZs statistics in one of Iran's neighbor.
According to Turkey's FTZs Organization, in 2004, exports from 21 FTZs operating in Turkey accounted for $22 million out of $63 million total exports. The figure is significant when compared to Iran's total non-oil exports. Turkish official predict that the figure will jump to $500 million in 2025. Based on the same figures, facilitated by the ease of access to roads, airports and international ports, six of the FTZs located in three different geographical regions have assumed up to 95% of total financial flow in Turkish FTZs. In this regard, 3 FTZs in Istanbul, Mersin Free Zone and 2 other FTZs in Ezmir ranked the highest with 64%, 16% and 15% of total cash flow in FTZs, respectively. In the first half of 2006, trade volume in 19 Turkish FTZs increased by 8.4% compared to the previous year. Statistics released by the Commerce Organization of Turkey indicate 7.7% to 68.3% decline in trade in 7 FTZs and 9% to 34.8% growth in the rest in the first half of 2006. In addition, in 2005, 39,000 workers were employed in Turkish FTZs.
On the contrary, Iranian FTZs are relatively underdeveloped. The statistics released by the Secretariat of Iranian FTZs show that in 2003, the three main FTZs could only generate $483 million out of exports during 1993 to 2001. In this respective, Chabahar, Kish and Qeshm FTZs respectively accounted for $7.12 million, $107 million and $363 million of the total with Qeshm ranking first by assuming 95% of total exports. The reason for their low productivity could be attributed to lack of required infrastructures. In general, Iranian FTZs have grappled with poor communication facilities required for their activity since their birth. Based on the Secretariat reports, Qeshm and Chabahar neighboring the mainland, have never been connected to railroads. There were no airports, hospitals, universities, repositories, communication and desalination facilities and wharves. FTZs Organization is tasked with laying the required infrastructure and preparing lands for economic activities in FTZs; however, lack of investment by the government to build infrastructures and its reluctance to devolve revenue-generating resources in order to finance development costs are the main reasons for the said problems in FTZs.

FTZs: prerequisite for integration in global markets
Unlike other countries where FTZs take the center stage, Iran seems to have taken them for granted despite her enabling geography. The islands located in the south China have always been a subject of dispute yet the beneficiaries have signed an agreement to treat them as free trade zones while remaining firm on the elements of their dispute. It can, therefore, be concluded that bilateral, regional and international collaboration is a must in order to adapt other countries' scientific and technological advancement in developing FTZs in a comprehensive manner. FTZs can resolve issues such as changes in marketing and supply systems arising from globalizing technology through collecting information and building global links and attracting foreign investment. This is why FTZs are regarded as active players in ever changing global stage capable of integrating countries into globalized world.
At the end, it is worthwhile to highlight that although Iran-Qatar free trade zone is in its early stages, laying the required infrastructure and initial negotiations are positive signals to realize private sector's hopes to operationalize it in six months.