FDIs in Iran. The role of the free economic zones

Lack of national saving is one of the main problems of developing countries for investment. Loans from international commercial banks was one of the ways for these countries to provide the capital. After the economic crisis in 80s, countries shifted their investment policies to FDI, as an attractive alternative, which entailed no risk in terms of debt. The United Nations World Investment Report (UNCTAD, 1999) defines FDI as, “an investment involving a long-term relationship and reflecting a lasting interest and control of a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise, affiliate enterprise or foreign affiliate)”. FDI plays a pivotal role not only in transferring technology as the consequence of spillover effect, but to provide complementary resources for those countries it is hosted. This is not possible without contribution of the multinational companies which have access to the latest technologies and are financially strong enough to provide the fund required for investment in a foreign country. But sometimes there are factors, for instance regulatory barriers, that impede these companies to enter the market of host countries. So, especially in developing countries, governments have tried to reduce obstacles and provide incentives to motivate multinational companies to invest. Establishing special economic zones with particular economic advantages, where business and trade laws are different from the rest of the country, is one of the ways to absorb foreign direct investment through either multinational companies or even individuals. The objective of this dissertation is to study the foreign direct investment in Iran and the role of special economic zones (SEZs). And to realize how much these zones have been able to absorb FDI.