Introduction

The Islamic Republic of Iran began to implement the first five year economic plan aimed at the reconstruction and economic recovery in 1989, after the end of the eight year Iraqi imposed war.  The main objective of this plan was to transform the managed economy of the war to an open economy based on market forces and establish and maintain relations with the world economy.

Due to the existing limitation for the application of the market economy, concern for the side effects of such a sharp transformation on the social well-being of the society it was decided to assign some locations and establish free or special economic zones in order to completely apply the principle of a free market economy.  This way, enough attraction incentives could be introduced for absorbing foreign investment. 

According to the legally accepted definition, the free trade zones and special economic zones are those parts of the Iranian territory that are managed according to the special laws and bylaws and are excluded from the laws of the governing motherland.  These zones are excluded from the domain of the custom authorities and enjoy the full freedom for the in and out flow of goods and commodities.  Unique geographical locations, sufficiently developed infrastructure and the foreign investment incentives have provided ample opportunity for internal as well as foreign investment in the zones.

The Iranian Parliament approved the Free Zones Act in September of 1993.  According to this act, Kish Island, Qeshm Island and the Port of Chabahar were declared as the Free Zones of Iran.   The council of ministers later adapted the bylaws of the free zones.  These bylaws have defined and set out all regulations pertaining to  import, export, investment, insurance, banking, labour, and employment of these zones.

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