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. Last Updated: 07/27/2016

Iran Defeats Clerics to Attract Investors

TEHRAN, Iran -- Iran has given final approval to a new foreign investment law aimed at luring oversees funds to help stimulate its sluggish economy.

But some economists said the law, which eases restrictions on foreign investment, was too complicated and lacking in transparency.

The controversial law, passed Saturday by the Expediency Council, Iran's highest arbitration body, ends a long-running dispute between the reformist parliament and the Guardian Council, a legislative watchdog run by conservative clerics.

The law protects foreign funds from possible seizure and entitles foreign investors to the same rights and services available to local investors.

It also guarantees the right of foreign investors to repatriate their capital and interests in hard currency. And it requires the government to compensate losses suffered by foreign investors due to legal complications.

But the new law limits foreign investment to 25 percent in each sector and 35 percent in a particular branch in any sector. Such restrictions were not part of the initial bill passed by parliament last year and some economists say these would only complicate matters and create more red tape.

"When they set a percentage limit, it is not clear what they mean -- percentage in terms of weight, money or what? It is too bureaucratic," economist Saeed Leylaz said.

Long wary of foreign investment and fearful of Western influence, Iran now actively seeks funds from abroad to stimulate its economy and create jobs.

Foreign investors have pumped about $10 billion into Iran over the past five years, mostly into the key energy sector.

But the country needs more to help it achieve an average economic growth of 7 percent per year and create between 800,000 to 1 million jobs for its booming population.

As part of an economic liberalization program, President Mohammad Khatami's government has already eased price controls and currency exchange restrictions for foreign investors.

It has also sharply cut tax rates for investors and abolished a multitier currency exchange system.

Still, economic progress appears to be hostage to bitter internal fighting between reformers allied with Khatami and hard-line conservatives.

There are still relics of ideological resistance to market reforms and foreign investment 23 years after the 1979 Islamic Revolution, which sought to fight "foreign domination."

In a further development, Iran was expected to announce Monday that two European banks have signed up to help it tap international capital markets for up to 500 million euros ($460 million) in its first Eurobond issue since the 1979 Islamic revolution, the Financial Times reported Monday.

BNP Paribas and Commerzbank have been tapped to handle the issue, the newspaper reported.

Officials at Bank Markazi, the country's central bank, said Iran could raise between 300 million euros and 500 million euros from a Eurobond with a three-to five-year term. Foreign bankers said they expected the issue to go ahead in the next few months, the newspaper said.