our country also had stronger trading partners with a broader level of trade,
it would be far more difficult to
sanction it by a bully like America.
One of the most important roles often accepted for the state in the
economy is the supply of public goods. Goods that if consumed by one person do
not limit access by others, and often the market fails to make them or at
least fails to provide them. One of the most important of these commodities is
‘security’, which has various dimensions and is, in every respect, a primary
socio-economic necessity. As the life security of a person is the first
condition for many choices, including the choice of vehicle, place of
residence, travel destination, etc., the primary requirement for economic
activities including investment, whether on a micro or macro level, it will be
“economic security” with different dimensions.
As a provider of public goods, the government is
also responsible for providing economic security, as it is responsible for
providing social security to citizens. An issue that can have a dual role in
the economy; security affects economic conditions and economic conditions play
a role in providing security. In other words, since markets are an appropriate
space for reflecting the economic dimensions of social relations, the economic
status of individuals will be closely linked to social security, as the recent
unrest in the country confirms this claim.
Economic security means the creation of a viable
platform for economic activities whose lack of practice actually impedes the
optimal allocation of resources and removes economic activity from its healthy
form. The context should be such that different businesses can make long-term
planning without worrying about environmental risks.
In other words, economic security means
providing a legal, social and political environment in which economic
activities are least threatened by the business environment. In the Business
Environment Assessment Index, which is reported annually by the World Bank and
some international institutions, micro-investor support is one of the key
pillars that considers investment security as part of economic security in
The degree of protection of shareholder rights,
the guarantee of performance and the enforceability of contracts are among the
characteristics that are defined for this type of security. Until the investor
is assured that the outcome and output of his business will not be materially
and spiritually violated (such as copyright) and until he is certain that no
breach will be made of his contracts and agreements, even with the expectation
of profits above, there will be no interest in investing.
Just like offering someone a cheap trip with the
best accommodation and facilities but with an unsafe vehicle. Naturally, the
appeal of such a proposal would be too small for many. Of course, economic
security is not limited to property rights and capital security. High
inflation rates, in turn, create uncertainty and insecurity. If a commodity
producer or service provider fails to correctly predict the cost of their
future production inputs that means their investment security is at risk. The
likelihood of a ban on imports or exports is a major insecurity.
The concept of business planning may be
questioned if production entities are suddenly not allowed to import and raw
materials cannot be used at the desired quality or on the other side export of
finished products is suddenly banned and initial targeting is disrupted.
Pricing itself is literally an insecurity for the investor. Commitment to
supplying the product at an orderly price that is undoubtedly below market
price means disrupting the profitability of the firm and reducing its economic
Stability in peaceful foreign policy and
positive international relations also clearly have an impact on economic
security. With current industries and businesses in various forms requiring
international communication, the result of any international sanctions or
restrictions would be to endanger economic security. An investor is confident
that as soon as he can meet the needs of global markets and that international
constraints are not likely for his business, an important factor is the lack
of economic insecurity.
This is even the
case for the other party. A broader business relationship with other countries
means increasing economic and even political security, because when countries’
financial interests are intertwined, threatening the security of a country
will mean threatening the economic security of a large number of countries,
which will naturally get united. A country that has invested heavily in
another country or has a high level of trade with it will not only risk it,
but will also stand against potential risks from others.
Certainly, if our country also had stronger
trading partners with a broader level of trade, it would be far more difficult
to sanction it by a bully like America. If Europe had suffered a significant
economic loss by cutting off its ties with Iran, it would not have easily
passed it and would not have endangered its own economic security. Therefore,
there is also a bilateral relationship between security and foreign
investment, and if it is strengthened by the comprehensive security of foreign
investment, its domestic security will also be strengthened.
In addition, the
likelihood of lack of access to the Internet is also a form of economic
insecurity. The role of the Internet is not only in the software-based
businesses of the Internet or start-ups, but today even in the simplest
manufacturing jobs, it is very important and disconnecting them from the
global information network is a serious threat. It may be unthinkable for a
foreign investor that for some days there may be no way to connect with
international sources. Therefore, even the possibility of such an event can
severely affect the economic security and consequently the decision to invest.
and external studies have more or less agreed that rule-of-law,
economic-political stability, security of persons and assets, the
predictability of litigation in contractual disputes, as well as other
security-related factors (especially economic security) all affect investment
and as a result economic growth.
In other words, the necessary condition for the
realization of an investment is the security of all aspects related to it. In
the absence of the necessary security, capital and labor will leave the
economy. Conversely, if the current economic context and future prospects
indicate capital security and economic-political stability, long-term
investment will be strengthened and economic growth will follow. Especially
for developing countries and transition economies, attracting foreign
investors will be difficult if investment security is not guaranteed.
Given that the Iranian economy is facing more
external constraints and internal deficiencies than ever before, reducing the
various dimensions of socio-economic security is considered a major risk and a
serious threat to the country’s long-term investment and growth. However, the
variable changes in the “formation of gross fixed capital” in national
accounts also reflect this worrying trend, especially in recent years.
How can one expect a foreign investor to
consider investing in Iran, given the international pressures, the security of
businesses and domestic investors in various forms, such as the imposition of
bans and restrictions, changing attitudes, and in this recent experience with
the outage of the Internet? Iran’s damaged economy needs more than ever to
provide economic security to domestic and foreign investors so that it can
provide the conditions for economic growth by strengthening capital formation.
By: Mohammad Kosari