As Iran opens up to international business, and especially that from the West, the health of the country’s business climate is becoming a major issue.

Iran’s investment climate is prone to various weaknesses that are typical of the developing world, but the prevalence of administrative and financial corruption is a core issue that needs to be addressed.

To be fair to the administration of President Hassan Rohani, the issue of the anti-corruption fight in Iran has been high on the government’s agenda.  Nonetheless, it seems as if the levels of corruption have not come down, and the phenomenon continues to plague the Iranian economy.

High-level meetings, including regular sessions attended by the heads of the executive and legislative bodies as well as the judiciary, have so far failed to produce any tangible improvement.

According to Transparency International, Iran ranked 130 out of 168 countries in the Corruption Perceptions Index of 2015. That represents a slight improvement from 2014, when Iran ranked 136 out of 175 countries, but the standing is unacceptable for a nation that is trying to attract hundreds of billions of dollars in foreign investment.

In an acknowledgement of the detrimental impact that corruption has on business and society, President Rohani stated in December 2014 that the effects of the anti-corruption fight needed to be felt by the people. But experts are concerned that the government’s hands may be tied, as a genuine anti-corruption campaign would have to include political and structural reforms.

One explanation for the slow progress of the anti-corruption fight could also be the depth of corruption and mismanagement in the previous government, led by the former president Mahmoud Ahmadinejad. The negative impact of external sanctions on the country’s business environment is another factor.

However, with those issues now in the past, the question is now what the government is actually doing to contain the damaging effects of corruption.

The ambiguity of Iran’s legal provisions has been one obstacle to anti-corruption efforts. The Law to Promote Administrative Health and Fight Corruption was passed in 2008 for a trial period of 3 years, and extended for another three years in 2011. The law offers clear definitions of corrupt acts as well as establishing the government’s responsibility to act transparently and fight corruption.

The growing number of corruption cases that are being pursued – including those against two former vice presidents as well as Saeed Mortazavi, the former head of the social security organisation – have relied on the provisions of this law.  The next logical step would be to either turn the law into permanent legislation, or to draft an improved version for further debate.

However, given that the current Majles is in its final year of its term, it is understandable that the government will wait until the next parliament to establish a solid legal framework to prosecute corruption.  Successful co-operation between the administration and the parliament over this sensitive issue will be more likely if the more moderate forces win the upcoming Majles elections.

This is an excerpt from an article in our monthly Iran Strategic Focus publication.