Reformist gains in Iran elections clear way for business boom

Friday's vote ended more than a decade of conservative domination of the legislature and the Assembly of Experts, a body that oversees the Islamic republic's supreme leader.

The outgoing parliament, filled with hardliners suspicious of detente with the West, had acted as a brake on President Hassan Rouhani's plans to strengthen the private sector, tackle corruption and welcome foreign investors.

Rouhani, the architect of last year's nuclear deal with world powers, is now expected to find it easier to push legislative reforms making the economy more attractive to foreign firms.

"In economic affairs the next parliament will be much better than the current parliament," said Saeed Leylaz, an economist who served as advisor to reformist former president Mohammad Khatami.

Iran faces deep problems including corruption, a shortage of investment and a lack of productivity, but "all these problems can be solved through liberalizing the economy," he said.

Iranian investment banker Ramin Rabii said he expected the new parliament to address issues crucial to the business sector such as updating the country's commercial code, modernizing labor laws and improving stock market regulation.

"If you have a parliament that is friendlier to the executive branch, things tend to move forward more easily," said Rabii, chief executive of investment group Turquoise Partners.

"When business-related regulations need to be passed, or joint venture agreements are signed with foreign partners and are scrutinized by parliament - it all goes more smoothly."

One early result of the elections could be to allow the government to offer new oil and gas contracts to foreign firms, a cornerstone of its plans to raise energy production after international sanctions on Tehran were lifted last month.

Iran had been scheduled to unveil the new contracts to international oil firms at a conference in London on Feb. 22-24. The conference was canceled earlier this month; oil executives blamed political feuding before the elections.

It is not clear if the election result could affect Iran's willingness to agree in talks with OPEC and non-OPEC oil producers on a proposed output freeze to prop up crude prices. But by giving the Rouhani administration a popular endorsement, the result appears likely to leave the administration with more domestic political freedom to sign a deal if it chooses.

Early election results on Sunday showed moderates and reformists dominating both elections in Tehran, and making significant gains elsewhere in the country. Full results are expected to be released in coming days.

REFORMS

The elections do not leave the Rouhani administration with a completely free hand on economic policy. Many powers will remain in the hands of conservatives; the Guardian Council, an unelected clerical body, has the power to vet all laws, and Supreme Leader Ayatollah Ali Khamenei has the last word on all important matters of state.

Rouhani is in any case expected to move cautiously in politically sensitive areas such as freeing up the labor market, where highly restrictive rules, the legacy of Iran's revolutionary past, make it hard to lay off workers.

Nevertheless, analysts said the administration would face comparatively few restrictions on economic reforms, as hardliners concentrated their diminished political capital on defending social and cultural conservatism.

The election may have established that Rouhani's strongest mandate for change is in the economic sphere. Many pro-Rouhani voters interviewed by Reuters cited economic reform as one of their main reasons for supporting the president.

Beyond any specific reforms, Rouhani appears to have won an endorsement of the idea of opening Iran's economy to the outside world.

Before the elections, he faced sharp criticism from members of parliament for deals such as Iran's January agreement to buy 118 Airbus (AIR.PA) jets worth $27 billion at list prices, and a venture between Iran Khodro and France's Peugeot (PEUP.PA) to build cars. That criticism is expected to diminish.

"We are going to see a more favorable attitude toward trade and commercial partnerships with the West, including with American companies," said Mehrdad Emadi, senior economist at the Betamatrix consultancy in London.

(reuters.com)