Statistical and Analytical Reports

Maximum Utilization Law

Published Date: July 2004
Status: Available (Hardcopy / Softcopy)

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The Law on Maximum Use of Iranian Technical, Engineering, Manufacturing, industrial and Executive Capability for Implementation of Projects and Provision of Facilities Required for Export of Services, shortly called Maximum Utilization” or “51% Local Content” law, has become a much debated and controversial issue amongst foreign and local companies involved in the activities in Iran. The concept dates back to some 10-11 yeas ago when Iran’s oil and gas projects were made available to foreign companies for development. Then, the law was manifested only in the annual budgets of the country for couple of years, wherein 30% of the tasks were foreseen to be allocated to local companies to create job opportunities and help transfer advance technology into Iran as well. Later, however, it was transformed into a law that was finally passed by Iran’s Majlis in the early days of March 1997. In order to provide interested companies with all that relates to the issue, has prepared a report that includes an authentic English translation of the law, the relevant executive directives, its analysis and also comments of the concerned authorities and those of the executives of certain private companies on this contentious subject. The report is an attempt to elaborate the objectives of the law and also the obstacles local firms, and consequently their foreign partners, face in the implementation of the law. Among many other topics, the report also includes the list of many of Iranian EPC contracting companies of different categories approved by the State Management and Planning Organization. For further enlightenment, please find hereunder the table of contents of the report.

Table of Contents:

1- Text of the Law
1-1 Article 1
1-2 Article 2
1-3 Article 3
1-4 Article 4
1-5 Article 5
1-6 Article 6
1-7 Article 7
1-8 Article 8
2- Relevant Executive Directives Issued By MPO
2-1 Definition
2-2 On Manner of Assigning Works
2-3 Council of Economy authorization requirement
2-4 Supervision over implementation of “Maximum Utilization” Law
2-4-1 Members of the “expertise task force”
2-4-2 Responsibilities of the “expertise task force”
2-4-3 Members of the “supervisory task force”
2-4-4 Responsibilities of the “supervisory task force”
2-5 Manner of obtaining authorization of the Council of Economy
3- Analysis of the law
3-1 Spirit of the law
3-2 Objectives of the law
3-3 Those in charge of implementing the law
3-4 Results expected out of Implementation of the law
3-5 The law & Iran’s 3rd Development plan
3-6 Why is the law not implemented appropriately?
4- Bottlenecks/Actions taken so far
4-1 Insurance coverage for the risks involved in service contracts
4-2 Securing the financial sources of the projects
4-3 Issuing bank warranties
4-4 Securing the needed hard cash
4-5 Inflation and foreign exchange rate
4-6 Amending Iran’s labor, trade and civil/legal laws
4-7 Facilitating and expediting customs procedures
4-8 Development of the human resources
4-9 Obstacles in tender procedures
4-10 State-run companies posing as genuine private sector
4-11 Unsuitable location of plants/yards producing facilities
5- Viewpoints
5-1 Nemat Zadeh (NPC)
5-2 Aghajani (NPC)
5-3 Sorrayaie (NIOC)
5-4 Mahnama (IDRO)
5-5 Ardeshirian (Namvaran)
5-6 Hosseini Yazdi (Expert)
5-7 A Western Diplomat
5-8 Attayie (Jahan Pars)
5-9 Madadi (SIPIEM)
6- MPO approved specialized associations/local contractors list
6-1 list of the Associations engaged in the oil industry related projects
6-2 list of local EPC contractors, approved by MPO as of end 2004
6-2-1 Oil & Gas Group
6-2-2 Power Group
6-2-3 Telecommunications Group
6-2-4 Mines & Industries Group

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