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Iran Law of Supporting Knowledge-Based Firms and Commercialization

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The law of Supporting Knowledge-Based firms and Commercialization

The present report tries to provide a summary of the mentioned law. The law was approved by parliament in November 2010. Important events related to knowledge-based firms law are summarized as table below: Activity | Date | Preparing the bill of law in vice presidency for science and technology | January, 2008 | Approval of the law in parliament | November, 2010 | Approval of the "Implementing Regulations" by the government | November , 2012 | Launch of qualification system of knowledge-based firms and enrolling applicants | March, 2013 | Announcement of tax exemption of firms located in the science and technology parks by Iranian National Tax Administration(ITNA) | August, 2013 | Approval of the first list of verified knowledge-based firms | September, 2013 | Approval of second edition of evaluation guideline and criteria of knowledge-based firms that recognizaed industrial companies with knowledge-based activities as potential applicants for the law | March, 2014 | The first financial facilities provided for knowledge-based companies by Innovation and Prosperity Fund (IPF) | June, 2014 | Approval of detailed methodology of customs exemption | October, 2014 | Implementing knowledge-based products leasing program by IPF | February, 2015 | Implementing program for support and development of of knowledge-based products and services export | May, 2015 |

Article 1. The law define knowledge-based firms as private or cooperative enterprises that aimed to make a synergy between science and wealth, help to growth of knowledge based economy, meeting scientific and economic goals and a mean for facilitation of commercialization of research and development results (including design and production of goods and services) in the high-tech areas with considerable added-value.
Article 2. Supreme Council of Science, Research and Technology (that will be called SCSRT for the rest of the report) is responsible for overseeing and implementing the law.
Article 3. Support and facilitate grants to firms including: * Exemption from taxes, duties, , and export duties for and interval of fifteen years. * Providing all or part of the production cost, supply or use of innovation and technology by granting low-interest long-term or short-term loans. * Prioritizing the establishment of research, engineering and production units of knowledge based firms in the science and technology parks, incubators and science and technology districts. * Prioritizing the cession of public research institutions shares based on Principle 44 of the constitution law to knowledge based firms. * Providing insurance to reduce risks associated with innovative and technological products in all stages of production, supply and use.
Article 5. In order to assist the commercialization of innovations,inventions and also applying know-how knowledge by providing financial services to knowledge based firms, the Innovation and Prosperity Fund (IPF) was established in 2011. It`s financial resources include state aid, credits allocated to the fund in government annual budget, investment of persons and public companies and institutions, NGOs,municipalities and commercial banks. The government should allocte at least a half percent of it`s public budget to IPF anually, after absorbing the seed capital in three years.
The initial capital of IPF is $853 million that will be provided by National Development Fund or foreign currency reserve accounts within 3 years.
Article 7. All of the executive organizations related to law are obligated to evaluate applicants' requests and turn in the results within a month.
Article 9. In order to establish and develop knowledge-based firms and strengthen their international cooperation, they can use free zones benefits, like tax exemptions ,duties of foreign investments and international financial transactions.
Article 11. All firms should use provided supports for specified goals of the law, otherwise, they will be punished by deprivation of supports and facilities and also they will be fined.

The constitution of Innovation and Prosperity Fund

Introduction
According to “The Support of knowledge-based firms the commercialization of innovations and inventions" law, Innovation and Prosperity Fund (IPF) was established in 2011. in order to assist the commercialization of innovations and inventions And also make the technical and knowledge prosperous and applicable by providing financial services to knowledge-based firms.
The main purposes of establishing IPF
• Assisting the implementation and development of knowledge-based economy
•Completing the “ideas to the market” chain
•Commercialization of innovations, inventions and research results
• Making the knowledge applicable through the provision of assistance and financial services to support knowledge-based firms
Structure of Innovation and Prosperity Fund
Innovation and Prosperity Fund is organizationally and legally independent and is directed by the “Board of Trustees”. Also IPF is not a subset of any governmental organization but is linked to the government through Presidency and Vice-presidency for science and technology institutions.
After the Board of Trustees, the highest executive authorities are the Board of Executive directors and The Chairman of the Board of Executive Directors. respectively in the IPF’s structure.
The members of the board of trustees
The president is the chairman of the board and other members are as following:
- Assistant Director of Planning and Strategic Supervision
- Science and technology Vice president
- Minister of Science, Research and Technology
- Minister of Health and Medical Education
- Minister of Economic Affairs and Finance
- Minister of Industry, Mine and Trade
- Governor of Central Bank
- The head of The Elite National Foundation
- Three persons elected by the President
At the moment, Dr. Sourena Sattari and Dr. Behzad Soltani have been elected by the president Hassan Rouhani as Vice-chairman and Secretary of The Board of Trustees, respectively.
Board of Executive Directors consists of seven members. Dr. Behzad Soltani has been appointed as The Chairman of the Board of Executive Directors and the Head of Innovation and Prosperity Fund (IPF) by decree of the president and approval of the board of trustees.
Innovation and Prosperity Fund is being monitored by follow ins organizations: * Auditor General Legal Inspector * Board of Executive Directors * Board of Trustees * Supreme audit court of Iran- General Inspection Office * Management and Planning Organization of Iran * Internal Auditor * Higher Council for Science and Technology
Range of supports
According to its mission, Innovation and Prosperity Fund is just responsible to support non-governmental knowledge-based firms.
Based on Support knowledge-based firms and the commercialization of innovations and inventions” law, a knowledge-based company or institution is defined as: “A private or cooperative enterprise or institution responsible for synergy of science and wealth, knowledge-based economic development, realization of the scientific and economic goals of invention and innovation) and (including the development and application commercializing the results of research and development (including design and production of goods and services) in hi-tech fields with a high value added.
The following items are excluded from the supports of TPF: 1. Governmental corporations, institutions and public non-governmental companies that more than fifty percent (50%) of their ownership is possessed by the government or public non-governmental institutions. 2. he representatives of foreign companies and companies that import knowledge-based products. 3. Universities, educational and research centers. 4. Normal daily software activities. 5. Organizing and participating in scientific conferences, library services, education and training. 6. Practices that are not aimed at developing new or improving products or services. 7. Activities that are not within the ambit of superior technologies. 8. Activities that have not high economic value added.
The differences with banks and financial governmental organizations * Facility fees are less than the banks (up to 8% and in some cases up to 10% lower than the rate approved by the Council of Money and Credit). * The time for knowledge-based companies to receive loans from IPF is much lower than the banks. * IPF requests less guarantees compare with the banks, at the same condition. * Knowledge-based companies do not need a depositary or a cash * contribution (similar to what is done in banks) to receive any of IPF’s facilities * By lending loans to high risk projects, IPF helps knowledge-based companies to grow and develop. However, banks usually refuse to provide facilities for these projects and do not accept such risks.
The difference of IPF with governmental financial organizations is that these organizations spend their credits to support the companies, but IPF is an economic-financial organization which must preserve its capital and the facilities must be returned and the members of the board of executive directors are responsible for that.
Providing financial resources of Innovation and prosperity Fund (IPF)
Based on Articles of association of Innovation and Prosperity Fund, the initial capital of 1 billion US Dollars should be provided gradually within maximum 3 years by National Development Fund and Reserves Account.
By the same token the total amount should have been paid to the IPF but due to the none-payment of the initial capital in the years of 2012 and 2013 so far only less than a fifth of this amount has been deposited. In the year of 2014 despite the presence of a severe economic pressure, the 11th government of Islamic Republic of Iran assigned a considerable amount to IPF.
Also, the following items are listed in the law to financially provide IPF: 1. State aid contained in the annual budget of the country. The government is required to support IPF by at least half a percent of state aid, from the third year onward. 2. Supports and investments of natural and legal persons, companies affiliated with the government, public nongovernmental institutions and municipality-affiliated companies. 3. Interests and facility fees. 4. Proceed from venture investments, investments of surplus funds and other resources for the purposes of the IPF. 5. Net income of IPF that could be deposited to the capital account of IPF after the approval of trustees and legal procedures. 6. Other financial supports (Other funds) 7. Banks and Credit institutions and Funds can also be part of this Fund to Provide loans.
Types of IPF services
Based on Articles of association of Innovation and Prosperity Fund. IPF should analyze technical, economic-financial, directorial and market conditions and also the projects of the knowledge-based companies prior to lending facilities.
Afterward based on aforementioned conditions and also the validation of the company and its board of directors and their offered request, IPF offers one of these services contained in the regulations adopted in November 2012. 1. interest-free loan for patent activities, acquisition of technology (a patent) and modeling (4%)
2. the interest-free loan to support technology commercialization companies (4%)
3. Long- term loans to manufacturing activities (14%)
4. Working capital loan (14%)
5. Facilities for the development activities of industrial production (14%)
6. Leasing sales Facilities (9%)
7. Facilities to buy the shares
8. Credit Guarantee Facility
9. Contribute to pay interest
10. Investment and venture partnership (with no financial ceiling)

Implementing regulations of Support of Knowledge-Based Firms and Commercialization of Innovation and Inventions Law

Implementing regulations was approved by cabinet in October 2013 according to Support of Knowledge-Based Firms and commercialization of Innovation and Inventions Law approved by parliament in 2011.
Chapter 1. This chapter assigned to definition of main elements of document like law, fund, council, commercialization, venture capital and etc. It also mentions that affiliatives of foreign companies, firms importing knowledge based goods and public firms are not supported by this regulations. In order to implement and monitor the regulations a group including following members is formed: * Chief representative * Ministry of Science, Research and Technology representative * Vice-Presidency for Science and Technology representative * Ministry of Health and Medical Education representative * Ministry of Industry, Mine and Trade representative * Ministry of Defence representative * Fund Director
Chapter 2. Supports Knowledge-based firms that have more than 50 experts and over 5 years of experience in case of forming a consortium with universities, local and foreign companies (provided that the majority of the shares belong to local companies) will be paid up to 20% of the costs of research and development activities.
Chapter 3. Facilities
Article 7. Knowledge-based firms can use fund facilities (upon presentation of the bussiness plan) in order to perform patent activities, tecnology acquisition and prototyping With a up to three years repayment period.
Article 9. In order to perform pre-production activities such as initial costs of equipping workshop and preparing production lines, industrial design, testing and debugging, demonstration products and marketing, firms can receive medim-term facilities (up to 5 years) at preferential rates (up to five percent lower than the rate approved by the Money and Credit Council each year). Identification of type of guarantee required, will be responsibility of the fund.
Article 11. In order to provide working capital of Knowledge-based firms IPF is allowed to offer short-term facilities (up to 1 year) with a preferential rate with participation (up to 30%) of banks or other financial organizations.
Article 12. In order to support the market development of knowledge-based products and services, IPF is allowed to grant loans for installment sales, leasing, etc to Knowledge-based firms at preferential rates.
Chapter 4. Warranties and insurance
Article 15. In order to reduce risks of contracts and facilitate conditions of the tender for knowledge-based firms, IPF will pay part of the cost of warranties and facilitate the process of receiving them by cooperation and brokerage contracts with banks and other related institutions.
Article 17. Central Insurance of Iran is obliged to offer appropriate insurance cover in the design, manufacture, supply and use of products and services of knowledge-based firms to reduce risks associated with them.
Chapter 5. Cooperation
Article 18. In order to develop venture capital and establish and enlargement of firms and vc funds, IPF should invest in exchange for an equity stake (up to 49%) and get out of investment in a period of maximum 4 years.
Chapter 6. Tax and customs exemptions
Article 19. In order to complete the cycle of venture capital and make the possibility for knowledge-based firms to take advantage of capital market, the securities and exchange organization is required to determine and facilitate mechanism of public offerring of knowledge-based firms in the OTC market, prepare and deliver implementing instructions.
Article 20. knowledge-based firms revenues from R&D contracts and activities, production and commercialization of knowledge-based products and services are exempt from taxes for 15 years.
Article 21. knowledge-based firms are exempt from paying duties, commercial benefit taxes and export duties.
Chapter 7. Prioritizing knowledge-based firms and other supports
Article 23. Science and technology parks, incubators, science and technology zones and special economic zones are required to prioritize the establishment of knowledge-based firms.
Article 24. IPF should assign at least 30% of aids, facilities and investments to knowledge-based companies in science and technology parks, incubators, science and technology zones and special economic zones.
Article 25. Knowledge-based firms are in priority of tenders for research contracts, commercialization and supply of technology and knowledge-based goods.
Article 27. Ministry of Science, Research and Technology is obliged to announce a list of executive organs needs including technological needs, equipments and raw materials to knowledge-based firms.
Chapter 8. Monitoring and reporting, Responding to complaints and legal penalties
Knowledge-based firms can register their objection to the performance of executive organs to SCSRT secretariat. SCSRT secretariat should handle objections within a month.
If it, based on executive organs reports, becomes clear that knowledge-based firms which benefit from legal protections have concealed information, provided unreal information or have taken supporting grants for other purposes, they will be deprived of legal protections and will be subjected to the penalties referred to in Article (22) of Support of Knowledge-Based Firms and commercialization of Innovation and Inventions Law.

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[ 1 ]. This principle is related to the government privatization and its importance can be seen almost in all development plans and policies of government.

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...IN CONTEMPORARY SOUTHEAST ASIA ISLAMIC STUDIES AND ISLAMIC EDUCATION i ii IN CONTEMPORARY SOUTHEAST ASIA ISLAMIC STUDIES AND ISLAMIC EDUCATION Editors KAMARUZZAMAN BUSTAMAM-AHMAD PATRICK JORY YAYASAN ILMUWAN iii Perpustakaan Negara Malaysia Cataloguing-In-Publication Data Islamic studies and Islamic education in contemporary Southeast Asia / editors: Kamaruzzaman Bustamam-Ahmad, Patrick Jory ISBN 978-983-44372-3-7 (pbk.) 1. Islamic religious education--Southeast Asia. 2. Islam--Education--Southeast Asia. I. Kamaruzzaman Bustamam-Ahmad. II. Jory, Patrick. 297.77 First Printed 2011 © 2011 Kamaruzzaman Bustamam-Ahmad & Patrick Jory Publisher: Yayasan Ilmuwan D-0-3A, Setiawangsa Business Suites, Taman Setiawangsa, 54200 Kuala Lumpur, Malaysia. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means – for example, electronic, photocopy, recording – without prior written permission of the publisher. The only exception is brief quotations in printed review. The opinions expressed in this publication is the personal views of the authors, and do not necessary reflect the opinion of the publisher. Layout and cover design: Font: Font size: Printer: Hafizuldin bin Satar Goudy Old Style 11 pt Gemilang Press Sdn Bhd iv ACKNOWLEDGEMENTS T his book grew out of a three-day workshop jointly held by the Regional Studies Program, Walailak University, and the Department...

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