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Iran's Paradise Island

In a little under three years, Iran has made a stunning shift from an isolated nation dominated by religious hardliners to one where reformers, led by President Mohammad Khatami, are slowly expanding freedoms and opening the country to Western contact.

CBS News Correspondent Tom Fenton reports it's too soon to see the change in Tehran. There, the long shadow of the mullah is still everywhere. Western trade embargoes limit most business to small business. And the city reeks of pollution and economic stagnation.

But on the leading edge of Iran's transition—and a mere hour's flight south of the capital—is Kish Island, a place to which Iranians are flocking in search of fun and profit.

Kish is an Iranian duty-free paradise where Iran is—somewhat nervously—opening up to the rest of the world here.

There's already a fledgling auto industry: Shahrooz Rostami came back from Detroit to help build the smart little Sinad.

"The wheels, the tires are Iranian. (The) headlights and the signals are Iranian," Rostami explains. The engine, however, is from France—one of the first signs of Western investment.

For Iranians under the rule of the mullahs, "paradise" once meant a place for martyrs, after a heroic death. But here on Kish Island, paradise is a plunge into consumerism.

Iranians are calling it "Paradise II."

Promoters see Kish as the model for a new Iran. The place is a giant mall, where Iranians fed up with being told what they can wear and what music they can listen to can shop 'till they drop. The average temperature is a comfortable 80 degrees.

Elegant new apartment buildings and a boulevard of banks anticipate a Kish Island boom.

Iranian magnate Hossein Sabet's new hotel is modeled on the ruins of Persepolis, the ancient capital of the Persian empire. He says he wants to bring happiness to his country. The hotel will be a pleasure dome where, once inside the gates, anything goes.

"Iran's changed a lot, you know," said Sabet. "More than 50 percent of Iranian people is young people. They know what they want. They want this," he said, gesturing to the island on which he, and others, are building dreams.

The reform-minded Khatami was elected in 1997. Reform parties won a majority of seats in the Iranian parliament this spring. Kish Island is part of an experiment with a free, open market that began years before.

The island is one of three free zones established by the Iranian government in 1993 "to completely apply the principle of a free market economy" without opening the entire country to a sudden influx of outside influences. The areas, which include Kish, Qeshm and Chabahar, are exempt from Iranian laws and customs authorities.

While a paradise grows on Kish, elsewhere in Iran the power of religious hardliners remains strong.

State-run Tehran radio reported Thursday that five people were arrested and charged wth helping make a controversial videotape featuring an Islamic vigilante group member discussing his links to hard-line politicians.

The five men were briefly detained for "their role in preparing and distributing the videotape," the radio quoted a Tehran Justice Administration statement as saying.

In the videotape, widely circulated in Tehran, Amir Farshad Ebrahimi, a member of a violent Islamic vigilante group, names several senior members of the establishment, all hard-liners, and alleges they used his group to attack their reformist opponents.

In the past two months, the hard-line run judiciary has closed 19 newspapers and ordered the detention of several journalists and political activists.