We are now approaching the end of Iran’s Third
Socio-Economic and Cultural
Development Plan, and many
economists are studying its
achievements and failures. Many
think that the Third Plan has
attained most of its objectives
while some others maintain that
it has badly failed as regards its
human development objectives
which are, after all, the main
objects of any development plan.
It has failed to lower the rate of
inflation which has in fact risen in
comparison with the past, while
the nation was promised that the
rate would be brought down to
a one figure digit but according
to official channels, e.g. Bank
Markazi or the Central Bank of
Iran, it has actually risen by 2%
points in 2003 as compared to
2002. Meanwhile independent
experts estimate infl ation to be
considerably higher even than
officially announced by the
Central Bank.
In general the Central Bank
employs a number of experts
living across the country and
receives their views on infl ation
with respect to 30-35 major
items of goods and services and
bases its fi nal fi gures on these
views. But can this give a true
basket figure?
The major items that the Central
Bank takes into consideration
are:
- Foodstuffs, drinks, tobacco
- Clothings
- Housing, fuel (energy) and lighting
- Transportation & communications
- Healthcare
- Leisure, education and studies
- Miscellaneous goods and services.
Looking at the bright side of the
Plan, GDP Growth was 5.9%
in 2000, 6.7% in 2003 and is
expected to be 6.15% in 2004.
Also, per capita income, which
was 7,204,000 rials at the
beginning of the Plan rose to
14,202,000 (though this fi gure is
not accepted by all economists); yet at 8,600 rials to the USD,
this means a per capita income
of 1,671 USD, lower than it s in
many developing countries.
Another problem that Iran’s
economy faces is the high rate
of unemployment. Although
employment rose from 15.8
million people in 2000 to
18.3m in 2004, the rate of
unemployment increased from
14.3% of the able workforce in
2000, to 19.5% in 2004.
Yet another problem Iran’s
economy faced during the Third
Plan period was an expansion in
the country’s liquidity which has
continuously increased by just
over 29% each year.
One promising factor has been
the increasing prices of oil
which for some time reached
the incredible level of 50 USD,
the highest ever. However since
Iran, like many other developing
countries, is spending a large
part of its crude oil earnings
on the purchase of fi nished or
semi-finished goods from the
international markets it is likely
that the prices of such goods will
be increased and much of the
extra oil earnings will go back to
the developed world.
However, Iran has been paying
a great deal of attention and
putting enormous effort into
non-crude exports, which
amounted to 5.5b dollars in 2003
from about three billions a few
years before, and is expected
to amount to 6.2b by the end of
2004. However, Iran’s imports
have increased in value and
consequently its foreign trade
defi cit has increased from 7.9b
dollars in 2000 to 10.6b in 2003
and is expected to amount to
about 12 billions by the end of
2004.
Another major problem that
Iran has to deal with is budget
defi cit which is growing each
year. Budget defi cit which was
40,665 billion rials (8,600 rials =
1 USD) in the year 2000 eached
81,441 billion rials in 2003 and
is expected to rise to 105,034
billions by the end of 2004.
During the years when Iran’s
revenues from export of crude
oil were high the government
decided to open a reserve
account for emergency
expenditures to help production
units. Thus an account was opened with the name of
Exchange Reserves initially
with an amount of 7.1b dollars.
Indexes | 2000 | 2001 | 2002 | First half of 2003 |
---|---|---|---|---|
Index for prices of goods and consumer | 12.6 | 11.4 | 15.8 | 16.4 |
services: | ||||
goods | 9.0 | 5.8 | 13.6 | 13 |
services | 17.1 | 20.4 | 16.3 | 20.0 |
housing, fuel & lighting | 18.4 | 18.8 | 19.6 | 20.9 |
Index for wholesale cost | 14.7 | 5.1 | 9.6 | 10.5 |
Index for producer's cost | 16.3 | 10.9 | 13.4 | 15.9 |
Today it amounts to 8.3b dollars
and is expected to increase
further as oil prices rise but most
economists maintain that to
satisfy the needs of production
units the account must meet
some expenditures that will
reduce its balance to about 7b
dollars.
In 2004 Iran is fortunately
experiencing a surplus
production of wheat for the first
time in many years. It is also
in a position now of expanding
petrochemical productions
and exports, and this trend in
expansion of petrochemical
exports is bound to continue.
Furthermore, the adjustments
in the legal system and the
ratifi cation of the Act on the
Attraction and Protection of
Foreign Investment has further
paved the way for foreign
investment which will consolidate
the petrochemical industry still
further.
Furthermore, Iran’s banking
system has improved remarkably
as competition among the stateowned
banks has been initiated
and many banks have been
established by the private sector
and authorized to operate.
Restrictions on exchange
dealings have been reduced
and thus the exchange market
is beginning to fl ourish. Finally,
experts worldwide agree that
risks concerning investment in
Iran are now within reasonable
limits and this shall certainly
encourage investment both by
Iranian and non-Iranian capital
owners.
Unfortunately no offi cial report
has so far been made available
as regards the achievements
of the Third Plan, but it seems
obvious that it has made
great effort with respect to the
expansion of non-oil exports,
a trend that must certainly be
followed by the Fourth Plan.
Indeed the Fourth Plan must
emphasize on increasingly
replacing exports of crude oil
with export of non-oil products.
Presently Iran is rapidly
expanding its petrochemicals
production, but this is just a
first step. We must develop
downstream productions - industries that turn
petrochemicals into fi nished or
semi finished products such as
parts used in appliances - to
gain further added value. Iran
must make an effort to free itself
from reliance on export of crude
oil. This is an urgent need an
issue that should not be taken
lightly.
Events, December 2004 - Copyright ©2003~2019 Events - All Rights Reserved