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Economy of Iran

From Academic Kids

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Contents

Overview

Iran's economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President Khatami has continued to follow the market reform plans of former President Rafsanjani and has indicated that he will pursue diversification of Iran's oil-reliant economy although he has made little progress toward that goal. The strong oil market in 1996 helped ease financial pressures on Iran and allowed for Tehran's timely debt service payments. Iran's financial situation tightened in 1997 and deteriorated further in 1998 because of lower oil prices. The subsequent zoom in oil prices in 1999 afforded Iran fiscal breathing room but does not solve Iran's structural economic problems.

In greater depth

Pre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s, Iran had achieved significant industrialization and economic modernization. However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution.

Since the revolution, growth has been rather slow. Iran's current difficulties can be traced to a combination of factors. Economic activity, severely disrupted by the revolution, was further depressed by the war with Iraq and by the decline of oil prices beginning in late 1985. After the war with Iraq ended, the situation began to improve: Iran's GDP grew for 2 years running, partly from an oil windfall in 1990, and there was a substantial increase in imports.

A decrease in oil revenues in 1991 and growing external debt, though, dampened optimism. In March 1989, Khomeini had approved Rafsanjani's 5-year plan for economic development, which allowed Iran to seek foreign loans. But mismanagement and inefficient bureaucracy, as well as political and ideological infighting, have hampered the formulation and execution of coherent economic policies. Today, Iranís economy is a mixture of central planning, state ownership of oil and other large enterprises, village agriculture, and small-scale private trading and service ventures. President Khatami has continued to follow the market reform plans of former President Rafsanjani and has indicated that he will pursue diversification of Iranís oil-reliant economy, although he has made little progress toward that goal.

Official unemployment was estimated to be 14% for 1999. Although the right to private ownership is guaranteed in Iran, banks and some industries -- including the petroleum, transportation, utilities, and mining sectors -- were nationalized after the revolution. However, Iran has recently been pursuing some privatization. (Oil price and debt problems are no longer relevant.) The import-dependent industrial sector is further plagued by low labour productivity, lack of foreign exchange, and shortages of raw materials and spare parts.

Agriculture also has suffered from shortages of capital, raw materials, and equipment, as well as from the war with Iraq; in addition, a major area of dissension within the regime has been how to proceed with land reform.

Iran, the WTO, and consequences

Missing image
Bankmarkazi.jpg
Iran's Central Bank, Tehran.

The US has consistently blocked Iran's bid to join the WTO since Tehran first asked for membership several years ago. The veto comes as no surprise - Washington claims that Iran is a terrorist nation and maintains trade sanctions against it. And despite the backing of countries like China for Iran's membership, without Washington's approval, Tehran could always be left out in the cold.

Yet if Iran does eventually gain membership status in the WTO, among other prerequisites, copyright laws will have to be obeyed in Iran. And this would require a major overhaul of business and trade operations in Iran. Something many experts believe would be a price too heavy for Iran's stagnant economy to pay. As it currently stands, all ministries, banks, academic centers, and businesses in Iran extensively use illegal pirated software. Iranian publishers reproduce books, films, and music from the west with no regard to intellectual property rights, and Iran's national TV broadcasters, IRIB, routinely screen Hollywood film productions without any permission from the respective ownership. With even condoms being reproduced without proper licensing from replicated brands, many experts have been left wondering how the Islamic Republic will manage once it does gain WTO membership status.

Yet this is a serious challenge that Iran will have to face up to one way or another. With the current gross levels of copyright violations, no major company is willing to expand their businesses in Iran. Iran's non-accession to copyright laws is in fact the cause of international companies refusing to carry out investment projects in Iran. (see related news item) (http://www.payvand.com/news/05/jan/1211.html)

Other statistics

Investment (gross fixed): 31.3% of GDP (2004 est.)

Household income or consumption by percentage share:

  • lowest 10%: NA
  • highest 10%: NA

Agriculture - products: wheat, rice, other grains, sugar beets, fruits, nuts, cotton; dairy products, wool; caviar

Industrial production growth rate: 3.5% excluding oil (2004 est.)

Electricity:

  • production: 129 TWh (2002)
  • consumption: 119.9 TWh (2002)
  • exports: 0 kWh (2002)
  • imports: 0 kWh (2002)

Electricity - production by source:

  • fossil fuel: 97.1%
  • hydro: 2.9%
  • other: 0% (2001)
  • nuclear: 0%

Oil:

  • production: 3.962 million barrel/day (2004 est.)
  • consumption: 1.4 million barrel/day (2002 est.)
  • exports: 2.5 million barrel/day (2004 est.)
  • imports: NA
  • proved reserves: 130.8 billion barrel (2004 est.)

Natural gas:

  • production: 79 billion m³ (2003 est.)
  • consumption: 72.4 billion m³ (2003 est.)
  • exports: 3.4 billion m³ (2003 est.)
  • imports: 4.92 billion m³ (2003 est.)
  • proved reserves: 26.7 trillion m³ (2004)

Current account balance: $2.1 billion (2004 est.)

Exports - commodities: petroleum 80%, chemical and petrochemical products, fruits and nuts, carpets

Imports - commodities: industrial raw materials and intermediate goods, capital goods, foodstuffs and other consumer goods, technical services, military supplies

Reserves of foreign exchange & gold: $29.87 billion (2004 est.)

Exchange rates: rials per US dollar - 8,885 (2004), 8,193.89 (2003), 6,906.96 (2002), 1,753.56 (2001), 1,764.43 (2000)

note: Iran has been using a managed floating exchange rate regime since unifying multiple exchange rates in March 2002.

See also


Organization of the Petroleum Exporting Countries (OPEC)
Algeria | Indonesia | Iran | Iraq | Kuwait | Libya | Nigeria | Qatar | Saudi Arabia | United Arab Emirates | Venezuela
pt:Economia do Ir„o
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