Economy of Iran

According to cheeroutdoor, Iran’s economic development is characterized by a strong dependence on oil, the state retaining control over the main sectors of the economy, the public sector, central planning, and the introduction of Islamic economic norms into the economy. The problem that originated in the Shah’s period of economic modernization and has remained acute in modern Iran is not only the dependence of industry on imported equipment and semi-finished products, but also food dependence on the world market. The liberalization of foreign trade activity and the use of external loans led in the 1990s. to the formation of public debt, rising inflation.

The most acute economic problems of modern development are employment, as well as the implementation of privatization and the attraction of foreign investment to create conditions for sustainable growth.

The volume of GDP is $456 billion at purchasing power parity, or $7,000 per capita (2002). High GDP growth rates in the 1960s and 70s. (10.8%) were undermined by the revolution and the eight-year war with Iraq. In the 1990s the decline in GDP was halted; the average annual GDP growth in 1990-2002 was 4.0%.

The rate of gross capital formation in the 1960s and 70s was fairly stable (within 20–24%), in the 1980s. decreased to 15% in the 1990s. again reached the level of 20-24%. More than ½ of capital investments are made by the private sector, which provides 60-70% of investments in equipment.

Industry structure. Share in GDP of industry 31.0%, incl. oil — 15.0%; agriculture, forestry and fisheries – 14.0%, services – 55.0%. Employment structure: industry – 31%, agriculture – 25%, services – 45% (2002).

The main branch of the extractive industry is oil. Oil production 3.5-3.7 million barrels per day (175-185 million tons per year), exports 2.5-2.6 million barrels per day (125-130 million tons), depending on the OPEC quota. The main centers of production: in the south-west of the country, in the ostan of Khuzestan (Aga-Jari, Marun, Karanj, Paris). The largest export terminals are located on the islands of the Persian Gulf: Kharg, Lavan, Sirri. All oil production is in the hands of the state. Gas production is 54 million m3. Gas is used mainly for domestic consumption, since after the collapse of the USSR, gas supplies through the Kangan-Astara gas pipeline ceased. In 2002, a gas pipeline was put into operation to supply gas to Turkey.

Electricity production in 2002 exceeded 125 million kWh and is concentrated mainly in oil and fuel oil (66%) and gas (30%) power plants. The construction of a nuclear power plant in Bushehr, which is being built with the technical assistance of the Russian Federation, is nearing completion.

The leading branches of the manufacturing industry are petrochemistry, ferrous metallurgy, the textile, food industry, and mechanical engineering. Since the 1990s a course has been adopted for the development of export-oriented industries. Ferrous metallurgy, petrochemistry, and the automotive industry became exports. Steel production exceeds 6 million tons, the largest automobile companies Iran Khodro and Saipa are increasing their exports. The manufacturing industry and carpet production provided 70% of non-oil exports in 2002. Despite privatization, the largest enterprises remain in the hands of the state.

Carried out in the 1960s. agrarian reforms, significant financial injections into agriculture in the post-revolutionary period made it possible to almost double the production of cereals and especially wheat, which is the main food product, almost twice, but the growth rate in the industry lagged behind the pace of urbanization, growth in the capacity of domestic consumer and industrial markets. On average in the 1990s the balance of cereals by 1/4 (and in the lean 1989/90 by 43%) was provided by imports. The country annually spends $2–2.5 billion on food imports. Fees of wheat in con. 1990s – 10-11 million tons. Iran supplies dried fruits and pistachios to the world market. The main export crop of the fishing industry is black caviar, mined in the Caspian Sea.

Transport is one of the most priority areas of development. 80% of domestic traffic is accounted for by road transport. In 2001, 860 million passengers and 210 million tons of cargo were transported. The length of motor roads by 2000 was 167 thousand km. In 2001, the construction of roads was completed: Zanjan-Tabriz, Tehran-Chalus, Ahvaz-Bender Imam Khomeini, Kashan-Isfahan. The construction of the Bafk-Mashhad road is nearing completion. The length of the main railway lines is 6.3 thousand km, they transport up to 22 million tons and 10 million passengers. The average speed is 35 km / h, mainly due to the deterioration of the railway track. Only the Bafk-Bender-Abbas line is equipped with a computer control system, and Tehran-Tabriz is equipped with a tracking system. The development of the railway network is one of the main activities of the Economic Cooperation Organization. Up to 80% of external cargo turnover is accounted for by sea transport. The largest of the four shipping companies is the IRI Shipping Company, which includes the INNK tanker company. The main port and naval base on the coast of the Persian Gulf is Bandar Abbas (62% of cargo turnover). The throughput of Iranian ports is approx. 40 million tons. Air transport (the volume of traffic is up to 10 million passengers and 30 million tons of cargo) is faced with the acute problem of modernizing airports and aircraft. The largest airline is the state-owned Iran Air. Pipelines have a widely branched network, their total length is St. 10 thousand km. All transport networks are public. their total length of St. 10 thousand km. All transport networks are public. their total length of St. 10 thousand km. All transport networks are public.

All districts are covered by telephone and telegraph communications. Iran leases several satellite communication channels. From con. 1990s allowed to use the Internet, the number of users in 2002 amounted to 420 thousand.

Domestic trade is characterized by the presence of a large number of intermediaries, the predominance of petty trade, and the backwardness of the material and technical base. Bazaars continue to retain their importance as centers of retail and wholesale trade. Small merchants and artisans are united in asnafs. According to the latest census of trade enterprises, out of 1150 thousand enterprises, 878.8 thousand, or 76.4%, were small establishments employing 1 person.

The balance of payments for services and tourism is negative, although Iran is expanding the sale of services, especially construction. The tourism development program is limited mainly to excursion tourism, the development of the leisure industry, despite exceptionally favorable natural conditions, is constrained by Islamic norms. A little over 1 million people come as tourists annually, up to 40% of them from the former republics of Central Asia and the Caucasus. The most famous recreation center is Kish Island.

As a result of the “White Revolution”, landownership was sharply limited, and sharecropping was abolished. Industrialization was carried out on the basis of the use of foreign capital and government funding. The share of the state in GDP in the 1970s was 46-48%, state intervention in the economy began to have the character of expansion. After the clergy came to power in 1979, the trend towards nationalization of the economy received a religious justification. Banks, insurance companies, foreign and large domestic enterprises were nationalized. The war with Iraq (1980–88) increased the centralization of the economy, which became distributive in character. Islamic foundations, operating on the principles of charitable Islamic organizations, acquired a huge weight in the economy, to which a significant part of the nationalized property was transferred.

From the beginning 1990s adopted a course towards the creation of a market economy. The government refused to interfere in pricing, foreign trade was liberalized, a privatization program was adopted, a new law on attracting and protecting foreign investment. The priority direction of economic policy, as in the 1980s, remains the support of small business. All forms of cooperation are encouraged. In fact, the entire rural population is cooperative, and 1,700 cooperatives are actively operating in industry.

The monetary sphere has significant features due to the fact that all banks are state-owned and operate on an interest-free basis (law 1983). However, in 1999, the creation of private and foreign banks in free zones was legally allowed. Since 2001, private banks have been created (3 in total). The Tehran Stock Exchange operates. Until 2002, there were two different rates of the rial: import (or oil) and export, in fact, equal to the market. The budget for 2002-03 was for the first time drawn up on the basis of a single exchange rate. Inflation, reaching in the 1980s. 40%, decreased in 2002 to 14.8%.

The fiscal system took shape in the 1960s and 70s. and during the years of Islamic rule has not undergone fundamental changes. The overall budget consists of the current budget (76% for 2001/02) and the development budget (24%). A significant part of budget expenditures goes to subsidies to state-owned enterprises and to maintain prices (8-10%). Defense spending does not exceed 8% of budget spending. The main source of budgetary funds: revenues from oil exports – 53.5%. The tax base of budget revenues does not exceed 1/3. The volume of budget expenditures in 2000/01 was 22.8% of GDP, the budget deficit was 1.1%.

The export of domestic capital is insignificant. One of the main obstacles to the import of foreign capital into Iran is the lack of the necessary legislation and US policy towards Iran. The volume of accumulated foreign direct investment in 2000 amounted to only 2.1 million US dollars. A relatively attractive regime for investment is in free economic zones (FEZs), where 100% participation of foreign capital is allowed, tax exemption for 15 years, the creation of private banks, insurance companies, and branches of foreign banks. Most of the SEZs have been created on the islands and in the ports of the Persian Gulf. The largest ones are on the islands of Qeshm and Kish, in Chahbahar, Khorramshahr, Bandar Abbas, Bender Imam Khomeini, in the Caspian ports of Anzali and Amirabad.

The balance of payments is largely dependent on oil exports, with ser. 1990s (except for the crisis of 1998) has a positive balance, which in March 2001 amounted to 12.5 billion US dollars, in March 2002 6.0 billion US dollars. After the liberalization of import regulation in the beginning. 1990s formed an external debt. To the beginning 2003 it was reduced to 8.3 billion US dollars. Iran has no debts on payments.

The standard of living is close to the world average, in 1999 the human development index was 0.714. The main problem is unemployment, the official level of which in 2002 was 13.7%. The population is covered by the social insurance system. Social assistance is also provided through Islamic foundations (in 2001, more than 700,000 people received assistance from the Imam Khomeini Committee and the Fund for the Dispossessed). Gini index (2000) 44.9. The minimum average monthly wage (2000/01) is 458 thousand rials, or 57.3 US dollars. In the expenses of urban families, 33.8% are housing costs, 31% are food costs, 8.9% are clothes and shoes, up to 8% are transport costs, 3% are education, 5% are medical care. In the budget of rural families, food expenses account for almost 1/2 of all expenses (47.5%). The total expenses of urban families are 54.3% higher than rural ones.

The constitutionally fixed priority direction of foreign economic relations is Islamic countries, but in fact Iran focuses on developed countries as the main consumers of oil, and most importantly, as a source of capital and technology. The volume of foreign trade in 2001/02 amounted to 42.0 billion US dollars, incl. export 23.9, import 18.1. The volume of exports depends on the export of oil, which in 2001/02 amounted to 19.3 billion US dollars, i.е. 80.8% of all exports. The main buyers of Iranian oil are the countries of Western Europe (35-50%) and Japan (more than 20%). Trade balance in the 2nd half. 1990s predominantly active. Despite the proclaimed policy of encouraging non-oil exports, their volumes do not exceed $4.5 billion. ½ of imports are semi-finished products for industry, up to 2 billion US dollars are spent on food purchases (grain, meat), 3-5 billion for the import of equipment. European countries are the main importers.

Economic relations with the Russian Federation include primarily technical and economic (energy, oil and gas), military-technical cooperation and foreign trade. Foreign trade turnover – approx. 500-600 million dollars, in 2002/03-860 million dollars, it is expected to increase to 1-1.5 billion dollars in the short term.

Economy of Iran