Economic growth and welfare improvement in Iran in the past few decades have been based on utilization of natural resources, mainly oil resources. Such assets, on the one hand, have enabled governments to put goods and services at the disposal of the public and, on the other hand, created industries based on the country’s privileged access to cheap energy.
However, limited foreign relations, lack of investment in expanding those resources along with the rentier system have made the continuity of economic growth based on natural resources an impossible task. The growth we are seeing today is in fact the continuation of the meager and fluctuating growth of the past decade, economist Farhad Nili prefaced an editorial for the Persian daily Donya-e-Eqtesad with this note. A translation of the text follows:
While the growth based on natural resources and the economic performance of the country in the past decades are defined within the paradigm of industrial revolution, development associated with technology and innovation has created different patterns of competitive advantages linked with the creation of value added and economic growth.
Digital Revolution
Technological developments brought about by changes in the process of creating wealth and economic value, in addition to causing transformations in economic relations and regulating social and economic activities of the people, have been an important factor in determining the economic and political power of countries at the international level.
The contemporary era, referred to as the Fourth and Fifth Industrial Revolutions, is shaped by technological developments and the transition to a digital economy, which is also referred to as the Digital Revolution.
Therefore, the current situation is an important opportunity for changing the pattern of creating value and wealth for the country.
According to Daron Acemoğlu, a Turkish-born American economist, the difference in the growth path of different countries depends on the difference in making the right decision at the moment of change. Successful countries are those that have made the right decision in that period with proper understanding. The right decision at important moments can create a future different from the past and current conditions for countries.
The current situation of our country is not favorable for any group, either politicians, statesmen, or the general public. Creating a different future requires making the right decision at the right moment. Important moments, which are turning points for change, are not too many during historical periods. The nature of big changes is slow and time-consuming, and for this reason changes that can have big and lasting effects are not highly repeatable.
Adaptability
The key concept in facing important historical and technological moments is adaptability, which means proper and timely understanding of opportunities, prioritizing the benefits derived from a change versus risks, and constantly appraising costs and risks.
While the infrastructure of the internet, like electricity, has entered all aspects of public lives and created a real and virtual duality, it has also created countless opportunities to create wealth for businesses.
In order to make use of these opportunities, the speed of the country’s adaptability should be increased at the three levels of household, corporation and governance.
While different groups of people, with the increasing share of young people, have adapted their lives to the changes of the digital age at the individual level and have chosen a dual life in accordance with their culture, attitudes and beliefs, the main challenge of the country to face this great change is adaptability at the corporate and national levels.
At the corporate level, due to the difference in the nature of digital and non-digital businesses, these businesses still face the challenge of adaptability. The processes of formation and birth, pattern of growth, product development model and customer relationship and competition are completely different for digital and non-digital businesses.
An important part of the process of creating wealth based on the digital revolution is transformation of traditional businesses into digital enterprises. In order to create value in proportion to the scale of economy, digital businesses need to further expand their activities.
Role of the Regulator
While the successful models of dealing with disruptive developments and moments of change are making regulators face technological developments from the perspective of business, the regulatory framework is to facilitate the adaptability of businesses to technological waves. In our country, the regulator is placed between households and businesses, and tasked with regulating the duality in the individual realm and creating adaptability. This is while people seem to have gone through their adaptation process and passed the stage of adaptation or non-adaptation.
In successful patterns, the regulator defines its function and role as managing macro risks and ensuring competitiveness, and during an adaptive process, it associates itself with technological developments. In our country, the regulator grapples with the control and management of businesses directly or indirectly, which limits innovation and leads to neglect of opportunities. This ultimately leads to forced adaptability with technologies at a time when the opportunity is lost.
If adaptability is defined as getting on board the technology train, in countries that have been successful in using technological opportunities, the role of the regulator is to create opportunities for increasing momentum and establishing stations to increase the number of passengers.
In Iran, the regulator has set its role as defining the destination for the train and limiting the railroads to reach a predefined destination, which causes an important part of the owners of ideas and businesses not to board such a train in the first place.
It seems that to use this historical moment requires a change in the mental paradigm of the regulator to match the requirements of the digital revolution. Since one of the characteristics of the historical moments is their low rate of occurrence and repeatability during historical periods, in the absence of taking advantage of such historical moment, it is not clear when the next opportunity will arise and whether at that time, the social and economic conditions of the country will have the potential to take advantage of it.
