Uncertainty has been the deadliest disease of Iran’s economy for over a century and will likely remain the staunch enemy of production and economic growth in the next decade, says Mohsen Jalalpour, former president of Iran Chamber of Commerce, Industries, Mines and Agriculture, in an article published by the Persian Economic Daily Donya-e-Eqtesad.
A translation of the text follows:
We are living through the final days of a tumultuous century; in a few days, we will enter a new century [as the new Iranian year 1401 begins on March 21]. Over all these years, one of the gravest challenges facing the Iranian economy has been the constant decline in investment.
If we go back to the beginning of the century and leaf through the newspapers and books of that time, or read the memoirs of erstwhile politicians, we’ll realize that the current state of the Iranian economy has at least two components in common with that period: “uncertainty” and “shortage of capital”.
A detailed and documented research can shed some light on the similarities of the Iranian economy then and now. But these two similarities can be noticed recurrently in the discourses of veteran businessmen and politicians.
At that time, making a plan for the future was impossible; today the same issue prevails in the Iranian economy. The uncertainty has reached its peak and the government is facing an unprecedented financial difficulty. Rising poverty has been the outcome of this situation both then and now.
What are the reasons behind the downtrend in investment? What will be the end?
Over the last few years, uncertainty has been the biggest contributor to the decline in private sector investment. On the other hand, government investment, which is usually manifested in the form of development budget, has been halted due to a severe budget deficit. The whole thing has led to the suspension of investment in Iranian economy; in other words, the Iranian economy is stagnating.
Private sector investors and entrepreneurs are reluctant to start a business because they cannot calculate the economic risks. With no prospects of diplomatic breakthrough in nuclear talks, they are unable to calculate non-economic risks.
On the other hand, chronic inflation and macroeconomic instabilities have rendered markets unreliable; they have hurt the efficiency of economic planning, increased the lure of speculative practices and dampened motivation for long-term investment.
The continuous decline in investment and production and the steady fall in employment and income, coupled with rising inflation, have created a dangerous situation in the country.
If policymakers are willing to see investments flourish, they should help stabilize the economy to facilitate the calculation of macroeconomic risks.
As a private sector businessman, I have been writing for several years on the devastating impacts of uncertainty on the Iranian society and economy. Today I believe, more than at any other time, that uncertainty has been the deadliest disease of our economy for a century and will likely remain the staunch enemy of production and economic growth in the next decade.
