nderstanding the changing landscape of Iran’s economy is of utmost importance for both politicians and private business owners.
Since 2018, an important phase began in Iran’s economy. Following the reimposition of sanctions, the role of oil in the government’s budget and economy diminished. Before that, the government used to inject foreign-source earnings from oil and gas exports into the country’s economy through the public budget as well as the budget of state-owned companies and the National Development Fund of Iran.
Industrial, trade and even agricultural sectors depended on oil revenue; the taxation system relied on the government’s oil budget directly (via taxes on salaries of public sector employees and state-owned companies) or indirectly. But this course of action has undergone a sea change, Ali Cheshomi, an economist, prefaced his article for the Persian-language economic daily Donya-e-Eqtesad with this note. A translation of the text follows:
The private sector should generate tax income for the people and the government through investments, job creation, production and export. Under new circumstances, if the policies remain unchanged, there will be widespread imbalances and malfunctions.
Iranian politicians have yet to fathom this new direction and continue to act in a destabilizing manner. These actions include ruining foreign relations, inability to ensure the stability of macroeconomic variables such as inflation and foreign currency, imposing regulations without regard to the opinions of producers, introducing constant changes in government regulations in various fields, including forex, monetary, banking, pricing and neglecting the need to provide a safe business environment for producers. They do not have a clear plan and strategy for the long-term growth and development of the country.
The time is right for the private sector to understand this change. There is no denying the fact that, in the shadow of Iran’s state-owned economy, the private sector has not been powerful over the years but it has played an important role in the country’s production and employment in recent years. The private sector should be able to make its voice heard. Government-made structures such as “the Dialogue Council of the Private Sector and the Government” are not efficient enough to play such a role. The private sector should be able to take the initiative to stabilize Iran’s economy in the short run and put the country on the development track.
The three important pillars of the private sector for such a role are inclusive guilds and labor unions, banks and other private-owned financial institutions, and independent, private-run media.
A small group of the country’s politicians are bent to limit these three; their efforts have only harmed social welfare but failed to stall the expansion of the independent private sector and its three pillars. Now is the time for the private sector to get rid of its passive role in the country’s legislative apparatus and assume a constructive role in the new economic phase.
Four Important Functions
Four important functions are open to the private sector in the coming months: developing a framework for overhauling the government bureaucracy to reduce the direct and indirect expenses of the government on production, pursuing an industrial development strategy, promoting plans to expand the production of each market separately and drawing up the Seventh Plan according to the demands of the private sector.
For many years, efforts have been made to reduce the government’s restrictive regulations for manufacturers by improving the business environment, but these efforts have led to the reproduction of new government procedures and offices. The private sector should and can, like other developed countries, propose a framework for reforming the government bureaucracy through careful monitoring and continuous reporting of government regulations to reduce direct and indirect government expenses on production.
Lack of an industrial development strategy in Iran has imposed heavy costs on the development process and Iran’s role in the global value chain. Evidently, a small group of politicians who dominate the political scene of the country do not have the needed economic knowledge to formulate and follow this strategy, therefore the private sector should act independently and prepare the industrial development strategy and put it on the agenda of economic policymakers through an independent media. In addition to the industrial development strategy, the private sector needs to formulate plans to promote production and follow up the government’s duties in all markets.
In other words, given Article 44 of the Iranian Constitution of 2008-09, which limits the government in owning and managing many markets, the private sector should independently coordinate production and investment and improve human resources and technology.
The Seventh Plan is being drafted amid the fact that the failure of the government’s comprehensive planning is evident in all aspects of people’s lives. Instead of being a roadmap for improving the welfare and development of the country, five-year development plans were sources for government offices to benefit from. Now, the private sector has the ability to pursue its demand for the long-term development of the country and within the framework of its desired industrial development strategy in the Seventh Plan.
