Domestic Economy

Project-Based Approach Toward Industrial Development Slammed

Project-Based Approach Toward Industrial Development Slammed
Project-Based Approach Toward Industrial Development Slammed

The recession gripping industrial enterprises based on the recent Purchasing Mangers’ Index report and the increase in the share of exports of raw and semi-processed materials in non-oil exports in the first half of the current fiscal year (started March 21) compared with the same period of last year are worrying developments, which are due to structural flaws in the industrial sector and the country’s unbalanced economy. 
This was stated by Hossein Haqgou, an economist, in an article for the Persian daily Ta’adol. A translation of the text follows:
Shortage of the supply of raw materials and lack of working capital on the one hand and the decline in people’s purchasing power and government pressures to stabilize prices on the other hand have lowered production and increased prices. 
The increase in the share of raw and semi-processed commodities in non-oil exports, which has been the case for several decades, is now reaching a critical point. It stems from the weakness of competitiveness, the breakdown of production chain and lack of advanced technology as well as the prevalence of speculative activities.
Sadly, what you cannot see is the policymakers’ research and analysis of these problems and an attempt to solve them. On the contrary, we are witnessing the continuation of the current flawed industrial development and the implementation of new plans through political maneuvering, government support and sometimes using the resources of development organizations. This path compounds the problems of the country’s industry and adds to the inefficiencies of this key sector.
In doing so, the power of development organizations, which were once the drivers of the economy and industry, is depleting. Their resources are being spent on projects that lack economic viability and giving rise to more rent-seeking practices and corruption. Even if completed, these projects will give rise to other economic challenges.



Unfinished and Unfeasible Projects

One of the gravest problems of Iranian governments in the last two or three decades was unfinished projects that lacked economic viability. Latest reports put the number of unfinished industrial projects at 66,000, of which 55,000 only registered a 20% progress. Last year’s budget report put the number of major unfinished projects at 75, which will take 39 years to complete.
Unfortunately, what we see now is the absence of an industrial development strategy and industrial policy; things are being done based on individual and group interests. This approach is smothering the industry. 
Not long ago, the head of Iran Chamber of Commerce, Industries, Mines and Agriculture, Gholamhossein Shafei, strongly criticized the chaos in the process of granting industrial permits by saying, “There are 81 automobile factories in our country compared with five factories in South Korea. There are 165 cement production units compared with 10 in South Korea. Iran has 210 motorcycle manufacturing plants compared with South Korea’s 82 plants. Fifteen countries, including Turkey and Japan, have 82 motorcycle plants combined.”
In the meantime, the key question to ask government officials and parliamentarians is why there is no intention to put this [industrial] house in order? Why is it that members of the parliament do not say a word about the important task of finalizing the “Industrial Development Strategy” (Articles 21 and 150 of the Fourth and Fifth Five-Year Development Plans). 
Although the Majlis Research Center has time and again stressed its necessity, lawmakers fail to call on the executive branch to determine what direction the country’s industry is moving toward or according to which strategy and industrial policy and economic justification are the industrial plans and projects being approved and implemented. 
Adopting a project-based approach toward the industry is the biggest harm inflicted on the industrial development of the country, especially when politics and individual and group interests dictate the notes.

Add new comment

Read our comment policy before posting your viewpoints