Shortly before the finalization of Iran’s historic nuclear accord with six major world powers, the government spokesperson Mohammad Baqer Nobakht told reporters that the sixth five-year economic development plan will be “formulated on the basis of the post-sanctions era”.
What can be perceived from this statement is that the axis of Iran’s economy has dramatically shifted and that a new economy ripe with new means and opportunities for growth and development is on the horizon.
However, before that can happen, flaws and shortcomings must be analyzed to properly prepare for the upcoming challenges ahead. The lifting of sanctions can be a double-edged sword; if utilized properly, it can be a launchpad for the economy, and if not, a deeper plunge into recession.
Deputy head of Tehran’s Chamber of Commerce, Industries, Mines and Agriculture, Mehdi Jahangiri, believes that the pivotal issue that has long haunted Iran’s economy is overreliance on oil revenues, which by itself has caused other problems. “Fluctuations in oil prices have always rocked the economy. The implementation of sanctions, as disastrous as they were, forced the government to try to find a way out of the single-product economy. This process must continue, especially now that the sanctions are being lifted,” Donyay-e-Eqtesad quoted Jahangiri as saying. He called on the government to focus on other sectors of the economy and move towards empowering the private sector.
In the post-sanctions era, Iran is seen by foreigners as a highly attractive market ready for rampant imports of foreign goods, which is a direct threat to domestic industries, economic growth and exports in the long run. According to Jahangiri, in order to prevent this, in addition to governmental support, the industries themselves must do their best to stay relevant and competitive in the new era by “adapting to the consumers’ newly acquired tastes.” The main challenge, Jahangiri says, is to outperform foreign firms in the domestic market. If this battlefield is conquered, exports to international markets will follow.
“The government has always been afraid of allowing the private sector to lead the economy. They have always talked about it, but no effective measures have been taken to actually implement it,” says chairman of Money and Capital Market Commission of TCCIMA, Ali Sanginian. He believes a pro-market economy away from state intervention alongside a powerful private sector will create an ideal economicl climate in the post-sanctions era.
“Theoretically, the government should act as an overseer and a policymaker in the economy. But in practice, it has been competing with the private sector while equipped with an abundance of oil revenues and controlling measures,” Sanginian said, adding that the private sector’s current main concern is losing the race for attracting investments and striking cooperation deals with foreign firms to state-controlled companies.
According to deputy head of Energy and Environment Commission of TCCIMA, Hamidreza Salehi, the government must drastically revise its economic policies if it is to make any use of the post-sanctions potential. He, too, believes a move toward pro-market policies is mandatory and failure to do so will “poison” the economy.
“Foreign firms, eying Iran’s skilled, educated and cheap workforce, are set to enter the country to invest in industries and provide them with modern technologies. If the private sector is empowered, we will not only witness a healthy competition in the domestic market, but also a boom in exports,” Salehi added. He called on the government to use oil revenues to develop the infrastructures of transportation, energy, and information and communications technology so that the ground is prepared for the exploitation of the new climate.
