Economy, Domestic Economy

Value Added: Essence of Industrial Development

Value Added: Essence of Industrial DevelopmentValue Added: Essence of Industrial Development

One of the key indicators of industrial development in a country is the degree to which high value added is obtained through domestic industries. In recent years, Iran’s industrial sector has failed to achieve decent growth rates, partly because of the low rate of value added by different industries.

The share of value added by industries as a percentage of total production value has been on decline since the Iranian year 1370 (March 1991-92), except for minimal growth in seven years. This shows that the produced raw materials were not converted into intermediate or final products before export, in turn giving rise to the import of such products, ISNA reported.

Meanwhile, a number of industries have fared better than others in this regard. According to data provided by the Ministry of Industries, Mining and Trade and the Central Bank of Iran, industries involved in the production of chemicals, base metals, non-metallic mineral products, motor vehicles, food and beverages accounted for 80% of the industrial value added generation over the past decade.

The chemical industry was the leading value added sector in 2013, accounting for 26% of the total industrial value added, followed by base metals (21.9%) and non-metallic mineral products (12.9%). Motor vehicles and trailers (11.4%) and food and beverages (9.1%) were the next major value adding industries.

The textile industry represented only 1.9% of total industrial value added during the period, despite the sector’s huge potential for growth and job creation due to availability of abundant raw materials.

The Industrial Strategic Document published by the Ministry of Industries, Mining and Trade last week has set the target of increasing the share of industrial value added in the gross domestic product to 17% in 2018 from 16.6% in 2014. The plan is aimed at further increasing this percentage to 17.5% in 2021 and 18.5% in 2025, in line with the National Vision Plan.

The ministry is trying to achieve this goal by focusing on industries which have high value added, walking the same line as countries like South Korea, Malaysia, China and Turkey, all of which made huge investments in the power, automotive, textile and textile industries and achieved high economic growth rates.