Economy, Domestic Economy

Dynamics of Economic Decision-Making

Dynamics of Economic Decision-MakingDynamics of Economic Decision-Making

Which state body is the main decision-maker in Iran’s economy?

Neither economic pundits nor policymakers can answer this question definitively, as there is no single entity tasked with devising Iran’s economic policies.

What has been lately agreed upon by many experts, however, is that on the one hand, the policymaking entities do not work together in tandem to help the economy meet the target desired by both the decision-makers and the public and, on the other, the drafted policies are never executed efficiently.

Financial Tribune’s sister publication, the Persian weekly Tejarat-e-Farda, asked a few pundits to share their views on diversity of sources of economic decision-making in the government.

In Iran, most of the economic policies are developed by three state bodies, namely the Central Bank of Iran, the Economic Ministry, and Management and Planning Organization.

The CBI is in charge of drafting and executing monetary policies, controlling the inflation rate and organizing banking affairs. This is while a majority of Iran’s banks are state-owned and work under the supervision of the Economy Ministry.

The ministry is also in charge of collecting taxes and customs duties, which make up a considerable portion of the administration’s income.

Management and Planning Organization drafts the annual budget bill to decide how those resources should be spent.

The National Treasury, which is tasked with granting financial quotas to state bodies as per the annual budget law, is affiliated to the Economy Ministry.

There are also other decision-making arms, some weakened in the past few years and others still active in shaping the Cabinet’s economic policies. The Supreme Economic Council established in 1950s and the Taskforce for Coordinating Economic Affairs are among these bodies.

The diversity of the country’s policymaking entities has always drawn an array of criticism.

Alinaqi Mashayekhi, senior professor at Sharif University of Technology, says many problems could emerge if various decision-making centers on the same governmental level are tasked with devising economic policies.

He took note of two major long-term policies that the government is currently drafting: the sixth five-year development plan (2016-21), and the Resistance Economy policies.

The development plans are drafted by the government and ratified by the parliament every five years since 1991, and the Resistance Economy policies are prepared based on guidelines of the Leader of Islamic Revolution Seyyed Ali Khamenei to promote domestic growth and reduce reliance on imports.

“If laws related to each topic are drafted in separate committees or councils, contradictory policies will be inevitable,” Mashayekhi said.

In fact, using several bodies to devise policies could lead to adoption of weak plans by the government as the economic elites would be fanned out to different policymaking centers instead of convening in one place and contributing to stronger decisions.

This is while many believe the main problem associated with Iran’s economic policymaking is that the policies are not executed properly.

“That has always been an issue in Iran’s economy,” says Mehdi Asali, former director of Management and Planning Organization’s Macroeconomic Bureau. Iran’s fundamental laws and policies, he believes, are adequate and the problem is in the implementation of those policies.

To tackle that issue, Mashayekhi suggests key managers in the government’s executive bodies should be participate in the process of devising economic policies.

“That way, not only can they comprehend the logic behind the policies, but they can also help the process with the information they can provide,” he says.

Executive managers’ participation in the policymaking process, he believes, helps make more realistic policies.