Economy, Domestic Economy
0

Ministry of Industry Could Use Parliament Support

Ministry of Industry Could Use Parliament SupportMinistry of Industry Could Use Parliament Support

Given the range of disagreements the parliament has with the Rouhani administration, the latest outburst of conflict only got a small footnote in domestic news outlets. Last Thursday (January 1), the Minister of Industry, Mines and Trade, Mohammad Reza Nematzadeh was handed down a second yellow card in a close call of 102 to 89 votes.

While the parliament wants valid reassurance that the government stays within its mandate, its combative attitude has to some extent inhibited routine politics. Even worse, the administration has been driven on the offensive and with it the parliament is preventing the possibility for real reform as itself advocates.

In the case of the minister of industry’s second yellow card, the points raised by Tehran representative Zahra Tabibzadeh were all valid and good.

She warned that imports of luxurious cars are at record highs, driven by economic growth, while unemployment is all but going up.

Rice, the staple food Iranians like more than anything else, is entering border posts at double the amount needed to fill the domestic output gap. According to Tabibzadeh, while domestic production currently stands at 2.4 million tons, annual consumption is 3 million. However, instead of importing 0.6 million tons, Iran has been importing 1.97 in the year ending March 2014.

Even worse, Tabibzadeh pointed out that the government has been buying rice from India at prices almost double market price. Sanctions can only explain part of the mark-up cost: Iran buys relatively overpriced rice, often with low quality.

Additionally, the market discourages rice cultivation in Mazandaran province. It is more profitable to sell a plot of land there to housing developers than it is to cultivate rice. The government has interfered little in these market forces.

These processes are mutually related. The oversupply of foreign rice puts downward pressure on the prices of domestic rice. However, Iranian rice is not as price flexible as Indian rice, which leads to loss of profitability for local farmers and the selling of their rice plots to tourist villa developers.

However, what the numbers really show is already close to full self-sufficiency in rice production. This is quite an astonishing feat of the Iranian government from a productive standpoint. Furthermore, rice cultivation is highly labor intensive and it thus accounts for the absorption of much seasonal labor in the Caspian Sea provinces.

However, while these complaints should be tackled one by one, they also obscure one of the prime reform challenges for the state: agriculture. Most importantly, consumption is going up along with population and income growth but a worsening national draught has shown that rice and wheat production in Iran are incompatible with full self-sufficiency. Worse, rice and wheat are both big stakeholders in the agriculture sector, which is blamed for claiming 92 percent of national water consumption, according to comments made by the Ministry of Energy several months ago.

The government needs to think about radical plans to reform the agricultural sector. The challenge is for the government to act within the framework of the Resistance Economy as laid out by the Leader. In this framework, Iran should limit its dependency on global staple markets and boost up its food security.

Taking account of this framework would not necessarily lead us to autarky or the absence of market forces: one possibility would be to make strategic partnerships with allied nations. The government is already attempting such a policy with wheat. Over the past months, it has laid out the necessary logistical capital to secure steady supplies of wheat from Kazakhstan and Russia; for example by finishing the railway linking Tehran to Astana and by reviving the Iran-Russia Bank. The government should pursue the same strategy with rice. In this case, India could be an appropriate partner. The Chabahar port on the Persian Gulf would serve as the appropriate strategic link, with the government bringing in tangible MoU’s and treaties that stipulate both price, quality and quantity.

Simultaneously, the government should try to bring back rice production from its critical draught level to a more equitable degree. Inevitably, this would lead to the loss of employment in the short- run, but extended periods of draught or even desertification bode much worse for the income of farmers in the long-run.

So instead of putting a break on such initiatives, the parliament might do better by offering critical support and advice while remaining within its mandate and the framework of the Resistance Economy.

Financialtribune.com