Instability, indecision and ad hoc policymaking are among major challenges facing Iran’s economy, which make any short-, medium- and long-term planning impossible for people, economic players and small and large businesses.
Masoud Khansari, the president of Tehran Chamber of Commerce, Industries, Mines and Agriculture, prefaced his article for the Persian economic daily Donya-e-Eqtesad on this note. A translation of the text follows:
The case of Iran’s non-compliance with the Financial Action Task Force, or nuclear negotiations that have been ongoing for more than 20 years are specific examples of this instability. These issues have increased capital flight and reduced foreign investment to an extent that, according to the latest statistics by the Ministry of Industries, Mining and Trade, foreign investments in domestic industries have plummeted by 82.7% in the first half of the current fiscal year (started March 21) compared with the same period of last year.
Other examples of instability and sudden decisions that we have seen in the past month and a half were severe restrictions on the internet and the shutdown of a number of platforms that have been used in the past years by different people and businesses, from rural women to young people to artists. These developments have inflicted huge damage on small and large businesses, which aggravate socioeconomic disappointment.
Massive Losses
According to the figures released by the Central Bank of Iran, information and communication technologies account for 3.3% of Iran’s GDP; estimates show that restrictions on the internet over the past month have caused losses worth 350 trillion rials [$970 million] on ICT directly. The indirect damage to businesses other than ICT industry is estimated to hover around 450 trillion rials [$1.25 billion].
In addition, between 500,000 and 700,000 digital businesses are said to be operating on online platforms, all of which are at risk now. These businesses have created at least one million jobs directly and eight million jobs indirectly. It is vital to note that these businesses are mainly run by young people in underprivileged rural and urban areas. The longer the restrictions prolong, the more severe the impact will be on the economy.
A survey by Computer Trade Union Organization of Tehran Province (Tehran’s Nasr Organization) shows that 90% of the companies affiliated to the organization registered a 25% decrease in sales between September 22 and October 2, when the internet was restricted; almost half of the companies saw over 50% decline in sales.
The survey also shows that 53% of businesses suffered daily losses of up to 500 million rials [$1,380], 21% between 500 million rials and 1,000 million rials [$2,770], 18% between 1,000 million rials and 5,000 million rials [$13,880], and 8% more than 5,000 million rials on a daily basis.
Social Consequences
Besides countless economic problems, the restriction of internet and foreign online platforms continues to have widespread social consequences, the most important of which are deeper frustration, an increase in the desire to migrate, especially among young people, the closure of small and large ICT companies and a surge in unemployment rate.
Digital platforms such as Instagram were the epicenter of businesses created by people living in rural areas over the past years. These people made a living by selling handicrafts, food and renting out their homes. They even hoped to continue living in their villages and not migrate to cities, but restrictions imposed on these platforms can result in disappointment and a sharp decline in their income that would naturally compound their livelihood challenges.
In addition, with the development of digital economy in the country over the past years, thousands of young people born in the 1990s and 2000s were employed by startups. Recent limitations would encourage them to leave the country.
Startups faced huge losses on the back of these restrictions and lack of prospects; some of the startup managers are thinking of closing or limiting their activities.
The findings of a survey of 6,000 senior and middle managers in the private sector conducted by Iran Migration Observatory show that the desire to emigrate was “high” or “very high” among more than 70% of managers of economic enterprises. But the key point is that as mismanagement and unfavorable governance continue to encourage the youth and the elite to migrate, other countries, including neighboring countries such as the UAE and Turkey, are providing incentives and offering startup visas to attract young people active in technology.
The way out of this situation is to end political maneuvering in the field of information technology, removing restrictions and assuring people that the internet will not be cut off or restricted again.
We are living in the era of communication and global village; we need to keep in mind that by restricting access to the internet, we are only holding back the country from the path of development and global competition, and paving the way for the progress and economic development of other countries.
Undoubtedly, the most important shortcut to achieve sustainable security and progress is through a strong economy. A dynamic economy will not materialize, except by relying on high social capital, especially the promising young people, by increasing public trust, promoting strong diplomacy, expanding foreign relations, including with neighboring countries, providing the infrastructure for businesses, such as access to the web and digital space, and preparing the ground for the economic participation of the people and the private sector, instead of the government.
