The services sector had the worst business environment in the third quarter of the current Iranian year (Sept. 23-Dec. 21, 2022), latest data related to the National Business Environment Index, measured by Iran Chamber of Commerce, Industries, Mines and Agriculture, indicate.
The index measures business friendliness of Iran’s economy, with 10 indicating the worst grade and a decline showing an improvement in the business environment.
The index stood at 6.07 points for the services sector, which was followed by industrial and agriculture sectors with 5.96 and 5.83 respectively.
Among 21 fields of business activities surveyed, the worst three business environments were registered by “construction”, “real-estate services” and “professional, scientific and technical activities”, while the top tier was occupied by “finance and insurance”, “mining” and “human health and social work”.
The ICCIMA index is fashioned after World Bank’s discontinued “Ease of Doing Business” index, a tool formerly used for countries seeking to measure costs of doing business.
The National Business Environment Index stood at 6.05 in Q3 to register a 0.17 percentage point or 2.89% increase compared with the preceding quarter and a 0.11 percentage point or 1.78% increase compared with the corresponding quarter of last year.
It stood at 5.88 in Q2 (June 22-Sept. 22) and 6.07 in Q1 (March 21-June 21).
“Unpredictability and fluctuations in the prices of raw materials and products”, “instability in policies, regulations and executive procedures related to businesses” and “difficulties associated with funding from banks” affected Iran’s business environment during the period under review (fall), according to the findings of the 25th round of this report.
The average real production capacity of economic enterprises participating in this survey stood at 43.51% in Q3, indicating an increase of 2.36 percentage points compared with the preceding quarter.
Enterprises with 6 to 10 employees had the best business environment with a score of 5.86 while those with 50 to 100 and less than five employees had the worst business environment each with a score of 6.09.
Businesses operating for less than two years and more than 16 years had the best business environment (5.97 each) while those operating for 6-10 years had the worst business environment (6.09).
Services Account for Over Half of the Employed
The services sector employed 51.1% of the Iranian employed population (12.29 million) in the third quarter of the current Iranian year (Sept. 23-Dec. 21, 2022), 1.2% higher than the corresponding period of last year, latest data released by the Statistical Center of Iran show.
The industrial and agricultural sectors provided 34.6% and 14.3% of jobs respectively.
Over 8.32 million were employed in the industrial sector, down 0.1 year-on-year and 3.44 million worked in agriculture, posting a 1.1% decrease YOY.
The services sector consists of wholesale and retail trade; restaurants and hotels; transport, storage and communications; financing, insurance, real-estate and business services; as well as community, social, education, health and personal services.
The sector employed 9.72 million men and 2.14 million women in Q3.
A total of 7.2 million men and 1.12 women were active in the industrial sector and 2.98 million men and 458,617 women worked in the agriculture sector.
Services accounted for 58.8% or 10.7 million of all jobs in urban areas and 27% or 1.58 million of jobs in rural areas.
The industrial sector made up 35.3% or 6.42 million of the jobs in urban areas and comprised 32.5% or 1.9 million of employment in rural areas.
This is while 5.9% or 1.07 million of the total jobs in urban areas and 40.5% or 2.37 million of the jobs in rural areas were in the agriculture sector.
Employment is defined as persons of working age engaged in any activity to produce goods or provide services for pay or profit, whether at work during the reference period or not at work due to a temporary absence from a job, or to working-time arrangement.
Increasing Employment at the Cost of Lower Productivity
According to economist Zahra Karimi, thanks to the plethora of workers in large industrial and service units, most of the new jobs are in the form of self-employment or in enterprises with five or fewer workers.
“Between the Q2 of fiscal 2021-22 and 2022-23, up to 547,000 jobs were created in the services sector, whereas the number of employees in the industrial sector was 122,000. The agricultural sector lost more than 300,000 jobs [mainly due to the water crisis] during the period.
Most of the jobs in the services sector include peddling, retailing and jobs in the transportation sector,” she said.
“According to official reports, in the fiscal 2021-22, the number of chauffeurs increased by one million. Many of them had lost their jobs in manufacturing units and turned to driving since they had no other option. In Iran, just like many other developing countries in Asia, Africa and Latin America, you can observe the phenomenon of employment without growth. During recession, the share of manufacturing, sustainable and formal jobs decreases and the share of services, informal and unsustainable jobs with low productivity increases significantly. The significant growth of peddling in large and small cities, the rapid increase in the number of online taxi drivers and the large number of small shops for buying, selling and repairing mobile phones are indications of decreasing investment and production, and increasing employment at the cost of lower productivity,” she wrote for the Persian economic daily Donya-e-Eqtesad.
