Bulletin de liaison et d'information - Institut kurde de Paris

Revue de Presse-Press Review-BerhevokaÇapê-Rivista
Stampa-Dentro de la Prensa-Baszn Özeti
INTERNATIONAL HERALD TRIBUNE,
TUESDAY, MARCH 21,2000
'
ECONOMIC SCENE
Tehran Maps Path
To a Free Market
By Philip Bowring
Illlemaliimal Herald Tribulle
TEHRAN - Iran started its new
year this week, along with the third
five-year social and economic development
plan. ' '
Such plans are usually forgettable
documents redolent of an earlier era
of economics. But this one matters'
because, although it has few detailed
targets, the plan outlines the reformist
principles of the government under
President Mohammed
Khatami.
The plan comes
into force just after
reformers won con~
trol of Parliament in
elections they hope
will speed Iran's
transition from a
tightly controlled,
quasi-socialist
economy into an open one where
market forces and private ownership
predominate. The economic strategy
is also starting as the United States
has begun to lift sanctions, which are
likely to be gone altogether within 18
months.
The Iranian economy has been in
dire straits, averaging growth of 2
percent over the past five years
while the work force has been expanding
at nearly 4 percent.
Inflation has been well over 20
percent a year. But social progress in
health, education and other areas over
the past decade has been impressive;
now peOple want goods and jobs.
With oil accounting for 80 per-
,cent of Iran' s exports, the economy
has suffered in part from low oil
prices, which only recently have
turned around.
Other hindrances include government
deficits funded by the central
bank, an inefficient state industrial
sector, multiple exchange rates, administered
pricing for many commodities,
negative real interest
rates, indiscriminate consumer subsidies
and a banking system that
favors the state and the tax-exempt
religious foundations that own
many enterprises, including oncesplendid
but now-dismal hotels.
The goals of the plan include a
unified floating-exchange rate, cur-
rent-account convertibility,
positive
rates of return for
savers, large-scale
privatization, attraction
of foreign
investment, tax reform,
reducing oil
dependence, encouraging
labor intensive
industries,
targeting of subsidies to needy
groups, and the reduction of government
deficits.
Goals for the financial sector include
the creation of credit institutions
- including private ones -
to compete with state-owned banks, ,
the issue of debt instruments to fund
state deficits, and the further development
of the Tehran Stock Exchange
as a medium for privatization
and new capital.
The five-year plan was mostly
formulated a year ago when low oil
prices were forcing Iran to radically
rethink its economic system. There
is a danger that higher prices will
reduce the pressure for change, but
political momentum is now strong.
High export reveijues will m*e it
easier to unify the exchange rate.
Under the current system, rates
,range from 1,750 ria,l_sto the dollar
for imports of some food ànd other
essentials to a free market rate of
about 8,500 rials.
Price reform will mean cutting'
the consumption subsidies, which
are given either from the budget or
through the exchange rate; both are
the major cause of government deficits,
inflation and the consequent
low level of savings.
But it will not be easy because
Iranians have become accustomed
,to bread and gasoline costing a fraction
of international levels. With
jobs hard to find and a rapidly growing
work force, the government will
have to find a way of protecting the
poor while reducing the subsidy
burden without relying on oil.
There is certainly now the the-
'qretical will to open up the economy.
But it will take time to over- ,
comebureaucratic inertia, en'- ,
trenched state enterprises and foundations
and the socialist thinking
,that always formed part of the Is-
Iran's economic plan outlines the policies of
President Mohàmmed ,Khatami, whose
reformist allies now dominate Parliament.
Social progress in
Iran has been
impressive. But
now, people want
goods and jobs.
lamie revolution in 1979.
As in China, workers in old organized
industries have job security
and many benefits while the small
scale, informal and rural workers
have little.
Privatization has long been on the
agenda in Iran. But until recently it
had been bogged down in constitutional
and political disputes. Now
it is moving again, with the ministry
of industry publishing a schedule of
sales of enterprises.
With private capital in such short
supply, privatization has often
meant the sale of one state enterprise
to another, or to a state bankinvestment
company. But this process
represents progress because the
growing enterprises are more commercially
minded.
A growing number companies are .
also listed on the slack exchange,
which provides a tax advantage and
,requires the companies to be mo~e
profit conscious.
Some Iranian companies survive
because of cheap credit, high tariffs
and import bans. But many make
good profits despite these obstacles
and will very likely show remarkable
growth as economic reform
proceeds.
If the government moves quickly
in carrying out the plan 's good intentions"
gross domestic' product
cO,uld easily grow 6 percent to 7
percent annually in the next five
years as Iran makes' uï:>for, lost
time.
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