As every year, the foreign trade volume in North America and Western Europe decreases in favor of newly emerging economies, removal of west sanctions against the Islamic Republic of Iran will suddenly thrust the country into a top position; especially with lifting the sanctions on economy, finance, banking, insurance, and above all, the sanctions in oil, gas, petrochemical, auto-making and shipping industries, Irans economy would enjoy new opportunities which would help empowering and strengthening the country in case of the governments preparation to manage the new situation and timely decisions of all three branches of the government. However, underestimating this specific condition or lack of coordination among the three branches may not only lose this opportunity, but can turn it into a potential threat.
In a general view, Iran is among 11 emerging and promising economies, with its market seeking rival that of Turkey; its oil being a dreaded rival to Saudi Arabian oil; and its gas seeking to push Russian gas to an edge and more importantly it has a population of young, educated, faithful and motivated people. Today, on the eve of sanctions removal, Iran, more than ever, requires a reassessment of its shortages and abundances to see what should be done for Iran which is no longer under Chapter VII of the U.N. Charter? The major question is to what extent the bureaucratic system of government would adopt itself to the new conditions? With government bodies bereft of highly competent and skilled experts due to political fluctuations, how they would be able to understand the new conditions and manage the situation so as to bring the maximum benefits for national economy and put the country on the path to economic growth and prosperity.
Inevitable changes in approach
In these conditions, it seems that the government could break the seal of sustainable development through regulations and policies; and guarantee our national security in a world rife with chaos more than any time through planning a model of economic development. It is necessary to consider redefining and changing the approaches as the first step toward preparing for the new conditions. In fact, optimally using these conditions entails the following changes in approach:
Defining Investment Opportunities in Oil and Gas: among all economic sectors, Irans oil and energy sectors are seemingly far more prepared for such new situation, and by defining the projects and unveiling the new contracts contribute to the attractiveness of the sector, and as it has been said, more than $ 70bn-worth projects in petrochemical and 100s of billions of dollars projects for developing oil and gas fields have been defined. The sector is, in fact, is prepared to intake investments which would revolutionize the development in infrastructures and crucial industries.
Joint Production vs. Unregulated Imports: having the approach of production with joint venture, and emphasizing on learning over time rather opening the countrys borders to consumer goods are among the important issue that protect the country from being beset by crises rising from unregulated imports; only under such conditions would a section of production be allocated to exports.
Wealth-Generating Firms vs. Uncompetitive Firms Incurring Losses: finding relative advantages of and preparing the grounds for creating large wealth-generating firms rather than uncompetitive firms incurring losses, which mainly infest the retirement pension funds, Justice Shares, and other public institutions.
Developing Urban Development Approach with New Technologies: Ministry of Roads and Urban Development can put this on the agenda as a new approach.
Changes in Auto-Making Industries: Codifying developing policies in auto-making sector, as one of the most important branches of the economy, providing the conditions for technology transfer and joint venture, and taking a share of the global market, are among the necessities of Irans industry.
Revolutionizing the Business Environment: Continual improvement of business environment and making the economy predictable are still top priorities of Irans economy in the new conditions, however, reducing the costs of money transfer is an important factor of attractiveness of economic activity in Iranian context.
Planning for Iranian Expatriates: Iranian expatriates should be viewed as opportunities rather than threats, and attracting their participation in the transfer of technology, capital and management is necessary in the future. .
Revolutionizing Tourism Sector: Developing approaches to attract tourists, preparing infrastructures and proper software of this sector a serious preoccupation for the officials in tourism sector.
Revolutionizing Services Sector: Expanding the service sector as an immediate and effective factor to job creation and economic prosperity should top the agenda.
Establishing Investment banks abroad: This can be studied as an important tool to supply and attract foreign investments.
Revolutionizing the Stock Market: To the testimony of many experts, redefining the role of Stock Market in attracting foreign and domestic capital from the general market is a necessity with conditions looming.
Planning for the Elites: Attempts to change the trend of brain drain and effectively using elites expertise within the existing structures and newly knowledge-based companies, facilitating their access to scientific data and promoting their living conditions would be attractive steps in handling this class of geniuses.
Government Executive Measures to meet new conditions
In line with the above-mentioned changes in approach and preparation for new conditions, it is necessary for the government to embark on some immediate actions by government bodies and postponing of implementation would incur losses; they are as follows:
- Facilitating, easing, and making transparent the process foreign investment and bolstering the system in terms of soft and hardware;
- Preparing a clear and verifiable plan by the Central Bank and Ministry of Economic Affairs for setting official exchange rate and the mechanisms of capital flight in and out;
- Promoting the place of Iran, by the Ministry of Economic Affairs through improving business environment and reducing the costs of risk;
- Redefining, by the Securities and Exchange Organization (SEO) in close cooperation with relevant government bodies, of conditions by which investors are accepted into the market and of capital transfer and flight, in a framework informed with national interests;
- Preparing, by government bodies, of all their transferable and semi-finished projects, for assigning to foreign investors; Ministry of Oil (more than $ 100bn), Roads and Urban Planning ($ 90bn), Industry, Mine and Trade ($ 55bn), Ministry of Energy ($ 60bn), and Agriculture ($ 20bn) are attractive investment opportunities;
- Developing by government of price policies and providing the investors with are also necessary measures by government bodies.
Threats not to be ignored
With all emphasis on the necessity of changes in approach and on policy implementation packages, threats are still on the ground looming, unless post-sanctions conditions are handled in a satisfactory manner. Threats which are ever-menacing now and then are as the following:
- Excessive importing of consumer goods: this concern seems legitimate enough that post-sanction era would fuel the consumption of imported goods to new highs, which brings to the attentions preventive measures;
- Inability to accurately respond to the new opportunities: with unprepared infrastructures, especially in software and lack of transparent response to demand side would negatively hit the enthusiasm thus created among the players;
- The sheer lack of order and regulation in the countrys development plan: lacking priorities would plunge the development plan into pandemonium; and,
- Conditions conducive to growth of rentiers and speculators: lack of an integrated management plan to attract foreign investments would be time- and resource-intensive to the expense of efficiency. Integrated management would effectively curb the corruption fostered by speculators and favoritism.
Last word: Toward an oil-independent economy
Finally, on of the issues experts warn against is the accumulation of public expectations of post-sanctions conditions; in fact, the expectations accumulated in society and the urgency to meet them in a stable environment in road to post-sanctions era is critical; more specifically, development activities are time-consuming; it would help find solutions to most pressing problems not in short, but in mid- and long-term. However, the role of media, pulpits, and elites in gradually placating the public sphere and reducing expectations seems crucial. A national consensus is a prerequisite for successful implementation of development plan in post-sanctions era.
On the other hand, the large-scale perspective expected to be drawn by authorities and decision-makers would reveal their resolve to revolutionize the general trend in macroeconomics in taking a U-turn toward an oil-independent economy. The actual expectation grown is that the sum of policies along with an integrated management should significantly reduce dependence on oil incomes, thus immunizing the country against shocks from outside along with protecting domestic markets.
This article was written by Abolqasem Khoshroo forIndustry and Development magazine. He is a member of Policy Council of Industry and Development Monthly and also former deputy of presidential office during Khatami's presidency.
