Saturday, November 24, 2007

The economy of Iran is a transition economy where a continuing strong labour force growth unmatched by commensurate real economic growth is driving up unemployment to a level considerably higher than the official estimate of 11%. According to experts, annual economic growth above five per cent would be needed to keep pace with the 900,000 new labour force entrants each year.
Government spending as percent of total budget was 6% for health care, 16% for education and 8% for the military in the period 1992-2000 and contributed to an average annual inflation rate of 14 percent in the period 2000-2004, although some unofficial estimates place the figure above 20 percent today., information and communication technology (ICT).

Centralisation vs. Privatization
See also: Management and Planning Organisation of Iran, Government of Iran, and Constitution of Iran
The Fourth Five-Year Economic Development Plan (2005-10) sets the guidelines and points the direction in which the trade sector will be taking over the next five years. In it, the focus will be on expanding trade interaction with the global community and pursuing an active presence in international markets. To achieve this would require raising exports substantially. Another area of focus will be to develop free trade zones and turning them into gateways to international markets.

Five-Year Economic Development Plan (2005-10)
See also: Next Eleven and Demographics of Iran
In the early 21st century the service sector contributed the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture. About 45 percent of the government's budget came from oil and natural gas revenues, and 31 percent came from taxes and fees. In 2006 the GDP was estimated at $195 billion ($610 billion at PPP), or $2,790 per capita ($8,900 at PPP). The informal economy is also important. Because of these figures and the country's diversified but small industrial base, the United Nations classifies Iran's economy as semideveloped.
The following is the trend chart of the Iranian GDP at market prices estimated by the IMF, with figures in millions of Iranian Rial. For purchasing power parity comparisons, the US Dollar is exchanged at 3,149.33 Iranian Rials only.

Macro-Economic Trend
See also: Labour and tax laws in Iran and Iranian citizens abroad
Agriculture contributes just over 11% to the gross national product and employs a third of the labor force. The industrial sector—including mining, manufacturing, and construction—contributed 42 percent of the GDP and employed 31 percent of the labor force in 2004. Mineral products, notably petroleum, dominate Iran's exports revenues (80%), but mining employs less than 1 percent of the country's labor force. In 2004 the service sector ranked as the largest contributor to the GDP (48 percent) and employed 44 percent of workers. In 2005, Iranian women accounted for 33 percent of the workforce (out of 25 million people). In 2006, the average annual salary in Iran was US$2,700. Migrant Iranian workers abroad remitted over two billion dollars home in 2006.

Sectors of the economy

Main article: Agriculture in Iran Agriculture
See also: National Iranian Petrochemical Company, IDRO, Iran Electronics Industries (IEI), Iran Aviation Industries Organization, Iranian Space Agency, and Environmental issues in Iran
Iran has a long tradition of producing artisan goods, including Persian carpets, ceramics, copperware and brassware, glass, leather goods, textiles, and woodwork. Iran's rich carpet-weaving tradition dates from pre-Islamic times, and it remains an important industry and contributes substantially to rural incomes. Textile mills, based on domestic cotton and wool, employed about 400,000 people in 2000 and are centred in Tehran, Esfahan and along the Caspian coast.
Large-scale manufacturing in factories began in the 1920s and developed gradually. During the Iran-Iraq War, Iraq bombed many of Iran's petrochemical plants, and the large oil refinery at Abadan was badly damaged and forced to halt production. Reconstruction of the refinery began in 1988 and production resumed in 1993. However, the war also stimulated the growth of many small factories producing import-substitution goods and materials needed by the military.
The country's major manufactured products are petrochemicals (w/a fertilizer plant in Shiraz), steel (w/mills in Esfahan and Khuzestan), and copper products. Other important manufactures include automobiles (with production crossing the 1 million mark in 2005),

See also: Automobile manufacturing companies in Iran
As of 2001, there were 13 public and privately owned automakers in Iran, of which two - Iran Khodro and Saipa - accounted for 94% of the total domestic production. Iran Khodro, which produced the most prevalent car brand in the country - the Paykan, which has been replaced in 2005 by the Samand -, is still the larger with 61% of the market in 2001, while Saipa contributed 33% of Iran's total production in the same year. The other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%. These automakers produce a wide range of automobiles including motorbikes, passenger cars, vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses and other heavy automobiles used in commercial and private activities in the country. Iran ranked the world's 16th biggest automaker in 2006 with a fleet of 7 million cars.

Automobile manufacturing

Main articles: Iranian defense industry and List of military equipment manufactured in Iran Defense industry

Main articles: Construction in Iran, Iranian architecture, and Milad Tower Construction

Main articles: Energy in Iran, Ministry of Petroleum of Iran, and 2007 Gas Rationing Plan in Iran Energy and petroleum

Main article: Mining in Iran Mining
See also: Education in Iran, Higher Education in Iran, Science in Iran, List of Iranian Research Centers, and Health care in Iran
Urbanization has contributed to significant growth in the service sector. Important service industries include public services (including education), commerce, personal services, professional services, and tourism. The tourist industry declined dramatically during the war with Iraq in the 1980s but has subsequently revived. About 1,659,000 foreign tourists visited Iran in 2004; most came from Asian countries, including the republics of Central Asia, while a small share came from the countries of the European Union and North America. The most popular tourist destinations are Esfahan, Mashhad, and Shiraz. In the early 2000s the industry still faced serious limitations in infrastructure, communications, regulatory norms, and personnel training.
Despite efforts in the 1990s toward economic liberalization, government spending—including expenditures by quasi-governmental foundations (Bonyad) that dominate the economy—has been high. Estimates of service sector spending in Iran are regularly more than two-fifths of the GDP, and much of that is government-related spending, including military expenditures, government salaries, and social service disbursements.

See also: Bonyad
Social protection is extended to the self-employed workers, who voluntarily contribute between 12% and 18% of their income according to the desired protection. Social protection covers the employees between the age of 18 and 65 years, and the financing is shared between the employee (7% of the wages), the employer (20 to 23% of the wage bill) and the State (which supplements the contribution of the employer to a total value of 3% of the wage bill). The social security makes it possible to ensure the employees against unemployment, the disease, old age (retirement pension), the occupational accidents. Iran did not legislate in favour of a universal social protection, but in 1996, the Center of the statistics of Iran estimates that more than 73% of the Iranian population is covered by a Social Security.
Civil servants, the regular military, law enforcement agencies, and the Islamic Revolutionary Guard Corps, Iran's second major military organization, have their own pension systems. In 2003 the minimum standard pension was 50 percent of the worker's earnings but not less than the amount of the minimum wage. Iran spent 22.5 percent of its 2003 national budget on social welfare programs. More than 50 percent of that amount covered pensions.
Welfare programs for the needy are managed by more than 30 individual public agencies, and semi-state organizations called Bonyads, as well as by several private non-governmental organizations. In 2003, the government began to consolidate its welfare organizations in an effort to eliminate redundancy and inefficiency. Bonyads are a consortium of over 120 organizations which are tax-exempt, receive government subsidies and religious donations and answer directly to the Supreme Leader of Iran. They control over 20% of Iran's GDP and they are involved in everything from vast soybean and cotton fields to hotels to soft drinks to auto-manufacturing to shipping lines. Bonyads are overstaffed, corrupt, and generally not profitable

Social service
See also: Central Bank of the Islamic Republic of Iran, Iranian Rial, Shetab Banking System, and Tehran Stock Exchange
The government makes loans and credits available to industrial and agricultural projects, primarily through banks. Iran's unit of currency is the rial. The official exchange rate averaged 8,614 rials to the U.S. dollar in 2004. However, rials are exchanged on the unofficial market at a higher rate. In 1979 the government nationalized all private banks and announced the establishment of a banking system whereby, in accordance with Islamic law, interest on loans was replaced with handling fees; the system went into effect in the mid-1980s.
The banking system consists of the central bank also known as Bank Markazi Iran, which issues currency and oversees all state and private banks; several commercial banks that are headquartered in Tehran but have branches throughout the country; two development banks; and a housing bank that specializes in home mortgages. Accounts of the state-owned commercial banks are dominated by loans to state and Bonyad enterprises and to large-scale private firms. The government began to privatize the banking sector in 2001, when it issued licenses to two new privately owned banks.
The Tehran Stock Exchange trades the shares of more than 400 registered companies. The stock market capitalisation of listed companies in Iran was valued at US$42 Billion in 2007.

Economy of Iran Banking system

Main articles: Communications in Iran, Telecommunication Company of Iran, and Media of Iran Communications

Main article: Transport in Iran Transport
See also: Economic Cooperation Organization, Developing 8 Countries, Colombo Plan, and United Nations Security Council Resolution 1747
Petroleum constitutes the bulk of Iran's exports, valued at $46.9 billion in 2006
More recently, Iran's Nuclear Program has become the subject of contention with the West because of suspicions regarding Iran's military intentions. This has led the UN Security Council to impose sanctions against Iran, on select Iranian companies linked to this program, thus furthering its economic isolation on the international scene.

Foreign Trade and Economic Relations
See also: Foreign Direct Investment in Iran, Assalouyeh, Tehran International Fair, and Sanctions against Iran
In the 1990s and early 2000s, some indirect oilfield development agreements were made with foreign firms. Buyback contracts in the oil sector, for instance, were arranged in which the contractor funded all the investments, and then received remuneration from the National Iranian Oil Company (NIOC) in the form of an allocated production share, then transferred operation of the field to NIOC after a set number of years, at which time the contract was completed.
Foreign investment has been hindered by unfavorable or complex operating requirements in Iran and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. In the early 2000s, foreign investors have concentrated their activity in a few sectors of the economy: the oil and gas industries, vehicle manufacture, copper mining, petrochemicals, foods, and pharmaceuticals. Iran absorbed 24.3 billion dollars of foreign investment from Iranian calendar year 1993 to 2007.

Foreign Direct Investment
See also: Group of 15 and Iran and copyright issues
Iran has had an observer status at the World Trade Organization (WTO) since 2005. The United States has consistently blocked Iran's bid to join the WTO since Tehran first asked for membership several years ago.
Yet if Iran does eventually gain membership status in the WTO, among other prerequisites, copyright laws will have to be obeyed in Iran. This would require a major overhaul of business and trade operations in Iran, a change which many experts believe would be a price too heavy for Iran's economy to pay at the present time. Still, Iran is hoping to attract billions of dollars worth of foreign investment while creating a more favorable investment climate, such as reduced restrictions and duties on imports and the creation of free trade zones like in Qeshm, Chabahar and Kish Island.

Iran and the World Trade Organization
Population: 70 million (2006 est.)
Labor force: 27 million (2007 est.)
note: shortage of skilled labor (2006 est.)
See also: Labour and tax laws in Iran
Investment (gross fixed): 31.3% of GDP (2004 est.)
Household income or consumption by percentage share:
Agriculture - products: wheat, rice, other grains, sugar beets, fruits, pistachios, nuts, cotton, dairy products, wool, caviar.
Industrial production growth rate: 3.2% excluding oil (2006 est.)
Electricity: - Iran is the world's fourth largest country of bloggers.
Reserves of foreign exchange & gold: $58.46 billion (2006 est.)
Exchange rates: rials per US dollar - 9,246.94 (2006), 8,964 (2005), 8,885 (2004), 8,193.89 (2003)
note: Iran has been using a managed floating exchange rate regime since unifying multiple exchange rates in March 2002.

lowest 10%: NA
highest 10%: NA
production: 155.7 TWh (2004)
consumption: 145.1 TWh (2004)
exports: 1.837 TWh (2004)
imports: 2.17 kWh (2004)
fossil fuel: 93% (75% came from gas generation, 18% from oil in 2006)
hydro: 7% (2006)
other: 0% (2006)
nuclear: 0% (2006)
production: 3.979 million barrel/day (2005 est.)
consumption: 1.51 million barrel/day (2004 est.) (expected to increase by 10% by 2007 from previous 2006 numbers)
exports: 2.5 million barrel/day (2004 est.)
imports: NA
proved reserves: 132.5 billion barrel (2006 est.)
production: 83.9 billion m³ (2004 est.)
consumption: 85.54 billion m³ (2004 est.)
exports: 3.56 billion m³ (2004 est.)
imports: 5.2 billion m³ (2004 est.)
proved reserves: 26.62 trillion m³ (2005) Further reading

Labour and tax laws in Iran
List of Major Iranian Companies
List of Iranian Research Centers
Environmental issues in Iran
Iranian Calendar
Government of Iran - With links to ministries and affiliated agencies
Iran travel guide from Wikitravel
Mehdi Sahraian
Iran's Nuclear Program