Economy of Iran

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%. [ [https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html#Econ CIA Factbook: Iran] Retrieved April 9, 2008] 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 overall 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% in the period 2000-2004, although some unofficial estimates place the figure above 20% today. [cite web|date=2007-05-14|url=http://iran-daily.com/1386/2842/html/economy.htm|title=Inflation Rates Fact Or Fiction?|publisher=Iran Daily|accessdate=2007-07-17] Iranian budget deficits have been a chronic problem, in part due to large-scale state subsidies totaling more than $80 billion for the energy sector alone in 2008 (80% of the government's budget). [cite web|date=2007-01-08|url=http://www.heraldextra.com/content/view/205986/3/|title=U.S. targets Iran's vulnerable oil|publisher=Los Angeles Times|accessdate=2007-07-17] [cite web|date=2007-01-08|url=http://www.iran-daily.com/1387/3111/html/economy.htm|title=Energy subsidies reach $84b|publisher=Iran-Daily|accessdate=2008-04-27]

The government is attempting to diversify away from petrodollars by investing in other areas of the economy, including, car manufacturing, aerospace industries, consumer electronics, petrochemicals and nuclear technology. Also, Iran has a great potential for development in mining, tourism [cite web|date=2007-07-17|url=http://www.iranyellowpages.net/en/about_iran/Tourism/Index.shtm|title=Tourism|publisher=Iran Yellow Pages|accessdate=2007-07-17] , and ICT.

History

Pre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s, Iran had achieved significant industrialization and economic modernization. However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution.

Iran's long-term objectives since the 1979 revolution have been economic independence, full employment, and a comfortable standard of living for its citizens, but at the end of the 20th century the country's economic future was lined with obstacles. Iran's population more than doubled in that period, and its population grew increasingly young. In a country that has traditionally been both rural and agrarian, agricultural production has fallen consistently since the 1960s (by the late 1990s Iran was a major food importer), and economic hardship in the countryside has driven vast numbers of people to migrate to the largest cities.

The rates of both literacy and life expectancy in Iran are high for the region, but so, too, is the unemployment rate, and inflation is regularly in the range of 20 percent annually. Iran remains highly dependent on its one major industry, the extraction of petroleum and natural gas for export, and the government faces increasing difficulty in providing opportunities for a younger, better-educated workforce, which has led to a growing sense of frustration among lower- and middle-class Iranians.

After the end of hostilities with Iraq in 1988, the government tried to develop the country's communication, transportation, manufacturing, energy infrastructures (including its prospective nuclear power facilities) and hospitals & schools and has begun the process of integrating its communication and transportation systems with those of neighbouring states. [cite web|date=2001-02-23|url=http://www.irvl.net/six_snapshots.htm|title=Iranian Economy in Six Snapshots|publisher=Payam-e Emruz; Economic, Social, Cultural (Monthly)|accessdate=2007-07-17]

Five-Year Economic Development Plan (2005-10)

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. The focus for the government has been 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 has been to develop free trade zones and turning them into gateways to international markets. [cite web|date=2006-02-21|url=http://iran-daily.com/1384/2504/html/focus.htm|title=Trade Perspective|publisher=Iran Daily|accessdate=2007-07-17]

On the domestic front, the priority has been to improve social justice and the overall situation; [cite web|date=2004-11-01|url=http://www.mporg.ir/Iran%20MDG%20Report%202004.pdf|title=The First Millennium Development Goals ReportIslamic Republic of Iran|publisher=The Management and Planning Organizationand the United Nations|accessdate=2007-07-17] i.e. regulating the domestic market on the one hand, and maintaining a well-functioning supply of basic commodities on the other. The latter would need improving the subsidy distribution system to relieve the government of the huge financial burden on subsidy payments. Another obligation the plan places on the government is to provide economic justification for the pricing of basic commodities and public services. [cite web|date=2004-09-01|url=http://www.mporg.ir/english/bar-4.pdf|title=Five-Year Economic Development Plan 2005-10 (1384-1388)|publisher=The Management and Planning Organization|accessdate=2007-07-17]

The five-year economic development plan also calls for the creation of a "national Internet" [ [http://www.iran-daily.com/1386/2850/html/ Nat’l Internet Network Approved] Retrieved 12 February 2008] , a target growth of 15% annually for the railroad network, [ [http://iran-daily.com/1386/3062/html/economy.htm Railroad Capacity Shy of Demand] retrieved 12 February 2008] introduction of foreign banks, a fourfold expansion of petrochemical output, to 56 million tons per year, downsizing of public workforce by 5% [ [http://iran-daily.com/1386/2875/html/economy.htm Privatization In Focus] Retrieved 12 February 2008] , the creation of 700,000 new jobs per year, [ [http://lcweb2.loc.gov/frd/cs/profiles/Iran.pdf COUNTRY PROFILE: IRANMarch 2006] Retrieved 12 February 2008] and the generation of 6,000 MW of electricity through nuclear technology by 2010 to meet its increasing demand for energy, and the establishment of 50 to 60 industrial parks by the end of the Fifth Five-Year Socioeconomic Development Plan by 2015. [ [http://mehrnews.com/en/NewsDetail.aspxNewsID=509073?] retrieved 12 February 2008] Turning to "Vision 2025", the plan has set an investment target of $3.7 trillion within two decades of which $1.3 trillion should be in the form of foreign investment. [ [http://iran-daily.com/1386/2881/html/economy.htm GDP Should Reach $1,200b] Retrieved 12 February 2008]

Centralization vs. Privatization

The Iranian Government declared its intention to privatize most state industries after the Iran–Iraq War in 1988, in an effort to stimulate the ailing economy. The sale of state-owned factories and companies proceeded slowly, however (mostly because of the opposition by a nationalist majority in "Majlis" - the Iranian parliament), and most industries remained state-owned in the early 21st century (70% of the economy as of 2006). The majority of heavy industry—including steel, petrochemicals, copper, automobiles, and machine tools—was in the public sector, while most light industry was privately owned.

According to the article 44 of Constitution, the economy of Iran is to consist of three sectors: state, cooperative, and private; and is to be based on systematic and sound planning.

* The state sector is to include all large-scale industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like; all these will be publicly owned and administered by the State.

* The cooperative sector is to include cooperative companies ("Bonyads") and enterprises concerned with production and distribution, in urban and rural areas, in accordance with Islamic criteria. 120,000 cooperatives are in operation across the country employing about 15 million people. [ [http://iran-daily.com/1387/3162/html/economy.htm#s315450 120,000 cooperatives operating in Iran] retrieved June 30, 2008]

* The private sector consists of those activities concerned with construction, agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.

A strict interpretation of the above has never been enforced in the Islamic Republic and the private sector has been able to play a much larger role than is outlined in the Constitution. In recent years, the role of the private sector has been further on the increase. Furthermore, an amendment of the article in 2004 has allowed 80% of state assets to be privatized. [cite web|date=2006-07-16|url=http://www.bbc.co.uk/persian/business/story/2006/07/060716_ra-rm-article44.shtml |title= BBC Persian.com|publisher=BBC|accessdate=2007-07-17]

Macro-Economic Trend

In the early 21st century the service sector contributed the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture. In 2008, about 55% of the government's budget came from oil and natural gas revenues, and 31% came from taxes and fees. [ [http://www.payvand.com/news/08/jan/1250.html Iran: Crude price pegged at dlrs 39.6 a barrel under next year's budget ] Retrieved 30 January 2008] In 2007 the GDP was estimated at $206.7 billion ($852.6 billion at PPP), or $3,160 per capita ($12,300 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 (1998).

The following is the trend chart of the Iranian GDP at market prices estimated by the IMF [ [http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbginim.cfm IMF World Economic Outlook database] Retrieved 12 February 2008] , with figures in millions of Iranian rial. For purchasing power parity comparisons, the US dollar is exchanged at 3,149.33 Iranian rials only.

ectors of the economy

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% of the GDP and employed 31% of the labor force in 2004. Mineral products, notably petroleum, dominate Iran’s exports revenues (80%), but mining employs less than 1% of the country’s labor force. In 2004 the service sector ranked as the largest contributor to the GDP (48%) and employed 44% of workers. In 2005, Iranian women accounted for 33% of the workforce (out of 25 million people). In 2006, the average annual salary in Iran was $2,700 ($19-23 per day in 2007Fact|date=March 2008). Migrant Iranian workers abroad remitted less than $2 billion home in 2006. [ [http://www.iran-daily.com/1386/2971/html/economy.htm Overseas Workers Remit Over $2b] Retrieved 12 February 2008]

Agriculture

About 20% of the land in Iran is arable. The main food-producing areas are in the Caspian region and in the valleys of the northwest. Some northern and western areas support rain-fed agriculture, while other areas require irrigation for successful crop production. [ [http://lcweb2.loc.gov/frd/cs/profiles/Iran.pdf Library Of Congress: Country Profile - Iran] Retrieved April 7, 2008]

The principal obstacles to agricultural production are primitive farming methods, overworked and underfertilized soil, poor seed, and scarcity of water. About one third of the cultivated land is irrigated; the construction of multipurpose dams and reservoirs along the rivers in the Zagros and Alborz mts. has increased the amount of water available for irrigation. Agricultural programs of modernization, mechanization, and crop and livestock improvement, and programs for the redistribution of land are increasing agricultural production. [ [http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1994/06/20/000009265_3961004234937/Rendered/PDF/multi_page.pdf World bank: Iran - Services for Agriculture andRural Development] Retrieved April 7, 2008]

Wheat, the most important crop, is grown mainly in the west and northwest; rice is the major crop in the Caspian region. Barley, corn, cotton, sugar beets, tea, hemp, tobacco, fruits (including citrus), potatoes, legumes (beans and lentils), vegetables, fodder plants (alfalfa and clover), spices (including cumin, sumac, and saffron (world's largest producer), nuts (pistachios (world's largest producer), almonds, and walnuts), and dates are also grown, and livestock is raised. Livestock products include lamb, goat meat, beef, poultry, milk, eggs, butter, cheese, wool, and leather. Honey is collected from beehives, and silk is harvested from silkworm cocoons. The northern slopes of the Alborz Mts. are heavily wooded, and forestry products are economically important; the cutting of trees is rigidly controlled by the government, which also has a reforestation program. In the rivers entering the Caspian Sea are salmon, carp, trout, and pike; sturgeon are abundant in the Caspian Sea. [ [http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1994/06/20/000009265_3961004234937/Rendered/PDF/multi_page.pdf World bank: Iran - Services for Agriculture andRural Development] Retrieved April 7, 2008]

Since 1979 commercial farming has replaced subsistence farming as the dominant mode of agricultural production. By 1997, the gross value of products in Iran's agricultural sector had reached $25 billion. Iran has attained 90% self-sufficiency in essential agricultural products; total rice production fails to meet domestic food requirements, however, making substantial imports necessary. In 2007 Iran reached self sufficiency in wheat production, and for the first time became a net wheat exporter. [ [http://iran-daily.com/1386/3029/html/economy.htm Iran Daily: Trade With PGCC To Improve] Retrieved April 7, 2008] By 2003, a quarter of Iran's non-oil exports were agricultural based. [ [http://info.worldbank.org/etools/docs/library/55547/geoindications/geoindications/pdf/casIRANillustrated.pdf] Retrieved April 7, 2008] Major agricultural exports include fresh and dried fruits, nuts, animal hides, processed foods, and spices.

Manufacturing

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thumb|right|170px|The_share_of_Iranprice of oil [ [http://www.sci.org.ir/portal/faces/public/sci_en Statistical Centre of 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), [ [http://money.cnn.com/magazines/fortune/fortune_archive/2006/09/18/8386173/index.htm?postversion=2006091209 Made In Iran] Retrieved 12 February 2008] electric appliances (television sets, refrigerators, washing machines, and other consumer items), telecommunications equipment, cement, industrial machinery (Iran has the largest operational stock of industrial robots in West Asia) [ [http://www.ifrstat.org/downloads/2006_Executive_Summary(1).pdf] Retrieved 12 February 2008] , paper, rubber products, processed foods (including refined sugar and vegetable oil), leather products and pharmaceuticals. Currently, 55 pharmaceutical companies in Iran produce more than 96% (quantitatively) of medicines on the market worth $1.2 billion annually. [ [http://www.austrade.gov.au/Health-services-and-pharmaceuticals-to-Iran/default.aspx Australian Trade] Retrieved 12 February 2008] [ [http://iran-daily.com/1386/2880/html/national.htm 18% of Medicines Thrown Out Annually] Retrieved 12 February 2008]

Automobile manufacturing

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 largest 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 and has a fleet of 7 million cars, which translates to almost one car per ten persons in the country. [ [http://iran-daily.com/1386/2865/html/economy.htm Iran 16th Biggest Automaker] retrieved 12 February 2008] [ [http://iran-daily.com/1386/2883/html/economy.htm Gasoline Quota Will Change In Two Months] retrieved 12 February 2008]

Defense industry

Iran's 2005 defence budget was estimated to be $6.3 billion (3.3% of GDP) by London's International Institute for Strategic Studies or $91 per capita. Iran's defense industry has taken great strides in the past 25 years, and now manufactures many types of arms and equipment. Since 1992, Iran's Defense Industries Organization (DIO) has produced its own tanks, armored personnel carriers, guided missiles, submarines, and a fighter plane [ [http://www.foxnews.com/story/0,2933,156160,00.html Iran Launches Production of Stealth Sub] Retrieved 13 February 2008] . As of 2006, Iran had exported weapons to 57 countries, including NATO members, and sold $100 million worth of military equipment abroad. [ [http://www.iribnews.ir/Full_en.asp?news_id=190718&n=32 IRI exports warfare to 50 countries] Retrieved 12 February 2008] [ [http://www.iribnews.ir/Full_en.asp?news_id=220656&n=12 Iran exports military equipment] Retrieved 12 February 2008]

Construction

The annual turnover in the construction industry amounted to $38.4 billion in 2005. [ [http://www.austrade.gov.au/Construction-to-Iran/default.aspx Australian Trade: Construction in Iran] Retrieved May 12, 2008] Until the early 1950s the construction industry was limited largely to small domestic companies. Increased income from oil and gas and the availability of easy credit, however, triggered a subsequent building boom that attracted major international construction firms to Iran. This growth continued until the mid-1970s, when, because of a sharp rise in inflation, credit was tightened and the boom collapsed. The construction industry had revived somewhat by the mid-1980s, but housing shortages have remained a serious problem, especially in the large urban centres as well as the poor quality of many constructions, which need anti-seismic reinforcement and/or renovation. Iran has a large dam building industry. [ [http://iran-daily.com/1385/2720/html/economy.htm Simultaneous Dam, Spillways Construction Obligatory - 30% Drinking Water Wasted] Retrieved 12 February 2008] Today 70% of the Iranians own homes. [ [http://iran-daily.com/1386/2812/html/economy.htm 70% of Population Own Homes] Retrieved 12 February 2008] Construction is one of the most important sectors in Iran accounting for 20–50% of the total private investment. One of the prime investment targets of well off Iranians as tangible.

Energy, gas, petroleum and petrochemicals

Seealso|National Iranian Oil Company|Asalouyeh|Iranian Oil Bourse|Iranian nuclear program [
oil reserves and 15% of its gas. It is OPEC's second largest exporter and the world's fourth oil producer.]

Iran holds 10% of the world's proven oil reserves. Iran also has the world's second largest reserves of natural gas (15% of the world's total); these are exploited primarily for domestic use. Since 1913 Iran has been a major oil exporting country. The chief oil fields are found in the central and southwestern parts of the Zagros mountains in western Iran. Oil also is found in northern Iran and in the offshore waters of the Persian Gulf. Domestic oil and gas, along with hydroelectric power facilities, provide the country with power. Iran built its first $1 billion nuclear power plant in Bushehr in March 2008, called Bushehr 1. In the late 1970s, it ranked as the fourth largest oil producer (OPEC's second largest oil producer) and the second largest oil exporter in the world. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the war with Iraq. Oil production began increasing in the late 1980s due to the repair of damaged pipelines and the exploitation of newly discovered offshore oil fields in the Persian Gulf.

Major refineries are located at Abadan (site of the country's first refinery, built 1913), Kermanshah, and Tehran. Pipelines move oil from the fields to the refineries and to such exporting ports as Abadan, Bandar-e Mashur, and Kharg Island. In the late 1990s, Iran's state-owned oil and gas industry entered into major exploration and production agreements with foreign consortia.

By 2004, Iran’s annual oil production was 1.4 billion barrels, creating a net profit of $50 billion. [ [http://seattletimes.nwsource.com/html/nationworld/2003494872_iranoil26.html] Retrieved 12 February 2008] Iran manufactures 50-80% of its industrial equipments domestically, including oil tankers, oil rigs, offshore platforms and exploration instruments. [ [http://iran-daily.com/1386/2829/html/economy.htm Company Advances In Energy Capabilities] Retrieved 12 February 2008] In February 2008 the Iranian Oil Bourse was inaugurated in Kish Island to trade crude oil and petrochemical products. [ [http://www2.irna.ir/en/news/view/line-203/0802173565111734.htm 1st phase of Iran oil stock inaugurated on Kish island] Retrieved 17 February 2008] The transactions are made in Iranian rial and other major currencies (except for USD). [ [http://www.presstv.com/Detail.aspx?id=43476&sectionid=351020102 Oil bourse opens in Iran's Kish Island] Retrieved 17 February 2008 ]

Mining

Iran’s mining industry is under-developed. Mineral production contributes only 0.6% to the country’s GDP. Add other mining-related industries and this figure increases to just 4%. Many factors have contributed to this, namely lack of suitable infrastructure, legal barriers, exploration difficulties, and government control over all resources.

Although the petroleum industry provides the majority of economic revenues, about 75% of all mining sector employees work in mines producing minerals other than oil and natural gas. These include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, strontium, silica, uranium, and gold (most as a coproduct of the Sar Cheshmeh copper complex operations). The mines at Sar Cheshmeh in Kerman Province contain the world's second largest lode of copper ore. Large iron ore deposits lie in central Iran, near Bafq, Yazd, and Kerman. The government owns 90% of all mines and related large industries in Iran and is seeking foreign investment for the development of the mining sector. In the steel and copper sectors alone, the government is seeking to raise around $1.1 billion in foreign financing. [ [http://www.austrade.gov.au/Mining-to-Iran/default.aspx Australian Trade: Mining in Iran] Retrieved April 8, 2008]

ervices

[
thumb|170px|Iran_currently_ranks_68th_in_tourism revenues worldwide. Iran with attractive natural and historical sites is rated among the 10 most touristic countries in the world. Close to 1.8% of national employment is generated in the tourism sector which is slated to increase to 10% in the next five years. [ [http://www.farsinet.com/travel2iran/ Travel To Iran - Tourism in Iran] Retrieved 12 February 2008] Iranian hospitality is one of the unique and distinctive features of its people.]

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 constitution entitles Iranians to basic health care. In the early 2000s, about 65% of the population was covered by the voluntary national health insurance system. Although over 85% of the population use an insurance system to reimburse their drug expenses, the government heavily subsidises pharmaceutical production/importation in order to increase affordability of medicines and vaccines. The total market value of Iran’s health and medical sector was almost $240 billion in 2002 and is forecast to rise to $310 billion by 2007. [ [http://www.austrade.gov.au/Health-services-and-pharmaceuticals-to-Iran/default.aspx Australian Trade - Health Sector in Iran] Retrieved 12 February 2008]

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.

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. [ [http://lcweb2.loc.gov/frd/cs/profiles/Iran.pdf COUNTRY PROFILE: IRAN] Retrieved 12 February 2008] The majority of the 300,000 tourist visas granted in 2003 were obtained by Asian Muslims, who presumably intended to visit important pilgrimage sites in Mashhad and Qom. Several organized tours from Germany, France, and other European countries come to Iran annually to visit archaeological sites and monuments. Iran currently ranks 68th in tourism revenues worldwide. Iran with attractive natural and historical sites is rated among the 10 most touristic countries in the world. Close to 1.8% of national employment is generated in the tourism sector which is slated to increase to 10% in the next five years. [ [http://www.farsinet.com/travel2iran/ Travel To Iran - Tourism in Iran] Retrieved 23 January 2008]

ocial 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 (20-23%) and the State (which supplements the contribution of the employer to a total value of 3%). Social protection is extended to the self-employed workers, who voluntarily contribute between 12% and 18% of their income according to the desired protection. 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 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% of the worker’s earnings but not less than the amount of the minimum wage. Iran spent 22.5% of its 2003 national budget on social welfare programs. More than 50% 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. [ [http://www.payvand.com/news/07/jan/1295.html#_edn7 "Ahmadinejad's Achilles Heel: The Iranian Economy" by Dr. Abbas Bakhtiar] Retrieved 12 February 2008] In 2007, Iran had 12 million people living below the poverty line. Six million of these people were not supported by any foundation or organization. [ [http://www.tehrantimes.com/Description.asp?Da=4/29/2007&Cat=14&Num=001 Tehran Times - Poverty in Iran] Retrieved 12 February 2008]

Banking system

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, large-scale private firms and to four thousand wealthy individuals who don't always repay their loans. [ [http://www.iran-daily.com/1387/3238/html/ Iran Daily: Banking System Needs Overhaul] Retrieved October 9, 2008] [ [http://www.iran-daily.com/1387/3240/html/ Iran Daily: President in Birjand Rally] Retrieved October 9, 2008] 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 $70 billion in 2008. [ [http://www.payvand.com/news/08/jun/1099.html Mehr News Agency: Value of Tehran Stock Exchange to top $70b] Retrieved 12 February 2008] According to experts, The economy of Iran has many investment opportunities, particularly on its stock exchange. [ [http://www.iran-daily.com/1387/3240/html/economy.htm Iran Daily: Vast Economic Potential Lauded] Retrieved October 8, 2008]

Communications

The government runs the broadcast media, which includes five national radio stations and five national television networks, as well as dozens of local radio and television stations. In 2000 there were 252 radios and 158 television sets in use for every 1,000 residents. There were 219 telephone lines and 110 personal computers for every 1,000 residents. Computers for home use became more affordable in the mid-1990s, and since then demand for access to the Internet has increased rapidly, where Iran has now the world's fourth largest number of bloggers. In 1998 the Ministry of Post, Telegraph & Telephone (renamed "Ministry of Information & Communication Technology") began selling Internet accounts to the general public. In 2006, the Iranian telecom industry's revenues were estimated at $1.2 billion. [ [http://www.iran-daily.com/1385/2681/html/focus.htm Privatization of Telecom Companies] Retrieved 12 February 2008]

According to the Electronic Journal on Information Systems in Developing Countries (EJISDC), the information and communications technology (ICT) sector had a 1.1-1.3% share of GDP in 2002. About 150,000 people are employed in the ICT sector, including around 20,000 in the software industry. There were 1,200 registered information technology (IT) companies in 2002, 200 of which were involved in software development.

Transport

Iran has an extensive paved road system linking most of its towns and all of its cities. In 2007 the country had 178,152 km (111,000 mi) of roads, of which 66% were paved. There were 55 passenger cars for every 1,000 inhabitants. Trains operated on 11,106 km (6,942 mi) of railroad track. [ [https://www.cia.gov/library/publications/the-world-factbook/geos/ir.html#Trans CIA Factbook: Iran] Retrieved April 8, 2008] [ [http://iran-daily.com/1386/2865/html/economy.htm Iran-Daily] Retrieved April 9, 2008] [ [http://www.rai.ir/Site.aspx?ParTree=A01011] Retrieved April 8, 2008]

The country’s major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving in Iran, imported goods are distributed throughout the country by trucks and freight trains. The Tehran-Bandar-Abbas railroad, opened in 1995, connects Bandar-Abbas to the railroad system of Central Asia via Tehran and Mashhad. Other major ports include Bandar Anzali and Bandar e-Torkeman on the Caspian Sea and Korramshahr and Bandar e-Khomeyni on the Persian Gulf. Dozens of cities have airports that serve passenger and cargo planes. Iran Air, the national airline, was founded in 1962 and operates domestic and international flights. All large cities have mass transit systems using buses, and several private companies provide bus service between cities. Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Esfahan are in the process of constructing underground mass transit rail lines.

Foreign Trade and Economic Relations

Petroleum constitutes the bulk of Iran's exports (80%), valued at $46.9 billion in 2006. [ [http://www.eia.doe.gov/emeu/cabs/Iran/Background.html US Department of Energy - Background about Iran's economy] Retrieved 23 January 2008] ] Iran's non-oil exports stood at $16.3 billion in the year ending March 20, 2007, a rise of 47.2% from the previous period. [ [http://www2.irna.ir/en/news/view/menu-237/0704155593011805.htm Iran's non-oil export up to dlrs 16.3b] retrieved 23 January 2008] The total volume of imports to Iran rose by 189% from $13.7 billion in 2000 to an estimated $39.7 billion in 2005. [ [http://www.payvand.com/news/06/may/1046.html The Cost of Economic Sanctions on Major Exporters to Iran] Retrieved 23 January 2008]

Iran's major commercial partners are China, Germany, South Korea, Japan, France, Russia and Italy. From 1950 until 1978, the United States was Iran's foremost economic and military partner; thus participating greatly in the modernization of its infrastructure and industry. After the Iranian Revolution in 1979 though, the United States ended its economic and diplomatic ties, banned Iranian oil imports and froze $12 billion of its assets. In 1996, the U.S. Government passed the "Iran and Libya Sanctions Act (ILSA)" which prohibits U.S. (and non-U.S. companies) from investing and trading with Iran for more than $20 million annually, [ [http://fpc.state.gov/documents/organization/23591.pdf] Retrieved 23 January 2008] with the exception, since 2000, for items like pharmaceuticals, medical equipment, caviar and Persian rugs.

Since the mid 90's, Iran has increased its economic cooperation with other developing countries in "south-south integration" including Syria, India, China, South Africa, Cuba and Venezuela. Iran is expanding its trade ties with Turkey and Pakistan and shares with its partners the common objective for the creation of a single economic market in West and Central Asia called ECO.

Since 2003, Iran has increasingly invested in the economy and reconstruction of its neighboring countries like in Iraq and Afghanistan. In Dubai, UAE, it is estimated that Iranian expatriates are handling over 20% of its domestic economy with an equal proportion of its population. [ [http://iran-daily.com/1384/2481/html/economy.htm Iran Daily - Domestic Economy (Islamic WTO proposed)] Retrieved 23 January 2008] [ [http://iran-daily.com/1385/2528/html/economy.htm In 2005: Import Bill From Dubai $28.7b] retrieved 23 January 2008] Money is invested in the local real estate market and import-export businesses, collectively known as the "Bazaar", and geared towards providing Iran and other countries with the demanded consumer goods. In 2006, the combined net worth of the Iranian citizens abroad was about 1.3 trillion dollars. [ [http://www.iran-daily.com/1385/2781/html/economy.htm Expats Worth $1.3 Trillion] Retrieved 23 January 2008]

Since 2006, 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 companies linked to this program, thus furthering its economic isolation on the international scene.

Foreign Direct Investment

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. 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. [ [http://www.payvand.com/news/07/may/1313.html Iran attracted $24.3 billion foreign capital in 16 years] Retrieved 23 January 2008] Foreign transactions with Iran amounted to $150 billion between 2000 and 2007 worth of major contracts including private and government lines of credit. [ [http://www.aei.org/publications/pubID.26147/pub_detail.asp AEI - Global Investment in Iran] Retrieved 23 January 2008] In 2007, Iran has $62 billion worth of assets abroad. [ [http://www.mehrnews.ir/en/NewsDetail.aspx?NewsID=510378] Retrieved 23 January 2008] Iranian reserves in foreign banks in mid-February 2008 reached over $81 billion. [ [http://www.payvand.com/news/08/may/1112.html Mehr News Agency: Iran's reserves in foreign banks increases 36% to $81B] Retrieved May 12, 2008]

The most active investors have been Germans, Norwegian, British, French, Chinese, Japanese, Russian, South Korean, Swedish, and Swiss companies. The sectors involved have been in electronics, telecom, utilities, energy, construction, transportation, clothing, food and beverages. [ [http://lcweb2.loc.gov/frd/cs/profiles/Iran.pdf COUNTRY PROFILE: IRANMarch 2006] Retrieved 23 January 2008]

Iran and the World Trade Organization

Iran has 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. [ [http://iran-daily.com/1386/2817/html/focus.htm WTO Membership] Retrieved 23 January 2008]

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.

Further reading

* [http://iran-daily.com/1387/3157/html/index.htm Gov’t Set to Change Economic Course] (2008)
* [http://iran-daily.com/1387/3159/html/economy.htm New Plan Focus On Subsidies] (2008)
* [http://www.scoop.co.nz/stories/HL0801/S00238.htm Iran and its Economy] (2008)
* [http://www.albawaba.com/en/countries/UAE/214290 Iran – Ambitious modernization program for the Tehran Stock Exchange] (2007)
* [http://www.payvand.com/news/07/jan/1295.html Ahmadinejad's Achilles Heel: The Iranian Economy] (2007)

ee also

*Labour and tax laws in Iran
*List of Major Iranian Companies
*Iranian Calendar
*Government of Iran - With links to ministries and affiliated agencies
*wikitravel|Iran (for business etiquette and tourism)
*Mehdi Sahraian
*NIOC Recent Discoveries
**Azadegan
**Yadavaran

References

External links

* [http://www.economist.com/Countries/Iran/index.cfm The Economist - Iran] (Forecast, factsheet, economic data & structure)
* [http://www.eia.doe.gov/emeu/cabs/Iran/Background.html US Department of Energy - Economy of Iran] (oil, gas, electricity, data, profile, analysis, weblinks/resources)
* [http://www.austrade.gov.au/default.aspx?ArticleID=4686#Doing%20business Australian Government - Doing Business in Iran] - many practical information and sector specific reports, with useful websites and resources
* [http://www.mefa.gov.ir/ Ministry of Economic and Finance Affairs of Iran] - Information on the Foreign Investment Promotion and Protection Act (FIPPA) and Taxes
* [http://en.freezones.ir/ High Council of Iran Free Trade-Industrial Zone] - Official site with information on Iran's Free Trade Zones
* [http://www.aei.org/IranInteractive/ Global Investment in Iran with Interactive maps] - American Enterprise Institute (list of major international companies investing in Iran broken down by their nationality, sector of activity and amount invested)
* [http://news.bbc.co.uk/2/shared/spl/hi/middle_east/06/iran_maps/html/default.stm Iran in Maps] - BBC (population, land, infrastructure)
* [http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/IRANEXTN/0,,menuPK:312982~pagePK:141132~piPK:141109~theSitePK:312943,00.html World Bank Statistics - Iran] - Social and economic indicators for Iran