Industrial development initiatives aim to increase competitiveness for generating more wealth, creating more jobs and promoting the country as an attractive place to invest and do business. They assist individuals, firms and industries to identify opportunities and develop the capability to utilize these opportunities.
Industrial growth is a key component of sustainable development and is complemented by a range of policies related to human resources, regulation of business, provision of infrastructure and the viable use of natural resources.
Industrial development does not work in isolation. The government can play a key role in overcoming difficulties associated with undertaking industrial activities, penetrating new markets and overcoming trade obstacles.
They can do this by providing access to resources (information, expertise and capital), building capability, creating a more responsive public sector and developing effective partnerships between private and public sectors, industrial organizations and individual enterprises.
Minister of Industries Es'haq Jahangiri is one of the most seasoned members of President Mohammad Khatami's economic team. His successful track record is evident from the double-digit growth registered in the industrial sector over the past eight years.
According to Jahangiri, the highlight of his success is in letting the private sector take over major projects. "The call for revising Article 44 of the Constitution is very clear: there should not be any limitation on the private sector's role in and contribution to the economy," said Jahangiri in a recent interview with the Persian daily Iran. Excerpts follow:
You had earlier said that the achievements of the Ministry of Industries and Mines and the industrial sector have been beyond expectation. Can you verify this with data?
At present, up to 70,000 industrial units are operational and 13,000 under construction. Only last year (March 2004-5), the ministry issued permits for the construction of 30,000 units.
Gross domestic product grew by 4.8 percent last year compared with its previous year, while the industrial and mining sectors registered 12 and 8.8 percent growth respectively.
From a general perspective, GDP increased by 5.4 percent during the Third Five-Year Economic Development Plan (2000-05), lower than the 11.1 and 5.4 percent growth recorded in the industrial and mining sectors respectively.
During this period, the industrial sector generated nearly 800,000 jobs more than the 615,000 predicted in the Third Plan.

What is the appropriate figure with respect to the sector's share in gross domestic product?
In industrial countries, the figure is as high as 25 percent. The 50-60 percent contribution by the services sector mostly relates to ancillary industrial activities. In other words, the services sector does not resemble what we have here.
Another primary index of industrial growth, attributed to Khatami's presidency, is funds allocated to industrial projects through the Forex Reserve Fund.
A total of $3.5 billion were allocated to the private sector under financial deals concluded during 1989-2001. That figure amounted to more than $6 billion in the past three years since the fund was set up.

At present, up to 70,000 industrial units are operational and 13,000 under construction.

What has been the state sector's share?
That figure also exceeded $6 billion, including funds assigned to major steel, petrochemical and copper projects.
Now let me give more details of the industrial gains. Industrial exports increased from $2.5 billion in the first year of the Third Plan to $5 billion last year. The share of industrial as well as engineering and technical services exported in overall non-oil exports increased from 53 percent in 2000 to 72 percent last year.

How has the government performed with respect to industrial privatization?
To a large extent, there has been progress. For example, National Iranian Industrial Organization, formed through large-scale seizure of assets following the victory of the revolution, is now being dissolved because most of its affiliated factories have been sold to the private sector. There was a time when the organization ran hundreds of medium- and large-scale industrial units. The same holds true for the Bank Sanat va Madan that used to control many industrial factories.

Are you saying the bank no longer owns these shares?
Except for a few firms that supply raw materials for producing certain commodities. This necessitates that they remain under the control of the state sector.

Is Bank Sanat va Madan involved in a whole new set of activities?
Yes. For example, for the first time in its history, the bank is issuing LCs in national currency. Moreover, the bank is acting on financial and industrial recommendations to give priority to the most profitable schemes.
I can say with confidence that 90 percent of the government's privatization objectives pertain to the industrial sector.
A number of advisory councils have been formed to incorporate the views of the private sector in industrial decision-makings.

Do these councils have leverage in macro and micro policies?
Definitely. For example, when the Ministry of Economy and Finance planned to raise the foreign exchange rate, apart from relevant organizations, the same advisory councils had the most impact on preventing it.

The private sector experienced an unprecedented growth during Khatami's presidency, but it lacks capacity. Would a private entity be able to finance major projects like establishing a steel or auto-making factory?
The private sector in Iran was the victim of 'elimination' policy. After I took office, many contacted me and wanted the assets and properties confiscated after the revolution.
The atmosphere that dominated the early post-revolution years was unsympathetic toward investors. What worries investors most today is legal restrictions and unsafe political and economic conditions that could hamper their profitability.
Establishment of the Forex Reserve Fund has helped bolster private sector capabilities to a great extent. Still, the government controls much of the economy.
Through its macroeconomic plans, the government has announced its intention to increase the industrial sector's annual investment growth, from 4.8 percent during the 90s to an average of 9.7 percent in 2010.
To achieve this target, it is necessary that the government help attract foreign direct investments not only for utilizing international financial resources, but also for importing technology and promoting competitiveness and industrial exports.

Class division could pave the way for a wide range of socio-economic, political, and cultural problems.

At a time when politicians are engrossed in politicking and nothing is more imperative than joining the World Trade Organization, the United Nations report on the crisis of poverty in Iran is cause for serious concern.
The conservatives maintain that reformers prioritized political development and failed to resolve public issues, which led to widespread unemployment. The reformers likewise claim that the conservatives are taking advantage of the existing problems to woo the ordinary people and in the process are creating crises, which will ultimately lead to brain drain and capital flight from the country, says an article in Etemaad.
Amid all the political rivalries, poverty is rapidly spreading throughout the society and every year more people are coming under the poverty line. Economic division as a result of poverty is one of the main indices of underdevelopment that face the third world countries, including Iran. Class division could pave the way for a wide range of socio-economic, political, and cultural problems and even challenge and undermine the efficiency of the system.
While many officials take social justice into account when devising economic plans, however, such consensus is not enough per se. The other side of the coin is that they are unable to reach consensus in terms of methods employed for achieving social justice as well as its relation with the objectives of national economic development schemes.
The truth is that officials acknowledge that the previous programs such as supportive schemes including costly subsidies are no longer justified nor workable in view of their social ineffectiveness.
The country is desperate for a new and efficient national development scheme.
The latest World Bank report on Iran concerning poverty and distribution of income suggests that 49.9 percent of national consumption and income belongs to the high-income households, which comprise 20 percent of the total population.
However, the report and other similar ones are completely unsubstantiated. This is because apart from certain legal entities, no one has access to these specific figures.