Annual budgets have to get rid of their present reliance on oil revenues.

The former head of the Management and Planning Organization (MPO) has called for changes in the government and budgeting systems, which are heavily reliant on oil revenues.
Mohammad Sattarifar, who now teaches economics at the University of Allameh Tabatabaei, believes that the only way by which the government can reduce the adverse consequences of its reliance on oil revenues is to make optimum use of oil money.
He told ISNA that while budgeting is a 55-year-old practice in Iran, the officialdom’s outlook on its modus operandi has to be revised.
“Annual budgets have to get rid of their present reliance on oil revenues,“ he said.
Budget is a summary of intended expenditures along with proposals on how to meet them. The president submits the annual budget to parliament proposing objectives, executive approaches, resources and ways of its distribution among various sectors in the four corners of the country.
“Iran’s budgeting experience of over five decades has brought it valuable technical and executive knowledge as well as expertise in this respect,“ he said, pointing out that the MPO, state organizations and parliament are in charge of devising annual budgets in Iran.
He said the Third Five-Year Development Plan (2000-2005) took positive steps in rectifying the budgeting system and making it more transparent, stressing that the effectiveness of budget projections were also taken into consideration in this process.

Downsizing
According to the budget reform plan, the “ government must design a budget which enables it to downsize as much as possible by handing over some of its responsibilities to private sector companies,“ he said.
The former MPO chief further noted that even if the government does not intend to hand over the ownership of some of its affiliates, it can entrust the costly task of running them to private entities.
A distinction has to be made between ownership and management tasks, he said, adding that the government has also been advised to economize on its current budget.
He said the third plan also took account of the imbalance between current and development budgets.
“Rectifying the poor share of tax revenues in revenue projections by annual budgets was also given high attention so as to help tax revenues meet a considerable portion of the annual revenues,“ he said, adding that the current budget needs to be met through tax revenues as far as possible.

New Mechanism
Experts predict that Iran’s oil revenues will reach $45 billion in the year to March 2007. How much of this should be spent on the government’s current expenses is a matter to be decided by parliamentarians.
At a time when most experts say oil has to be omitted from most development projections, Sattari-Far has come up with a new mechanism; replacing oil-dependency of the government and budgeting systems with an oil-based economy.
“The authorities of the oil-reliant government and the oil-based budgeting system have to be reduced,“ he said.
“By oil-based economy I mean that economic development needs to depend on oil as was projected by Article 90 of the third plan to allocate 10.5-12 billion dollars of oil revenues for development projects,“ he said, adding that as per the article, the government could withdraw more from the Foreign Exchange Reserve Fund, which collects surplus oil revenues, at times of urgent need.
He said during the third plan, the government withdrew an average of $16 billion from the Foreign Exchange Reserve Fund on an annual basis.
The former MPO chief said while the forex fund’s deposits increased thanks to rising oil prices, the previous government managed to save significant amounts of money.

Eliminated
Sattari-Far believes that the elimination of some of the government’s main sources of income served as a blow to the third plan.
“It was initially planned in 2003 to hike the parity rate of the national currency against the US dollar to 14,000 rials for each dollar, which was altered later,“ he said, adding that the government also spent a great deal of money on gasoline imports following the record-high fuel consumption in recent years.
Some sources of revenues were eliminated and some costs were added, whereas the objectives of the third plan remained in place and had to be realized, he said.
He further noted that the government had to withdraw several billions in hard currency to reduce the adverse consequences of this imbalance.
“One of the major problems of the third plan was that tax revenue projections did not ensure supply of the government’s current expenses,“ he said, noting that an effective annual budget is one that can meet current expenses from taxation.
He said in 2003 tax revenues accounted for only 50 trillion rials of the 140,000-trillion-rial budget.
The university lecturer stressed that the government needs to direct its efforts to bring about structural reforms in the budgeting system on the principles and objectives set by the Fourth Five-Year Development Plan (2005-10).
“The government also needs to downsize according to the fourth plan,“ he said.
He said there is a balance between resources and costs envisaged by the latest Plan.
According to the five-year plan, he said, the growth in gross domestic product (GDP) will reach eight percent, investment growth has been estimated to reach 12.2 percent, the population growth rate is expected to come below 1.4 percent and the growth in non-oil exports and liquidity and inflation rates will also hit 10.7, 20 and 9.9 percent, respectively.

Study Needed
The budget bill needs to be studied by parliamentarians. Some lawmakers have announced that the bill could undergo some fundamental changes.
Iraj Nadimi, rapporteur of Majlis Economic Commission, told ISNA that the Seventh Parliament will not sacrifice its objectives for those of the government when studying the budget bill for the year to March 2007, stressing that the MPs have made campaign pledges in their constituencies just as President Mahmoud Ahmadinejad did during the presidential election.
Lawmakers believe that meeting public demands should not be limited to short-term needs and current expenses, he said, adding that long-term plans are required to develop infrastructures and boost investment in development projects.
He said parliament reserves its right to make the final decision on the budget bill, pointing out that the executive apparatus can only draw up the bill and then wait and see what decision would be made by lawmakers.
“Parliament, as the main decision-making body, will not turn a blind eye to its obligations under overt and covert pressures,“ he said, adding that any decision on the budget bill will be within the framework of the Fourth Five-Year Development Plan (2005-2010) and the 20-Year Perspective.
He said there are two types of pledges made to the public either by the president or the parliamentarians. “The pledges can be amalgamated in some parts and dealt with separately in some others,“ he said, however, noting that only parliament can decide which needs to be addressed.
“The Majlis deputies feel accountable to the nation just as the government officials do, which means lawmakers will stick to their own views in most cases (regarding the budget bill),“ he said.

some of the goods produced in the country don't meet the required standards and many fake products continue to enter the market.

The Institute of Standards and Industrial Research of Iran is the sole organization in the country that can lawfully develop and designate official standards for products. It is also responsible for seeing their endorsement through the Council of Compulsory Standards.
The Institute needs at least 500 million rials in funds to implement its compulsory standards plan. However, the second phase of the plan, which covers 50 basic products, has already started across the country even though the institute has not received the funds.
Ali Asghar Tofiq, head of the institute told Persian daily Hamshahri that the current standards in Iran are in line with those in the world. For instance, Iran is an active member of some 128 international standard institutes and also holds an observer status in another 111. However, some of the goods produced in the country don’t meet the required standards and many fake products continue to enter the market. For the same reason, the institute has delayed issuing licenses to three production units, cancelled another 12, and confiscated 262 others. In addition, over the past two months, the institute has also identified some 38 cases in which production units have used fake standard logos on their products. These production units are no longer allowed to continue their activities.
About the chief aim of implementing the comprehensive plan of compulsory standards nationwide, he said the objective was to identify production units that break the law or use fake logos on their products. In addition, in line with protection of public health and social security, the plan was expected to have comprehensive supervision over production methods and distribution, as well as imports.
Within the framework of the new plan which will cover some 485 products by the end of the next year (March 20, 2007), those production units which fail to meet the standard requirements will be shut down and proprietors of those which continue to use fake standard logos will be sentenced to prison terms of up to ten years.
All these measures are meant to encourage or even force the existing production units, which were never supervised before, to improve product quality. Then again, execution of the comprehensive plan is also expected to improve the quality of products in general and facilitate the export of domestically produced goods in particular.
On how the institute will manage to secure the much needed funding to implement the comprehensive plan efficiently, Tofiq said, “We had hoped that the Management and Planning Organization would come to the rescue and allocate the necessary budget for the Institute of Standards and Industrial Research of Iran. However, despite the fact that we have already started implementing the second phase of the nationwide project, we have not received the funds.“
In conclusion he said that the first draft of the strategic comprehensive quality plan is also being devised, to improve the existing planning methods, design, performance, quality, and economic growth of production units. The comprehensive plan will be devised and implemented during the Fourth Five-Year Economic Plan (2005-2010) and will help secure a better place for the country in the world markets in terms of quality products.