Positive developments are seen in the private sector and the stock market.

The annual report of Iran’s Ministry of Economy was published recently.
Positive developments are seen in the private sector and improvement in stock market, reduction of bank lending rates-making it almost equal to standard world rates-stabilization of unemployment, reduction of inflation rate, amendments in budget planning system and administration of social justice, according to Mehr News Agency.
The government has prioritized economic growth, administration of social justice and creating regional balance aimed to reaching sustainable development. Excerpts of measures in this direction are as follows:

Private Sector
Issues related to private sector which the ministry is obliged to oversee are devising bills associated with the executive bill of implementing Article 44 in the Constitution, ceding public ownership shares to non-governmental sector and privatization bill.
Given the current political and economic developments, priority has been given to reduce state monopoly and encourage state regulation and supervision instead and amend policies of Article 44.
The Supreme Leader Ayatollah Seyyed Ali Khamenei urged for a change in governing duties and issued a directive entitled general policies of Article 44 in the Constitution of Islamic Republic of Iran in line with the following objectives.
- Speeding up economic development and growth process
- Broadening people’s ownership to administer social justice
- Increasing productivity of economic agencies plus efficiency of taskforce and technology
- Boosting competitiveness of economy
- Reducing financial burdens, state management and monopoly over economic activities
- Stabilizing employment by creating new jobs
- Encouraging people to save, invest and improving household income
The directive is based on five main axes namely general policies for: non-governmental sector development and preventing state-enlargement; cooperative sector; development of private sector through ceding shares of state-owned economic agencies to private businesses-as top priority in Article 44-and privatizing and avoiding monopoly.
The bill concerning implementation of the policies were devised and submitted to government by the ministry. After ratification the bill was sent before parliament and is awaiting final approval.
Endorsement of the bill will make it possible to privatize state-owned companies paving the way for development and participation of private businesses and cooperatives. Moreover, the legal bill on privatization has been devised aimed to pave the way for further privatization of state-owned entities.

Stock Market
Action taken in this sector include implementing the new law on bond market; ratification of articles of association for Bond Market Company; establishment and appointment of a managing director for the company; devising organizational charter of the Bourse Organization; devising articles of association for the Commodities Market companies; paving the way for establishment of Iran Oil Bourse; setting the fourth Stock Market Index to transfer unprofitable or poorly performing companies to protect interests of share holders in stock and bond markets.

Curbing Inflation
Last year measures were taken to curb inflation and boost purchasing power of general public by following the plan to stabilize general prices of goods and services; preventing further finance borrowing from the Central Bank of Iran (CBI); regulating and improving government’s financial practices and reducing inflation rate by 2.7 percent compared to the previous year.
Other steps taken until October 2006 were implementing the same policies that helped reduce inflationary effects of inflation rate to about 11.5 percent. This is similar to the average rate predicted in the Fourth Five-Year Development Plan (2005-10).

Bank Lending Rates
This year’s bank lending rates (started March 21, 2006) were reduced by 2 percent to stay at 14 percent in state-owned banks (It was 10-11.5 percent in agricultural sector).Likewise rates in private banks and non-governmental financial institutes reduced by 10 percent and stayed at around 17 percent. The reduction tapered current expenditures as lending rates are usually included in final costs of production for producers.

Reducing Unemployment
The unemployment rate in spring 2006 declined by one percent compared to the same period the previous year. The government supported investors, especially those in less developed regions to reduce unemployment and remove barriers in way of production.
In this regard, entrepreneurship offices were established in many ministries including strategies to generate new jobs and investment security through development and organizations of small and medium-sized economic agencies with quick returns.
The government imposed strict supervision over performance of agent banks (10 agent banks) regarding offering credit facilities to qualified applicants.
Since implementation of the directive (March 20, 2006ÐSeptember 21, 2006) some 305,750 projects were introduced to agent banks and each agreement predicted creation of 2.6 jobs for jobseekers on average.

Unemployment rate in spring 2006 declined by one percent compared to the same period the previous year.

Budget Writing System
In this year’s budget the initial process concerned devising the budget in an operational method or writing based on final cost of activities. The last process will be pursued in the forthcoming annual budget.

Higher Tax Income Share
Action taken in this direction over the past few years in the form of amending direct tax law and devising duties collection law have positively impacted the performance of taxation tools.
By boosting income tax, share funds have been secured for government expenditure.
For instance, the income tax share to secure funds increased to 47 percent compared to 41 percent of the previous year.
Income tax during the first nine months of the current year also increased around 31 percent compared to the same period a year earlier.

Fair Distribution of Wealth
Distributing part of state-owned shares as justice shares among low-income strata are among other measures the government adopted.
Last year some 1.278 billion shares worth 3425 billion rials were distributed among the low-income strata in four under-developed provinces of Ilam, South Khorasan, Sistan-Baluchestan and Kohkiloyeh-Boyerahamad.
The Leader’s directive saw the government quicken process of selling justice shares and till date some 23040 billion rials worth of state-owned shares have been sold to 4.608 million people.
Other steps have been to raise minimum wages for pensioners, offering more health insurance covers for people in rural areas, allocating around 20 percent of direct subsidies to low-income strata in the 2007 budget under the document of reducing poverty and making state subsidies goal-oriented, establishing Mehr Imam Reza (AS) Fund to offer financial assistance for youth planning to marry, allocate 2 percent of oil and exports income to oil and gas regions, including deprived areas, offering housing and renting loans (100 and 30 million rials respectively) and ratifying plans to offer special credits to developers building houses for rent.

State Decentralization
In a bid to decentralize and create regional balance, the government adopted measures such as the development document according to general policies stated in the Fourth Plan. The commencement of the first year of the Plan which began last year, saw Cabinet Ministers reviewing and ratifying the document for 30 provinces.
Other measures include transfer of state-owned companies to cities where their operations are based, appointing governor generals to administer certain tasks, merging township and provincial management and planning departments, tasking provinces to manage part of banking duties and giving responsibilities to many provinces to implement development plans.

Foreign Investment
Economic reforms and legal amendments in recent years have helped the country to absorb huge volume of foreign direct investment. The government devised and ratified the plan to encourage and support foreign investors. It issued and submitted executive articles of association to affiliated organizations.
The law aims to update existing legal framework to encourage and facilitate foreign investments in development plans and economic activities.
According to national accounts, the government ratified the plan to absorb $4.3 billion in foreign direct investment last year. These include 61 projects of which 60 are provincial and one national. One project is in the agricultural sector, two in mining, 36 in industry, 11 in building construction, three in transport and telecommunications and eight in the services sectors.