IranÕs economy has performed well in aggregate terms, with a moderate rate of growth in the last fifteen years, including healthy GDP and per capita growth in investment.

For some observers it is inefficient, bloated and over-reliant on oil revenues, for others it has the potential to become a leading light in the Middle East. There is truth in both points of view.
Iran’s undoubted strength is its reserves of natural resources, most notably oil and gas. Iran holds about 10 percent of the world’s crude oil reserves and is second only to Russia in terms of natural gas.

Road to Prosperity
The second-largest producer in the Organization of Petroleum Exporting Countries, Iran is currently flourishing along on a wave of record crude revenues.
Major customers for Iranian oil and gas include the booming economies of China and India, as well as Japan, South Korea, Taiwan and Europe.
The extra oil cash will help underpin increased state spending and drive Iran’s economic expansion--the International Monetary Fund estimates growth at 6 percent during this year and the next.
However, Iran is not just a one trick pony and, having avoided the conflicts that hammered neighbouring Afghanistan and Iraq, it is well-placed to prosper.
The state is looking to diversify into new areas and has invested in developing the nation’s petrochemicals businesses so that Iran can manufacture more profitable crude oil derivatives.
Industry in Iran, which includes large state-run textile and automotive companies, accounts for about 41 percent of annual gross domestic product (GDP).
Service industries, meanwhile, generate 49 percent of GDP, with agriculture making up the remaining 10 percent.
As well as oil and gas, exports include pistachio nuts, fruit and carpets, and are worth close to $39 billion a year. Foreign interest in Iran is increasing as its political cold shoulder begins to thaw; Switzerland has just signed a multi-billion dollar deal to import Iranian gas.

Few and Far
Despite all the positives, Iran has significant problems that oil revenues are likely only to paper over and are unlikely to solve, analysts said.
Even with the efforts to diversify, Iran’s fortunes remain closely tied to the price of oil.
Huge state subsidies mean that the country’s firms are inefficient and unlikely to be able to withstand foreign competition should Iran decide to open up its domestic markets and also join the World Trade Organization.
Small and medium-sized businesses, meanwhile, are few and far between making it difficult to stabilize the employment rate. The youthfulness of Iran’s population of 70.7 million makes matters more serious; one out of every two of Iranians is under the age of 25.
With so many young people looking for work, Iran must create almost 1 million new jobs every year just for its unemployment rate to remain at its present level.
According to the latest USIPeace Briefing, Iran’s economy has performed well in aggregate terms, with a moderate rate of growth in the last fifteen years, including healthy GDP and per capita growth in investment. In the last three years, Iran’s actual growth rate has averaged 5.8 percent.
In this respect, Professor Rodney Wilson at Durham University’s Center for Middle East and Islamic Studies told BBC that it is less a link between political reform and growth and more the fact that the economy might have been ignored to some extent.
“Political reform is not as crucial as it might seem,“ Wilson said. “The conservatives are not against economic growth but against westernization.“
To sum up, Iran is experiencing growth in the energy and non-energy areas of its economy. However, the government has not taken the steps needed to diversify its economy by producing consumable goods for export.
Iran has the infrastructure and educated population it needs to succeed, but it must implement economic reforms. This includes increasing transparency and easing pressure on the private sectors.

About 33 percent of the banking facilities have been allocated for investment in the industries and mining sector, said director general of the Industries and Mines Ministry’s Planning Department.
Mohammad Kalishmi noted that reduction of bank lending rates from 12 to 10 percent has a positive impact on the development of investment in the sector, IRIB reported.
Investment in the industries and mines sector looks promising, and the ministry will take constructive measures in this respect, he said.
Kalishmi noted that making new investments, implementing incomplete projects, renovating and restructuring industrial units and increasing the funds of factories based on regional development plans are among the future programs of the ministry.
Based on Vision 2025 Plan, the Fourth Five-Year Economic Development Plan (2005-2010) and strategic development document, due attention has been paid to making industrial investment target-oriented. Comparative advantage of each province have been studied in compiling the general policies for balancing investment in different parts of the country.
He said that the ministry has regulated the import tariff on raw materials to help industrial units continue operations and increase output.

About 80 percent of the shares of Telecommunications Company of Iran (TCI) will be sold to the private sector by March 2009, said TCI managing director.
Saber Faizi added that the remaining 20 percent would be maintained by the government, according to IRIB.
Regarding the announcement of Iran’s Privatization Organization on handing over five percent of shares of TCI by July 21, he said that TCI is not in charge of determining the timing of privatization. “It operates as per guidelines set by Iran’s Privatization Organization,“ he underlined.
TCI said that several major foreign telecommunication firms have expressed interest in buying its shares.
“Several foreign companies are studying the details of Telecommunications Company of Iran and want to obtain further information on the types of telecommunication equipment TCI is using (to provide coverage) in villages,“ said Faizi.
TCI, which was established in 1971, was listed in the Tehran Stock Exchange last March.
Faizi says he is confident that the shares of TCI will be well received by foreign firms, adding that Iran’s budget is dependent to a considerable extent on the sale of publicly traded companies.

The new Fiat factory is located in Saveh and will have an advanced assembly line and paint shop from which its first model Siena will be manufactured.

The Fiat Group has announced that CKD assembly of Siena sedan will begin in Iran with parts to be sourced from the Tofas plant in Bursa, Turkey.
After a long delay since an agreement was signed with Pars Industrial Development Foundation (PIDF) three years ago, it was announced that initial production of Siena (sedan) will commence in Iran this autumn.
It is to be the first of four Fiat models based on the 178 platform set to go into production. Initially the Siena will be assembled locally from CKD kits shipped to Iran from the Tofas factory.
The original agreement with PIDF was signed by then Fiat Auto boss Herbert Demel in 2005, and called for a raft of Fiat passenger cars and light commercial vehicle models to be built in Iran, with the country scheduled to become Fiat’s global hub for CNG powered vehicles.
PIDF was set up in 2003 in Tehran with the target of becoming sole Fiat agent in the country for producing and selling a number of models both domestically and for export.
Initial annual production will be targeted at 50,000 units and these cars will be sold through PIDF’s Top Co. division. Ambitious plans aim to exceed annual output of 250,000 units with in next two years.
Sadeq Bairami, managing director of PIDF told Fars News Agency early this week that production of the Siena would commence in the autumn and that plans to build the full range of models based on the 178 ’World Car’ platform were in the pipeline, with the Palio (hatchback), Palio Weekend (estate) and Strada (pickup) set to follow. The Fiat Idea is also set to join the line-up.
However, it is the Siena that will start the ball rolling in Iran. It will be well-suited for the local market, with features including ABS brake system, driver and passenger front airbags, hydraulic wheel drive, anti-theft alarm, lateral window and mirror, rear seatbelts, trip computer, remote control opening for car’s trunk and petrol tank, lateral door protective bars, driver’s seat regulation system and CD player.
Fiat Group is an Italian automobile manufacturer, engine manufacturer, financial and industrial group based in Turin in northern Italy.
Founded in 1899 by a group of investors, the company’s name FIAT is an acronym for Fabbrica Italiana Automobili Torino (Italian Automobile Factory of Turin), though it also means ’let there be’ in Latin.
Fiat based cars are constructed worldwide with the largest concern outside Italy being in Brazil. It also has factories in Argentina and Poland. Fiat has a long history of licensing products to other countries irrespective of local political or cultural persuasion. Joint venture operations are conducted in France, Turkey, Egypt, South Africa, India and China.
The group’s activities were initially focused on the industrial production of cars, industrial and agricultural vehicles.
Over time it has diversified into many other fields, and the group now has activities in a wide range of sectors in industry and financial services.
It also has significant worldwide operations, operating in 61 countries with 1,063 companies employing over 223,000 people, 111,000 of whom are outside Italy.
The new Fiat factory in Iran is located in Saveh, Markazi province and will have an advanced assembly line and paint shop from which the first model of Fiat (Siena), equipped with a 77 bhp 1.4-liter, 4-cyl engine compliant with Euro 4 regulations, will be manufactured. An automatic gearbox option will also be available.

Trade between Iran and Turkey stood at $3.95 billion in the first five months of 2008, up 28.81 percent compared to the figure for the corresponding period in 2007.
According to IRNA, the value of transactions reached $1.15 billion in May while the figure for the same month last year was $662.18 million.
Turkish exports to Iran during the period were valued at $256.85 million, 6.15 percent higher than the figure for May 2007.
Meanwhile, a gas pipeline will be constructed between Miandoab and Bazargan in West Azerbaijan province, announced deputy oil minister and managing director of National Iranian Gas Company, Seyyed Reza Kasaeizadeh.
He said that the 56-inch pipeline, which will facilitate gas export to Turkey, will extend for 420 km.
Kasaeizadeh referred to increasing the gas pressure in East and West Azerbaijan provinces as another objective of the project, adding, “We are trying to organize tenders and select the contractor in the near future.“
He hoped that Gas Engineering and Development Company will create conditions for holding the tender soon.
The 2,577-kilometer Iran-Turkey natural gas pipeline runs from Tabriz in northwest Iran to Ankara in Turkey. The pipeline was commissioned on July 26, 2001.

Over 100,000 workers from Tehran province have been referred to cooperative administrations to take possession of land under the government’s plan to lease land for 99 years to housing cooperatives, said deputy head of the provincial Labor Department.
Saeed Qovvati explained that about 80,317 workers from Tehran, Shemiranat, Firouzkooh, Damavand, Pakdasht, Varamin and Eslamshahr have been introduced by 750 labor housing cooperatives, ISNA reported.
In addition, close to 22,555 workers from Karaj, Savojbolagh, Shahriar, Nazarabad and Robat Karim have been introduced by 161 cooperatives to provincial cooperative administrations. In total, about 64,850 workers were eligible for the 99-year land lease plan, the official underlined.
About 43,967 workers have been provided with land in Parand and Hashtgerd towns near Tehran, Qovvati pointed out. Married workers will be entitled to receive land provided they have not used any facilities granted by the state until now, he stated.
As per agreement the housing units should be ready by March.
On the costs to the workers, he said that initially they should pay 10 million rials for developing the land. Then, they have to repay the 140-million-rial loan in installments.

Tax evasion rate currently stands at between 20 and 30 percent and this figure will decline with the implementation of the economic reform plan proposed by the government, declared head of the State Taxation Organization.
Ali-Akbar Arab-Mazar said that amending the taxation system is one of the key elements of the government’s plan, reported IRNA.
The official added that 35 percent of the general budget for the year to March 2009 should come from tax revenues.
Excluding tax revenues earned by Iran’s Customs Administration, Arab-Mazar said that the total tax revenues have been estimated 165 trillion rials in the year to March 2009 which, if materialized, will show a 19-percent growth compared to the figure for the previous year.
The government considers tax as an important source of revenue and a mechanism for implementing economic policies and boosting development. Moreover, policymakers amend tax laws to meet the exigencies of time and reform the economy.
Value-added tax (VAT) bill will be implemented from September 22, he said, adding that with the implementation of the plan, taxes will also be levied on brokers and other profit-making activities.
Those involved in real estate and property business will also be required to pay tax on their earnings, he concluded.