How many new projects will there be for Khatami to inaugurate?

Mohammad Reza Gerami  Researcher on Industrial Engineering, strategic management and political economy. He also managed a number of Industrial companies in Iran in the past ten years. The Iranian elections and its economic ramifications. Comments on this article

The 6^th post revolution parliamentary elections in Iran will undoubtedly have a serious impact on the countries affairs.

In spite of the fact that almost 10 percent of the candidates names were crossed off the list for being considered as unqualified, the reality is that the balance of political forces in Iran is such that cheating in the election is practically impossible and thus making this election a healthy, a rare and an exceptional one in the contemporary Iran. It is vastly believed that the Iranian’s great participation at the coming elections will be unprecedented.

The experience of democracy in Iran is short and civil administrations in the state are ineffective and incomplete. This is while the Iranian society, in the process of its transformation has continuously weakened its traditional independent social foundations.

Indeed, this election is a rehearsal of democracy for the Iranian nation in such a way that once it is preformed it cannot be reversed. The political and social reforms in Iran, which pave the ground for the economic reform, will mark a turning point during the election.

Also in the short run the numerous changes that take place when the election is over, will have profound effects on the country’s economy.

A woman changing Rials on the black market

The Iranian economy, within the past 5 years has sustained huge losses due to the lack of frankness and courage in setting middle term economic goals. People now have got used to assume some sort of a correction among popular and attractive slogans in the government announced programs even if they actually contradict one another. For instance: The slogans for “development” is seen with the slogan for “social Justice” to mean equal incomes, reduction of Inflation together with the improvement of unemployment, not being dependent on Oil income together with the increasing of subsidies– based on a fixed rate –, the necessity in investing in the agriculture and energy sector together with the support and protection of the government’s pricing regime and thus stabilizing the prices for these two sector’s products and finally the slogan for attracting foreign capitals and investments together with the prohibition of trading foreign currency in the unlawful free market.

Total one of the biggest recent foreign investors in Iran

The Iranian political economy is culturally accustomed to these inconsistencies that are due to the various political views among the country’s elites and also as a result of inadequate public awareness regarding the effects of political decisions on the nation’s economy.

Improving the countries economic situation in Iran demands structural changes which the government since 1995 hasn’t been able to make the relevant decision. Neither have other state establishments supported the government in this regard.

Election’s impact on the major factors involved in the adoption of an economic policy in Iran

The political economy in Iran faces such issues as: suspicions due to lack of transparency in the regime’s economic views – related to its ideology - , the impact of the Islamic republic’s foreign affairs and relations on the state’s economy particularly its relations with the west especially USA, the country’s political stability, security and justice, the ineffectiveness of the government and its bloated structure, the government’s vast meddling in the state’s economic affairs, the abandoned halfway implemented adjustment policies, privatization policies which are particularly deserted, subsidies and the government pricing policy with regard to basic and essential commodities, monopolies and those economic foundations which the government has no control over their activities. These dilemmas in the long term have deteriorated the conditions and obscured the social ties among economic productive groups. Hence they have caused management bodies and investors to feel unsafe and insecure.

A homeless woman and her child beg for money

Can the next parliament find some clear solutions for the present dilemmas?

In the view of the fact that the election is a means that clarifies the balance of power among various political forces and arranges and distributes power among various political groups, it will enhance the state’s political stability. Also it will cast light on the philosophical views influencing the economic policies. However, to predict its effect on other influential factors with respect to the economic policy, depends on the “Clout” and the majority in the next parliament.

The political parties may be categorized into 4 groups on their economic views.

1.      The traditional right wing

This groups economic views are expressed through a group called: “The Organization of United Group” (Sazmane Hai-at-e Mo-a-talifeh). After the revolution which this group has its roots in Iran’s traditional “Bazaar” is more inclined towards enjoying the economic rent available through the government economy and less interested in the competitive private sector’s activities.

2.      The modern right wing

The political group called “Kargozaran” follows Rasfanjani’s viewpoints and believes in capitalism under the control of circles of power in the state. Accordingly, this group or party may be considered as the Modern Right Wing. The party will press for economic adjustments and full privatization provided it gains the majority of seats in the parliament. Furthermore, it will also expand the state’s relations with the World Bank. In any case, its cooperation with Khatami’s cabinet will be considerable as well.

$50 million loan agreement with Korea

3.      The traditional left wing

This wing includes “Majmae Rohanion Mobarez”, “Mojahedin Enghelab” and “Tahkime Vahdat”. Considering that some political figures such as Behzad Nabavi will represent this wing in the upcoming elections, without any doubt this wing will enjoy a great powerful position in the Parliament. The wing has numerous important characteristic one of which is its capability in organizing and creating official and unofficial institutions. It is socialistic in its economic views and thus is very cautious in dealing with capitalism. The members of this wing in the Parliament will stress more on supporting the government and helping it to become more efficient rather than stressing on privatization and free market. They are not optimistic about the policies of economic adjustments. They believe that although expansion of government’s economic responsibilities will not reduce its dependencies on oil revenues, the economic revolutionary foundations and monopolies will be better controlled.

4.      The modern left wing

The wing is composed of a wide range of small and large groups, which have come into existence during Khatami’s presidency. These will call for the development and expansion of civil institutes and bid for all out reforms. The most popular title they are known by is “Hezebe Mosharekat” (Cooperation Party). However, these new groups are even much younger than the mere concept of reformism in the country’s political arena. Thus one cannot accurately predict their attitude and behavior towards economic policies.

What may be foreseen, is that considering that the decisive majority of independent candidates who are going to be voted in through the younger generation, supports the modern left wing and due to that fact that the “Hezbe Mosharekat” is in dire need of becoming popular in order to enhance the process of political reform in the state and also in view of the fact that the public opinion is not generally familiar with the issues of economic adjustment and it is more concerned with a just public welfare, the Modern Left Wing will share with the traditional Left Wing the same economic views: More responsibilities assigned to the government to support justice and socialism and struggle more and more for social ideals…, just as majority of Iranians still follow such lines of thoughts.

So, it seems that the “Kargozaran” will be unaccompanied in their pursuit of adjustment policy and economic development in the next parliament. They also won’t reach any effective mutual understanding with the majority of the Parliament members. Although Rafsanjani’s effective presence in the Parliament provides them with the greatest power of political maneuver, implementing a sweeping adjustment policy requires a force much greater than that. As a result, Iran’s sources of foreign exchange will continue to be limited to the state’s oil, gas and petrochemical income earned through exports and Iran’s development will still be dependent upon oil prices. Although the government’s efficiency will be enhanced and the states taxing system will target undetected incomes of the rich.

Iran's revenues still confined to oil and gas

Iran’s economy with a GDP of 350 billion dollars-based on equal purchasing power- and yearly per capita income of 5000 dollars, will continue to be comprised of central planning, state ownership of oil revenues and large business firms and agencies, traditional farming and smaller business firms under the control of private sectors. The government responsibilities will be reduced a bit. There will be more subsidies allocated to cooperatives. The third development plan will be implemented with less stress on its major points.

An optimistic foreseeing is that-providing oil prices continue an upward trend- the economic improvement will hold on average of 3.5 percent at the highest and there will be a maximum of 250 thousand new jobs. Thus the 6^th term of parliament will leave the issue of unemployment - which will inevitably appear as a social crisis - for the seventh term of the parliament to resolve.

Mohammad Reza Gerami is a science member of the weekly publication Gostareshe San`at (Industrial Expansion) governed by the Society of Expansion and Development of Iranian Industries containing articles on Iranian Economy, and Industrial Management.

He has researched and studied Industrial Engineering, Strategic Management and Political Economy. He also managed a number of Industrial companies in Iran in the past ten years.

He is currently researching at Qom and the subject of his research interest is Islamic Commercial Law.

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