Islamic Republic of Iran’s Economic Review and its development strategy – Shahidul Islam

Iran is one of the richest countries in the Middle East. Recently, it has been the most discussed topic because of the barbaric killing of the major general of the Islamic Revolutionary Guard Corps named Qaesm Soleimani. The country is known as an Islamic religious state after the Islamic revolution in 1979. Ayatollah Khomeini was the spiritual and religious leader and founder of the Islamic republic. Iran belongs to the second-largest economy (First: Saudi Arab) and the second-largest population after Egypt in Middle East countries and North Africa (MENA). The economy of Iran is described by the hydrocarbon sector, agriculture, service sector. Manufacturing and financial service are noticeable in presence. It places second in the world in natural gas reserves and fourth in proven crude oil reserves. Natural gas and oil are the driving factors of economic activity in Iran. Government revenues still rely on oil revenues to a great extent.
Iran’s economy can be reviewed by the following statistics. Iran’s Human Development Index (HDI) value for 2018 is 0.797. Between 1980 and 2018, Iran’s HDI values rise from 0.490 to 0.797. Under HDI value, UNDP categorizes 189 countries. Among them, Iran ranks 65 out of 189 countries. Life expectancy was 54.11 years in 1980 which being increased stood at 75.7 years (according to the World Health Organization, 2018). According to Human Development Report, between 1990 and 2018, Iran’s life expectancy at birth increased by 12.6 years, mean years of schooling increased by 5.8 years and expected years of schooling increased by 5.5 years and GNI per capita increased by 59.5 percent. Analyzing all these data and criteria, undoubtedly it can be stated that Iran as a country has been progressed remarkably.
Above mentioned the development progress of Iran is the overall scenario of the country. From social development, the situation is different. A study reveals that 33% of Iranian people (26.4) live below the poverty line. The state-run Eco Titr website reported in 2017 that 30 million Iranian populations live below the poverty line. A great number of these poor people are a threat to going ahead of a country. Apart from this, the unemployment rate is also so high. The unemployment rate was 12.6% in 2017. The rate decreasing slightly in 2018 stood at 12.1%. Male and female unemployment rates are 10.2 and 19.7 respectively which indicates the gender gap in the labor market. University graduates, Athletes, women, the youth, etc these categories of people are remarkable among unemployed. So, employment opportunities should be created to a greater extent.
Due to poverty, unemployment, and inflation, social discontentment and dissatisfaction are growing among populations. Sometimes, they are protesting against the Government. In 2009, reformist opposition raised accusations against re-elected populist president Mahmud Ahmadinejad. Secularists also protest against the forced hijab. Feminists raise their voices in favor of economic and political rights. Sometimes, the conflict between Shia and Sunni is noticeable in Iran. It should be noted that 99.4% of Iranian populations are Muslim. Among them, 90% of Iranian Muslims are Shia and approximately 10% are Sunni.
In the pre-Islamic revolution (the 1960s and 1970s), Iran followed a growth-oriented development strategy. But the strategy could not ensure justice and welfare for all categories of people; rather it was beneficial for rich people. It increased income inequality throughout the period. In order to remove these difficulties, the Islamic revolution has launched a new development plan which was committed to establishing more equity as well as justice in society. The Government introduced a new ingredient “Economic and Social welfare” in the development strategy. The Islamic revolution was not like a socialist revolution relating to the working class or the peasantry. It followed Islamic economic policies that could be called Islamic Economic Development Strategy. It eliminates the interest rate from the banking system. Surely, its populist and pro-poor approach was quite distinct from the Pahlavi regime.
It is a matter of fact that, during the period of the Iraq-Iran war (1980 to 1988), the Iranian economy was often devastated and occupied by a large number of economic problems such as inflation, the decline of oil revenues and stagnation of production. There had no development plan during the war. After the war, the Government took the First five-year Development Program (1989-1994). The fourth development plan (2005-2009) has deemed the important policies of Millennium Development Goals (MDGs) for achieving goals.
At present, the sixth five years Development Program (2017-21) is ongoing. This plan also has considered the significant policies of Sustainable Development Goals (SDGs). For example, the Islamic Republic of Iran took several policies on environmental issues. At the same time, Iran has avoided some targets, for instance, education targets based on gender equality. The sixth five-year plan consists of three components- the development of a resilient economy, the progress in science and technology, and the promotion of cultural excellence. The development plan targets an annual economic growth rate of 8 percent as well as it envisages to reform public enterprises, the financial and banking sector, and the distribution of oil revenues amongst the main priorities of Government. In particular, the economy, science and technology, and culture are emphasized in the plan.
Following development priorities, the Iranian Government concentrates on four indicators such as environment, health, resilient economy and drug control. Iran has a scarcity of water resources. The Government should resolve this problem keeping in mind the foreseeable future. It is necessary to mention here that, after the Iraq-Iran war, the economic policy has been a paradigm shift from income distribution to a free-market economy. IMF and the World Bank help the country to liberalize the trade and business and to initiate the foreign exchange market in addition to privatize the economy. Actually, the Iranian Government has adopted a comprehensive strategy including a market-based economy which is reflected in the 20-year vision document.
Since the post-revolution, America continues a conflict and war situation with Iran. Iran is one of those countries in which the shake of Arab spring could not impact. The USA recurrently imposed sanctions on Iran since the beginning of the Islamic revolution. It has been a great obstacle towards progress in Iran’s Economy. In 2015, President Hasan Ruhani decided in a contract with the USA and five other superpower countries. Iran promised to limit the Iranian nuclear program in exchange for the lifting of those sanctions. When the deal was implemented in the next year (2016) and withdrew the economic sanction, Iran’s economy bounced back. GDP stood at 12.3% according to the Central Bank of Iran. This overwhelming growth rate became plausible through the oil and gas industry. Whenever the US President Donald Trump reinstated sanctions on Iran in 2018, Iran’s GDP growth abruptly dropped to 3.5 percent. Cause, the sanction hinders US companies from trading with Iran. It bars not only US companies but also foreign firms and countries that are dealing with Iran. As a result, it hits the GDP growth of Iran. Thus, in order to overcome these problems as well as retain the development progress, the country should have a strong relationship with other countries. The authorities should concentrate on other key sectors such as agriculture, service sector, construction, and trade.

The author is a student of Institute of Social Welfare at University of Dhaka.