DATE=8/5/98
TYPE=BACKGROUND REPORT
NUMBER=5-41084
TITLE=KHATAMI ANNIVERSARY -- P 3: THE ECONOMY
BYLINE=ALI JALALI
DATELINE=WASHINGTON
CONTENT=
NOT VOICED:
INTRO: ON THE EVE OF HIS INAUGURATION ANNIVERSARY (AUG 3) THIS
WEEK, IRANIAN PRESIDENT MOHAMMAD KHATAMI ANNOUNCED THE OUTLINES
OF HIS LONG-AWAITED ECONOMIC RECOVERY PLAN. THE PROGRAM CALLS
FOR FUNDAMENTAL ECONOMIC REFORMS BUT PROVIDES LITTLE DETAILS. (IN
THIS THIRD OF A FOUR-PART SERIES), VOA ALI JALALI LOOKS AT
ECONOMIC CHALLENGES FACING IRAN UNDER KHATAMI.
TEXT: DECLINING OIL PRICES, HIGH INFLATION AND A LACK OF CAPITAL
HAVE REPORTEDLY TAKEN A HEAVY TOLL ON PEOPLE'S LIVING CONDITIONS
IN IRAN.
IN HIS ASSESSMENT OF THE ECONOMY, PRESIDENT KHATAMI LINKED THE
DEEPENING STAGNATION TO THE COUNTRY'S DEPENDENCE ON DECLINING OIL
REVENUES, SHORTAGE OF CAPITAL AND BUREAUCRATIC RESTRICTIONS ON
INVESTMENT. TO CORRECT THE SITUATION, HE PROPOSED SWEEPING
REFORMS, SUCH AS REDUCING GOVERNMENT MONOPOLIES ON GOODS AND
SERVICES, ATTRACTING FOREIGN INVESTMENT AND BOOSTING THE NON-OIL
INDUSTRY.
BUT WESTERN ANALYSTS ANALYSTS DOUBT THAT MR. KHATAMI, A
REFORM-MINDED CLERIC, WILL BE ABLE TO GET THE POLITICAL STRENGTH
NEEDED TO IMPLEMENT HIS AMBITIOUS PLAN. PROFESSOR YERVAND
ABRAHAMIAN OF BARUCH COLLEGE IN NEW YORK CITY SAYS THAT SINCE THE
PRESIDENT AND HIS TEAM DO NOT CONTROL THE COUNTRY'S ECONOMY,
HIS PROPOSED REFORMS WILL LIKELY HAVE LITTLE EFFECT.
// ABRAHAMIAN ACT //
ANY IDEAS OF REFORM THEY MAY HAVE, THEIR IMPLEMENTATIONS WILL BE
VERY MUCH LIMITED BY THE RESTRICTIONS THEY HAVE AND THEY HAVE TO
WORK WITHIN THOSE RESTRICTIONS. THEREFORE, WHATEVER HAPPENS, I
DON'T THINK IT COULD BE BLAMED ON THE KHATAMI ADMINISTRATION IF
THE ECONOMY DOES NOT DO WELL, BECAUSE BASICALLY THEY DON'T
CONTROL THE ECONOMY.
// END ACT //
CONSERVATIVE FORCES PLAY A KEY ROLE IN THE ECONOMY. THEY ARE
IMPORTANT FACTORS IN VIRTUALLY EVERY AREA OF THE COUNTRY'S
ECONOMIC ACTIVITY, INCLUDING TAX COLLECTION. THEY ALSO DOMINATE
THE PARLIAMENT AS WELL AS THE CUSTOMS SERVICE, AND ARE CLOSELY
TIED TO THE TRADITIONAL TRADE COMMUNITY (BAZAAR)
FURTHER, THE CONSERVATIVE CLERGY HAS VESTED INTERESTS IN
MAINTAINING THE HUGE STATE-AFFILIATED FOUNDATIONS (BONYADS) THAT
WERE SET UP AFTER THE 1979 ISLAMIC REVOLUTION. THE BONYADS
INCLUDE HUNDREDS OF LARGE NATIONALIZED ENTERPRISES AND MOSTLY
REMAIN OUTSIDE ALL REGULATORY CONTROL. THEY ARE CONSIDERED A
SOURCE OF CORPORATE POWER AND PERSONAL BENEFIT FOR THE RULING
CLERGY WHO RESIST PRIVATIZATION.
PROFESSOR SIAMAK SHUJAEI OF MANHATTAN COLLEGE IN NEW YORK CITY
SAYS THE CONSERVATIVE FORCES ARE A BASIC OBSTACLE TO ECONOMIC
REFORM -- AND RECOVERY.
// SHUJAEI ACT //
THE MAIN PROBLEM IN IRAN IS THE STRUCTURE OF THE ECONOMY AND THE
STRUCTURE OF THE ENTIRE SOCIETY. MR. KHATAMI IS FACED WITH A
CONSTITUTION WHICH IS THE ROADBLOCK TO ANY REAL STRUCTURAL REFORM
IN IRAN. ON TOP OF THAT, YOU HAVE A VERY STRONG GROUP OF
MERCHANTS IN THE BAZAAR WHO ARE DEALING WITH THE IRANIAN ECONOMY
AND A NEW GLOBAL ECONOMY IN THE SAME WAY THEY HAVE BEEN DEALING
WITH PERHAPS FOR CENTURIES. THEY ARE JUST USED TO HAVING ACCESS
TO CHEAP FOREIGN CURRENCY GENERATED BY THE OIL INDUSTRY IMPORTING
GOODS AND THEN SELLING (THE GOODS) WITH A MARK UP WHICH ARE SOME
TIMES FOUR, FIVE AND EVEN SIX HUNDRED PERCENT. AND THAT IS ONE
OF THE MAJOR STRUCTURAL CHALLENGES THAT MR. KHATAMI IS FACED
WITH.
// END ACT //
IRAN'S STRATEGY FOR ECONOMIC RECOVERY HAS BEEN ONE OF THE MOST
CONTENTIOUS ISSUES IN THE DEBATE BETWEEN REFORMIST SUPPORTERS OF
PRESIDENT KHATAMI AND THE CONSERVATIVE FACTIONS THAT CONTROL MOST
OF THE POWER CENTERS IN THE COUNTRY.
ACCORDING TO PROFESSOR ABRAHAMIAN, PRESIDENT KHATAMI AND HIS
PREDECESSOR (PRESIDENT RAFSANJANI) FAVOR AN INCREASE IN FOREIGN
INVESTMENT IN IRAN.
// ABRAHAMIAN ACT //
I THINK ONE WAY OF IMPROVING THE ECONOMY AT THE PRESENT IS TO
TRY AND JUMP-START THE ECONOMY, AND TO DO IT THE EASIEST WAY
OBVIOUSLY WOULD BE WITH AN INFLUX OF FOREIGN CAPITAL, AND I THINK
THAT'S WHAT THE PREVIOUS ADMINISTRATION OF RAFSANJANI TRIED AND
THE PRESENT ADMINISTRATION WOULD LIKE TO DO. I THINK FOREIGN
CAPITAL WOULD NOT ONLY HELP THE ECONOMY AT LEAST REVIVE BUT
ESPECIALLY IN THE OIL SECTOR CONSIDERABLE AMOUNT OF INVESTMENTS
ARE NEEDED JUST TO KEEP THE OIL INDUSTRY GOING. BUT TO GET THE
FOREIGN INVESTMENTS BASICALLY, THAT TIES IT INTO FOREIGN POLICY,
SO THE ECONOMIC ISSUE CAN'T BE ISOLATED FROM FOREIGN POLICY
ISSUES.
// END ACT //
BUT WESTERN ANALYSTS NOTE THAT TO ATTRACT FOREIGN INVESTMENT IRAN
MUST FIRST NEW LAWS TO ENCOURAGE AND ENSURE THE SECURITY OF
INVESTMENT. THEY ALSO SAY, IMPROVEMENT OF RELATIONS WITH THE
UNITED STATES AND EUROPE ARE OTHER KEY FACTORS IN IRAN'S ECONOMIC
RECOVERY.
GIVEN THE STRONG OPPOSITION TO REFORMING IRAN'S ECONOMY, WESTERN
ANALYSTS DON'T EXPECT DRAMATIC CHANGES IN THE SITUATION -- AT
LEAST UNTIL THE NEXT PARLIAMENTARY ELECTIONS IN ABOUT 18 MONTHS.
(SIGNED)
NEB/AJ/KL
NEB/AJ/KL
05-Aug-98 1:53 PM EDT (1753 UTC)
NNNN
Source: Voice of America
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