DATE=11/10/98
TYPE=BACKGROUND REPORT
NUMBER=5-41817
TITLE=IRAN / ECONOMY
BYLINE=SCOTT BOBB
DATELINE=TEHRAN
CONTENT=
VOICED AT:
/// EDS: THIS IS THE SECOND IN A SERIES OF BACKGROUND REPORTS
ABOUT IRAN ///
INTRO: THE GOVERNMENT OF IRAN RECENTLY ANNOUNCED DRASTIC
MEASURES TO COVER THE GOVERNMENT'S BUDGET DEFICIT. THE DEFICIT
HAS BEEN RISING IN RECENT YEARS BECAUSE OF A DROP IN EARNINGS
FROM OIL, IRAN'S MAJOR EXPORT. IRAN'S ECONOMIC PROBLEMS HAVE LED
TO PRESSURE FOR ECONOMIC REFORM, ESPECIALLY SINCE THE ELECTION OF
PRESIDENT MOHAMED KHATAMI 18 MONTHS AGO. HOWEVER, CHANGE IS SLOW.
V-O-A MIDDLE EAST CORRESPONDENT SCOTT BOBB VISITED IRAN RECENTLY
AND HAS THIS REPORT ON THE ECONOMIC SITUATION.
TEXT: WHILE IRANIANS DEBATE, SOMETIMES HEATEDLY, THE MERITS OF
POLITICAL AND SOCIAL REFORM, THEY SEEM VIRTUALLY UNANIMOUS ON ONE
TOPIC -- THE ECONOMY IS NOT GOOD AND LIFE IS GETTING HARDER.
ONE OF THE REASONS FOR THE LOSS OF BUYING POWER FOR THE AVERAGE
IRANIAN IS INFLATION, WHICH IS DUE PRIMARILY TO THE GOVERNMENT'S
BUDGET DEFICIT. THE DEFICIT IS EXPECTED TO REACH 10 PERCENT OF
THE TOTAL BUDGET THIS YEAR. IT IS BLAMED ON THE LOW PRICE FOR
OIL, WHICH PROVIDES IRAN'S GOVERNMENT WITH 85 PERCENT OF ITS
FOREIGN EXCHANGE EARNINGS.
PROFESSOR ALI RASHIDI IS AN ECONOMICS PROFESSOR WHO RECENTLY
WROTE A BOOK ON THE IRANIAN ECONOMY. HE SAYS THE IRANIAN
GOVERNMENT IN THE SHORT TERM IS FACING CONSIDERABLE DIFFICULTIES.
/// FIRST RASHIDI ACT. ///
THERE IS NO SOLUTION IN THE SHORT RUN. SO THE
GOVERNMENT IS TRYING TO BORROW SOME MONEY FROM THE
CENTRAL BANK AND ALSO SELL SOME OIL IN FUTURE MARKETS
AND ALSO REDUCE SOME OF THE CURRENT EXPENSES.
/// OPT /// HOPEFULLY TO RAISE ENOUGH MONEY TO REPAY
THE SALARIES OF THE GOVERNMENT EMPLOYEES AND ALSO
IMPLEMENT SOME OF THE PROJECTS WHICH ARE UNDERWAY. ///
END OPT ///
/// END ACT ///
PROFESSOR RASHIDI SAYS THE ECONOMIC PROBLEMS HAVE BEEN AGGRAVATED
BY INEFFICIENCY IN THE PUBLIC SECTOR. THE IRANIAN ECONOMY IS
DOMINATED BY THE GOVERNMENT. ECONOMIC REFORM AND THE
PRIVATIZATION OF SOME GOVERNMENT-CONTROLLED COMAPANIES IS A HOTLY
DEBATED TOPIC.
/// OPT /// THE GOVERNMENT STILL BELIEVES IT SHOULD CONTROL
STRATEGIC SECTORS LIKE THE PETROLEUM AND COMMUNICATIONS
INDUSTRIES. HOWEVER, SINCE THE ELECTION OF REFORM-MINDED
PRESIDENT MOHAMED KHATAMI, IT HAS TAKEN SOME SMALL STEPS IN THE
ECONOMIC AREA.
/// OPT /// AHMED NASSIRI IS VICE-PRESIDENT OF THE FIRST
PUBLICLY-OWNED COMPANY IN THE PETROLEUM SECTOR, CALLED THE OIL
INDSUTRY INVESTMENT COMPANY. HIS COMPANY HAS FORMED NEARLY
ONE-DOZEN SUBSIDIARIES TO PRODUCE PRODUCTS NEEDED IN THE OIL
INDUSTRY.
/// OPT /// MANY OF THE COMPANIES ARE JOINT VENTURES WITH
FOREIGN AND MULTINATIONAL CORPORATIONS, PRIMARILY FROM EUROPE.
SOME OF THE VENTURES BENEFIT FROM TAX HOLIDAYS AND OTHER
INCENTIVES. OTHERS ARE UNDER WHAT ARE CALLED BUY-BACK
ARRANGEMENTS, WHERE THE FOREIGN PARTNER IS ALLOWED TO SELL THE
PRODUCT OF THE VENTURE UNTIL ITS ORIGINAL INVESTMENT IS
RECOVERED.
/// OPT /// BUT MR. NASSIRI SAYS THE IRANIAN GOVERNMENT IS
MOVING WITH CAUTION BECAUSE OF POLITICAL SENSITIVITES CONCERNING
THE OIL INDSUTRY.
/// OPT // NASSIRI ACT ///
THE NEW GOVERNMENT, AFTER PRESIDENT KHATAMI, THEY HAVE
TO PRIVATIZE AS MUCH AS THEY CAN, AND TO HAVE A
GOVERNMENT TO JUST GUIDE THE INDUSTRY, NOT OPERATE THE
INDUSTRY, THAT'S HOW THEY THINK. SO I THINK THEY WANT
TO DO IT STEP BY STEP. BUT OIL INDUSTRY, OF COURSE,
IT'S A POLITICAL ISSUE. SO YOU HAVE TO GO STEP BY STEP,
VERY QUIETLY, TO SEE CLEARLY WHAT YOU ARE DOING.
/// END ACT ///
/// OPT /// MR. NASSIRI SAYS HIS COMPANY WOULD LIKE TO ENTER
INTO PARTNERSHIPS WITH U-S COMPANIES, BUT THESE HAVE BEEN
RELUCTANT TO DO SO BECAUSE OF THE POOR RELATIONS BETWEEN THE
GOVERNMENTS OF IRAN AND THE UNITED STATES. /// END OPT ///
WITH PROSPECTS NOT EXCELLENT FOR OIL PRICES AND NEW FOREIGN
INVESTMENT, IN THE SHORT-TERM, PROFESSOR RASHIDI SAYS THE IRANIAN
GOVERNMENT NEEDS TO TAKE SEVERAL MAJOR STEPS TO BOSLTER THE
ECONOMY. THE FIRST STEP, HE SAYS, IS TO OPEN THE DOOR TO PRIVATE
INVESTORS.
THE SECOND, HE SAYS, IS TO GET RID OF THE NUMEROUS
GOVENRMENT-SANCTIONED MONOPOLIES. MANY OF THESE, HE SAYS, ARE
RELIGIOUS FOUNDATIONS THAT CONTROL ENTIRE INDUSTRIES AND MAKE
HUGE PROFITS, BUT PAY NO TAXES. HE SAYS THAT AS A RESULT, THE
GOVERNMENT LOSES AS MUCH AS 40 PERCENT OF ITS POTENTIAL TAX
REVENUE.
FINALLY, PROFESSOR RASHIDI SAYS THE GOVERNMENT COULD IMPROVE THE
ECONOMY BY ATTACKING WASTE AND BY APPOINTING OFFICIALS WHO HAVE
ECONOMIC EXPERIENCE RATHER THAN MERELY GOOD POLITICAL
CREDENTIALS. HE SAYS THIS WILL BRING NEW BLOOD INTO GOVERNMENT.
/// SECOND RASHIDI ACT ///
THESE THREE STEPS, IF TAKEN TOGETHER, I THINK, WILL GIVE
US THE CHANCE TO START THE PROCESS OF ECONOMIC, SOCIAL,
AND POLITICAL REFORM. OF COURSE, IT WILL TAKE A LOT OF
TIME. BUT I THINK IF THERE IS THE POLITICAL WILL, I
THINK WE ARE NOT GOING TO HAVE MUCH PROBLEM.
/// END ACT ///
ECONOMIC OBSERVERS NOTE MANY IRANIANS STILL ARE NATIONALISTIC
ABOUT ECONOMIC POLICY AND THEY ARE SENSITIVE TO PERCEIVED FOREIGN
DOMINATION. THEY NOTE THAT THE POLITICAL REFORM MOVEMENT IS MUCH
STRONGER THAN THE ECONOMIC REFORM MOVEMENT. AND SOME OF THE
STRONGEST REFORMISTS STILL FAVOR A HIGHLY CENTRALIZED ECONOMY.
AS A RESULT, MANY PREDICT ECONOMIC STAGNATION IS LIKELY TO
CONTINUE IN IRAN UNTIL A STRONGER CONSENSUS EMERGES FOR ECONOMIC
CHANGE. THEY WORRY THAT IF THIS COURSE IS NOT CORRECTED IN
TIME, IT COULD POSE A THREAT TO SOME OF THE LEADING ADVOCATES OF
POLITICAL REFORM. (SIGNED)
NEB/SB/JWH
10-Nov-98 11:23 AM EST (1623 UTC)
NNNN
Source: Voice of America
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