DATE=2/9/99
TYPE=BACKGROUND REPORT
NUMBER=5-42558
TITLE=IRANIAN REVOLUTION AT 20: THE ECONOMY
BYLINE=ALI JALALI
DATELINE=WASHINGTON
CONTENT=
NOT VOICED:
INTRO: THE TWENTIETH ANNIVERSARY OF IRAN'S ISLAMIC REVOLUTION
(FEB 11) COMES AS THE COUNTRY IS SUFFERING WIDESPREAD ECONOMIC
WOES. (IN THIS LAST OF A THREE PART SERIES), V-O-A'S ALI JALALI
LOOKS AT CHALLENGES FACING THE IRANIAN ECONOMY AND THE WAYS THAT
HAVE BEEN PROPOSED TO DEAL WITH THEM.
TEXT: IRANIAN REVOLUTIONARIES INHERITED A FAST GROWING ECONOMY
WITH SIGNIFICANT POTENTIAL FOR DEVELOPMENT. TWENTY YEARS LATER
THE COUNTRY FACES A DEEPENING RECESSION AND WORSENING LIVING
CONDITIONS. IRAN'S POPULATION HAS MORE THAN DOUBLED SINCE THE
REVOLUTION, BUT ITS PRODUCTION HAS DECLINED.
SEVERAL FACTORS HAVE BEEN BLAMED FOR THE STAGNATION. IRANIAN
ECONOMIST JAHANGIR AMUZEGAR, WHO SERVED AS MINISTER OF COMMERCE
AND FINANCE IN THE SHAH'S REGIME, SAYS INCREASED GOVERNMENT
INVOLVEMENT IN THE ECONOMY IS THE MAJOR REASON FOR THE DECLINE.
// AMUZEGAR ACT //
ACCORDING TO ACTUAL ESTIMATES, PRESENTLY 80 PERCENT OF THE
IRANIAN ECONOMY IS DIRECTLY AND INDIRECTLY UNDER THE GOVERNMENT
CONTROL. THE SHARE OF THE PRIVATE SECTOR IS ESTIMATED AT 15
PERCENT AND THE SHARE OF COOPERATIVES IS FIVE PERCENT.
THEREFORE, FROM THIS STANDPOINT GOVERNMENT INTERVENTION IN THE
ECONOMY HAS TREMENDOUSLY INCREASED.
// END ACT //
THE REVOLUTIONARY GOVERNMENT CHOSE TO EXPAND THE GOVERNMENT AS A
WAY TO HELP THE POOR AND TO MEET CALLS FOR SOCIAL JUSTICE. THE
GOVERNMENT NATIONALIZED BANKS AND SOME KEY INDUSTRIES, INCLUDING
OIL, TRANSPORTATION, UTILITIES AND MINING SECTOR. THE GOVERNMENT
ALSO GROUPED HUNDREDS OF CONFISCATED AND NATIONALIZED ENTERPRISES
INTO HUGE STATE-AFFILIATED FOUNDATIONS -- BONYADS -- THAT
GRADUALLY TURNED INTO STAGNANT CONGLOMERATES.
IN ADDITION, IRAN'S LONG WAR WITH IRAQ (1980-1988) INTENSIFIED
THE DRIVE FOR EVEN MORE GOVERNMENT CONTROL OF THE ECONOMY. WHEN
THE WAR ENDED THE BONYADS REMAINED AS A SOURCE OF CORPORATE POWER
AND PERSONAL BENEFIT FOR THE RULING CLERGY WHO RESISTED
PRIVATIZATION.
ANOTHER BLOW TO THE IRANIAN ECONOMY CAME WITH THE DROP IN OIL
PRICES. THEY STARTED FALLING IN 1985 AND RECENTLY SLUMPED TO A
12-YEAR LOW. ON TOP OF THIS, THE UNITED STATES IMPOSED ECONOMIC
SANCTIONS AGAINST THE ISLAMIC REPUBLIC.
A SPECIALIST ON THE IRANIAN ECONOMY, PROFESSOR SIAMAK SHUJAEI OF
MANHATTAN COLLEGE IN NEW YORK SAYS MOST OF THE EXTERNAL PROBLEMS
THAT HURT THE IRANIAN ECONOMY WERE PROBLEMS THAT IRAN BROUGHT ON
ITSELF BY ITS DAMAGING POLICY CHOICES.
// SHUJAEI ACT //
THERE HAVE BEEN A LOT OF INTERNAL FACTORS, LIKE MISMANAGEMENT,
CORRUPTION, MISGUIDED IDEOLOGY, INCOMPETENCE WHICH HAS LED TO A
LOT OF EXTERNAL PROBLEMS LIKE WAR, ECONOMIC SANCTIONS AND ALSO
THE WEAKNESS THAT WE OBSERVE IN OPEC AND THE DISARRAY WHICH
EXISTS AMONG THE OPEC MEMBERS AND LOWER OIL PRICES. ALL THESE
INTERNAL FACTORS HAVE CREATED AN EXTERNAL ENVIRONMENT WHICH HAS
DEPRIVED MILLIONS OF IRANIANS OF THEIR TRUE PLACE IN HISTORY AND
THE GLOBAL ECONOMY.
// END ACT //
AFTER THE WAR ENDED WITH IRAQ IN 1988, IRAN BEGAN A MAJOR DRIVE
FOR RECONSTRUCTION OF THE ECONOMY. HOWEVER, THIS WAS HINDERED,
ANALYSTS SAY, BY WHAT HAD BECOME ENTRENCHED PROBLEMS --
MISMANAGEMENT, AN INEFFICIENT BUREAUCRACY AND POLITICAL AND
IDEOLOGICAL INFIGHTING. PROFESSOR SHUJAEI SAYS NO MAJOR
ECONOMIC IMPROVEMENT IS POSSIBLE WITHOUT FUNDAMENTAL CHANGES IN
THE GOVERNMENT SYSTEM.
// SHUJAEI ACT //
THE ECONOMY NEEDS TO MOVE TOWARD PRIVATIZATION. IT NEEDS TO
MOVE TOWARD FREE MARKET INITIATIVES, TO LET THE TALENTED PEOPLE
OF IRAN MANAGE THEIR AFFAIRS THEMSELVES, THEY HAVE TO MOVE AWAY
FROM THESE NATIONALIZED BANKS, THESE INSURANCE COMPANIES AND THE
OIL INDUSTRY. BUT THE POLITICAL SITUATION IS SUCH THAT THEY (THE
RULING CLERGY) ARE AFRAID THAT IF THEY MAKE ANY SUBSTANTIAL
CHANGE, THEY WILL LOSE THEIR POLITICAL POWER.
// END ACT //
THE STRATEGY FOR ECONOMIC RECOVERY HAS BECOME ONE OF THE MOST
CONTENTIOUS ISSUES IN THE DEBATE BETWEEN REFORMIST SUPPORTERS OF
PRESIDENT MOHAMMAD KHATAMI AND THE CONSERVATIVE FACTIONS THAT
CONTROL MOST OF THE POWER CENTERS IN THE COUNTRY. POLICY
DIFFERENCES HAVE ALSO SURFACED AMONG GROUPS INSIDE PRESIDENT
KHATAMI'S CAMP. REFORMIST TECHNOCRATS, FOR EXAMPLE, ARE PUSHING
FOR WIDER PRIVATIZATION, WHILE POPULIST GROUPS FAVOR CONTINUED
WELFARE SUBSIDIES.
IN THE ECONOMIC RECOVERY PLAN HE PUT FORTH LAST YEAR, PRESIDENT
KHATAMI LINKED THE DEEPENING STAGNATION TO THE COUNTRY'S
DEPENDENCE ON DECLINING OIL REVENUES, SHORTAGE OF CAPITAL, THE
SLIDING NATIONAL CURRENCY (RIAL) AND BUREAUCRATIC RESTRICTIONS ON
INVESTMENT. TO CORRECT THE SITUATION, HE PROPOSED SWEEPING
REFORMS, SUCH AS REDUCING GOVERNMENT MONOPOLIES ON GOODS AND
SERVICES, BOOSTING THE NON-OIL INDUSTRY AND ATTRACTING FOREIGN
INVESTMENT.
HOPES FOR FOREIGN INVESTMENT SOARED LAST YEAR WHEN THE UNITED
STATES WAIVED (MAY 98) ENFORCEMENT OF SANCTIONS AGAINST A
CONSORTIUM LED BY FRENCH OIL COMPANY TOTAL TO INVEST TWO BILLION
DOLLARS IN A MASSIVE IRANIAN OFFSHORE GAS FIELD. THE OPPORTUNITY
PROMPTED IRAN TO SEEK FOREIGN INVESTMENT IN OVER 40 OTHER GAS AND
OIL PROJECTS TOTALING EIGHT BILLION DOLLARS.
BUT WESTERN ANALYSTS SAY IT WILL TAKE A LOT MORE THAN THIS
INVESTMENT TO TURN THE ECONOMY AROUND. FAR MORE IMPORTANT IS HOW
THE COUNTRY IMPLEMENTS THE RECOVERY MEASURES. THE PARLIAMENT HAS
AUTHORIZED THE GOVERNMENT TO DRAW UP PLANS FOR SELLING OFF MOST
OF THE STATE-OWNED ENTERPRISES. BUT TO DO THIS, ANALYSTS SAY,
MR. KHATAMI WILL HAVE TO HAVE THE POLITICAL STRENGTH TO IMPLEMENT
ANY MAJOR PRIVATIZATION PLAN OVER THE OPPOSITION OF THE
CONSERVATIVE FACTIONS THAT HAVE A VESTED INTEREST IN THE STATUS
QUO. (SIGNED)
NEB/AJ/KL
09-Feb-99 2:25 PM EST (1925 UTC)
NNNN
Source: Voice of America
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