| Economy of Iran | |
|---|---|
 Tehran skyline, Central Bank building in foreground. | |
| Rank | 18th (PPP) |
| Currency | 1 toman = 10 Iranian rial (IRR) ( ) = 1000 dinar |
| Fiscal year | 21 March – 20 March |
| Trade organizations | ECO, OPEC, GECF, WTO (observer) and others |
| Statistics | |
| GDP | $827.1 billion (2009 est.) (PPP; 18th) 330.5 billion (2009 est.) (nominal; 29th) |
| GDP growth | 1.5% (real growth; 2009 est.) |
| GDP per capita | $10,900 (2009 est.); (PPP; 100th) |
| GDP by sector | agriculture (10.9%), industry (45.2%), services (43.9%) (2009 est.) |
| GDP by component | Private consumption (36.4%) Government consumption (10.3%) Gross fixed investment (23.9%) Exports of goods/services (34.6%) Imports of goods/services (−19.7%) (2008 est.) |
| Inflation (CPI) | 9.4% (June 2010) |
| Population below poverty line | 18.7% living below $11/day (2006) 3.1% living below $2/day (2006) |
| Gini index | 38% (2008 est.) |
| Labor force | 25.02 million (2009 est.); note: shortage of skilled labor |
| Unemployment | 14.6% according to the Iranian government (2010 est.) |
| Main industries | petroleum, petrochemicals, fertilizers,caustic soda, car manufacture,pharmaceuticals, home appliances,electronics, telecom, energy, power, textiles, construction, cement and other construction materials, food processing (particularly sugar refining and vegetable oil production), ferrous and non-ferrous metal fabrication,armaments |
| Ease of Doing Business Rank | 129th (2011) |
| External | |
| Exports | $70.16 billion (2009 est.) f.o.b. |
| Export goods | petroleum (80%), chemical and petrochemical products (4%), fruits and nuts (2%), cars (2%), carpets(1%), technical services |
| Main export partners | China 16.58%, Japan 11.9%, India 10.54%, South Korea 7.54%, Turkey 4.36% (2009) |
| Imports | $57.16 billion (2009 est.) f.o.b. |
| Import goods | industrial raw materials and intermediate goods (46%), capital goods (35%), foodstuffs and other consumer goods (19%), technical services |
| Main import partners | UAE 15.14%, China 13.48%, Germany 9.66%, South Korea 7.16%, Italy 5.27%, Russia 4.81%, India 4.12% (2009) |
| FDI stock | Home: $7.854 billion (72nd; 2009) Abroad: $825 million (67th; 2009) |
| Gross external debt | $18.73 billion (31 December 2009 est.) |
| Public finances | |
| Public debt | 16.7% of GDP (2009 est.) |
| Revenues | $96.94 billion (2009 est.): 45% from oil exports, 31% from taxes, tariffs and fees, 20% from government properties and holdings (on exchange rate basis, not PPP) |
| Expenses | $93.04 billion (2009 est.) (on exchange rate basis) |
| Economic aid | $121 million (2008 est.) |
| Credit rating | B for sovereign risk (June 2009) |
| Foreign reserves | $100 billion (30 October 2010 est.) |
| Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars | |
The economy of Iran is the eighteenth largest economy in the world by purchasing power parity (PPP). It is a transition economy with a large public sector and an estimated 50% of the economy centrally planned. Exports are dominated by oil and gas (80%) and constituted 60% of the government revenue in 2010. A unique feature of Iran's economy is the large size of the religious foundations whose combined budgets make up more than 30% that of the central government. Iran is one of the few major economies that has kept a positive growth, despite the 2008 global financial crisis and the international sanctions relating to its nuclear program.
Distortions resulting from a combination of price controls and subsidies, particularly on food and energy,continues to weigh down the economy; and contraband, administrative controls, widespread corruption, and other rigidities undermine the potential for private sector-led growth. President Mahmoud Ahmadinejad has proposed replacing energy subsidies with targeted social assistance.However, previous government-led efforts at reform – such as fuel rationing in July 2007 and the imposition of the value-added tax (VAT) in October 2008 – were met with stiff resistance and violent protests. Iran ranks 69th out of 139 in Global Competitiveness Report.
High oil prices in recent years have enabled Iran to amass US$ 100 billion in foreign exchange reserves. Although this increased revenue has aided self-sufficiency and domestic investments, double-digit unemployment and inflation still remain.According to the Central Bank of Iran, annual inflation declined to 11.5% as of February 2010. The economy has seen only moderate growth. Iran's educated population, economic inefficiency, and insufficient foreign and domestic investment have prompted an increasing number of Iranians to seek employment overseas, resulting in significant "brain drain". Iran will be among the leading economies of the world.Iran has a high potential of becoming one of the world's largest economies in the 21st century.
History
Economic history of Iran and History of the Islamic Republic of Iran
Iran's GDP and population growth, 1967–2007
Pre-revolutionary Iran's economic development was rapid. Traditionally an agricultural society, Iran had achieved significant industrialization and economic modernization by the 1970s.] However, the pace of growth had slowed dramatically by 1978, just before the Islamic revolution. The flight of capital from Iran shortly before and after the revolution was in the range of $30 to $40 billion 1980 US dollars.
Iran's long-term objectives since the 1979 revolution have been economic independence, full employment, and a comfortable standard of living for citizens, but at the end of the 20th century, the country's economic future faces many obstacles. Iran's population more than doubled in a 20-year period, with an increasingly young population. Although a relatively large part of the population engages in farming, agricultural production has fallen consistently since the 1960s. By the late 1990s, Iran was a major food importer, and economic hardship in the countryside had driven vast numbers of people to migrate to cities.
After the end of hostilities with Iraq in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy infrastructures (including its prospective nuclear power facilities) and has begun the process of integrating its communication and transportation infrastructure with that of neighboring states. The imposed war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000, at a cost of $500 billion to the Iranian economy.
Macro-economic trends
Demographics of Iran, Science and technology in Iran, and International rankings of Iran
In the early 21st century the service sector contributed the largest percentage of the gross domestic product (GDP), followed by industry (mining and manufacturing) and agriculture. In 2008 the GDP was estimated at $382.3 billion ($842 billion by PPP), or $5,470 per capita ($12,800 by PPP). GDP figure is projected to double in the next five years. The informal economy is also important. Because of these figures and the country’s diversified but small industrial base, the United Nations classifies Iran's economy as semi-developed (1998). Due to huge energy subsidies, Iran is one of the most energy inefficient countries of the world, with the energy intensity three times higher than global average and 2.5 times the middle eastern average. According to Goldman Sachs, Iran has a high potential of becoming one of the world's largest economies in the 21st century.
| Year (Source: IMF) | GDP, current prices (billions IRR) | Implied PPP conversion rate (USD/IRR) | GDP at PPP per capita (current international dollar) | Inflation index (average CPI) (2000=100) | Population (million persons) |
|---|---|---|---|---|---|
| 1980 | 6,622 | 58 | 2,974 | 2 | 38 |
| 1985 | 16,556 | 77 | 4,507 | 4 | 48 |
| 1990 | 35,315 | 144 | 4,489 | 12 | 55 |
| 1995 | 185,928 | 569 | 5,094 | 43 | 64 |
| 2000 | 580,473 | 1,341 | 6,800 | 100 | 64 |
| 2005 | 1,697,305 | 2,675 | 9,268 | 190 | 68 |
| 2010 (est.) | 3,698,348 | 4,307 | 11,396 | 377 | 75 |
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Fiscal and monetary policy
Public finance and fiscal policy in Iran and Inflation and monetary policy in Iran
Government spending as percent of budget was 6% for health care, 16% for education and 8% for the military in the period 1992–2000 and contributed to an average annual inflation rate of 14% in the period 2000–2008. Iran's gross net investment was 27.7% of GDP in 2009. In 2008, about 55% of the government's budget came from oil and natural gas revenues, and 31% came from taxes and fees. The budget for the Iranian year 2010 amounts to $368 billion, representing an increase of 31% on 2009 and is based on a projected oil price of $60. Iran had approximately $97 billion in foreign reserves at the start of 2009. Iran balances its external accounts around $75 per barrel.
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Five-year socio-economic development plan
See also: Supreme Audit Court of Iran and Management and Planning Organization of Iran
The fifth development plan (2010–15) sets the guidelines for the socio-economic development of the country over the next five years. It has been designed to give the power to the people through delegation. The five-year plan is part of "Vision 2025", a plan for long-term sustainable growth. Each year, after approval of the government’s annual budget, the Central Bank of Iran presents a detailed monetary and credit policy to the Money and Credit Council (MCC) for approval. Thereafter, major elements of these policies are incorporated in the five-year economic development plan.
Economic reform plan
Iranian targeted subsidy plan
Other main objectives of the fifth plan are making improvements in public healthcare, and expanding international relations. The target is self-reliance by 2015 and the implementation of an ambitious economic reform plan, which includes subsidy, banking, currency, taxation, infrastructure, employment, social justice and productivity as its main focus. By removing energy subsidies, Iran intends to make its industries more efficient and competitive with that of the world. The banking sector in Iran is viewed as a potential hedge against the removal of subsidies, as the plan is not expected to have any direct impact on banks. According to plan, Iran will be the world's 12th largest economy in 2015.
Item in the plan 2010 (realized) 2010–15 (target)
GDP world ranking 18th largest economy by PPP 12th in 2015
Annual growth rate 2.6% 8% on average;[64] BMI forecast: 3.6% on average (2009–14)
Unemployment 11.8% according to government; unofficially: 12–22%; 30% according to opposition 7% by 2015, by creating 1 million new jobs each year
Inflation rate 15% (as of January 2010) 12% on average
Value Added Tax 3% 8%
Oil price & revenues in budget $60 per barrel $65 per barrel on average / $250 billion in oil and gas revenues in 2015 once the current projects come on stream; IMF projections: ~$60 billion only
Natural gas production N/A 900 million cubic meter/day
Share of non-oil exports 20% 30% ($110 billion) by 2015
Investment in oil and gas industry N/A $20 billion a year in private and foreign investment, partly to boost oil refining capacity
Petrochemical output ~50 million tpy 100 million tpy
Investment in mining and industry N/A $70 billion/700,000 billion rials
Crude steel production ~10 million tpy 42 million tpy by 2015
Iron ore production ~27 million tpy 66 million tpy by 2015
Cement ~71 million tpy 110 million tpy
Limestone N/A 166 million tpy
New industrial parks N/A 50 new industrial parks to be built by 2015
Tourism N/A 20 million tourists annually by 2015 (including domestic tourism)
Bunkering 25% market share in Persian Gulf 50% market share or 7.5 million tpy of liquid fuel
Ports capacity 150 million tons 200 million tons
Centralization and privatization
Privatization in Iran
Tehran Stock Exchange and List of Iranian companies
The Iranian Government declared its intention to privatize most state industries after the Iran–Iraq War in 1988, in an effort to stimulate the ailing economy. The sale of state-owned factories and companies proceeded slowly, however, mostly because of opposition by a nationalist majority in Majlis, the Iranian parliament. By 2006 most industries, comprising 70% of the economy, remained state-owned. The majority of heavy industry—including steel, petrochemicals, copper, automobiles, and machine tools—was in the public sector, while most light industry was privately owned.
According to Article 44 of the Constitution, the economy of Iran is to consist of three sectors: state, cooperative, and private, and is to be based on systematic and sound planning. The state sector is to include all large-scale industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like; all these will be publicly owned and administered by the State. The cooperative sector is to include cooperative companies and enterprises concerned with production and distribution, in urban and rural areas, in accordance with Islamic criteria. 120,000 cooperatives are in operation across the country employing about 15 million people. The private sector consists of those activities concerned with construction, agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.
A strict interpretation of the above has never been enforced in the Islamic Republic and the private sector has been able to play a much larger role than is outlined in the Constitution. In recent years, the role of the private sector has been further on the increase. Furthermore, an amendment of the article in 2004 has allowed 80% of state assets to be privatized – 40% of which will be conducted through the "Justice Shares" scheme and the rest through the Tehran Stock Exchange. The government will keep the title of the remaining 20%. In 2005, the government's assets were estimated at about $120 billion. In the past five years, about $63 billion of the assets was privatized, bringing the government's direct share in the gross domestic product (GDP) from 80% down to 40%.
Islamic Revolutionary Guard Corps
The Islamic Revolutionary Guard Corps (IRGC) are thought to control about a third of Iran's economy through a series of subsidiaries and trusts. The Los Angeles Times estimates that IRGC has ties to over one hundred companies, with its annual revenue exceeding $12 billion in business and construction. IRGC has been awarded billions of dollars in contracts in the oil, gas and petrochemical industries, as well as major infrastructure projects. As enforcers of cross border activities, the IRGC has maintained a monopoly on smuggling. It runs laser eye-surgery clinics, makes cars, builds bridges and roads, develops gas and oil fields.
Religious foundations
Bonyad
Welfare programs for the needy are managed by more than 30 individual public agencies, and semi-state organizations called Bonyad, as well as by several private non-governmental organizations. In 2003, the government began to consolidate its welfare organizations in an effort to eliminate redundancy and inefficiency. Bonyads are a consortium of over 120 organizations which are tax-exempt, receive government subsidies and religious donations and answer directly to the Supreme Leader of Iran. They control over 20% of Iran's GDP and they are involved in everything from vast soybean and cotton fields to hotels to soft drinks to auto-manufacturing to shipping lines. Bonyads are overstaffed, corrupt, and generally not profitable.
Labor and welfare
Iranian labor law, Taxation in Iran, and Education in Iran
According to experts, annual economic growth above 5% would be needed to keep pace with the 750,000 new labor force entrants each year. Agriculture contributes just over 11% to the gross national product and employs a third of the labor force. The industrial sector—including mining, manufacturing, and construction—contributed 42% of the GDP and employed 31% of the labor force in 2004. Mineral products, notably petroleum, dominate Iran’s exports revenues (80%), but mining employs less than 1% of the country’s labor force. In 2004 the service sector ranked as the largest contributor to the GDP (48%) and employed 44% of workers. In 2005, Iranian women accounted for 33% of the workforce (out of 25 million people). More than two-thirds of the population (74 million) is under the age of 30.
Personal income
Social class in Iran
Iran is classed as a middle income country and has made significant progress in provision of health and education services in the period covered by the Millennium Development Goals (MDGs). Net enrollment at primary school level is almost 100%. In 2010, Iran's average monthly income was about $500 (GDP per capita in 2009: $10,900 by PPP). There is a minimum national wage applicable to each sector of activity fixed by the Supreme Labor Council. In 2009 the minimum wage, determined by the Supreme Labor Council, was about $263 per month ($3,156 per year).The World Bank reports that in 2001, approximately 20% of household consumption was spent on food, 32% on fuel, 12% on health care, and 8% on education.
The poverty line for Tehran in the year ending March 20, 2008 was $9,612 per year and the national average was $4,932.In 2010, Iran's Department of Statistics announced that 10 million Iranians live under the absolute poverty line and 30 million live under the relative poverty line.
Social security
Social Security Organization (Iran) and Healthcare in Iran
Iran did not legislate in favor of a universal social protection, but in 1996, the Center of the Statistics of Iran estimated that more than 73% of the Iranian population was covered by social security. Membership in the social security system for all employees is compulsory.
The social security makes it possible to ensure the employees against unemployment, disease, old age, and occupational accidents. In 2003 the minimum standard pension was 50% of the worker’s earnings but not less than the amount of the minimum wage. Iran spent 22.5% of its 2003 national budget on social welfare programs. More than 50% of that amount covered pensions.
Social protection covers the employees between the age of 18 and 65 years, and the financing is shared between the employee (7% of the wages), the employer (20–23%) and the State (which supplements the contribution of the employer up to a total value of 3%). Social protection is extended to the self-employed workers, who voluntarily contribute between 12% and 18% of income depending on the protection sought. Civil servants, the regular military, law enforcement agencies, and the Islamic Revolutionary Guard Corps, Iran’s second major military organization, have their own pension systems.
Trade unions
Trade unions in Iran
Although Iranian workers have, in theory, a right to form labor unions, there is, in actuality, no union system in the country. Workers are represented ostensibly by the Workers' House, a state-sponsored institution that nevertheless attempts to challenge some state policies. Guild unions operate locally in most areas but are limited largely to issuing credentials and licenses. The right of workers to strike is generally not respected by the state, and since 1979 strikes have often been met by police action.
The comprehensive Labor Law covers all labor relations in Iran, including hiring of local and foreign staff. The Labor Law provides a very broad and inclusive definition of the individuals it covers, and written, oral, temporary and indefinite employment contracts are all recognized. The Iranian Labor Law is very employee-friendly and makes it extremely difficult to layoff staff. Employing personnel on consecutive six-month contracts is illegal, as is dismissing staff without proof of a serious offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee.
Sectors of the economy
Agriculture and foodstuff
Agriculture in Iran
Geography of Iran and Environmental issues in Iran
About 20% of the land in Iran is arable. The main food-producing areas are in the Caspian region and in the valleys of the northwest. Some northern and western areas support rain-fed agriculture, while other areas require irrigation for successful crop production.
The principal obstacles to agricultural production are primitive farming methods, overworked and underfertilized soil, poor seed, and scarcity of water. About one third of the cultivated land is irrigated; the construction of multipurpose dams and reservoirs along the rivers in the Zagros and Alborz mountains has increased the amount of water available for irrigation. Agricultural programs of modernization, mechanization, and crop and livestock improvement, and programs for the redistribution of land are increasing agricultural production.
Wheat, the most important crop, is grown mainly in the west and northwest; rice is the major crop in the Caspian region. Barley, corn, cotton, sugar beets, tea, hemp, tobacco, fruits (including citrus), potatoes, legumes (beans and lentils), vegetables, fodder plants (alfalfa and clover), spices (including cumin, sumac, and saffron (world's largest producer)), nuts (pistachios (world's largest producer), almonds, and walnuts), dates (2nd largest producer), berberis (world's largest producer) and berries (world's largest producer) is raised. Livestock products include lamb, goat, meat, beef, poultry, milk, eggs, butter, cheese, wool, and leather. Honey is collected from beehives, and silk is harvested from silkworm cocoons. The northern slopes of the Alborz mountains are heavily wooded, and forestry products are economically important; the cutting of trees is rigidly controlled by the government, which also has a reforestation program. The rivers that drain into the Caspian Sea are fished for salmon, carp, trout, pike, sturgeon and caviar (world's largest producer).
Since 1979 commercial farming has replaced subsistence farming as the dominant mode of agricultural production. By 1997, the gross value of products in Iran's agricultural sector had reached $25 billion. Iran has attained 90% self-sufficiency in essential agricultural products; rice production fails to meet domestic food requirements, however, making substantial imports necessary. In 2007 Iran reached self-sufficiency in wheat production, and for the first time became a net wheat exporter. By 2003, a quarter of Iran's non-oil exports were agricultural based. Major agricultural exports include fresh and dried fruits, nuts, animal hides, processed foods, and spices.
Manufacturing
Industry of Iran, IDRO, Iran Electronics Industries (IEI), Iran Aviation Industries Organization, and Iranian Space Agency
Large-scale manufacturing in factories began in the 1920s and developed gradually. During the Iran–Iraq War, Iraq bombed many of Iran’s petrochemical plants, and the large oil refinery at Abadan was badly damaged and forced to halt production. Reconstruction of the refinery began in 1988 and production resumed in 1993. However, the war also stimulated the growth of many small factories producing import-substitution goods and materials needed by the military.
The country’s major manufactured products are petrochemicals, steel, and copper products. Other important manufactures include automobiles, home and electric appliances, telecommunications equipment, cement, industrial machinery (Iran has the largest operational stock of industrial robots in West Asia), paper, rubber products, agricultural products and processed foods, leather products and pharmaceuticals. Textile mills, based on domestic cotton and wool such as Tehran Patou and Iran Termeh, employed about 400,000 people in 2000 and are centered in Tehran, Isfahan and along the Caspian coast.
According to a report by the Economist, Iran has been ranked 39th for producing $23 billion of industrial products in 2008. From 2008 to 2009 Iran has leaped to 28th place from 69th place in annual industrial production growth rate.
A 2004-report made by United Nations Industrial Development Organization regarding the state of SME's in Iran identified these causes as the ones impeding Iran's industrial development: lack of monitoring institutions, inefficient banking system, lack of sufficient R&D, shortage of managerial skills, corruption, inefficient taxation, socio-cultural apprehensions, absence of social learning loops, lack of familiarity with international markets necessary for global competition, cumbersome bureaucratic procedures, shortage of skilled labor, lack of intellectual property protection, shortage of research centers, lack of social capital, social learning, social responsibility and socio-cultural values.
Handicrafts
Iranian art and Persian rug
Iran has a long tradition of producing artisan goods, including Persian carpets, ceramics, copperware and brassware, glass, leather goods, textiles, and woodwork. Iran’s rich carpet-weaving tradition dates from pre-Islamic times, and it remains an important industry and contributes substantially to rural incomes. There is an estimated population of 1.2 million weavers in Iran producing carpets for domestic markets and international export. Iran exports more than $500 million worth of hand-woven carpets each year or 30% of the world's market share (2008). About 5.2 million people work in some 250 fields of the handicraft industry, contributing 3% to the GDP.
Automobile manufacturing
Iranian automobile industry
As of 2001, there were 13 public and privately owned automakers within Iran, of which two – Iran Khodro and Saipa – accounted for 94% of the total domestic production. Iran Khodro produced the most prevalent car brand in the country – Paykan – which was replaced in 2005 by Samand. Iran Khodro was still the largest with 61% of the market in 2001, while Saipa contributed 33% of Iran’s total production in the same year. The other car manufacturers, such as the Bahman Group, Kerman Motors, Kish Khodro, Raniran, Traktorsazi, Shahab Khodro, and others together produced only 6%.These automakers produce a wide range of automobiles including motorbikes, passenger cars such as Saipa's Tiba, vans, mini trucks, medium sized trucks, heavy duty trucks, minibuses, large size buses and other heavy automobiles used in commercial and private activities in the country. Iran ranked the world's 12th biggest automaker in 2010 and has a fleet of 11.5 million cars. Automobile production crossed the 1 million mark in 2005 and Iran car exports are projected to reach $1 billion by March 2009.
Defense industry
Military of Iran, Iranian defense industry, and List of military equipment manufactured in Iran
Iran's 2007 defense budget was estimated to be $7.31 billion (2.6% of GDP) by London's International Institute for Strategic Studies or $102 per capita, ranking the 25th largest defense expenditure globally. Iran's defense industry has taken great strides in the past 25 years, and now manufactures many types of arms and equipment. Since 1992, Iran's Defense Industries Organization (DIO) has produced its own tanks, armored personnel carriers, guided missiles, radar systems, guided missile destroyer, military vessels, submarines, and a fighter plane. In 2006 Iran exported weapons to 57 countries, including NATO members, and sold $100 million worth of military equipment abroad.
Construction and real estate
Construction in Iran
Water supply and sanitation in Iran, List of reservoirs and dams in Iran, and Iranian architecture
The Central Bank of Iran indicate that 70% of the Iranians own homes, with huge amounts of idle money entering the housing and other markets.
The annual turnover in the construction industry amounted to $38.4 billion in 2005. Until the early 1950s the construction industry was limited largely to small domestic companies. Increased income from oil and gas and the availability of easy credit, however, triggered a subsequent building boom that attracted major international construction firms to Iran. This growth continued until the mid-1970s, when, because of a sharp rise in inflation, credit was tightened and the boom collapsed. The construction industry had revived somewhat by the mid-1980s, but housing shortages and speculation have remained serious problems, especially in the large urban centers. Because of the poor quality of many constructions, many buildings need anti-seismic reinforcement or renovation. Iran has a large dam building industry. Today 70% of the Iranians own homes. Construction is one of the most important sectors in Iran accounting for 20–50% of the total private investment. One of the prime investment targets of well off Iranians as tangible.
Energy, gas, petroleum and petrochemicals
Energy in Iran and Petroleum industry in Iran
Asalouyeh, 2007 Gas Rationing Plan in Iran, List of power stations in Iran, and Iranian nuclear program
Iran holds 10% of the world's proven oil reserves and 15% of its gas. It is OPEC's second largest exporter and the world's fourth oil producer.
Iran holds 10% of the world's proven oil reserves. Iran also has the world's second largest reserves of natural gas (15% of the world's total), mainly in South Pars; these are exploited primarily for domestic use.Since 1913 Iran has been a major oil exporting country. The chief oil fields are found in the central and southwestern parts of the Zagros mountains in western Iran. Oil also is found in northern Iran and in the offshore waters of the Persian Gulf. Domestic oil and gas, along with hydroelectric power facilities, provide the country with power. Iran built its first $1 billion nuclear power plant in Bushehr in 2010.
In the late 1970s, it ranked as the fourth largest oil producer (OPEC's second largest oil producer) and the second largest oil exporter in the world. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the imposed war with Iraq. Oil production began increasing in the late 1980s due to the repair of damaged pipelines and the exploitation of newly discovered offshore oil fields in the Persian Gulf.
Major refineries are located at Abadan (site of the country's first refinery, built 1913), Kermanshah, and Tehran but fail to meet domestic demand for gasoline. The oil refining industry of the country needs a $15 billion investment for its development over the next 5 years to become self-sufficient and end imports. Pipelines move oil from the fields to the refineries and to such exporting ports as Abadan, Bandar-e Mashur, and Kharg Island. Since late 1990s, Iran's state-owned oil and gas industry has entered into major exploration and production agreements with foreign consortia, notably in Asalouyeh.
With a fertilizer plant in Shiraz, the largest ethylene unit in the world in Asalouyeh and the completion of other PSEEZ projects, Tehran expects to see a surge in petrochemical exports from of $5.5 billion in 2007 to a total of nearly $9 billion in 2008.
By 2004, Iran’s annual oil production was 1.4 billion barrels, creating a net profit of $50 billion. Officials in Iran estimate that Iran's annual oil and gas revenues could reach $250 billion by 2015 once the current projects come on stream. Iran manufactures 60–70% of its industrial equipment domestically, including refineries, oil tankers, drilling rigs, offshore platforms and exploration instruments.
In February 2008 the Iranian Oil Bourse was inaugurated in Kish Island to trade crude oil and petrochemical products. The transactions are made in the Iranian rial and other major currencies (except for USD).
In 2008 energy wastage in Iran amounted to six or seven billion dollars. The energy consumption in the country is extraordinarily higher than international standards. Iran recycles 28% of its used oil and gas whereas the figure for certain countries stands at 60%. Iran paid $84 billion in subsidies for oil, gas and electricity in 2008. Iran has the third largest consumption of natural gas in the world after United States and Russia.
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Mines and metals
Mining in Iran
Iran is among the top ten countries in the world in terms of diversity of minerals. Close to 30% of the country’s investment has been made in the field in recent years. In 2008, 45% of the stock market's capitalization was in the mineral industries.
Mineral production contributes only 0.6% to the country’s GDP. Add other mining-related industries and this figure increases to just 4%. Many factors have contributed to this, namely lack of suitable infrastructure, legal barriers, exploration difficulties, and government control over all resources.
Although the petroleum industry provides the majority of economic revenues, about 75% of all mining sector employees work in mines producing minerals other than oil and natural gas. These include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, strontium, silica, uranium, and gold (most as a co-product of the Sar Cheshmeh copper complex operations). The mines at Sar Cheshmeh in Kerman Province contain the world's second largest lode of copper ore. Large iron ore deposits lie in central Iran, near Bafq, Yazd, and Kerman. The government owns 90% of all mines and related large industries in Iran and is seeking foreign investment for the development of the mining sector. In the steel and copper sectors alone, the government is seeking to raise around $1.1 billion in foreign financing. The sector accounts for 3% of the country’s exports.
Iran has recoverable coal reserves of nearly 1.9 billion short tonnes. By mid-2008, the country produced about 1.3 million short tonnes of coal annually and consumed about 1.5 million short tonnes, making it a small net importer of coal. The country plans to increase hard-coal production to 5 million tons in 2012 from 2 million tons in November 2008. Main steel mills are located in Isfahan and Khuzestan. Iran became self-sufficient in steel production in 2009. Aluminum and copper production are projected to hit 245,000 and 383,000 tons respectively by March 2009. Cement production reached 65 million tons in 2009, while Iran exports this item to 40 countries.
Services
Education in Iran, Higher Education in Iran, Science and technology in Iran, and List of Iranian Research Centers
Iran is amongst the top 10 countries in stem cell research. Iran will invest 2.5 billion dollars in the country's stem cell research over the next five years (2008–2013).
Despite efforts in the 1990s toward economic liberalization, government spending—including expenditures by quasi-governmental foundations that dominate the economy—has been high. Estimates of service sector spending in Iran are regularly more than two-fifths of the GDP, and much of that is government-related spending, including military expenditures, government salaries, and social service disbursements.
Urbanization has contributed to significant growth in the service sector. Important service industries include public services (including education), commerce, personal services, professional services, and tourism. Iran's national science budget is about $900 million (2005) and it has not been subject to any significant increase since 15 years ago. By early 2000, Iran allocated around 0.4% of its GDP to R&D, which ranks it "far behind industrialized societies" and the world average of 1.4%. By 2009 this ratio of research to GDP reached 0.87% and the set target is 2.5%.
The total value of transport and communications GDP will rise to $46 billion in nominal terms by 2013, representing 6.8% of Iran’s GDP. Projections based on employment figures compiled for the International Labor Organization in 1996 suggest that Iran’s transport and communications sector employed 3.4 million people, or 20.5% of the labor force, in 2008.
Retail and distribution
Retail industry in Iran and Electronic commerce in Iran
At present the Iranian retail industry is largely in the hands of cooperatives, many of them government-sponsored, and of independent retailers in the bazaars. The bulk of food sales occur at street markets, where the Chief Statistics Bureau sets the prices. More mini-markets and supermarkets are emerging, but these are mostly one-off, independently owned operations. The most significant chains are the state-owned Etka, Refah, Shahrvand and Carrefour-owned Hyperstar Market, all of which are gearing up for expansion. Migros Turk has also investment projects in Iran. Iran's electronic commerce will reach 10,000 billion rials ($1 billion) by March 2009.
Healthcare and pharma
Healthcare in Iran
IRAN: Healthcare (Source: Economist Intelligence Unit)[169] 2005 2006 2007
Life expectancy, average (years) 70.0 70.3 70.6
Healthcare spending (% of GDP) 4.2 4.2 4.2
Healthcare spending (US$ per head) 113 132 150
The constitution entitles Iranians to basic health care. In the early 2000s, about 65% of the population was covered by the voluntary national health insurance system. Although over 85% of the population use an insurance system to reimburse their drug expenses, the government heavily subsidizes pharmaceutical production/importation in order to increase affordability of medicines and vaccines. The total market value of Iran’s health and medical sector was almost $24 billion in 2002 and was forecast to rise to $31 billion by 2007. In 2006, 55 pharmaceutical companies in Iran produced more than 96% (quantitatively) of medicines on the market worth $1.2 billion annually.
Tourism and traveling
Tourism in Iran
Iran currently ranks 68th in tourism revenues worldwide. Iran with attractive natural and historical sites is rated among the 10 most touristic countries in the world. Iranian hospitality and culture are some of the unique and distinctive features of its people.
The tourist industry declined dramatically during the war with Iraq in the 1980s but has subsequently revived. About 1,659,000 foreign tourists visited Iran in 2004; most came from Asian countries, including the republics of Central Asia, while a small share came from the countries of the European Union and North America. The most popular tourist destinations are Isfahan, Mashhad, and Shiraz. In the early 2000s the industry still faced serious limitations in infrastructure, communications, regulatory norms, and personnel training. The majority of the 300,000 tourist visas granted in 2003 were obtained by Asian Muslims, who presumably intended to visit important pilgrimage sites in Mashhad and Qom. Several organized tours from Germany, France, and other European countries come to Iran annually to visit archaeological sites and monuments. Iran currently ranks 68th in tourism revenues worldwide. Iran with attractive natural and historical sites is rated among the "10 most touristic countries in the world". Close to 1.8% of national employment is generated in the tourism sector which is slated to increase to 10% in the next five years.
Banking, finance and insurance
Main articles: Central Bank of Iran and Iranian Rial, and Banking and Insurance in Iran
See also: Shetab Banking System, Tehran Stock Exchange, and Iran Mercantile Exchange
The government makes loans and credits available to industrial and agricultural projects, primarily through banks. Iran’s unit of currency is the rial. The official exchange rate averaged 9,326 rials to the U.S. dollar in 2007. However, rials are exchanged on the unofficial market at a higher rate. In 1979, the government nationalized all private banks and announced the establishment of a banking system whereby, in accordance with Islamic law, interest on loans was replaced with handling fees; the system went into effect in the mid-1980s.
As of June 2008, 400 companies, with a market capitalization of $70 billion were listed on the Tehran Stock Exchange (TSE).[ TSE has been one of the world's best performing stock exchanges in recent years.
The banking system consists of the central bank also known as Bank Markazi, which issues currency and oversees all state and private banks; several commercial banks that are headquartered in Tehran but have branches throughout the country; two development banks; and a housing bank that specializes in home mortgages. Accounts of the state-owned commercial banks are dominated by loans to state and Bonyad enterprises, large-scale private firms and four thousand wealthy/connected individuals who don't always repay their loans. The government began to privatize the banking sector in 2001, when it issued licenses to two new privately owned banks. Iranian reserves in foreign banks in mid-February 2008 reached over $81 billion.
The Tehran Stock Exchange trades the shares of more than 400 registered companies. The stock market capitalization of listed companies in Iran was valued at $70 billion in 2008. According to experts, the economy of Iran has many investment opportunities, particularly on its stock exchange.
Insurance premiums come to just below 1% of GDP. This is partly attributable to low average income per head. Five state-owned insurance firms dominate the sector, four of which are active in commercial insurance. The leading player is the Iran Insurance Company, followed by the Asia Insurance Company, the Alborz Insurance Company and the Dana Insurance Company. In 2001/02 third-party liability insurance accounted for 46% of premiums, followed by health insurance (13%), fire insurance (around 10%) and life insurance (9.9%).
Communications and IT
Communications in Iran, Telecommunication Company of Iran, and Media of Iran
Iran is among the first five countries which have had a growth rate of over 20% and the highest level of development in telecommunication. Iran has been awarded the UNESCO special certificate for providing telecom services to rural areas.
The government runs the broadcast media, which includes five national radio stations and five national television networks, as well as dozens of local radio and television stations. In 2000 there were 252 radios and 158 television sets in use for every 1,000 residents. There were 219 telephone lines and 110 personal computers for every 1,000 residents. Computers for home use became more affordable in the mid-1990s, and since then demand for access to the Internet has increased rapidly, where Iran has now the world's fourth largest number of bloggers. In 1998 the Ministry of Post, Telegraph & Telephone (renamed Ministry of Information & Communication Technology) began selling Internet accounts to the general public. In 2006, the Iranian telecom industry's revenues were estimated at $1.2 billion. By the end of 2009, Iran's telecom market was the fourth-largest market in the region at $9.2 billion and is expected to grow to $12.9 billion by 2014 at a CAGR of 6.9% Iran currently has 1,223 Internet Service Providers (ISPs) all private sector operated.
According to the Electronic Journal on Information Systems in Developing Countries (EJISDC), the information and communications technology (ICT) sector had a 1.1–1.3% share of GDP in 2002. About 150,000 people are employed in the ICT sector, including around 20,000 in the software industry. There were 1,200 registered information technology (IT) companies in 2002, 200 of which were involved in software development. Software exports stood around $50 million in 2008.
Transport
Transport in Iran
Tehran Metro, Islamic Republic of Iran Railways, Iran Shipping Lines, and Airlines of Iran
Tehran is the hub of the country's communication and transport network.
Iran has an extensive paved road system linking most of its towns and all of its cities. In 2007 the country had 178,152 kilometers (111,000 mi) of roads, of which 66% were paved. There were approximately 100 passenger cars for every 1,000 inhabitants. Trains operated on 11,106 km (6,942 mi) of railroad track.
The country’s major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving in Iran, imported goods are distributed throughout the country by trucks and freight trains. The Tehran-Bandar-Abbas railroad, opened in 1995, connects Bandar-Abbas to the railroad system of Central Asia via Tehran and Mashhad. Other major ports include Bandar Anzali and Bandar Torkaman on the Caspian Sea and Khoramshahr and Bandar Imam Khomeini on the Persian Gulf. Dozens of cities have airports that serve passenger and cargo planes. Iran Air, the national airline, was founded in 1962 and operates domestic and international flights. All large cities have mass transit systems using buses, and several private companies provide bus service between cities. Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Isfahan are in the process of constructing underground mass transit rail lines. More than one million people work in the transportation sector, accounting for 9% of GDP (2008).
Foreign trade and economic relations
Economic Cooperation Organization, Middle East economic integration, Developing 8 Countries, and Colombo Plan
Iranian exports in 2006. Part of the non-oil exports are rising as the country is moving towards industrial diversification. Pistachios, liquefied propane, methanol (methyl alcohol), hand-woven carpets and automobiles are the core items of Iran's non-oil exports.
Iran is a founding member of OPEC and the Organization of Gas Exporting Countries. Petroleum constitutes the bulk of Iran's exports (80%), valued at $46.9 billion in 2006. Iran's non-oil exports stood at $16.3 billion in the year ending March 20, 2007, a rise of 47.2% from the previous period, and $25 billion in 2010. Pistachios, liquefied propane, methanol (methyl alcohol,) hand-woven carpets and automobiles are the core items of Iran's non-oil exports. Iran's export of technical and engineering services in 2007–08 was $2.7 billion; 40% of the export of technical services pertains to Central Asia and the Caucasus. About 30%, equivalent to $350 million, to Iraq, and close to 20% ($205 million) to Africa and North Africa. Iranian firms have implemented projects in different fields such as energy, pipeline, irrigation, dam construction and power generation in different countries. Iran has made the development of non-oil exports a priority. The country has the advantage of a broad domestic industrial base, an educated and motivated workforce and geographical location, which gives it access to an estimated population of some 300 million people in Caspian markets, Persian Gulf states and some ECO countries further east.
The total volume of imports to Iran rose by 189% from $13.7 billion in 2000 to an estimated $39.7 billion in 2005 and $55.189 billion in 2009. Iran is among the few countries that has kept a positive GDP growth despite the 2008 global financial crisis.
Iran's major commercial partners are China, India, Germany, South Korea, Japan, France, Russia and Italy. From 1950 until 1978, the United States was Iran's foremost economic and military partner; thus participating greatly in the modernization of its infrastructure and industry.
Map of the Economic Cooperation Organization (ECO) member states which is headquartered in Tehran.
Since the mid 90's, Iran has increased its economic cooperation with other developing countries in "south-south integration" including Syria, India, China, South Africa, Cuba and Venezuela. Iran's trade with India crossed US$13 billion in 2007, an 80% increase in trade volume within a year. Iran is expanding its trade ties with Turkey and Pakistan and shares with its partners the common objective for the creation of a single economic market in West and Central Asia called ECO.
Since 2003, Iran has increasingly invested in the economy and reconstruction of its neighboring countries like in Iraq and Afghanistan. In Dubai, UAE, it is estimated that Iranian expatriates are handling over 20% of its domestic economy with an equal proportion of its population. From 2005 to 2009, trade between Dubai and Iran tripled to $12 billion; money is invested in the local real estate market and import-export businesses, collectively known as the Bazaar, and geared towards providing Iran and other countries with the demanded consumer goods. Migrant Iranian workers abroad remitted less than $2 billion home in 2006.
Foreign direct investment
Foreign Direct Investment in Iran
Assalouyeh, Tehran International Fair, and Iranian citizens abroad
Stock of Foreign Direct Investment in Iran (Proposed) hit a record $10.2 billion in 2007 from $4.2 billion in 2005 and $2 million in 1994. By 2009 Iran had invested $793 million abroad and received $7.854 billion at home.
In the 1990s and early 2000s, some indirect oilfield development agreements were made with foreign firms. Buyback contracts in the oil sector, for instance, were arranged in which the contractor funded all the investments, and then received remuneration from the National Iranian Oil Company (NIOC) in the form of an allocated production share, then transferred operation of the field to NIOC after a set number of years, at which time the contract was completed.
Foreign investment has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran absorbed $24.3 billion of foreign investment from Iranian calendar year 1993 to 2007. Foreign direct investment in Iran hit a record $10.2 billion in 2007 from $4.2 billion in 2005 and $2 million in 1994. Foreign transactions with Iran amounted to $150 billion worth of major contracts between 2000 and 2007, including private and government lines of credit. In 2007, Iran had $62 billion worth of assets abroad.The EIU estimates that Iran's net FDI will rise by 100% within the next four years.
Firms from over 50 countries have invested in Iran in the past 16 years (1992–2008), with Asia and Europe receiving the largest share, as follows:
Continent of origin Leading countries investing in Iran (1992–2008) Number of projects Total amount invested
Asia United Arab Emirates (UAE), Singapore, Indonesia and Oman 190 $11.6 billion
Europe Germany, the Netherlands, Spain, UK, Turkey, Italy and France (20 countries in total) 253 $10.9 billion
Americas Canada, Panama, the USA and Jamaica 7 $1.4 billion
Africa Mauritius, Liberia and South Africa N/A $8 billion
Australia Australia 1 $682 million
Foreign investors have concentrated their activity in a few sectors of the economy: energy, vehicle manufacture, copper mining, construction, utilities, petrochemicals, clothing, food and beverages, telecom, and pharmaceuticals. Iran is a member of the World Bank's Multilateral Investment Guarantee Agency. In 2006, the combined net worth of the Iranian citizens abroad was about 1.3 trillion dollars.
According to the head of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI), Iran ranked 142 among 181 countries in terms of working conditions in 2008. Iran stands 96 in terms of business start, 165 in getting permits, 147 in employment, 147 in registering assets, 84 in getting credits, 164 in legal support for investments, 104 in tax payment, 142 in overseas trade, 56 in feasibility of contracts and 107 in bankruptcy. Iran ranks 69th out of 139 in Global Competitiveness Report.
Iran and the World Trade Organization
Iran and WTO and Group of 15
Middle East economy and Intellectual property in Iran
Middle East economic integration is a step towards WTO accession and a prime market opportunity for Iran's non-oil exports.
Iran has an observer status at the World Trade Organization (WTO) since 2005. The United States has consistently blocked Iran's bid to join the WTO since Tehran first asked for membership several years ago but accepted the country in as a goodwill gesture so as to ease the nuclear negotiations between Iran and the international community.
If Iran does eventually gain membership status in the WTO, among other prerequisites, copyright laws will have to be obeyed in Iran. This would require a major overhaul of business and trade operations in Iran, a change which many experts believe would be a price too heavy for Iran's economy to pay at the present time. Still, Iran is hoping to attract billions of dollars worth of foreign investment while creating a more favorable investment climate, such as reduced restrictions and duties on imports and the creation of free trade zones like in Qeshm, Chabahar and Kish Island. Iran has allocated $20 billion in loans to launch 20 trade centers in other countries.
International sanctions
International sanctions against Iran
U.S. sanctions against Iran, European Union sanctions against Iran, and Smuggling in Iran
After the Iranian Revolution in 1979, the United States ended its economic and diplomatic ties, banned Iranian oil imports and froze approximately $11 billion of its assets. In 1996, the U.S. Government passed the Iran and Libya Sanctions Act (ILSA) which prohibits U.S. (and non-U.S. companies) from investing and trading with Iran for more than $20 million annually, with the exception, since 2000, for items like pharmaceuticals and medical equipment.
Since 2006, Iran's Nuclear Program has become the subject of contention with the West because of suspicions regarding Iran's military intentions. This has led the UN Security Council to impose sanctions against Iran on select companies linked to this program, thus furthering its economic isolation on the international scene. Sanctions notably bar nuclear, missile and many military exports to Iran and target investments in oil, gas and petrochemicals, exports of refined petroleum products, as well as the Iranian Republican Guard Corps, banks, insurance, financial transactions and shipping. It is estimated that one third of Iran's imported goods and exports are delivered through the black market, underground economy, and illegal jetties.
(source:wikipedia)
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