The global industry has witnessed an emergence of a new paradigm in the field of technology and the establishment of a technical-economic system different from previous periods during the past two decades. This paradigm combines new technologies with modern industrial management and organizational methods and has led to the emergence of various forms of intra-corporation and inter-corporation links at an international level. The role of knowledge and science in production-industrial processes has become very important and exchange of information between executives and activists in the industrial and economic fields has remarkably increased. Technological developments have changed international economic relations and changes in capital flow, technology, manpower, production as well as information ownership and property rights have led to emergence of new models of relative advantages for production and trade of the industrial goods. Although, the industrial world has been and continues to be the main focus of technological developments, however, developing countries, in general, and Iran, in particular, will be inevitably touched by the new developments in economic-industrial relations. They would only be able to take advantage of numerous commercial and investment opportunities in global economy and push their own industrial development processes only if they adapt to new conditions and pave the way for finding a suitable position in the new system of division of labor by entering international networks of value. The most important characteristics of global industrial development resulting from developments in a new technical-economic atmosphere can be enumerated as follows:

Industries requiring science and industries with moderate and superior technological contents have turned into pioneer industrial fields.

In the field of technical changes and competitiveness: A higher share has been allocated to information, knowledge and services in new processes of the industrial production and the share of materials and low-skilled workforce in production of competitive industrial corporations has dwindled. Classic industries with similar products have been rearranged; traditional materials have been replaced by new ones and diversity of products, design, process management, marketing, sales and publicity have become increasingly important in industrial competition. The advantages of having natural resources have been replaced in the new competitive model by privileges and superiorities resulting from science and technology. In this way, in a new global industrial atmosphere and as a result of intense competition in industrial products’ markets, innovation, learning, resilience, quality of products as well as production of new products, processes and services have found a special place in realization of the competitiveness. Industries requiring science and industries with moderate and superior technological contents have turned into pioneer industrial fields.

In the field of emergence of new structures for organizing production: In new industrial organizations, hierarchical arrangements have been replaced with establishment of intermingled production-technological networks. Industrial clusters, industrial zones of coalitions and strategic pacts, arrangements made by long-term industrial contractors with suppliers of materials, intermediate goods and parts, are examples of this kind of organization.

Revolution in information and communication technologies has made possible separating industrial production stages and establishment of international production networks and systems under the management of transnational corporations. This has created new opportunities for industrialization of the developing nations proportionate to their privileges and superiorities within framework of global value networks. At the same time, participation of domestic and foreign industrial corporations for obtaining necessary technology and science for the industrial development has created new conditions for upgrading technology and materialization of competitive performances. One of the important consequences of establishment of an international production and new organization is emergence of competitive superiorities on the basis of systematic (and not individual) efficiency and productivity within framework of corporate conglomerates. Boosting the role of small- and medium-size industries within industrial clusters and connecting them to big complexes and industries in global production and trade networks is another result of new industrial arrangements.

In the field of new industrial development paradigm and strategies: In new strategies of industrial development, such ideas as self-sufficiency, introspection and imports replacement have been replaced with externalized strategies targeting integration with global economy and good placing in international production-commercial networks. Also, taking advantage of active policies for utilization of place advantages proportionate to necessities of the new competition model has become an important factor in the industrial strategies.

The industrial world has been and continues to be the main focus of technological developments, however, developing countries, in general, and Iran, in particular, will be inevitably touched by the new developments in economic-industrial relations

When adapting to new commercial and investment regimens of the world, industrial policymaking approaches change and biased policies would be replaced by applied policies based on creating a suitable atmosphere and upgrading industrial capabilities. In these strategies, although capacity creation is still an important factor for industrial development, due to necessities of competitiveness the issue of upgrading competitive capabilities of industries for infiltration into international markets and networks has been given more priority. Making use of the rules of sustainable development and environmental concerns as well as relying on regional treaties as an important factor for the industrial development of countries has been emphasized in national policymaking by countries.

- Promotion and expansion of informatics and information technology and easier access to the industrial information

- Intense competition in international markets and increased number of technology providers

- More reliance of technology on scientific rather than experimental bases and increased speed of technological developments

- Increased choices for selecting technology as a result of numerous available technologies

- Increased pace of availability of complicated technologies and easier facilities for using them in production of the industrial products (crystallization of science in equipment and tools and industrial software and reduced role of experience and skill in technology transfer).

Source: WIR, 2002

Innovation, learning, resilience, quality of products as well as production of new products, processes and services have found a special place in the realization of competitiveness

• In economies where agriculture sector (with low productivity) and simple service activities are dominant, the role of the industrial sector as the most important developmental factor persists.

• Industrial sector provides more widespread and rapid facilities for the application of science and technology in comparison to traditional activities.

• Industrial sector is the main impetus for establishment and development of new job creation capacities.

• Industrial sector is the main breeding ground for establishment and development of new skills in the process of production and management as well as organization and maintenance activities.

• When combined with externalized strategies and export-oriented policies as well as attraction of foreign direct investment, the industrial sector and industrial development can be most effective in bringing about cultural changes and altering social views.

• Industrial sector can provide new, varied and very dynamic facilities for the establishment and realization of relative advantages and competitive advantages of international trade.

• Promoting capabilities of the industrial sector will pave the way for growth of the national production accompanied with increase in productivity, salaries and wages.

• Expansion and deepening of the industrialization process and establishment of a major industrial basis are among important conditions for developing necessary capabilities for the establishment of new exportable service activities. Many new services and service activities are closely related to the industry both as providers of requirements of the industrial sector and users of skills that were initially developed in this sector. Therefore, the industrial sector is one of the main breeding grounds for growth of such new service activities.

• Having extensive opportunities and facilities from the viewpoints of establishing global value links and networks and developing capital, technological and commercial exchanges at an international level, the industrial sector is an important factor for expansion and deepening of international interactions and economic globalization.

Therefore, the industrial sector will continue to keep its role as the most important factor for economic activity and growth of production and exports. Nonetheless, changes in economic and industrial relations of the world have led to developments in the objectives of the industrial development. Former paradigms of industrial development in many countries were based on producing a wide range of goods to replace imports and these countries looked upon industry as a means of making domestic natural resources more valuable and diversifying structure of exports. The main role of small- and medium-size industrial corporations was to create jobs and skills needed for finding a job. In this paradigm, formation and development of domestic corporations is regarded as a means of preventing dominance of foreign corporations.

Under new atmosphere of the industrial development many of these goals have continued to be creditable. However, under conditions of technological changes and rapid growth of technological advancements, as well as free trade and free flow of capital and technology, priorities and means of realizing these goals have inevitably changed. In view of the current circumstances and future exigencies of the global economy as well as emergence of new competitive necessities, the industrial sector must respond to necessities of economic competitiveness; because under these circumstances, resilience, possibility of rapid reaction and ability to use new technologies and logistic methods are regarded as the main determining factors in the economic and industrial growth and survival of countries. It is only through upgrading competitive power and competitiveness, both directly from the inside of the industrial activities and indirectly through more resilience and thriving of the economic structure as well as externalization that industrial activities and the industrial sector can contribute to the process of growth and public welfare. Achieving such goals as fighting poverty, human development and social welfare would only be possible through employment and development of jobs combined with increase in incomes, whose realization under new global economic conditions would be dependent on promoting competitive capabilities in the process of industrial development of countries. There may be apparent incompatibilities between growth, distribution of income and competitiveness in the short run, but these three goals will be quite harmonious in the long run and a growth process combined with competitiveness would lead to desirable distribution of income.

Policies for utilization of place advantages proportionate to necessities of the new competition model has become an important factor in the industrial strategies.

A comparison of figures related to export performance of Iran with those of some newly industrialized economies as an indicator of power to influence global markets and competitiveness and, finally economic-industrial capabilities, shows that Iran is lagging considerably behind developing countries. Available information shows that although total oil and non-oil exports of Iran doubled during 1980-2000 and non-oil exports grew from $645 million in 1980 to $4,119 million in 2000, but its absolute value in comparison with increase in exports of newly industrialized economies has been meager and not proportionate to potential facilities and capabilities of the country. During all these years, oil products accounted for 85-97 percent of total exports of Iran while export of the industrial goods in its best years (including 2000) only made up 7-8 percent of total exports.

During those two decades, newly industrialized economies succeeded to attain eye-catching export figures through extensive investments and changing their economic-production structure, 80-95 percent of which consisted of industrial exports. It is obvious that during 2000 and with regard to commercial competitions in the international arena, achieving mass production and exports at the level of such high figures as $249.3 billion for China, $172.2 billion for South Korea, $166.4 billion for Mexico and even $26.6 billion for Turkey would not have been possible without entering global markets and producing according to international standards, which has been made possible through cooperation with foreign corporations and attraction of their investments. Figures related to foreign direct investment in the said countries and their comparison with Iran will reveal this more clearly. While foreign direct investment in Iran has decreased by about 20 percent during those two decades and has fallen from $2,609 million in 1980 to $2,115 million in 2000, countries successful in the field of exports have managed to attract a great share of such investments in the fields of construction, machinery and production equipment and have used it as a powerful managerial lever for their economic-commercial development.

The result of this process can be reflected in growth of manpower productivity or per capita production of the employees with regard to total economic activities. Comparing Iran with newly industrialized nations indicates fall of this index during two decades in Iran against its extraordinary rise in those countries. Manpower productivity in Iran has declined by 29 percent to fall from $9,310 in 1980 to $6,649 in 1999, while the same index has doubled in Malaysia and Thailand, increased by 3.5 times in Hong Kong and 4 times in South Korea.

Apart from per capita growth of the workforce, these figures indicate deepening of the industrialization process, achieving superior technologies and entering competitive markets controlled by developed industrialized nations through attracting foreign investments and corporate management. Entering these markets and attracting participation of international companies producing industrial goods, which control the lion’s share of global commodity trade in various sectors, would not be easy. It requires suitable circumstances in the domestic economy which are characterized by investment security, positive motivations resulting from relative and competitive advantages as well as facilities for boosting profitability of production and trade under conditions of economic stability (including a low inflation rate).

With regard to the ability to flourish industrial and trade potentials, it suffices to say that Iran is located at the center of the energy and trade geography of an extensive region and neighbors 18 countries with an estimated population of about half a billion through its land and sea borders, which constitutes one of the biggest markets in the world. Therefore, the country enjoys extensive capabilities in terms of establishment of a big network for production and trading materials, intermediate goods and parts as well as the industrial tools and presentation of logistic and industrial services in adjacent countries and access to the big regional markets including wealthy littoral countries of the Persian Gulf. Naturally, this situation has provided the country with enormous opportunities with regard to establishment and development of industries, especially intermediate industries and industrial clusters linked to global value networks.

Ignoring such a superb situation by Iran has provided countries in north and south of the country to earn hefty revenues through playing the role of a go-between in a trade base, while those revenues could have easily been earned by Iranian industrialists, businesspeople and executives. We can and must act for the future right now. Iran’s industrial strategy must target production for a global market in an inter-corporation relationship with all its requirements and prerequisites. The overt and covert regional and national advantages will automatically charge domestic corporations and economy with the task of making the best choice.

For developing countries, in general, and Iran, in particular, integration with global economy will provide new opportunities from the viewpoint of access to extensive markets and advanced technology, development of goods exchange facilities and flow of foreign private capital, which can facilitate the process of the economic growth and industrial development in these countries. Economic reforms in these countries and adoption of externalized strategies oriented toward development of exports will both invigorate the process of globalization and pave the way for these countries to be benefited from globalization. In successful experiences, such reforms have been effective in improving economic condition of these countries and prospects for their economic-industrial growth through increasing efficiency and productivity and creating a suitable atmosphere for growth of exports and attraction of foreign investments. Globalization and creation of new opportunities has posed challenges for these countries too. Integration with global economy requires establishment of more latitude for trade and investment and an assuring environment for domestic and foreign economic executives. Under new global economic circumstances, development of the market and new investment opportunities is accompanied with intense competition. These opportunities, however, can prove to be serious threats for countries unable to take advantage of them and Iran is no exception.