Small industries constitute a powerful means of technological development in many countries and they can, thus, be considered the parent of big industries. All powerful industries of the world have started as small industries. Small industries thrive through innovations. Technological growth is the main factor that helps them develop. Small industries along with big industries work like different organs of a single body and the role of neither of them in promoting overall economic development can be ignored. However, small industries have not achieved their rightful status in the Iranian economy. Unfortunately, policymakers and state-run planners of Iran are used to changing their focus on different economic phenomena. In other words, in one period of time, policymakers are intent on developing small industries while later on; they pay more attention to other sectors. The main reason for that instability is ideological; that is, as long as we pay attention to small industries through an ideological angle, they will have their main function in the economy. The government cannot focus on big industries and totally ignore the economic role of small industries. That sector has its own economic functions and should meet more expectations. To meet those expectations, government’s approach to small industries should change.

The most important point that has imparted an ideological role to small industries in economy is the issue of employment. No robust economic theory seeks to remedy unemployment through small industries and in short term. Employment is the result of industrial and economic developments in a country. If those developments are positive, new jobs will be created. Otherwise, it is a common mistake to think that unemployment could be tackled by developing small industries. Small industries seek to create new opportunities and cannot achieve the target productivity through accumulation of manpower.

Some claim that new jobs should be created in labor-intensive industries. They maintain that small labor-intensive industries can solve unemployment problem because they reach production stage over a short time. The experience, however, has shown that no industry can to that because employment policies achieve the said goal in the long run. You can achieve that goal through extensive planning combined with development of investment. Even if job creation is to be done through development of small industries, construction industry is a good field to attain that goal. Therefore, before doing anything, we must revise the concept of small industries in the Iranian economy because even use of labor-intensive industries would be effective in a specified or limited period of time. Emphasis put on job creation in small industries ultimately harm the sector.

Small industries enjoy unique features such as high capacities, innovation, flexibility, being invasive toward market, rapid reduction in costs, and rapid reaction to economic phenomena. Major industrial states including Germany and the United States are currently creating special zones to gather small industries there because a lot of industrial innovations are possible through development of small industries.

Small industries are invigorating the sweeping wave of information technology in the world and this is the best opportunity for our country to avail of them. We can establish many industries to harness that wave in our country. Sticking to the old idea that small industries create jobs, has prevented real development of such industries in our country. Unfortunately, both the government and Majlis believe that development of small industries will lead to job creation. The world has given up that idea which belongs to 1970s. High capacities in small industries have encouraged such countries as Canada and Germany to invest a lot in their development. They monitor developments in their small industries and creditable stock exchanges of Tokyo, Toronto, and Montreal have defined a special index for them. Therefore, small industries are sure to play an active role in future economic activities of the world, especially in various stock exchanges. We must come up with a solid strategy to develop small industries and give up the idea of job creation through this sector.

Small industries should feel that they are being supported. The most important supports to be afforded by governments are consultation, legal and financial services. Industrial nations establish information systems to support their small industries and provide them with needed services. Industrial hubs, technology parks, industrial clusters and incubators are among those supports. Iran’s development passes through growth of small industries. Therefore, the government shoulders heavy responsibility. A reason why our country has not achieved industrial development after 40 years is ambiguity about strategic status of small industries. When the governing populist theories introduce industry as a place for job creation, the result of policies made for small industries will be radicalism. As a result, no goal is achieved. Political radicalism of the government in relation to industries has been adopted from viewpoints that were in vogue in 1970s and International Labor Organization was seeking a way to prove them. That idea emphasized that people need work and welfare more than economic growth. The theory which was known as "theory of basic needs" rapidly leads to populist ideas. As the path to industrial development inclines toward people, the industry follows suit.

A clear example in this regard is provision of low interest loans to small industries. Basically, giving loans to small industries, whatever of the underlying motives, will not be a suitable measure. The most important problem which is facing small industries is ideological radicalism. Therefore, granting loans to small industries will lead to opposite results. They maintain that a large part of economic and industrial problems could be solved through attention to demand. Such radical or structuralist viewpoints ignore public aspects of economy and think that reducing interest rate can solve many problems. Even when they believe in correctness of that theory, they look at it from a populist angle, for example, what will be the effect of reduced interest rate on people’s livelihood?

The interest rate, which should regulate economic relations, is reduced by the ninth government without attention to its relationship with other economic issues. On the opposite foreign exchange rate is constant to encourage importers import more goods. However, all those variables, which bolster demand in the face of supply, are manipulated by the government just to achieve populist goals. Interestingly, those manipulations rapidly reveal the reverse effects. Even policies adopted for development of small industries, do not bear fruit. If demand parallels supply in any economic sector, that sector is sure to thrive.

Another point is that, granting such loans will not led to development of small industries, but pave the way for rent seeking. When manager of a small industrial unit only focuses on taking loans without really believing in innovation, rent seeking will flourish. Those managers only think about how to take a loan without having a clear plan to use that loan.

Information technology and network economy have provided conditions under which small industries can work without needing a permit. Since many small industries are currently active in the country in an unofficial manner, the government should make a plan to organize them. It seems that the government is not able to fulfill its duties with regard to small industries. I have no doubt that under current economic conditions in Iran; small industries can lead to a major leap in the field of information technology and even do the same with other economic sectors. ERP (Enterprise Resource Planning), consultation, assembly and hardware account for the bulk of small industries’ exports with regard to information technology. In fact the government should follow suit with the global wave that is sweeping small industries.