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July 2013, No. 67


Economy

Fifteen Years Needed
to Return to 2005 Zero Point


Restoration of government's credit among citizens and the international system is one of the main challenges and duties of the next government.


Dr. Farshad Mo'meni

Thanks to the performance of the current government, it would be fair enough to say that in the years to come we will be facing numerous difficulties. Due to the vastness and depth of abnormalities imposed on the national economy and development prospects the damage on our economy is widespread.

In this period (under the administration of the incumbent government) we have fetched one of the most unprecedented levels in oil revenues. These revenues have caused dependence of Iranians in all aspects of life but with the least positive impact on their life. The oil income has had the least significant effect on national production and creation of new capacities. It has also drawn the least promising prospect for welfare and employment.

In terms of facts and figures, the rate of development of fixed capital in Iran's economy according to the Fourth and Fifth Development Plans was specifically expected to reach 12% which figure in the years of the Fourth Plan hardly reached 3%.

This means the government in the course of the Fourth Plan years spent over four times more than the oil revenues to realize only one fourth of the capital which could be obtained with one fourth of the oil revenues. In terms of target setting for realization of the goals stipulated in the 20-Year Vision Plan, we are facing a worrying and perilous situation. The prospect is tantamount to the national covenant realization of which objectives is currently considered one of the biggest challenges.

In terms of institutional arrangements and executive procedures, one of the worst heritages left from the incumbent government is its unconventional and anti-development insistence in the field of aversion from science, law and planning. In the past six or seven years and according to reports released by the State Auditing Organization the government has made two thousand violations through budget channel each year. This means the government has committed 15 administrative violations every working day.

Restoration of law, science and planning to the country as the most important components of development is among the most major challenges of the next government. Although this government came to power with big claims on campaign against corruption and institutionalization of justice, however the most deplorable performance of the government has been in this section.

In some years of the past seven years Iran's relative stand in the area of government performance has dropped 75 ranks in terms of economic virtue. Iran has been placed in the group of countries with the highest economic corruption level. A year before the current government came to power Iran ranked 87 internationally and stood among the first half of the world in terms of economic virtue. Currently, we stand almost at the end of the list of the second half and among the worst countries.

Restoring Iran's dignity is one of the most critical responsibilities of the new government. Also, Iran's ranking in the past seven years has dropped by 63 ranks in terms of environment quality. With regard to the business environment, Iran has collapsed by 20 ranks. Restoration of government's credit among citizens and the international system is one of the main challenges and duties of the next government.

According to a report released by the Ministry of Health up to the calendar year 1389 (2010-2011) the number of those who fell down below the poverty line rose from the 1% to 5% in 1390 (2011-2012), that is to say an increase of about 500%. According to reports, with regard to education, one third of the total population of school age children is excluded from the cover of the Ministry of Education. This is an indication of the inflation generating policies of the government and  increasing stagnation.

In view of economic policies, the main plague is creation of an atmosphere of mistrust among productive sectors of the economy. The gap between development plans and rate of development of fixed investment is indicative of the impacts of destabilizing policies of the government which have forced the private sector to flee the scene.

Present statistics show that 10 to 15 years are needed in order to restore the zero position of the calendar year 1384 (2005-2006). But, in the case of normal-cultural components it would take two decades to repair the damage caused. As for the second phase of the targeted subsidies and the process for its implementation, first it should be seen how much that government is committed to science and planning. On the basis of this commitment different scenarios could be prepared. The most destructive measure in terms of retreating in sustainable development is for a government to hinder its citizens from active participation and accustoms them to receive charity.

In the literature of sustainable development we have a phrase which refers to the priority of creating job opportunities to cash subsidies. If the government instead of instability of the environment of macro economy and forcing the private sector to escape had planned for improvement of business environment and prepared the ground for creating job opportunities, on average welfare of citizens compared to receiving subsidies would go one thousand per cent higher.

Now the government pays 450 thousand rials (per person per month) but the minimum revenue for employed individuals would be 5 million rials which is 10 times more than the charity the government pays. In the meantime, the effects and outcomes of unemployment as well as direct and indirect consequences have been imposed on the society.

 

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  July 2013
No. 67