We have to take unemployment seriously and this calls for more efforts in various economic sectors.

Suitable distribution of jobs at governmental and private sectors, good use of inter-generational assets like oil, planning for economic growth, and inhibiting inflation and unemployment are major factors that give rise to good governance. Good governance, as one of the most important focuses of the Fourth Economic Development Plan, is a method which has been worked out according to expert studies by university teachers and experienced economic scholars of Iran in order to lay the foundation for preparation of 20-Year Perspective Plan of the country. In the following interview, Hamid Reza Baradaran Shoraka, former head of the former Management and Planning Organization, expresses his viewpoints on the Fourth Economic Development Plan which has been neglected by the ninth government, challenges facing the Iranian economy and last year’s budget. Baradaran Shoraka is a graduate of economics from University of Florida. He is associate professor and faculty member of Allameh Tabatabaei University’s Faculty of Economics. In his review of ups and downs that the Iranian economy has been through since formulation of the Fourth Economic Development Plan up to inflationary and liquidity problems faced by the ninth government, he shows to be still optimistic about opportunities that lie ahead of the statesmen.

The Iranian economy has been structured in such a way that it needs consolidated and long-term planning. A large part of the country’s revenues stem from oil and gas sales and are controlled by the government. Therefore, we have to make correct plans on how those revenues should be spent. Fortunately, we formulated a long-term plan under Khatami as president and that vision was hailed by many officials including the Supreme Leader. The perspective plan is, in fact, a collection of ideal goals which should be endorsed by all authorities, though they do not constitute a law. The Fourth Economic Development Plan was drawn up on the basis of the 20-Year Perspective Plan and it was an honor for the Khatami government that such a plan was formulated on the basis of academic and expert studies. There were innovations in the five-year plan and we followed 12 major objectives through it the most important of which included more interaction with global economy, bringing more competitive capacity to domestic economy based on knowledge and regional developments, territorial survey, and good governance. Each of those objectives required several legal notes which were approved by the sixth Majlis and the final version was ratified by the seventh Majlis after changes were made to it according to viewpoints of the Guardian Council.

The ninth government, however, practically failed to achieve the Fourth Economic Development Plan’s objectives. For example, we were supposed to achieve an economic growth rate of over 8 percent and this was not a matter of choice, but we had to do that. Our studies showed that we were lagging behind other developing nations and we had to catch up with them. Our country’s population is young and most of them need honorable jobs which cannot be created in the absence of new economic investments. We have to take unemployment seriously and this calls for more efforts in various economic sectors.

There are many perspectives in this regard. We hear from here and there that the government is critical of the plan. I have announced in other interviews that if the government has any criticism, it has every right to make corrections, so that, we would not have lost so many opportunities. Now, after three years we have just started to find solutions for this problem. We must not forget that in economy even moments matter let alone three years which is a long time to be lost.

Undoubtedly, the Fourth Economic Development Plan needed corrections because it was drawn up when we were selling oil for 19 dollars per barrel. The ninth government took over when oil was sold for 70 dollars per barrel and corrections were needed in the plan. Studies have shown that there is close relationship between economic growth and oil revenues and it is for this reason that the Iranian economy is so dependent on oil proceeds. Now that international market conditions have offered us with a good opportunity to sell oil, we must make the most of this opportunity and review the goals of the plan.

It was a great mistake from the very beginning. The nature and structure of the Iranian economy is such that we need expert planning for all economic affairs. Fortunately, the Management and Planning Organization enjoyed 60 years of experience and good experts were working there and one can claim that in terms of diversity in experts, the organization was perhaps unrivalled in the world. About 70 percent of them held master’s degrees and higher academic degrees. We could have used their experience to serve planning and supervision in the country. Their expert views would have been beneficial not only for the government, but also for the whole system such as the Islamic Consultative Assembly (Majlis). Therefore, absence of that organization can deal serious blows to, at least, implementation of the Fourth Economic Development Plan.

By dissolving that organization we have deprived ourselves of its supervision and the potential to deal effectively with emerging problems.

I have no doubt that in the near future we would have to establish a similar organization, but this means that we will lose many opportunities. Of course, this does not mean that Management and Planning Organization did not need any reforms, but the Fourth Economic Development Plan had projected to downsize the body. It was supposed to reduce its own size after attending to other organizations. Its mission and duties had been clearly explained by the Fourth Economic Development Plan. In the absence of the Management and Planning Organization it is not clear which organization will undertake its tasks.

There are parallel organizations in other countries which do the job when another organization is dissolved, but this is not the case in our country and we feel the need for a central body. Within five-year plans, we must work out short-term, one-year plans in order to regulate all economic activities in the country and achieve the goals of the 20-Year Perspective Plan.

We concluded when drawing up the Fourth Economic Development Plan that our economy is ill and needs a treatment. The best treatment is to have an annual economic growth rate of about 8.6 percent and we need hefty investments in order to meet that goal.

For example, we have projected a rise of 12 percent in investment in industrial, agricultural and service sectors. We maintained that in addition to domestic sources, foreign sources were needed in the form of direct and indirect investments. In attracting foreign investments, we had not simply focused on foreign capital, but we aimed to have access to their financial resources and experiences and also to pave the way for technology transfer.

If the goals of the Fourth Economic Development Plan had been realized, instead of simply exporting crude oil, we could have exported its products or exported agricultural products. We could have prepared our country for a competitive economic system because in order to be present in international markets, we must be able to compete with international prices and quality of our goods should be also improved. Here, good grounds are provided for competitiveness within a knowledge-based economic system. Knowledge-based economy means a system in which knowledge has the first say and even shortage of resources can be compensated through knowledge. We were supposed to improve our economic productiveness by 33 percent through promotion of knowledge in all economic sectors. The grounds for establishing such a system are readily available in our country.

When drawing up the Fourth Economic Development Plan, we knew that we could not succeed without development. Therefore, we planned to shift from a centralized system in some economic sectors to a non-central one. Therefore, by paying attention to all economic centers, capabilities and potentials, we could have managed immigration to the capital city. All those efforts were enough to turn our economy into a productive one. A productive economic system would have reduced unemployment because new investments call for sufficient manpower. If we succeeded in distributing our monetary assets in a correct way, new economic activities could have prevented escalation of the inflation rate as well as employment.

Instead of correct allocation of resources, the ninth government concentrated oil revenues in state budget and that in an inorderly manner. Lack of financial discipline has greatly increased liquidity, so that, liquidity has expanded by more than two times from about 680,000 billion rials in 2004 to more than 1,440,000 billion rials in November 2007. Naturally, expansion of liquidity will have inevitable effect of increasing the inflation rate. Unfortunately, if we failed to control inflation, its consequence would be with us in the years to come.