Iran Country Assessment -- Economic Assessment Iran Country Economic Assessment

Economic Assessment

Like many other Islamic countries in the Middle East region, Iran's economy is heavily dependent upon its oil and natural gas resources. According to an estimate, oil and natural gas exports contribute more than 80% of the total export revenues for the country. Tehran; being the business hub for the country, has the highest population, employment opportunities, and industrial setups[footnoteRef:1]. The major industries in Iran include textile, automobile, food and consumer products manufacturing while a number of small and medium enterprises have been set up during the last two to three decades. The Iranian Government formulates its comprehensive economic policy after every five years period. Iran economy has been facing various challenges from local and international environment; unemployment, low industrial growth, inflation, corruption, and international relations are named to be few of them[footnoteRef:2]. [1: World Bank. 2012. Iran at a Glance. Online, available from Internet accessed July 17th, 2012. ] [2: The Library of Congress. 2012. Country Studies: Iran. Online, available from Internet, accessed July 17th, 2012.]

The Gross Domestic Product (GDP) Growth Rate:

The GDP growth rate of the country has always been showing a decreasing trend for the last few years. The estimated GDP growth rate for 2011 is 2.5% as compared to 3.2% in 2010 and 3.5% in 2011. Due to this low real growth rate, Iran has been ranked on the 142nd position in the world's country comparison chart. Some neighboring countries of Iran have relatively better growth rate; Iraq has a real GDP growth rate of 9.6% (2011), Turkey has 4.6%, whereas Pakistan has significantly improved this rate from 1.7% in 2009 to 2.4% in 2011[footnoteRef:3]. [3: CIA. 2012. The World Fact book -- Iran. Online, available from Internet, accessed July 17th, 2012. ]

The Gross Domestic Product (GDP) Per Capita (PPP):

The Gross Domestic Product per capita (PPP) has shown a little improvement in the last two years period. It has increased from $11,900 (2009) and $12,100 (2010) to $12,200 in 2011. This increase shows a positive sign towards the economy growth of the country. This slight increase has also improved the country's ranking by placing it at 99th position. If the GDP per capita for Iran is compared with the other countries in the region, it will be surprising to see at the figures for Iraq and Turkey. Iraq, which has a 9.6% real GDP growth rate, noted the GDP per capita at only $3,900.

On the other hand, Turkey has $14,600 GDP per capita (2011) despite having a 4.6% real GDP growth rate[footnoteRef:4]. The Services sector of the country contributes the highest (51%) towards its GDP whereas industrial sector has 37% and Agricultural sector has 10.4% share. This contribution by each sector of the economy also keeps on changing with the economic conditions of the country. For example, the contribution of the Services sector was 47% in 2006 while industrial sector used to share more than 41%. It shows that the services sector has grown at a rapid pace than any other sector in the Iranian Economy during the last five to six years period. [4: CIA. 2012. The World Fact book -- Iran. Online, available from Internet, accessed July 17th, 2012.]

The comparative analysis of different countries in the Middle East reveals that the industrial and services sector has always taken the major share in GDP contribution. The industrial sector in Iraq contributes 60.5% whereas services sector has 29.8% share in GDP. Turkey, Pakistan, and Afghanistan have almost the same situation where both the aforementioned sectors take the most of the GDP share for these countries[footnoteRef:5]. The contribution of the agricultural sector for Iran is 10.4% while this figure is 34.9% for Afghanistan, 20.9% for Pakistan, 9.7% for Iraq, and 9.3% for Turkey. It means Iran is relatively more reliant on its Agricultural sector than its neighboring countries in the Middle East and less reliant than Pakistan and Afghanistan (the neighboring countries from the South Asian region). [5: The Heritage Foundation. 2012. 2012 Index of Economic Freedom. Online, available from Internet, accessed July 17th, 2012.]

Labor Force:

Iran's total labor force is 26.37 Million (2011 estimate). The country has been facing a severe shortage of skilled labor due to which the industrial sector is unable to achieve efficiency in its operational and production activities. The level of unemployment and under-employment is also very high in the country. It creates frustration among youngsters and makes them leave the country for better work opportunities in the United Arab Emirates, Saudi Arabia, and developed European countries[footnoteRef:6]. On account of the strength of labor force, Iran is ranked at the 24th position among other countries of the world. Among its neighboring countries, Iraq has a labor force of 8.9 million, Afghanistan: 15 million, Pakistan: 58.41 million, and Turkey: 27.43 million. Pakistan; being the 7th most populated country of the world has a large labor force composed of both highly skilled and unskilled workers. Turkey,...

The labor force of Iran can also be categorized according to its composition in different sectors of the economy. The services sector has hired 45% of the total labor force whereas agriculture has 25% and industrial sector has 31% of this composition.
[6: CIA. 2012. The World Fact book -- Iran. Online, available from Internet, accessed July 17th, 2012.]

Sr. #

Country

Labor Force

1

Iran

26.37 million

2

Afghanistan

15 million

3

Pakistan

58.41 million

4

Turkey

27.43 million

5

Iraq

8.9 million

The Level of Poverty:

The country has 18.7% Population below the poverty line of $2 per day as compared to Afghanistan: 36%, Iraq: 25%, Pakistan: 22.3%, and Turkey: 16.9%. This figure shows that the economic conditions of the country are not much favorable for its general public as they are unable to avail the basic necessities of life from their current incomes. The high level of unemployment, inflation, corruption, and low industrial growth has made it harder for the poor to live from hand to mouth[footnoteRef:7]. The current economic crisis has further worsened the economic conditions of the country by putting heavy financial burden on both the manufacturing and services sector and exposing the general public to purchasing power parity in their daily consumption activities[footnoteRef:8]. [7: CIA. 2012. The World Fact book -- Iran. Online, available from Internet, accessed July 17th, 2012.] [8: World Bank. 2012. Iran at a Glance. Online, available from Internet accessed July 17th, 2012. ]

Sr. #

Country

Population below poverty line

1

Iran

18.7%

2

Afghanistan

36%

3

Pakistan

22.3%

4

Turkey

16.9%

5

Iraq

25%

Foreign Aids:

As far as foreign aids are concerned, Iran has taken a number of steps to help the economically deprived nations in its neighborhood and international relationships. The biggest recipient of Iranian foreign aid is Afghanistan which is funded by the Iranian Government for the sole purpose of rehabilitation and economic development. In 2011, Iran donated 300,000 tons oil to Afghanistan as a part of its foreign aid. Iran also funds Lebanon for its gas exploration projects. On the other hand, Iran receives foreign aid from Russia and China in various forms. The country's external debt has decreased to $17.9 billion in 2011 from $22.1 billion in 2010. The foreign aids which Iran gives to its South Asian neighbor Afghanistan have been largely criticized by the International community; blaming them to be a direct funding to Taliban agencies[footnoteRef:9]. [9: Iran Tracker. 2012. Afghanistan-Iran Foreign Relations. Online, available from Internet, accessed July 17th, 2012]

Critical Technologies

Technological Advancements:

For the last few years, the Iranian Government has been showing a deep concern for bringing technological advancements in the country. The major steps include the implementation of new electricity projects to facilitate the increasing consumption in the country (206.7 billion kWh), expanding the network of main telephone lines (26.849 million) and mobile cellular (67.5 million). Due to rapid improvements in its critical technologies, Iran has been ranked at the 12th position among the most technologically advanced countries in the telecommunication sector.

Internet and Information Technology:

The country has more than 8.214 million internet users that use different types of broadband networks to access the Worldwide Web. Further, Iran has a state-run broadcast media which is responsible to communicate the latest news and current affairs to the entire population of the country. Currently, the widespread telecommunication network can facilitate the country to keep an effective communication with the outside world.

Research and Development:

The Research and Development projects in the Natural gas and oil sector can help the country in bringing efficiency in the exploration and refining processes. From military point-of-view, the expenditures incurred on the R&D projects can help the Iranian Government in making the country economically, politically, and technologically stable and advanced. Improvements in the critical technologies can boost up the economy and facilitate the creation of attractive opportunities for the local businesses and individuals[footnoteRef:10]. [10: CIA. 2012. The World Fact book -- Iran. Online, available from Internet, accessed July 17th, 2012.]

Physical Resources

Natural Resources:

Iran has been bestowed with rich natural resources in the form of lands, forests, minerals, natural gas and oil products, etc. In its rich agri land, Iran grows…