LET'S DEFINE DEVELOPMENT

Iran 2011 | ECONOMY | INTERVIEW

TBY talks to Yahya Ale-es-hagh, President of the Tehran Chamber of Commerce, Industries and Mines.

Yahya Ale-es-Hagh
BIOGRAPHY
Yahya Ale-es-Hagh is the President of the Tehran Chamber of Commerce, Industries and Mines

How would you describe the developments in the Iranian economy in the wake of the Fifth Five-Year Development Plan (FYDP)?

Before I answer your question, let us first set a definition for development. For instance, development has a standard definition, but internally we have another way of looking at it. We position the progression of development alongside the upholding of justice. What do we mean by justice? Justice means that everybody capable of having a talent or skill should be given the opportunity to exercise that talent, whether in social, cultural, or economic affairs. In other words, in justice, we should help those classes and strata of people who have had a historical disadvantage to achieve a higher standard of living and let them participate in the competitive sphere. If one has such an outlook, then the priority in having development will be different from others. Before the Revolution there were about 70,000 university students, and now there are 3 million students in the universities. This shows how we gave priority to human development over other forms of development. We are one of the top countries for human development, and this development started from our small villages right up to our big cities. The sweet fruit of that is the high level of knowledge and scientific production that we have today. You see that in different realms and fields of science where we are at the cutting edge. The news was recently announced that Iran was the first country to achieve the industrial production of bio-implants, which are used for eye surgery. We even preceded researchers in the US, who were only doing bio-implants on a laboratory scale. The other priority that we are working on is the fair distribution of incomes and to achieve a Gini coefficient at a normal and plausible level. The inequality in income distribution is quite high in Iran and we are trying to moderate it. The other point is investment in infrastructure development. In the past we decided to give more significance to the development of financial and manufacturing infrastructure. For instance, investment in petrochemicals, power plants, and hydro dams.

How do you think these policies will affect the future of the country?

We firmly believe that they will play a key role in the future. The country's 20-year vision states that we should be ranked first in development terms and have the highest per capita income in the region by 2025. If we assume that today the per capita income in the region is about $20,000, we presume it will be about $30,000 by 2025. This means that we need to achieve an annual 8% growth rate.

What should be done to reach 8% annual growth from the current level of 2%?

We hope that over time the pace of growth will increase. For instance, on infrastructural issues we are trying to execute two general policies. One is Article 44, and the other is the subsidy direction code. They mean we have to speed up privatization efforts, remove energy subsidies, and create more targeted subsidies for the poor. We forecast that by having these two policies executed there will be an acceleration of economic growth.

What are the implications of these two reforms on the country's growth trajectory?

Transparency and saving will affect the growth of the country positively. On only the question of energy alone, the government is paying $100 billion to support energy subsidies. This is five times more than the development budget. Imagine if that $100 billion were to be transferred to the development budget of the country. We can do it as soon as possible. It would have its own implications on the development of different fields, such as the economy, social affairs, and politics. Though I am not a man of politics, part of our development as we have defined it is the development of the nation's presence in the international arena. As was predicted in the 20-year vision for the country, in the coming decades Iran will achieve a much higher interaction with all countries in the region and in the world as a whole. This interaction means that we shall find a place in the world that is compatible with our level of achievement. What we are doing in the international affairs arena is to express that we have our own rights and prerogatives in the region and the whole world to prove to ourselves. It is one of the foundations of development. If we view all these pieces together, it shows that all of us are getting ready to take a big leap forward. Taking into account the different aspects of geo-strategy, geo-geography, and geo-economy along with the other parameters, it shows we have the potential to make that great leap.

We are a country with a population some 74 million. Over 50-60% of the population is under 30 years old. We have 5 million university graduates. We have huge reserves of energy, which makes our country first or second in the world. We have a very strategic geographical location that makes this country the gate between East and West, North and South. Another point to boast about it is the fact that Iran has 3,000 years of written history. There are very few civilizations like that. There were many challenges and hurdles in the course of history, but the nation successfully passed through all of them. Therefore, there is an innate ability of managing and challenging international problems. Some countries are only 100 years old. The most significant advantage we have over all of them is that we have an integrated strategic management system. While the operational offices are working in different corners of the country, there is a grand vision that moves the entire nation toward a single goal.

Where do you see foreign direct investment (FDI) in upping the pace of economic growth? How is this chamber looking to increase FDI levels?

FDI has a key role to play in the advancement of the country's economy. Let me give you some figures. In the next five-year plan under completion, to maintain 8% growth and help us achieve the final goals we will need $1,000 billion in investment in the coming five years. It is a big gap from the $3 billion we receive now, but we will try to compensate this figure with $300 billion from oil revenues. We have also forecast the ability to generate $300 billion from other resources like taxes. Then we are left with $300 billion-$400 billion. This is the share that we have allocated for FDI. The question is, how can we get to the final figure? It goes back to many parameters like foreign policy, internal issues, and other matters. Generally, we are optimistic, and there are many other parameters that can help. For instance, we plan to have $500 billion in investment in the oil sector over the coming five years. That is a must. Investment this year in Iran, in terms of the turnover of invested money and capital and the benefits and revenue that they generate, cannot be compared with any other place in the region. In our country, a project can be viable even at interest rates of 20%, while in neighboring countries a rate over 10% is not economic. In terms of internal consumption, we have a market of 70 million people, and to this can be added the 200 million to 300 million people in the neighboring region. There are huge opportunities for investment. Although there are some political issues and international matters, we believe we can cope with them. Therefore, we see that there is an opportunity to absorb $300 billion-$400 billion in FDI. If we mobilize our nationals living overseas, they can provide that. This figure is not as high as it first appears.

As the Tehran Chamber of Commerce, do you provide any services to potential foreign investors?

Internally, we provide different services to our members. It is part of the various tasks we specialize in at the chamber. On international issues, through the cooperation and communication that we have with our government, we render many services to support different activities, such as investment support, legal support, business support, information, and any other form of support that an investor may need to obtain contacts. We hold seasonal, regional, and international seminars for investors to get to know Iran better. We invite the chambers of different countries to Iran to give them the opportunity to improve their knowledge of Iran. We also have joint chambers, like Iran-China, or Iran-Canada, where the active members get together and exchange information and visits. One of the other functions of the chamber is to play the role of consultant. In the case of disputes it plays the role of arbitrator, giving legal support to the parties. We encourage the establishment of joint ventures in different fields.