Azerbaijan, Baku, Feb. 5 / Trend T.Konyayeva /
EU Economic Adviser Mehrdad Emadibelieves theactive intervention by the Iranian security forces in all economic processes of the country slows economic growth and adversely affects the inflows of foreign direct investments in Iran.
"Sanctions are partially to blame," Emadi wrote Trend in an e-mail. "The fundamental problem affecting the economy has been the mass entry of the Iranian Revolutionary Guard Corps (IGRC)and security forces into all areas of the economy."
This week, Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) Director General Behrouz Alishiri said the country managed to attract only $2.7 billion of direct investment during the ten months of 2010 (from March).
However based on the plan for first five years of Iran's 20-year Development Program, to achieve the eight percent economic growth the Islamic republic should have been to ensure receipt of $ 500 billion of investment in 2005-2010, that is $ 25 billion per year, which is far more than the figure specified by Alishiri.
In 2005, Iran adopted the 20-year development plan up to 2025. This document is the first long-term strategic plan for the country's development, which consists of the so-called "five-year plans", that is medium-term socio-economic programs.
Based on the program's main goal, Iran will have to enter in the list of developed countries in the world by 2025, becoming the first among the states in the region in economic, scientific and technological sphere. In the long term, the main objective is a steady and rapid economic growth, accompanied by a growth in GDP per capita.
Many of its objectives, particularly improving macroeconomic indicators, have not been fulfilled during the first five years. In particular, there are difficulties in a sequential increase in investment in key industries - gas, oil, petrochemical, metallurgical and construction. Investment inflows are insufficient to maintain the desired dynamics of the industrial development of Iran. Many regard sanctions of the Western countries, especially unilateral restrictive measures of the EU and Japan, as serious obstacle for this.
Emadi said that no sanctions were imposed and enforced by the EU, Japan, Canada and Australia until 2008. The period 2005-2008 recorded a distinct fall in the growth rate, industrial development and technology transfer in the economy especially in the strategic sectors gas and oil.
"The Iranian security forces' intervention in many economic processeshas caused a decline in the share of the private sector in the economy from 58% in 2005 in foreign trade to less than 10% in 2009 and a fall in performance and productivity of more than 35%," Emadi said.
"The take over of many sectors by the business entities set up by the security forces in the oil, gas, transport, manufacturing and distribution of consumer goods has seen a fall in the productivity of and a rise in the cost of completion to such an extent that the key oil and gas fields in the Persian Gulf have seen a fall in output," he said. "These take place at a time when the need for further expansion is paramount given the low level of growth and investment in the rest of the economy.
Iran possesses 11 percent of world oil reserves and 16 percent of gas reserves. According to the National Iranian Continental Shelf Oil Company (NICSOC), Iran's oil reserves in Persian Gulf amounts to 95 billion barrels. At present, an infrastructure installed on the Gulf to produce up to 2.25 million barrels of oil per day. A total of 30 oil and gas fields have been found in the Gulf, and some of them are already under development. Iran annually exports up to 200 million barrels of oil from these fields.
Gas reserves in the Persian Gulf are estimated at about 4.53 trillion cubic meters. According to BP, Iran's proven gas reserves hit 29.61 trillion cubic meters as of Jan.1,2010.
OPEC's January report noted that oil production in Iran is reduced since early 2010. Every month Iran produced less oil than in the previous month.
Thus, Iran produced an average 3.74 million barrels of oil per day in the first quarter of 2010, 3.73 million - the second, 3.68 million - the third, 3.69 million - October and 3.65 million - November, which is less by 44,200 barrels than the average figure for October.
Another factor aggravating the situation is the streamlining of rent-seeking activities by the businesses owned by the quasi-state firms (owned by the Revolutionary Guards) , which turns The Iranian economy into one of the most corrupt economies in the world, Emadi said.
According to the Corruption Perception Index published by the Transparency International, Iran moved from the 88th position in 2005 to 146th position in 2009, becoming the tenth in the list of most corrupt countries in the world.
Emadi said the businesses set up outside the existing monitoring and accounting systems were given access, with almost no external control to foreign exchange reserves, bank loan and were able to set up a network of illegal ports and airports which effectively allowed them to create a parallel economy.
"They used all the instruments of the state to maximize economic rent without paying taxes," he added.
Furthermore, Emadi said, many existing contracts with foreign firms in the energy sector were cancelled and re-signed so hidden payments could be extracted without being recorded in public accounts.
The International Transparency as well as the New Economics statistics report a rise of 40 to 70 percent in the cost of doing business in Iran for foreign firms all caused by payments sought by officials.
"As a result, Iran has become one of the least transparent and most costly environment to conduct business and even the excising foreign firms, except those prepared to pay the irregular payments have left the country," Emadi said.
Theretofore, Iran needs to restrict the control of security forces on the civilian economy, encourage financial transparency in its banking system and adhere to the basic rules of foreign trade with regards to smuggling to attract investment, Emadi noted.
Emadi said until 2008 there were no sanctions imposed and enforced by the EU, Japan, Canada and Australia. The period 2005-2008 recorded a distinct fall in the growth rate, industrial development and technology transfer in the economy especially in the strategic sectors gas and oil.