Sanctions against Iran stimulate non-oil sector's development

Analysis Materials 11 May 2012 16:27 (UTC +04:00)

Azerbaijan, Baku, May 11 / Trend /

Ellada Khankishiyeva, Trend Analytical Centre Head

In the course of the past five years, Iran has seen significant economic growth in the face of economic sanctions and embargos.

According to the Ministry of Finance and Economy of Iran, from 2006 to 2011 Iran's GDP has doubled, from $241 billion to $482 billion. The per capita income is more than $13,000.

However, much of the growth was provided by raw materials industries (16.5 per cent of GDP). With regard to industries that are focused on meeting domestic demand (about 13 percent of GDP fall to the processing industry), weak growth was observed over the years.

Iranian Minister of Economic Affairs and Finance Shamseddin Hosseini Iran calls investment the main reason for GDP growth. According to him, the cost on the capital market has grown over the period from $53 billion to $110 billion. Foreign direct investment in Iran totaled $4.3 billion in the past calendar year, which ended on March 19, which is almost twice higher than in the previous two years, he said.

Again, these investments have been directed to commodity export-oriented industries. It is known that in 2011 more than $ 30 billion have been invested in Iran's oil industry from different sources.

In terms of per capita income, Iran on the wording of the World Bank is part of a group of countries with high per capita income (from $12,276 and above). But if we examine the structure of these revenues, we will realize that the bulk is subsidies allocated to the population from the country's oil revenues. They allowed to increase the level of social protection, develop health and raise the Iranians' education. But the country is unable to allocate from the state treasury so large grants, and proceeds to address social help to the poor. We know that Iran each year allocated to subsidize gasoline, electricity, gas, bread and basic food needs $100 billion.

Of course, now it is difficult to change the approach in solving the economic problems of the country, but Iran has in its recent history repeatedly been subject to economic sanctions, therefore, it's time to give priority to the development of non-oil sector, solution of the social issues - in this context sustained economic development is possible. Western sanctions are directed primarily against Tehran's oil trade - the main source of income of the country, the rest of their articles are purely secondary. And now the economy and financial system of Iran acutely feels the difficulties associated with the embargo, although it has not even come into effect.

And yet, according to Iranian statistics, GDP growth is evident. But it can not be called growth, ensuring sustainable development. The purpose of the fifth Five-Year Development Plan (2010-2015) of Iran is to reach 8-percent economic growth. However, without changing the quality of economic growth dreaming of a beautiful tomorrow is a simple naivete. You can arbitrarily grow in this way, and yet all the time feel weak and appear as such in the eyes of the world.