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Prior to 1979, Iran's economic development was rapid. Traditionally an agricultural society, by the 1970s the country had undergone significant industrialization and economic modernization.This pace of growth had slowed dramatically by 1978 as capital flight reached $30 to $40 billion 1980 US dollars just before the revolution.
The Iranian Revolution, also known as the Islamic Revolution or the 1979 Revolution, was a series of events that involved the overthrow of the last monarch of Iran, Mohammad Reza Shah Pahlavi, and the replacement of his government with an Islamic republic under the Grand Ayatollah Ruhollah Khomeini, a leader of one of the factions in the revolt. The movement against the United States-backed monarchy was supported by various leftist and Islamist organizations and student movements.
After the Revolution of 1979, Iran's government proceeded with 4 reforms:
The government's long-term objectives since the revolution have been economic independence, full employment, and a comfortable standard of living for citizens, but at the end of the 20th century, the country's economy faced many obstacles.Iran's population more than doubled between 1980 and 2000 and grew increasingly younger. Although a relatively large number of Iranians are farmers, agricultural production has consistently fallen since the 1960s. By the late 1990s, Iran had become a major importer of food. At that time, economic hardship in the countryside resulted in vast numbers of people moving to cities.
Independence is a condition of a person, nation, country, or state in which its residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over the territory. The opposite of independence is the status of a dependent territory.
Full employment is a situation in which everyone who wants a job can have work hours they need on "fair wages". Because people switch jobs, full employment involves a positive stable rate of unemployment. An economy with full employment might still have underemployment where part-time workers cannot find jobs appropriate to their skill level. In macroeconomics, full employment is sometimes defined as the level of employment at which there is no cyclical or deficient-demand unemployment.
Iran's population increased dramatically during the later half of the 20th century, reaching about 80 million by 2016. In recent years, however, Iran's birth rate has dropped significantly. Studies project that Iran's rate of population growth will continue to slow until it stabilizes above 100 million by 2050. More than half of Iran's population is under 35 years old (2012).
The eight-year war with Iraq claimed at least 300,000 Iranian lives and injured more than 500,000. The cost of the war to the country's economy was some $500 billion.After hostilities with Iraq ceased in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy sectors (including its prospective nuclear power facilities), and began the process of integrating its communication and transportation infrastructure with that of neighboring states.
Iran’s telecommunications industry is almost entirely state-owned, dominated by the Telecommunication Company of Iran (TCI). Fixed-line penetration in 2004 was relatively well-developed by regional standards, standing at 22 lines per 100 people, higher than Egypt with 14 and Saudi Arabia with 15, although behind the UAE with 27. Iran had more than 1 mobile phone per inhabitant by 2012.
Iran has a long paved road system linking most of its towns and all of its cities. In 2011 the country had 173,000 kilometres (107,000 mi) of roads, of which 73% were paved. In 2008 there were nearly 100 passenger cars for every 1,000 inhabitants.
Education in Iran is centralized and divided into K-12 education plus higher education. K-12 education is supervised by the Ministry of Education and higher education is under supervision of Ministry of Science and Technology and Ministry of Health and Medical Education (Iran). As of September 2015, 93% of the Iranian adult population are literate. In 2008, 85% of the Iranian adult population were literate, well ahead of the regional average of 62%. This rate increases to 97% among young adults without any gender discrepancy. By 2007, Iran had a student to workforce population ratio of 10.2%, standing among the countries with highest ratio in the world.
Since 2004, Supreme Leader Khamenei and President Ahmadinejad have tried to implement reforms that will lead to the privatization of Iran but they haven't worked out yet, making Iran a command economy in transition towards a market economy.
Sayyid Ali Hosseini Khamenei is a Twelver Shia Marja' and the second current Supreme Leader of Iran, in office since 1989. He was previously President of Iran from 1981 to 1989. Khamenei is the second-longest serving head of state in the Middle East, as well as the second-longest serving Iranian leader of the last century, after Shah Mohammed Reza Pahlavi.
According to the Fourth Five-Year Economic Development Plan (2005–2010), the Privatization Organization of Iran affiliated with the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange. The privatization effort is primarily backed by reformist members of the Iranian government and society who hope that privatization can bring about economic and social change.
A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a market economy. Transition economies undergo a set of structural transformations intended to develop market-based institutions. These include economic liberalization, where prices are set by market forces rather than by a central planning organization. In addition to this trade barriers are removed, there is a push to privatize state-owned enterprises and resources, state and collectively run enterprises are restructured as businesses, and a financial sector is created to facilitate macroeconomic stabilization and the movement of private capital. The process has been applied in China, the former Soviet Union and Eastern bloc countries of Europe and some Third world countries, and detailed work has been undertaken on its economic and social effects.
Reza Shah Pahlavi (r. 1925–41) improved the country's overall infrastructure, implemented educational reform, campaigned against foreign influence, reformed the legal system, and introduced modern industries. During this time, Iran experienced a period of social change, economic development, and relative political stability.
In the interwar period, modern industries were introduced. Whereas fewer than 20 modern industrial plants existed in 1925, by 1941 more than 800 new plants had been established, with the intention of reducing the country's dependence on imports. The state encouraged industrialization by raising tariffs, financing modern industries, and imposing government monopolies. Changes in the legal system, tax structure, and trade policies attracted domestic financial resources and led to the emergence of a group of new, young entrepreneurs. The shah's court became the biggest investor in the new industries. Primarily by confiscating real estate, the shah himself became the country's richest man. Increased investment in mining, construction, and the manufacturing sector occurred, and infrastructure investment grew significantly. Iran had only 250 kilometers of railroads and 2,400 kilometers of gravel roads in 1925; by 1938 these totals had increased to 1,700 and 12,000 kilometers, respectively. Industrial growth was not balanced, however. Integration among sectors and industries was absent, and the new industries met only part of the growing domestic demand. Agriculture, from which 90 percent of the labor force made its living, did not benefit from economic reform. Furthermore, the expanding areas of the economy were not labor-intensive. Modern sectors (Caspian Sea fisheries, railroads, seaports, the oil industry, modern factories, and coal fields) absorbed a total of only about 170,000 workers, less than 4 percent of the labor force.
The government managed the expansion of international trade by techniques such as the foreign exchange controls imposed in 1936. Many new items were among the imported goods required by industry, the military, railroads, and other areas of infrastructure investment. Traditional agricultural and industrial export products were replaced by oil exports. Germany became Iran's primary trading partner by 1940, accounting for 42 percent of its foreign trade; the United States was second, with 23 percent. The Soviet Union also was a major trading partner in this period. Despite many advances in domestic and foreign economic policy, however, Iran remained an exporter of raw materials and traditional goods and an importer of both consumer and capital goods in the years before World War II.
Reza Shah Pahlavi, who abdicated in 1941, was succeeded by his son, Mohammad Reza Shah Pahlavi (r. 1941–79). No fundamental change occurred in the Iranian economy during World War II (1939–45) and the years immediately following. However, between 1954 and 1960 a rapid increase in oil revenues and sustained foreign aid led to greater investment and fast-paced economic growth, primarily in the government sector. Subsequently, inflation increased, the value of the national currency (the rial) depreciated, and a foreign-trade deficit developed. Economic policies implemented to combat these problems led to declines in the rates of nominal economic growth and per capita income by 1961.
In response to these setbacks, Iran initiated its third economic development plan (1962–68) with an emphasis on industrialization. New economic policies significantly altered the role of the private sector. The expansion of private and public banks, as well as the establishment of two specialized banks, provided reliable credit markets for medium- and large-scale private manufacturing enterprises. Not limited to cheap credit, government programs also included a wide range of incentives to encourage investment in new industries by both Iranian and foreign businesses. Most new investment was a joint effort between either the public sector and foreign investors or private businesses and foreign corporations. Investment in roads, highways, dams, bridges, and seaports also increased. With government support, part of the agricultural sector also attracted significant investment. Many large-scale agricultural operations in meat, dairy products, and fruit production were established. Small-scale farmers, however, did not benefit from the new investment opportunities.
Under the fourth and the fifth economic development plans (1968–73; 1973–78), the Iranian economy became increasingly open to imports and foreign investment. A combination of oil revenues, public spending, and foreign and domestic investments enlarged the middle class in major cities, particularly Tehran. In the wake of the spike in crude oil prices that followed the 1973 war pitting Egypt and Syria against Israel, the process of industrialization and consumption grew rapidly. Between 1973 and 1977, the specialized banks provided more than 200 billion rials to the manufacturing sector, and the increase in investment averaged 56 percent per year. A flood of imported goods and raw materials overwhelmed the capacity of seaports and warehouses. The military was also a beneficiary of the new economic and social conditions. Military personnel, modern artillery and equipment, and military training absorbed a major part of the budget.
Between fiscal year 1964 and FY 1978, Iran's gross national product grew at an annual rate of 13.2 percent at constant prices. The oil, gas, and construction industries expanded by almost 500 percent during this period, while the share of value-added manufacturing increased by 4 percent. Women's participation in the labor force in urban areas increased. Large numbers of urban Iranian women, from varying social strata, joined the semiskilled and skilled labor forces. In addition, the number of women enrolling in higher education increased from 5,000 in FY 1967 to more than 74,000 in FY 1978.
Economic growth, however, became increasingly dependent on oil revenues in the 1970s. By 1977, oil revenues had reached US$20 billion per year (79 percent of total government revenues). Other sectors of the economy and regions of the country did not experience a uniform pattern of growth during this period. Agriculture, traditional and semi-traditional industries, and the services sector did not thrive to the same extent as the “modern” state-sponsored manufacturing industries, which accounted for only 6 percent of industrial employment. As employment opportunities in rural areas and traditional industries decreased, public employment in urban areas increased. The proportion of self-employed Iranians remained stable.
Accelerated development of the middle class was a major outcome of the 1960s and 1970s. Among this class were the new professional intelligentsia, called motekhassesin (experts). Their common denominator was the professional, cultural, or administrative expertise acquired through modern education. Nevertheless, the patterns of economic growth and regional development along with the political underdevelopment of the shah's regime in areas such as civil institutions, human rights, and property rights limited opportunities for the majority of Iranians to develop fully their social and economic potential. Economic and social polarization minimized competition among businesses and limited development to the part of the economy concerned with the interests of dominant groups closely tied to the shah's court and the state. Most Iranians were excluded from political and economic decision making.
According to the 1979 Iranian Constitution, it is the duty of the Islamic government to furnish all citizens with equal and appropriate opportunities, to provide them with work, and to satisfy their essential needs, so that the course of their progress may be assured.Iran's long-term objectives since the 1979 revolution have been economic independence, full employment, and a comfortable standard of living for citizens, but at the end of the 20th century, the country's economic future faces many obstacles. Iran's population more than doubled in a 20-year period, with an increasingly young population. Although a relatively large part of the population engages in farming, agricultural production has fallen consistently since the 1960s. By the late 1990s, Iran was a major food importer, and economic hardship in the countryside had driven vast numbers of people to migrate to cities.
The rates of literacy and life expectancy in Iran are high for the region, but so is the unemployment rate, and inflation is in the range of 20% annually. Iran remains highly dependent on one major industry, the extraction of petroleum and natural gas for export, and the government faces increasing difficulty in providing opportunities for a younger, better educated workforce. Such lack of opportunities has led to a growing sense of frustration among lower- and middle-class Iranians.
Following the nationalizations in 1979 and the outbreak of the Iran–Iraq War, over 80% of Iran's economy came under the control of the government.After the end of hostilities with Iraq in 1988, the government tried to develop the country's communication, transportation, manufacturing, health care, education and energy infrastructures (including its prospective nuclear power facilities) and has begun the process of integrating its communication and transportation infrastructure with that of neighboring states. It is estimated that Iran sustained a loss of $500 billion through the Iraq war.
In 1996, the U.S. Government passed the Iran and Libya Sanctions Act (ILSA) which prohibits U.S. (and non-U.S. companies) from investing and trading with Iran for more than $20 million annually,with the exception, since 2000, for items like pharmaceuticals, medical equipment.
|Plans (main data sources: Iranian Parliament & Ministry of Commerce)||1991–2001 (achieved)||2005–10 (target)||2009–10 (achieved)|
|Number of articles to be implemented in the plan||N/A||290||117|
|Economic growth||3.9% on average||8% on average||6.3% on average (2006–10)|
|Liquidity growth||27.3% on average||<20% on average||33% on average|
|Inflation||23% on average||<10% on average||16% on average|
|Unemployment rate||N/A||11% by 2010||12% on average (2005–10)|
|Jobs creation per year by 2010||N/A||848,000 jobs/year||725,000 jobs/year|
|Labor productivity growth||1.3% on average||3.5%||N/A|
|Investment growth||4.3% on average||12.2%||N/A|
|Population growth||1.5% on average||1.4%||N/A|
|Non-oil export growth||5.6% on average||10.7%||N/A|
|Technology access index||N/A||0.45||0.26|
|Ratio of research expenditures to GDP||0.4% (2001)||2.5%||0.87%|
|Ratio of high-tech exports to total non-oil exports||N/A||6||2|
|New oil and gas fields discovered (2005–10)||N/A||N/A||19 new oilfields and eight new gas reserves|
|Ratio of the expenditures of top 10% to bottom 10% households||19.4 (2001)||N/A||14|
|Gini coefficient||0.43 (2001)||N/A||0.38 according to government|
|Social welfare index||423 (2001)||N/A||800|
|Population below the poverty line (the middle 50%)||15% (2001)||N/A||7% according to government|
|Penetration rate – mobile users||N/A||50%||60% (2009)|
|Fixed telephone lines||N/A||36 million fixed lines||24.8 million (2008)|
|Internet users||N/A||30 million users||23 million (2008)|
|Item||2010 (achieved)||2010–15 (target)|
|GDP world ranking||18th largest economy by PPP||12th in 2015; Goldman Sachs estimate: 12th by 2025|
|Annual growth rate||2.6%||8% on average (based on $1.1 trillion domestic and FDI); BMI forecast: 3.6% on average (2009–14)|
|Unemployment||11.8% according to government; unofficially: 12–22%; 30% according to opposition||7% by 2015, by creating 1 million new jobs each year|
|Inflation rate||15% (as of January 2010)||12% on average|
|Value Added Tax||3%||8%|
|Privatization||N/A||20% of state-owned firms to be privatized each year|
|Share of cooperative sector (% GDP)||< 5%||25%|
|R&D (% GDP)||0.87%||2.5%|
|Share of non-oil exports||20%||30% ($83 billion) by 2016|
|Oil price & revenues in budget||$60 per barrel||$65 per barrel on average / $250 billion in oil and gas revenues in 2015 once the current projects come on stream; International Monetary Fund projections: ~$60 billion only|
|National Development Fund||N/A||30% of oil revenues to be allocated to the National Development Fund by 2015|
|Oil production||4.1 million bpd||5.2 million bpd (with some 2,500 oil and gas wells to be drilled and commissioned)|
|Natural gas production||N/A||900 million cubic meter/day|
|R&D projects in oil industry||N/A||Implementation of 380 research projects by 2015 covering the enhancement of the recovery rate, gas conversion and hydro conversion|
|Investment in oil and gas industry||N/A||$20 billion a year in private and foreign investment, in part to boost oil refining capacity|
|Petrochemical output||~50 million tpy||100 million tpy|
|Bunkering||25% market share in Persian Gulf||50% market share or 7.5 million tpy of liquid fuel|
|Oil products storage capacity||11.5 billion liters||16.7 billion liters|
|Natural gas storage capacity||N/A||14 billion cubic meters|
|Electricity generation capacity||61,000 MW||86,000 MW|
|Efficiency of power plants||38%||45%|
|Investment in mining and industry||N/A||$70 billion/700,000 billion rials|
|Crude steel production||~10 million tpy||42 million tpy by 2015|
|Iron ore production||~27 million tpy||66 million tpy by 2015|
|Cement||~71 million tpy||110 million tpy|
|Limestone||N/A||166 million tpy|
|Industrial parks||N/A||50 new industrial parks to be built by 2015|
|Ports capacity||150 million tons||200 million tons|
|Railways||10,000 kilometers||15,000 kilometers by 2015 at a cost of $8 billion per annum|
|Transit||7 million tons||40 million tons of goods|
|Electronic trade||N/A||20% of domestic trade, 30% of foreign trade and 80% of government transactions to be made electronically|
The economy of Cambodia at present follows an open market system and has seen rapid economic progress in the last decade. Cambodia had a GDP of $18.05 billion in 2015. Per capita income, although rapidly increasing, is low compared with most neighboring countries. Cambodia's two largest industries are textiles and tourism, while agricultural activities remain the main source of income for many Cambodians living in rural areas. The service sector is heavily concentrated on trading activities and catering-related services. Recently, Cambodia has reported that oil and natural gas reserves have been found off-shore.
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The economy of Pakistan is the 24th largest in the world in terms of purchasing power parity (PPP), and 39th largest in terms of nominal gross domestic product. Pakistan has a population of over 207 million, giving it a nominal GDP per capita of $1,357 in 2019, which ranks 154th in the world and giving it a PPP GDP per capita of 5,839 in 2019, which ranks 132th in the world for 2019. However, Pakistan's undocumented economy is estimated to be 36% of its overall economy, which is not taken into consideration when calculating per capita income. Pakistan is a developing country and is one of the Next Eleven countries identified by Jim O'Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world's largest economies in the 21st century. The economy is semi-industrialized, with centres of growth along the Indus River. Primary export commodities include textiles, leather goods, sports goods, chemicals, carpets/rugs and medical instruments.
The economy of the United Arab Emirates is the second largest in the Middle East, with a gross domestic product (GDP) of $403.2 billion in 2014. The Emirates have been successfully diversifying their economy.
The politics of Iran take place in a framework that officially combines elements of theocracy and presidential democracy. The December 1979 constitution, and its 1989 amendment, define the political, economic, and social order of the Islamic Republic of Iran, declaring that Shia Islam of the Twelver school of thought is Iran's official religion.
The economy of Iran is a mixed and transition economy with a large public sector. It is the world's eighteenth largest by purchasing power parity (PPP). Some 60% of the economy is centrally planned. It is dominated by oil and gas production, although over 40 industries are directly involved in the Tehran Stock Exchange, one of the best performing exchanges in the world over the past decade. With 10% of the world's proven oil reserves and 15% of its gas reserves, Iran is considered an "energy superpower."
The economy of India is a developing mixed economy. It is the world's seventh-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). The country ranks 139th in per capita GDP (nominal) and 119th in per capita GDP (PPP) as of 2018. After the 1991 economic liberalisation, India achieved 6-7% average GDP growth annually. Since 2014, India's economy has been the world's fastest growing major economy, surpassing China.
The Tehran Stock Exchange (TSE) is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of May 2012, 339 companies with a combined market capitalization of US$104.21 billion were listed on TSE. TSE, which is a founding member of the Federation of Euro-Asian Stock Exchanges, has been one of the world's best performing stock exchanges in the years 2002 through 2013. TSE is an emerging or "frontier" market.
The economy of the Middle East is very diverse, with national economies ranging from hydrocarbon-exporting rentiers to centralized socialist economies and free-market economies. The region is best known for oil production and export, which significantly impacts the entire region through the wealth it generates and through labor utilization. In recent years, many of the countries in the region have undertaken efforts to diversify their economies.
Roughly one-third of Iran's total surface area is suited for farmland, but because of poor soil and lack of adequate water distribution in many areas, most of it is not under cultivation. Only 12% of the total land area is under cultivation but less than one-third of the cultivated area is irrigated; the rest is devoted to dryland farming. Some 92 percent of agricultural products depend on water. The western and northwestern portions of the country have the most fertile soils. Iran's food security index stands at around 96 percent.
The construction industry of Iran is divided into two main sections. The first is government infrastructure projects, which are central for the cement industry. The second is the housing industry. In recent years, the construction industry has been thriving due to an increase in national and international investment to the extent that it is now the largest in the Middle East region. The Central Bank of Iran indicate that 70 percent of the Iranians own homes, with huge amounts of idle money entering the housing market.
Energy in Iran describes energy and electricity production, consumption, import and export in Iran. Iran has the fourth largest oil reserves and the largest natural gas reserves in the world.
Foreign direct investment in Iran (FDI) has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global competitiveness of 142 countries. In 2010, Iran ranked sixth globally in attracting foreign investments.
Following the Iranian Revolution, Iran's banking system was transformed to be run on an Islamic interest-free basis. As of 2010 there were seven large government-run commercial banks. As of March 2014, Iran's banking assets made up over a third of the estimated total of Islamic banking assets globally. They totaled 17,344 trillion rials, or US$523 billion at the free market exchange rate, using central bank data, according to Reuters.
The first sanctions against Iran were those imposed by the United States in November 1979 after a group of radical students seized the American Embassy in Tehran and took hostage the people inside. The sanctions by Executive Order 12170 included freezing about $12 billion in Iranian assets, including bank deposits, gold and other properties, and a trade embargo. These sanctions were lifted as part of the Algiers Accords which was a negotiated settlement of the hostages’ release.
The Iranian targeted subsidy plan, also known as the subsidy reform plan, was passed by the Iranian Parliament on January 5, 2010. The government has described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's recent economic history". The goal of the subsidy reform plan is to replace subsidies on food and energy with targeted social assistance, in accordance with a Five Year Economic Development Plan and a move towards free market prices in a 5-year period. The subsidy reform plan is the most important part of a broader Iranian economic reform plan.
Iran officially submitted an application to join the World Trade Organization (WTO) on 19 July 1996. From July 1996 to May 2001, Iran’s application had not been considered, mainly as a result of US objections and the US veto power in the WTO Council. From May 2001 Iran’s application for WTO membership has been brought up 22 times. At the 22nd time, on 26 May 2005, Iran’s application for WTO membership was approved unanimously by the organization’s members. Thus the process of Iran’s membership in the WTO started. Once Iran’s application was accepted and examined by WTO General Council, Iran became WTO observer member and started the process of full membership in the organization. In November 2009 Iran submitted the Foreign Trade Regime Memorandum as the process of accession entered a new phase.
For the economic effects refer to Economy of Iran.
Economy in Iraqi Kurdistan consists of the autonomous economy in Kurdistan region in northern Iraq. The Kurdistan region's economy is dominated by the oil industry, agriculture and tourism. Due to relative security and peace in the region and more economically liberal and market-oriented policies, it has a far more developed economy in comparison to other parts of Iraq.