Iran's Fourth Plan
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MIDDLE EAST POLICY , VOL . XVII, NO. 4, WI N TER 2010 IRAN ’S FOURTH PLAN : A PART I AL ASSESSMENT Jahangir Amuzegar Dr Amuzegar served the pre-revolution government of Iran as minister of commerce, minister of finance and ambassador-at-large. He was on the Executive Board of the International Monetary Fund, representing Iran and several other member countries between 1974 and 1980. He has taught at UCLA, the University of Michigan, Michigan State University, the University of Maryland, American University and Johns Hopkins SAIS. He is the author of seven books and more than 100 articles on Iran, oil, OPEC and economic development. he Islamic Republic’s Fourth be limited to the areas for which data are Economic, Social and Cul- available — with a reminder that at no tural Development Plan (2004/5- time since the 1979 revolution have official 2009/10) came to its unceremoni- economic statistics been so scarce, incon- Tous end on March 21, 2010.1 This was to sistent, doctored or deliberately withheld be the first of a four-plan scenario within by the responsible authorities.3 Wide dif- Iran’s ambitious Twenty-year Economic ferences in published facts and figures also Perspective 2004-2024. According to this exist among various government agencies, perspective, by 2024, after the completion lending much doubt to their accuracy.4 of four five-year plans, Iran was expected to be a fully advanced nation, ranking THE FRAMEWORK first among 28 Middle Eastern and South The statute mandating the Fourth Plan Asian countries in economic, scientific and was approved by the Majlis (the national technological progress, offering a guiding assembly) on January 25, 2005, to go into light for the Islamic world while engaging effect on March 21. The plan’s 52 major in constructive interaction with the interna- objectives in four chapters included almost tional community.2 every coveted national aspiration under This review intends to examine the the sun: cultural, scientific and techno- performance of the Fourth Plan against logical affairs; social, political, defense the backdrop of its major socioeconomic and security topics; foreign political and objectives. The analysis will be limited diplomatic relations; and major economic to the outcome of the plan itself and does imperatives. Each category enumerated not deal with the totality of events, actions its own specific goals. or circumstances in the Islamic Republic In the economic arena, which is the during the period. Discussion will also focus of this review, the plan set a large © 2010, The Author Middle East Policy © 2010, Middle East Policy Council 114 AM UZEGAR : IRA N ’S FOURTH PLA N : A PARTIAL ASSESS M E N T number of concrete and specific goals. • Liquidity expansion shall be limited to an At the top were (1) rapid and sustained annual average of 20 percent. economic growth, job creation and reduced • Aggregate domestic investment shall rise unemployment; (2) curbed inflation and by 12.2 percent a year, and its share of reduced income gaps among various social GDP shall rise from 27.7 percent to 34.7 strata; (3) economic diversification along percent. with increases in human capital, technol- • The foreign-direct-investment ratio to ogy and total-factor productivity; (4) self- GDP shall grow from 0.6 percent to 3 sufficiency in basic agricultural products; percent by 2010. (5) enhanced international competitiveness • The foreign-exchange value of the Ira- and increased non-oil exports; (6) bud- nian rial shall be adjusted in line with the getary reforms and reduced reliance on difference between domestic and foreign crude-oil exports; (7) privatization of state inflation. enterprises and their transfer to the private • Internal revenue from taxes shall reach 8 sector; (8) stabilization of the climate for percent of GDP by 2010. domestic trade and business; (9) provi- • Current annual government expenditures sion of housing for low-income and rural shall rise by no more than 10 percent in groups; and (10) attention to the supply, nominal terms. maintenance and use of water resources. • The government’s current annual budget The plan’s six sections and 15 chapters shall be increasingly financed from non- contained 161 articles dealing with such oil sources. varied topics as (a) high national economic • Annual budgetary appropriation for growth in conjunction with the global research shall reach 2.5 percent of GDP economy; (b) environmental protection by 2010. and regional balance; (c) enhancement of life quality, human security and social Based on these presuppositions, the justice; (d) preservation of the nation’s plan promises the following outcomes dur- Iranian/Islamic identity; (e) enhancement ing the 2005-10 period: of national security and space exploration; • An average annual real GDP growth of 8 and (f) reinvention of the government and percent; improvement of public services. There • An average annual real per capita income were upwards of 1,000 specific obliga- rise of 6.6 percent; tions on the part of government agencies. • An average annual decline in unemploy- A final section presented nine quantitative ment by 4.2 percent, with the jobless rate tables involving specific targets in various cut by March 2010 to 8.4 percent; areas. Targeted figures in each table were • The average annual inflation rate reduced based on certain specific assumptions. to 9.9 percent, and to 8.6 percent by In quantitative terms, the plan project- March 2010; ed the following concrete targets: • The ratio between the expenditures of the • Population growth shall be limited to 1.4 wealthiest 10 percent of families and the percent a year. poorest 10 percent reduced from 17 to 14; • Labor, capital and total-factor productivi- • The Gini coefficient of income disparity ty shall rise by 3.5 percent, 1 percent, and reduced to 0.38; 2.5 percent, respectively, every year. • The percentage of the population below 115 MIDDLE EAST POLICY , VOL . XVII, NO. 4, WI N TER 2010 the relative poverty line brought down to been reduced, and there were three times 7 percent; as many patents on inventions. Finally, • An average annual increase in non-oil he boasted that tens of large projects are exports by 10.7 percent; inaugurated every day, and $7-$8 billion • The ratio of national budget to GDP in new oil and gas contracts concluded reduced to 10 percent; every three months.6 He offered no proof • The total number of government employ- for these claims, and no one in the private ees reduced by 5 percent. sector or elsewhere took them seriously. There has been no further official RESULTS report pertaining to the Fourth Plan. A Despite the government’s obligation tentative appraisal, based on both par- to submit annual and final reports of the tial official data and private estimates, is plan’s implementation to the Majlis, only thus ventured here. The accompanying one, for the year 2006, was issued. In a table shows numerical targets of the plan speech in late December 2008, President and their estimated realization. A more Mahmoud Ahmadinejad gave a brief detailed discussion of the goals and their account of his three-and-a-half-year-old realization follows. administration without reference to the plan. After accusing his critics of having FROM BAD TO WORSE concocted “40,000 lies” about his govern- As can be readily seen from the table ment’s performance,5 he cited a number (on p. 117) and will be further elaborated of accomplishments on his watch. He below, none of the main targets of the plan, claimed that GDP had grown 7 percent a with the arguable exception of non-oil ex- year, thanks to four times as many devel- ports, have been reached — in many cases opment projects initiated each year and not even approached. substantial increases in steel, cement, aluminum, coal, oil and gas production. Economic Growth Based on these investments, he claimed, The plan’s realized annual economic unemployment had been cut from 12.9 per- growth has been one of its most disap- cent to less than 10 percent, income gaps pointing outcomes. Based on a projected among various strata had been reduced, crude-oil price of $20 a barrel, with total and the Gini coefficient had improved. In oil and gas receipts of $120 billion, the the first three years of his stewardship, he economy was expected to grow at an aver- continued, the rural sector had enjoyed age yearly rate of 8 percent. Yet, despite vastly more natural-gas connections, an actual average oil price of $68.80/bbl drinking-water supplies, paved roads, over the five-year period and a whopping health care and insurance, and ten times as $340 billion in oil and gas export receipts, many housing renovations. In other areas, the annual growth rate over the five-year he added, privatization had expanded ten period is estimated to have been no more times faster than before. More “justice than 4.3 percent.7 Stranger still, the yearly shares” had been distributed among the growth rate, which was to accelerate in poor, and government employees had been the last two years of the plan, actually reduced. Furthermore, he mentioned, non- declined!8 In fact, toward the plan’s end, oil exports had tripled, foreign debt had a combination of structural weaknesses, 116 AM UZEGAR : IRA N ’S FOURTH PLA N : A PARTIAL ASSESS M E N T FOURTH PLAN: TARGETS AND PERFORMANCE, 2005-2010 1991-2001 Target Actual Record 1 5-year Avg. March 2010 5-year Avg. March 2010 GDP1 3.9 8.0 9.3 4.3 Per capita GDP 2.4 6.6 2.8 Unemployment1 4.7 -4.2 8.4 11.2 14.6 Inflation1 2.3 9.9 8.6 15.8 10.8 Productivity1 Capital … 1.0 … -1.3 … Labor 1.3 3.5 … 0.76 … Total Factor … 2.5 … -0.16 … Investment: Domestic1, 3 4.3 12.2 … 5.9 … Foreign3 … 3.0 … 0.075 … Exports: Oil & Gas ² … 120.0 … 340.0 Non-oil Exports1 5.6 10.7 … 15.6 … Non-oil Exports² … 53.0 … 78.0 … Imports² … 185.0 284.0 … Population1 1.5 1.4 1.48 … Liquidity1 27.3 20.0 … 28.0 … Source: Central Bank of Iran, Iran Statistics Center, official releases, and author’s estimates.