Report No. 378a-IRN The Economic Development of FILE COPY Iran Volume II (Part 1) Public Disclosure Authorized Sectoral Analyses (Parts I and II) October 4, 1974 Europe, Middle East and North Africa Region Not for Public Use Public Disclosure Authorized Public Disclosure Authorized Document of the International Bank for Reconstruction and Development Public Disclosure Authorized International Development Association L J This report was prepared for official use only by the -Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS Official Exchange Rate To February 13, 1973: 1 Iranian rial = 0.0132 US dollars 1 US dollar = 75.75 Iranian rials From February 13, 1973: 1 Iranian rial = 0.0147 US dollars 1 US dollar = 68.17 Iranian rials All conversions to dollars to the end of Iranian year 1972 are made at the rate of 75.75 Iranian rials. NOTE The Iranian year is Marah 21 to March 20. For convenience, the nearest Gregorian year is used here. Thus 1973 is March 21, 1973 - March 20, 1974. Page 1 of 2 pages IRAN BASIC DATA A. POPULATION (1972) 31.2 Milliol GROWTH (1962-1972) 3.1% of which Urban 41.9% Birth rate 4.7% Literate 37.0% Death rate 1.6% under 15 years 47.1% Infant mortality rate 16.0% Labor Force 29.5% B. LABOR FORCE (1972) 9.2 Million GROWTH (1962-1972) 2.7% of which Agriculture 41.3% Eaployment growth 8.2% Manufacturing 19.8% PARTICIPATION RATE 65.7% Construction 7.7% Utilities 0.7% UNEMPLOYMENT (open) Civil Service 7.0% as % of labor force 3.5% Others 23.5% as % of active population 2.3% C. G.N.P. PER CAPITA (1972) $ 558 GROWTH (1962-1972) 7.1% Urba,n (estimate) $1,035 Rural (estimate) $ 215 D. INCOME DISTRIBUTION (1971): Top 20% receive 50-60% of income Lowest 20% receive 5% of income E. GROSS NATIONAL PRODUCT (1972) $17,04 Million GROWTH (1962-1972) 10.2% of which Gross Domstio Investment 23.3% Growth 15.7% Private Consumption 57.4% Growth 7.3% Govt. Consumption 21.0% Growth 20.6% Exports (inel. NFS) 30.6% Growth 10.9% Imports (incl. NFS) 20.9% Growth 16.7:4 as proportion of G.N.P. Gross National Savings 21.6% Growth 17. 11 Money and Quasi- Money 33.7% Growth 19.h Government Sector 30.4% Growth 23.34 Agriculture 16.1% Growth 4.2% Manufacturing 13.2% Growth 12.3% F. CONSUMER PRICE INDEX, 1972 (1969 - 100): 113.8 GROWTH (1962-1972) 2 6% Page 2 of 2 pages G. BALANCE OF PATMTS (end 1972): Merchandise ]kports $4,654,.o Million Merchandise Imports *3,80.0 Million Balance of Merohandise Trade $1,074.0 Million Balance of Current Aocouit - $ 863.0 Million Balance of Long Term Capital $ 556.0 Million Basic Balance of Payments - $ 307.0 Million Overall Balance of Payments $ 518.0 Million H. FOREIGN EXCHANGE RESERVES (Dec. 1973): $ 970.0 Million as % of 1972 Imports 26.5% I. EXTERNAL DEBT (end 1972): Total $ n.a. Million of which Public $3,6.5 Million Private $ n.a. Million DEBT SERVICE RATIO (1972): 17.0% J. IBRD/IDA LUNDING (Nov. 30, 1973): IBM IDA Outstanding and Labursed $261.1 million $ million Undisbursed $427.1 million $ million Outabanding incl. Undiabursed $688.2 million $ million NOTSt All growth rates are average annual rates and are in constant (1959) prices except those marked with asterisk. IBRD 1D751R ¸ аа ³ sz sr Æ,. а»ÅÁ½³о ¸ `. .1-`, 1 ', f à s.s.R %' ,_ , ;, i RA³v r ¼1) _ - ADMWISTRATIVED1V1S10NS _ _ - 1 ' ' `` { `` u.s.s.R tL CASP/AN5£ А о Á²³¸о¸¸³, Á ³»²¿:: о 4C j= F I º[ а¼»¸ ³¿оȽÁеа¼eio. u ti `r'» EAST ''' . {аnG7,Áоº³, о,: ¸оЕ¸»аЕ. .,, º ? ¸² : ð AZERBA¦ AN' 1 ._,,. i v ½ .+: ²о½оаº³Ï ² . Е,¸.,, о¸.аоо,о»».ЕÁ Á³Â J Р¤ º½, о .s,. - - \ . .+ " ½.,.,, :¿'³ r.,,.. ³, , ,<, v.2 G AN ; Ë Å: о Á. ¿ьо urL²x `.- 11 ³ q ¸ ° º '9 ¸ \` ³ о,,,,,, ¼ аь¸½³ AZA1VDARAN . , о l . r..i " , ь . /' ³ KURDESTAN Ž, а о .'1J ³,º,а о . 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Г - ,., ³, 7, Г { - t , аº³ÁG? . _ »° о :, ,. ¸» vw'Ã, J/ ½. ³Á i R ´ ¸ J ' ³о¿о. ¸ Ã_ i- )/ _ Р sS³¸ / 1 I º Î iao Æо ³оо ³Î О AN l F6r,r ^ ½ s ²£о: »¸r ÂА ÅF`* _ Г» "- Ã,-( _ J G i \! f1y 0 50 10D i5c ..fy- _ о ºÁ¼ i½[5fl5 wo, :: »:° о"" ½: ' QATAR sx so , Æ THE ECONOtiIC DEVELOPME14T OF IRAN VOLUME I THE MAIN REPORT VOLUME II SECTOAAL ANALYSES (Parts I and II) VOLUME-III: STATISTICAL APPENDIX This is Volume II of a three-volume report of the Basic Economic Mission which visited Iran in September/October 1973. The Mission consiste' d of Vinod Dubey (Chief), S. K * Bery, Julian Bharier, Peter Bowden, Walter Elkan (Consultant), S. A. Faruqi, John Foster, Norman Hicks,,.Sang Eun Lee, Jacques Nusbaumer, Vinod Prakash, Liza Shipp (Secretary). Anthony Stapleton of the IB10 Agricultural Task Force in Iran, was an associate member of the Mission. Volume I, the Main Report, was finalized and circulated in June 1974. Volume III, the Statistical Appendix, is being finalized and will be circulated concurrently. TABLE OF 00NTENTS (PART I) Page No. 1. AGCULTUE AND URAL DEVELORENT ...... 1 Structure of the Rural Sectort . 1 Performance During the Third and Fourth Plans . 1 The Fifth Plan . 23 Key Sectoral Issues . 28 2. INDUSTRY . Introduction . d. Groth and Structural Chanugee .. 5 Industrial Strategy and Policies . 6 3. INFRASTRUCTURE . 79 An Overview . 9 Development Plan and Priorities . Cost Overruns and Other Problems of Implementation of Development Plans . Sector Profiles . .. OIL AND GAS . ..0 Impact of Petroleum on the Economy . 110 Institutional Arrangements . 113 Oil Production, Consumption and Exports . 118 International Oil Prices . 121 Natural Gas . 128 Petrochemicals . 129 (PART II) 5. DOMESTIC FINANCE: THE MOBILIZATION AND AllOCATION OF RESOURCES . 131 Introduction . 131 The Role of the .Public Sector . .. 131 Financial Organization of the Public Sector . 13 Resources and Taxation . .. T. h3 Resource Allocation Through.the Budet . Demand Management: Problems and Policies . 168 Monetary Policy and Demand Management . 176 Allocation Through the Financial System . , 181 6. A MACRO-EC0NOMIC MODEL OF IRAN . .... o .......197 Introduction .,. .o . o . 197 Model Projections . .. 198 Government Accounts .. ?02 Balance of Payments . .. 20, The Model in Detail . Iran Model Li.sting . .? . .*. 2 List of Tables Table No. a e 1. Official Growth Rates of Agricultural Value Added . 2. Rural Incomes and Expenditure . ... 2C 3. Projected Growth in Demand for Major Agricultural Commodities . 29 1. Livestock Production and Targets . 40 5. Estimated Supply of Short-Tenn Credit . 44 6. Estimated Supply of Medium- and Long-Term Credit to Agriculture, 1970-72 . .o . o . 5 7. Growth and Shares of Manufacturing Value Added . 56 8. Growth and Shares of Value Added by Broad Economic Categories . 56 9. Manufacturing Employment by selected Product Groups, Urban Iran, 1962 and 1972 . .. .. 57 10. Growth of Labor Productivity by Broad Economic Categories, Urban Iran, 1962 and 1972 . .. 58 11. Distribution of Industrial Investment in the Third and Fourth Plans by Broad Economic Categories . .. 12. Gross Inflow of Foreign Private Capital and Loans to Iran by Selected Industries During Third and Fourth Plans . s. 13. Public Investment in Manufacturing by Major Industries During the Fourth Plan . 0 . .. 60 14. Growth of Small and Large Manufacturing Establishments, Urban Iran, 1964 and 1969 . 61 15. Regional Distribution of Manufacturing Activity, 1969/70 . 62 16. Cross Output of Selected Minerals . 64 17. Fixed Investment in Manufacturing by Broad Economic Categories During the Fourth and Fifth Plans . 66 18. Sectoral Distribution of Government Development Funds . 75 19. Investment in New Housing Units .. 103 20. Number and Distribution of Hospital Beds . .108 21. Iranian Oil Revenues . 22. Contribution of Oil Sector to Balaice of Payments . 112 23. Crude Oil Output and Disposal . ... 121 24. Projected F.O.B. Market Prices of Iranian Light Crude . 127 25. The Size of the Public Sector, Selected. Years . 133 26 . S a v i n g s P e r f o rm a n c e . .. 1 3 5 27. Stracture of Central Government Revenues (Selected years) . 145 28. Relative Burden of Non-Oil Revenues (Selected Years) . 1t- 29. Average Rates of Trade Levies (Selected Years) . t 30. Central Goveninent Revenue Projections . .1 31. Recent Budgetary Developments . .. 9 32. Structure of Iranian Income Tax . 33. Private Corporate Taxation . 34. Current and Capital Expenditure from the Budget ... Db 35. Functional Classification of Total Central Government Expenditure . 1 8 36. Comparison of Social Services Expenditure, 1970 and 1972 . 1 37. Comparison of Economic Services Expenditure, 1970 and 1972 . 164 38. Price Movements: Annual Average Chages . 168 39.