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Payvand's Iran News ...

Reformation is the antidote of extortion and invisible powers (Part 2)

An Interview with Seid Mehdi Sahraian, economist

Source: Hambastegi

Q: You said that Mr.Khatami has achieved good economic accomplishments. Up to now you have only discussed the problems facing him. Would you now talk about these accomplishments?

A: Being aware of the unsuitable conditions ruling our management system, I think Mr. Khatami was contemplating to choose between dealing with inside and getting involved with tremendous amount of conflicts or dealing with the outside and achieving some quick economic accomplishments, and he chose the second alternative. For on one hand, our economy is largely dependent on oil income and any increase in incomes here can quickly affect the whole economy, and on the other hand, in his approach to outside with the purpose of improving the oil income, he was enjoying a relatively greater independence. Therefore, the president adopted a policy of lessening the international tensions and accelerating the policy of getting closer to our Arab neigbours. He succeeded in attracting the attention of Saudi Arabia to the necessity of introducing some reforms into world's oil prices and then he did the same with Venezuela and Norway. As the result, the price of oil started to improve fro! ! ! ! ! m 1999. On one hand, the president intended to re-activate OPEC- whose activity had minimized during the past decade and some believed that its consumption time has already passed- by applying the strategy of active policy, and with the aid of Saudi Arabia and Venezuela revived OPEC. The consequences were that oil income of the country that amounted to $17 milliards in 1996 and then had decreased to $9.9milliards in 1998, reached $13.9 milliards in 19999 and finally, $20milliard in 2000. This meant a surplus of income amounting to $10milliards. Perhaps we can view Khatami's policy of decreasing the international tensions -- that tremendously affects our economic relations - as his most important accomplishment.

Q: You said that the successful accomplishment in the sphere of oil income depended only on Mr. Khatami's own ingenuity, what were the role of other economic indices here? Has he had any achievements in other spheres too?

A: Yes, in 1998, we hand $16.8millards foreign debts that together with the potential and actual debts of the country amounted to %32.6 milliards. By the end of 1999, our foreign debts decreased to %10.4 milliards.

Imports amounted to $5.7milliards in 1997, but it decreased to $3.5milliards in 1999, i.e. %38 improvement. The rate of inflation was %23.3 in 1996, but %20.1 in 1999.

Q: If the economic indices have improved during Mr.Khatami's presidency, then why the situation of employment is reaching a crisis?

A: This is exactly what is causing a lot of concern among the productionists of our country. As I have mentioned in my book 'Productionism" and my previous interview, the reasons for "feasibility of a complete economic collapse" are the unsuitable rate of employment growth, rate of production growth and finally the rate of accumulation of capital and deposit. For employment is the twin of production. When the foundations of production and production ownership are shakable, employment would not increase. This deficiency is rooted in the lack of productive investment in the past. During the first and second development plans (1989-1998), despite the fact that foreign currency incomes amounted to $260 milliards, we only appropriated %6.8 milliards to investment in machinery and %80 of these credits were given to non-profitable state corporations. The first and second development plans failed in their policy for producing mass employment and the army of unemployed people was tr! ! ! ! ! ansferred to Mr. Khatami's period. The root of the present disorganization and disorder in the sphere of employment should be sought in our 'import trade approach' to economy during the past two decades. In the fifth construction plan, before the Revolution, about %47 of credits were allocated to investment in production, and together with the extensive participation of private sector in productive investments, the rate of growth of job opportunities increased to %12.6.

Therefore when it is said that Khatami's government is responsible for the spread of unemployment is not scientific at all.

Q: Then what measure should be taken to solve the problem of unemployment?

A: Mr. Khatami's economic successes were only in the cases that were in the sphere of his authority and ingenuity. By applying his personal creativity to oil diplomacy, taking extensive economical measures in currency expenses of the government, alteration of cultural face of Iran outside the country, Mr. Khatami has been able to accomplish some important achievements and attract the attention of foreign investors. But when these very investors come to Iran, they realize that the secure grounds for investment are not available. The problem of employment can not be solved without extensive productive investments.

Q: Wound you enumerate the most prominent evidences for insecurity of investment?

A: The retroactive characteristic of laws in Iran has made this country to be among one of the most backward primitive societies in respect to the risk of currency and banking policies.

The directive of the difference in currency rate issued in 1994 by the Central Bank and the fact that it is retroactive, is the most prominent evidence in this respect.

Q: What is the content of this directive?

A: During the first development plan, and according to paragraphs 4-40 dealing with strategies of the plan, the parliament allocated currency to industries on the basis of the preferential rate of currency, for the import of capital commodities and industrial machinery. The state and non-state industries used this currency and imported their machinery and started to work and the bank too cleared the accounts.

In 1974 Central Bank faces a deficiency in sources and issues a directive on the basis that anybody that borrowed currency from the bank in the past -- note only for the purposes of importing machinery -- should on the basis of the new currency rate, pay the difference. And afterwards it introduced the content of this directive as the sub-clause 29 of paragraph G of the law of budget without thinking about its negative consequences on our national economy. That meant that all the factories of the countries faced with a spontaneously created debt much higher than the value of their total investment over night. Some of the factories were closed down and some of the investors were imprisoned and many milliard dollars escaped the country and the surviving factories were facing a very critical situation. Not only the government could not get this money back, but by borrowing the same amount from the Central Bank, increased the rate of inflation.

In a book published in Germany only for its industrial managers, this very law has been considered as one of the important factors of risk of investment in Iran and warns German investors that in Iran laws can easily be retroactive.

Now, suppose Khatami's government absorbs foreign investors, what will it do with this inherited law? If it suggests to omit it, there will be a great scandal that Khatami is supporting 'wind brought capitals', although this is not really wealth as it consists of means of production and it is not possible to be circulated in the market.

Q: So to your opinion, what should be done to solve unemployment problem?

A: The problem of employment is a very complicated subject and requires a series of harmonious factors that include: revision of laws and unsuitable regulations for investment, a competent, dynamic and powerful management system, major economic policies, cooperation and coordination of all the governmental organizations and institutes.

I don't know why we insist on sacrificing our society's interests for the maintenance of an unsuccessful manager for life? The function of Central Bank in opposing production during the past two decades has been very negative. Nearly everybody has been protesting against this Bank's policies. We try to cover the mistakes by saying "his intention is good", but we should know that the failure of economic policies will have many grave consequences that can not be resolved only with 'good intention.'

Q: You said that for controlling the crisis of unemployment, we require extensive investment in the private sector. Now regarding the problems that Mr. Khatami is facing in this respect, two questions arise. First, you said that during Khatami's presidency, the amount of absorbed foreign currency amounted to $18 milliards and second, many specialists say that the fear of confiscation of properties is the main factor of insecurity. Now we all know that there has been no confiscation of ownership recently. What can you say about that?

A: Regarding the first part of your question, the major part of this $18 milliards have been allocated to the projects in the field of oil and gas production for which we were forced to pay a very high price due to our aforementioned unsuitable laws. On the other hand, the guarantee for this capital is oil shipments that can be taken into custody anywhere. By investment I mean investments in job-creating industrial production that in its totality would actually take place in Iran and would enjoy the necessary security.

Regarding the second part of your question, I should say that the shakable characteristic of ownership in Iran has a long history reaching its climax during Ghajar and Pahlavi eras when the fate of ownership depended on a 'simple shake of finger' of despotic kings. Well at the beginning of Revolution the wave of confiscation ruined that little security of ownership produced very gradually totally. It is true that there has been no more direct confiscation in the past few years, but its indirect form is still in action and the foundations of industrial production is still shaky.

The aforementioned directive of Central Bank is an evidence of modern way of confiscation of industrial ownership. With what sort of guarantee and assurance should an Iranian or foreign investor invest in an Industrial plan, without being worried that tomorrow, Central Bank or some other institute would not issue a retroactive directive that would destroy his capital?

Q: It is said that the Society of Iranian Producitonists has prepared a project for immunization of industrial job opportunities and in fact they intend to help Mr. Khatami. Can you tell us more about it?

A: The second paragraph of goals stated in the constitution of Society of Productionists, has set the subject of defending the rights of civilians as one of its duties. The research committee of Society, enjoying the cooperation and intellectual support of many university professors, young researchers, MPs, job-creators and compassionate artisans in the private sector, has carried out extensive studies for finding scientific and practical ways to overcome the crisis of unemployment. The results can be classified into two groups.

The first group includes 10 plans for economic reforms that will be presented in two weeks and we hope that the honorable parliament would put the approval of these plans on top of its priority list. The proposed plans deal with the maintenance of the existing job opportunities in the production sectors and also the preparation of the grounds for creating new job opportunities.

The second group includes 17 economic reform plans whose overall aim is to help our industrial production to bloom and prosper.

It is natural that approval of these economic reform plans would help the president to overcome many of the present obstacles and to solve the serious problem of unemployment.

Q: How do you evaluate economic functions of Mr. Khatami in general?

A: It seems that Mr. Khatami has accomplished striking and considerable achievements on the international scene and external aspects of our economy. And considering all the unsuitable conditions ruling our economy and political tensions producing abnormalities and limitation of opportunities in the sphere of economic decision-making, Mr. Khatami has had some limited successes inside the country, too.

-- Translated for by Roya Monajem,

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