What are the Obstacles to 'Boosting Production' in Iran?

Although 'Boosting National Production' has been declared as the slogan for the new solar year by the Supreme Leader of the Islamic Republic of Iran, signs indicate that such a slogan goes beyond a mere dream. The first question is how feasible this slogan is. Second, what are the obstacles to boosting production? Third, what role do the institutions under the supervision of the Supreme Leader play in hindering production? 'Boosting production' is not an accurate title. However, if it refers to economic growth with a high productivity strategy, its realization depends on fulfilling several conditions and removing many obstacles. Some of these obstacles are structural, others relate to economic policymaking and management, and others pertain to widespread financial-managerial corruption within the government. At the same time, political factors such as macro management, interference from military and security institutions, rent distribution, the nature of Iran's relationship with the world, the government's sectarian claims, and its regional policies also play a role in boosting production as mentioned. Therefore, many variables play a role in the production and economic boom of Iran, which overlap with each other in a nested manner. Many of these variables are recognized by economists inside Iran, both governmental and non-governmental. For example, the content of Iran's 20-year vision document, which has been shaped since 2005 in the form of four five-year development plans, aims at achieving this very boost in production within the country. According to this document and the five-year development plans, as well as the document for sustainable economic growth, the growth rate should be eight percent. However, the average economic growth rate in Iran over the 40 years since the fall of the previous regime has not even reached half of this amount. Furthermore, according to predictions from research institutions in the country or global organizations, the economic growth rate in the new solar year is expected to be negative. Many of Iran's economic problems are more or less related to the lack of 'boosting production' since economic recession, high inflation and rising prices, poverty and low living standards, and currency rates are directly and indirectly related to 'boosting production'. What preconditions are necessary for 'boosting production'? 'Boosting production' refers to the degree of efficiency and effective yield from production factors, such as advanced technology, the employment of skilled human resources, and the efficiency of organization, management, and financial resources dedicated to production. Various statistics from international and domestic sources do not show a favorable situation. For instance, according to World Bank statistics, Iran's per capita energy consumption is twice the average consumption in the Middle East. Simultaneously, Iran's agricultural productivity is approximately half the average of developed countries and lower than the average of Middle Eastern and North African countries. Iranian statistical sources also show that productivity in labor, capital, the banking system, energy, and overall factors has continuously decreased in recent years. In other words, while in other countries around the world, on average, for every dollar spent, production has increased and improved, this has not been the case in Iran. Specifically, in the new solar year, the actual activity level of production units is much lower than their nominal capacity. A significant portion of the workforce is inactive and unemployed, and unemployment is expected to rise. Even those employed lack the necessary efficiency. In this context, the environment, which is the natural capital of society, is not being utilized effectively. The current air crisis, water crisis, and improper use of fossil energy are all examples of this inefficiency in production factors in Iran. Additionally, low knowledge or management skills, especially at higher levels, is one of the important factors. This deficiency is observable in the three branches of government: executive, judiciary, and legislative. As long as the necessary preconditions for 'boosting production', namely the efficiency of production factors, are not realized, one cannot expect to witness a boost in production merely through technocracy within the current limited political and economic framework. The role of institutions under Khamenei's supervision in hindering production According to various reports from the Joint Commission of the Parliament, the National Tax Administration, and government officials, between 50 to 70 percent of Iran's economy does not pay taxes. Nearly 40 percent of institutions, especially those under Khamenei's supervision, are exempt from paying taxes, and about 30 percent also engage in tax evasion. According to these reports, the major share of tax evasion is related to institutions such as the economic organizations of the Revolutionary Guards and the Astan Quds Razavi, which are rent-seeking entities directly managed by the Supreme Leader and are exempt from taxes. This means a budget deficit for the government and thus a reduction in the allocation of resources for long-term infrastructure investment, which is another reason for the economic boom in Iran. Furthermore, the institutions under the leadership's supervision are a serious obstacle to making Iran's economy competitive and increasing its productivity. Any international tension and sanctions are an obstacle to 'boosting production'. International tension and sanctions mean disruption in Iran's relations with the world and its global trade, especially oil exports. According to reports, Iran's crude oil exports fell to about one million barrels per day in March 2019. This is while the average oil export from Iran in the month prior was at least 1.3 million barrels per day. This indicates the significant impact of U.S. sanctions on Iran's economy. It is undeniable that Iran's extraverted, inward-looking, and rent-seeking economy and its economic growth depend on the injection of oil dollars. Currently, the trend of Iran's crude oil exports to the global market and the revenues derived from oil has been disrupted. Therefore, it is expected that last year's recession will deepen further. Predictions from international institutions such as the World Bank and the International Monetary Fund, as well as reports from the Research Center of the Iranian Parliament, confirm this issue. The consequences of deepening economic growth include reduced investment and consumption, and increased unemployment. Also, under Iran's specific conditions, the budget deficit has increased, and naturally, inflation will inevitably rise. Although the Iranian government claimed that non-oil exports would replace oil exports, in many cases, non-oil exports have been halted to prevent shortages of goods within the country. For this reason, statistics show that non-oil exports decreased by more than five percent over the past 11 months. This indicates that international tensions will also affect non-oil exports. Therefore, non-oil exports cannot quickly and completely replace oil exports.