Iranís Economy Needs Surgery!
We have to do surgical operation on the economy. I say this very
firmly: A person who has cancer cannot be cured by taking aspirins.
Dr. Asghar Fakhriyeh Kashan says: ďFrom the very beginning after the (1979)
revolution, our government has failed to formulate a program to manage its
resources. Investing requires management of financial resources. Rare
resources of the country should be distributed and prioritized towards
development. But has this been the case? Definitely not! We wasted the
I ask him whether the government will be financially capable of investing
towards economic growth and whether it would be able to raise development
investment to at least the level of the 1980s. Fakhriyeh Kashan does not
provide me with an explicit negative answer to this question but says the
advanced disease of the Iranian economy would not be cured by taking
aspirins and that it requires surgery. He speaks of dispersed economic
islands in Iran, and the funds that are wasted between these islands and in
the absence of a development program. He cites numerous examples that show
our main problem in the economy is not lack of investment. But the problem
is that the funds are wasted. He says we do not invest in Iran. We just
divide up the donations.
How do you think the government can create economic growth?
There is no doubt that economic growth requires investment. But investing
requires factors that we have not been able to provide and, at the same
time, expect to attract capital. Investment requires a well-documented
economic program: A plan that would give the people the signal as to where
the economy is set to go in the next few years so that people and the
private sector can safely and securely invest in long-term projects. But
there is no such program in our country. Our economy has no stability and
security. The same insecurity does not give a good signal to the people and
the private sector, and everyone is trying to invest in markets that would
give them the highest profits in the shortest time. The result is a
wandering of the capital. The people would hastily invest in the foreign
currency and gold market one day and in housing another day. They would make
advance purchase of mobile sets one day and buy gold coins another day.
These are all due to the lack of a principled development plan. In the
absence of this plan, short-term investments will be economical and the
economic signs direct investors towards short-term investment. We have had
five development plans so far but I can confidently say that none of them
has been a development plan. Security is the second requirement of
When the private sector does not enter long-term investment, all the
investment load will be put on the public sectorís shoulders. Today also,
the government is incapable of continuing to invest in the economy with this
heavy body and lack of capital. Today the hands of the government are empty
and it does not have the funds to make investment. But that has not been the
case always. Even when we had the capital we could not use it appropriately.
Since the beginning of the revolution, our government has not had a plan to
manage its resources. Investing requires management of financial resources.
Rare resources of the country should have been distributed and prioritized
in a way to be in line with development.
When the private sector does not enter long-term investment, all
the investment load will be put on the public sectorís
But has this been the case? Definitely not! We wasted the resources. There
are many examples to prove my claim. The simple example is the division of
limited resources among countless construction projects. One thousand
billion rials were needed to launch the Tehran-Mashhad railroad in 2009. We
also had the money. But instead of allocating this credit to the project we
split the money among several projects, none of which was realized. Today,
with 120 trillion rials, we have not been able to start the project, and it
may require up to 200-300 trillion rials to finish. The mismanagement of
resources caused neither the railroad project nor the rest of the projects
This is while, if we had made the right investment at that time the railway
would have been ready and operating in the economic cycle. Do you know that
we have a few thousand projects with a physical progress of 10-15%. Every
year, we need to allocate resources that are only spent on maintaining these
projects without a particle of physical progress. What I am trying to say is
that our problem is not just lack of credit and capital. We do not know how
to manage existing resources. We do not have the art of optimal resource
allocation. We allocate resources under the pressure of MPs, Friday prayers
leaders, ministers and expert of the Planning Organization rather than based
on a formulated development plan!
You know where the problem is and you have the solution as well. There are
many others like you: People who both recognize the disease and have the
treatment prescription. But why all these things remain in words? When will
this island outlook and complaint about weak management come to an end?
Look! If we want to really examine the roots, I would say that itís not an
economic problem. The problem is cultural. I have been emphasizing from the
outset that it is true that our resources are limited, but we waste even
these limited resources. We have not been able to convince the private
sector to make investment. Its root cause is not just economic. The problem
is our educational system and our Eastern line of thinking. Oriental thought
is particularistic. This thought has precise and complete instructions about
marriage, the wisdom of individual livelihood, inheritance, individual
transactions, and so on but not at the macro level.
To have a comprehensive outlook about the economy and development requires
planning. Planning in Iran is an imported matter and we do not even believe
in it. We closed down our Ďplan and budget organizationí twice after the
revolution: Once at the time of Mousa Khayer (head of the plan and budget
organizationí at the time of assassinated president Mohammad Ali Rajaei) and
once under Mahmoud Ahmadinejad. After that, our plan became budget; While
these are two different things. So, we do not have the culture of planning,
and in this planning everyone has an island type function. Development, and
hence investment, requires a single economic rule. There is no single
economic sovereignty in our country.
Because it is in the united sovereignty that resources can be consumed
correctly. When the sovereignty is not united everyone would allocate
resources based on their priorities. Iím 100% opposed to putting the
revenues of companies at their disposal. This is the root cause of
corruption and part of the cause of our backwardness. The government spends
billions of dollars on operation of a sector over the years, and then gives
the income to the companies. So, when the return on investment will go to
the government so that it could use it for reinvestment? I emphasize that we
lack the science of planning. We do not invest, we divide up the donations.
We use the government resources in the worst possible way. Itís a tradition
to increase the costs of government agencies by 10% every year! When will a
rise in efficiency, cost reduction and cut in human resources occur? Where
do increased productivity, growing domestic output and investment stand in
What should the government do now to invest and achieve growth?
The answer is very clear. We have to do
surgical operation on the economy. I say this very firmly: A person who has
cancer cannot be cured by taking aspirins. Surgical operation will be
necessary. This is what other countries did. I am not talking about economic
surgery in developed countries. I am citing Iraq and Algeria as examples. In
Iraq, when oil revenue declined, the projects were divided into three
categories: Projects the government accepted the responsibility to complete;
projects the private sector could carry out with its own capital; and those
projects that should be shut down altogether. Algeria did the same when oil
prices dropped. We do not want to face the reality. Apparently we are
idealist and greedy people. We want to advance all the projects together and
invest everywhere. But we are unable to do that.