ďOil Free EconomyĒ
the Only Way to Save Iran
If we havenít followed the path China, Turkey, and the UAE have
taken in recent years, the resulting imbalance in our economy is the
outcome of government mentality and rent-seeking activities.
What happened in China during the inauguration of the Daxing international
mega airport has once again drawn the attention of the public to Iranís
failures in achieving development; but there is hardly anyone who could
provide answers to these important questions: A response similar to what Ali
Dadpay has given. The prominent Iranian university professor believes that
the government in Iran has confused the economy with groceries.
Noting that the problems Iran is facing today originate from the mentality
of the government and the society about the economy, Dadpay said the main
cause that Iran has not made progress and the inability to launch large
scale projects is the endless oil rent.
Associate professor of economics and finance at St Edwards College, Austin,
Texas, US, believes neither wrong policymaking nor legislative issues are a
major cause of Iranís backwardness; the cause is rather oil and its
easy-to-use revenue as a strong incentive to drive the government out of tax
and the societyís interest to get their share.
Policymaking, adhering to long-term goals and objectives, competing with
regional neighbors and global and regional competitors, or building
political economyÖ What is really the main driving force behind the massive
growth in Iranian counterparts such as Turkey, India, the United Arab
Emirates, China and Malaysia that every year we are witnessing the Iranian
economyís stagnation in creating new infrastructures and on the other side
we witness the inauguration of Starfish mega airport in Chinaís Daxing?
I do not see the root cause of these problems in the weakness of the Iranian
economy, but rather in the weakness of the government. Ironically, the
economic elements in Iran are very capable, and in recent years have
formulated various projects and mega projects that have been fallen into
disrepair only because of lack of support or interest or even direct and
indirect obstructions of the government and government institutions. If the
government accepted the axioms, we would have a very powerful 80
million-strong economy with 15 countries sharing land and sea borders.
Thousands of Iranians are actively involved in these countries and have
shaped Iranís relations with these states. A brief look at Iranís economic
map shows that private-sector activists from Dubai to Baku, Tbilisi and
Baghdad have established economic ties with these countries without
We have both the capability and the potential to design and deliver mega
projects. Now, if there is no incentive in our country to succeed in super
projects, it is rooted in the structure of statesmenís motivation and the
governmentís mentality. If we havenít followed the path China, Turkey, and
the UAE have taken in recent years, the resulting imbalance in our economy
is the outcome of government mentality and rent-seeking activities. The
governmentís constant effort to keep prices down artificially is an attempt
to conceal its performance and focus on consumption rather than prioritizing
economic growth. In practice, governments in Iran have been more involved in
the economy than in economic expansion. That is why super-projects are
neither a priority for the state nor a place for statesmen to evaluate the
success of the state.
But many believe that given the propaganda aspects of implementing these
projects, the Iranian government should be keen to build public and welfare
infrastructures in the country. How true is this statement?
I donít agree. There are no major projects in Iran because the government
does not need to open such projects. When Imam Khomeini International
Airport (IKA) was inaugurated, could the government make full use of its
cargo and passenger capacity? What is really needed to spend billions of
dollars building huge airport complexes like what we see in Dubai, Istanbul
or Beijing? We have already deployed the IKA at one-fifth the capacity and
in this context, comparing the volume of cargo potential at the IKA and
Dubai Airport is more like a joke. In such circumstances, the government
does not feel the need to move in the same way as the governments you refer
to. If the private sector wants to take action they will prevent it. The
goal of Iranian governments has always been to control the economy rather
than expand it.
In the last four decades, we have seen relatively few projects that we have
been able to construct fully and in a timely fashion and incorporate them
into an ultrastructure. Where are the drawbacks?
We look at a project as bread! For a long time, the well was drilled in Iran
to earn bread, not water! In Iran, the project budget line is more important
than the project itself. Since the government is not an active private
sector and does not have the private sector outlook on the economy, it does
not care about monetization of large projects after inauguration, so anyone
who implements the project has no hope of project income after inauguration.
This is the cycle that has taken place in Iran and the result is that the
government and the contractor can extend the project implementation time to
the benefit of the project.
The only way we can solve many of these problems is to cut back
on oil revenues and oil to meet the economic realities that
exist everywhere in the world.
Let me give you an example. We have for many years believed that Iran
tourism has a high potential for revenue generation and that it is necessary
to use this potential to build a hotel. But you can only build a hotel when
its income horizon exceeds the hotelís construction horizon! In government
projects it is often the construction project itself that has the bread and
butter for the contractor and the beneficiaries so it is not surprising that
the process will continue forever. Many inside the country now say that the
United Arab Emirates and Qatar have established international airlines by
copying from Iran. They are right!
This is the same strategy of the Iranian aviation industry in the late 40ís
and early 50ís that, using Iran Air and airport design, were intended to
become a transit hub for travelers between Asia and Europe. Well we couldnít
do it, but they could. People who constantly criticize this question do not
once ask if we were able to solve the problem of the foreign transit
passengersí hijab (Islamic dressing). Well we couldnít solve this! We
were unable to provide conditions for those foreign travelers who did not
wear hijab in an enclosed building at the IKA in order to receive
transit income. Then how do we expect to solve our big issues or do a mega
What is the main policy making and decision making of governments in these
countries? Is it merely the public interest that influences policy making or
does the need for new revenues and the attraction of investment to increase
production drive the design and implementation of mega projects by powerful
government, administration, or actors?
In all of the countries mentioned, the government in its macro management
has taken into account critical issues such as expertise and commitment or
scientific and technical capability while also considering economic
realities. Together, these countries and governments do not fall into the
trap of self-deception. I personally believe that the Iranian society is
extremely unfair about the reasons for development in the UAE. Because it
ignores the realities of this sector and considers only the petrodollars as
a factor in its development.
In fact they have separated their way from ours for decades. We and the UAE
have a lot of oil money, but they have invested the money and resources,
expanded their trading and transactions, boosted their private sector with
oil resources, and focused their macro goals on making their economy bigger
and wider. But we not only did not develop but reduced our private sector
with oil resources. It is a convincing proposition that since the rise to
power of Mohammad Reza Shah, the private sector has been steadily shrinking.
Why did that happen? Because the government has introduced its oil money as
a substitute for the private sector, it is expanding its economic role every
day. On the other hand, the government in all the leading countries
mentioned here knows exactly the meaning of economics.
What changed the perceptions of Chinese and Turkish rulers that made their
policy making more purposeful in line with the modern world?
When we read the history of China, we are shocked by the deaths of 65
million Chinese as a result of government blunder. From time to time, the
Chinese government realized that it could no longer afford to pay for its
mistakes, so it tended to adopt a model of free economy to provide its
people with food and water. The subtle point here was to cut off the hope of
the extraordinary power of the state created in the minds of Chinese
statesmen. They realized that the government was neither capable nor had the
resources to do all the work.
Therefore, to solve the problem it focused on the ability of all members of
the society: An incident overlooked in the analysis of free market economies
and competition theory. In these economies, one person does not do all the
work but the final goods are the result of the collective efforts of all
people and strata (insiders and outsiders). It is here that it becomes a
public mentality that the game is defined for all and has room, so that the
individual benefit or economic benefit puts the individual and the firm on
the right track. Something that has been the opposite in the state economy
and the government wants to do everything on its own to make a profit, but
it canít. In todayís Iran, doing an economic activity is not an everyday
occurrence but a concession from the government to someone close to the
government. In this situation it is natural that because of the interests of
certain people, a large part of society is not even allowed to do business.
How decisive is the complex relationship of the political system and the
economic system in experiencing similar conditions with China in Iran? Is
there a time for a change of course by the government in Iran?
The only way we can solve many of these problems is to cut back on oil
revenues and oil to meet the economic realities that exist everywhere in the
world. I do not know and do not imagine that this would be possible in Iran.
This is a practical and political issue. As long as our definition of power
is focused on controlling peopleís behavior, that jump will never happen,
and the government or political system will never be honest in bringing
everyone into the game with every vote and opinion. We are in a situation
where a minority in the community is taking advantage of the oil rent to
consolidate their position, and issues such as mega projects or the
development of national ultra-structures are being discredited. We have been
writing articles and stories about the potentials of the Iranian economy for
years, but our potentials remain as illusionary as ever, never realizing the
color and size of regional competitions. As long as we use oil rents in this
social equilibrium and receive many benefits without paying for it, we will
not be able to break the current situation.
And where do you think the starting point for the new trend is? Suppose we
wanted to get on a road that Turkey, China and the UAE had already gone.
What changes should our policy, mentality, and decision-making take?
It is an all-encompassing task and requires a wide range of changes. The
first step is to change the fight against corruption, along with removing
the role of government from projects. When these two occur then we must move
to decentralization and allow each region of the country to implement its
own economic strategies and, based on its strengths and potentials, seek to
attract investment to increase employment and productivity. We need to
create the conditions in the country for individuals and groups to do their
jobs and flourish without the need for the government. Iranís economic
development needs government support, but with a monopoly state and this
pervasive and interventionist government it will only reach a dead end.