Thursday, May 27, 2010

Incredible Iran?

According to International Monetary Fund (IMF) figures, Iran is the sixteenth largest economy in the world, consistently enjoys healthy growth rates and trade balances, and has a low national debt burden. While Iran's real growth rate of around five per cent a year for close to a decade has far outpaced that of Western economies.
Despite having had one of the youngest populations in the world for the past two decades, the Iranian unemployment rate has stabilised at around 12 per cent since approximately a decade ago.

The country's economy is also one of the most diversified in the region, second only to that of Turkey.
Iran's petrochemical exports have grown 15-fold since 2000 and her steel and car manufacturing industries are the largest in the region with outward investments in several countries.

More importantly, Iran is among only a few countries learning to master high tech areas such nanotechnology, nuclear technology and space exploration. In addition, it has one of the most sophisticated military industries in the region, despite having one of the lowest military budgets.

The 2007 US sanctions against Iranian banks ironically ensured Iran's immunity from the global financial crisis that was about to explode. Moreover, and despite the sanctions, the net flow of foreign direct investment (FDI) into Iran has grown steadily too, save for the 2008-2009 blip. The EIU estimates that Iran's net FDI will rise by 100 per cent within the next four years.
Iran was among the few major economies in the world not to be severely affected by the crisis. Smaller banks from emerging economies, Islamic banking and less formal means of cross-border payments, including cash and 'hawala', provided the best protection for those who were kept out of the ailing Western banking system as a form of 'punishment'.

Iran's exports grew from $8.5bn in 1987 to $70bn in 2006, representing an 824 per cent increase.
Iran's exports have continued to grow since. According to the Economist Intelligence Unit (EIU), they are expected to reach $82bn this year.

Iran's largest export market is Iraq, followed by China. As irony would have it, Iran's trade with both countries has grown exponentially since the US invasion of Iraq in 2003. The United Arab Emirates and Singapore have emerged as two of Iran's largest trading and foreign investment partners, although European countries as a group also form a substantial trade partner.

The Iranian government has responded to the increased costs by reducing other transaction costs for Iranian exporters. These include reduced freight costs and taxes for certain types of goods and greater use of expanded and improved free trade zones and special economic zones.
Iran has also set some ambitious targets for elevating her 'ease of doing business' ranking in the region. The index is a World Bank tool for comparing business environments across various countries, and Iran currently ranks in the mid-range compared to other countries in the region.

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