Iran: Increase in Domestic Production to Aid Economy Is Easier Said Than Done


Supreme Leader Ayatollah Ali Khamenei

Iran Focus

London, 03 April – During his Nowruz (Persian New Year) speech just over a week ago, Supreme Leader Ayatollah Ali Khamenei spoke about the effect of the U.S. sanctions on Iran and about the ways the country can overcome its economic hurdles. He said that domestic production must be increased, meaning that the levels of imports must be drastically reduced.

The Supreme Leader said that domestic production is being greatly hindered by “unnecessary imports”. He called on all regime officials to make sure that domestic production does not fail, emphasising that they should prevent the imports of goods that the country can already produce.

This is a lovely idea. The country is going through some major difficulties at the minute including high rates of unemployment, export barriers because of sanctions, a failing economy and a suffering currency. Increasing domestic production would made a great difference to the country’s economy. However, the matter is not quite so simple.

Low-efficiency industries would require a huge amount of resources, so this is another area in which it would be difficult to make a significant improvement to the economy.

The leadership of Iran has been in it for itself for the past four decades. It has shown, time and time again, that it will put its own interests over that of the people. Is this just another way for the regime to do so? For example, promoting natural gas industries is something that will have many benefits for the government and semi-state companies. Surely the Supreme Leader wants to boost the private sector to help the unemployment rate improve?

In any case, boosting domestic production is more difficult than Khamenei likes to make out because of the government’s policies. In order for domestic industries to thrive, they need trade and taxation policies that do not change with great frequency and the businesses also need exchange rate policies that are clear and reliable.

And developing the private sector would undoubtedly require a major input from the banking sector – a sector that is under extreme pressure as it is. A large portion of the banks are concentrating and focusing all of their resources on the regime’s own interests and have no desire to put anything into the private sector given the poor economic conditions.

Confidence is at an all-time low. Because of the regime’s unreliability and its current instability, many do not want to even take the risk of losing it all. Entrepreneurs have been leaving Iran – driven away for numerous reasons including widespread corruption.

In short, the Supreme Leader of Iran said some of the right things. He gave the impression that the people are of a genuine concern to the regime and that there will be great changes that will improve the lives of millions. But every year it is the same. False promises are made and they are never realised. The people will not be misled by the Supreme Leader’s speech and words of encouragement. They refuse to let themselves be fooled.