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  • Date :
  • 4/29/2007


Economy and Development

Of Iran

According to the Article 44 of the Constitution of the Islamic Republic, the economy of Iran is composed of three sectors: private, state, and cooperative. Presently, only 2.5% of the country"s economy is owned by cooperatives; the most predominant ownership is concentrated in state and private sectors. Regarding the official figures, 50% of the country"s Gross National Product (GNP) comes from governmental monopolies, which with the calculation of contribution of other governmental firms reaches 60%. In the last four decades, the main source of income of the country has been oil and gas exports. This amount has been about 64% of the country"s total budget in 1995. In spite of severe fluctuations in the global oil price , the oil export still plays a very important role in the economy of the country and is the main source of income in foreign currency.  

The Gross Domestic Product (GDP) is composed of four sectors: agriculture, industry & mine, services and oil. During the past 18 years (1977-1995), the added value of agriculture sector has reached 3,740 billion Rls. with 130% increase on the basis of fixed prices of 1982. This sector, since the Islamic Revolution, has always been the impetus of Iran"s economy. 

On the contrary, for decreasing dependency on oil income and due to unstable global prices of oil, contribution of oil export to GDP of the country has decreased from 39.4% in 1979 to 18.1% in 1996. In this period, the contribution of agriculture sector increased from 14.7% to 26.9%, and the contribution of industry and mine sector increased from 20.8% to 23.7%.  

After termination of the Iraqi-imposed war in 1988 and stabilization of the political and economical condition of the country, the added value in the economic sector began to grow. 

Between the years 1989 and 1994, the average growth rate in different sectors increased to 5.7% in agriculture, 7.9% in industry and mine, and 6.7% in services. Since 1994, along with foreign currency shortage and its impacts on the national economy, industry and mine sector has become the essential means in accelerating economic growth of the country. 

Since the victory of the Islamic Revolution, sub-sectors of industry and mine such as water, electricity, and natural gas have been the most thriving aspects of the country"s economy. 

In the services sector, the highest rate of growth belongs to transportation and communications. This phenomenon has brought about the condition in which the services sector plays an important role in the economy of the country during last years with a relatively sound structure. During the period 1988-1994, the added value of transportation, warehousing and communication sectors has increased more than 97% all together.  

In general, positive changes in national production and added value in recent years have shifted the national economy towards production, specially industrial production. 

In 1994, for the first time since the early 1990s, the growth of added value in the industry and mine sector exceeded the average growth of GDP and even sector"s growth. While the figures of these indices for GDP and services were 1.6 % and 2.5% respectively, the mine and industry sector experienced an annual growth of 4.9% that increased to 5.7% in 1995. At the end of 1995, the contribution of different economic sectors in gross domestic product (GDP) was 26.9% in agriculture, 23.7% in mine and industry, 42.9% in services, and 18.1% in oil, on the basis of factors price (fixed prices of 1982). 

Industry, Mines & Metals

The contribution of the industrial sector in GDP increased from 10% in 1981 to 14.5% in 1992 and this sector is developing with a rate that is more than average growth rate of the national economy. In the last two decades, industry in Iran has found its course of development. Till mid 1950s, the industrial productions of the country were mainly food products and textiles. Today, after four decades, this sector has been widely diversified. Since the early 1960s, the extent of Iran"s productions expanded. Some essential chemical materials including chemical fertilizer, dyestuff and soap have been produced. Electrical and mechanical industries were developed in 1960s and 1970s and diversity of productions since 1960s were offspring of this expansion.  

The quantitative rate of structural changes of production sector in Iran, through supply of information regarding the distribution of added value production (M.V.A.) in main industrial branches, in the years 1971-1994, which were gathered by the United Nations Industrial Development Organization (UNIDO), indicate that production in Iran has been traditionally dependent upon industries like textile, foodstuff (with beverages and tobacco products), and sectors related to transportation equipment, the common contribution of which has been more or less constant during the years 1974-1993. 

During these years, important changes occurred in these sectors so that contribution of textile industries decreased from 20.5% to 14.6%, and the contribution of food industries and transportation equipment increased from 12% to 13.1% and from 8.6% to 13.1%, respectively. At present, the main production sectors of the country are: non-metal mineral products (including ceramic and glass), metal industries (except machinery and equipment), and electrical and non-electrical industries. Each of these branches supplied more than 10% of the total added value of production in 1993. 

Iran was one of the main importers of steel in 1960s and 1970s. But today, it has become one of the producers and exporters of steel and its products as well as creation of relevant technology in the world. At present, foreign currency needed for production of 1 ton of steel has decreased from US$180 to less than US$70. According to planning made in recent years for export of steel, it is hopped that Iran will be one of the major exporters of steel in the near future. 

Iran has been equally successful in increasing its production of zinc, sponge iron, ferrous alloys, and refractory materials. This country has also found innovative ways for the production of light 

aluminum and the creation of technology and know-how within the country, all seemed impossible by reputable international experts. Today, metal and mineral products of Iran including alloys of different metals, are exported to industrial countries worldwide, i.e. Japan, South Korea, China, Italy, and other industrial countries. 

Similarly, the exploitation of decorative stone quarries, which was once done by old methods like explosion, has changed to one of the most developed industries through making use of modern technology. 

The important plants in the mines and metals industries in the country are: National Iranian Steel Company, Esfahan Steel Mill, Khuzestan Steel Complex, Mobarakeh Steel Complex, Sarcheshmeh Copper Complex, Fariab Mines Company, Iran Aluminum Company (Arak), Almahdi Aluminum Complex (Bandar Abbas), Jajarm Bauxite Plant, Iran Alloy Steel Company (Yazd), Golgohar Iron Ore Complex (Sirjan), Chadormaloo Iron Ore Complex, and... 


The Iranian civilization centers were based on agriculture and the use of arable lands. As water is a scarce resource in Iran, it has always played an important role in the development of agriculture. Thus, since a long time ago, agriculture has played a major role in Iran"s economy and development. This important sector, responsible for providing the food supply of the country, has employed about one third of the total employed population. Today, agriculture sector plays a very important role in the foreign exchange balance of the country for securing GNP and non-oil exports, as it has been also proved during the imposed Iran-Iraq war.  


According to a census conducted in 1993, the total agricultural lands of the country are estimated at about 18.2 million hectares constituting only 11% of the total area of Iran. Out of these lands, 5.7 million hectares (31%) are fallow lands and the rest has been under annual cultivation. In the last year, the value of the growth in agriculture sector export was about 8%. 

The contribution of agricultural products to non-oil exports has been 23% with 1,310.1 tons and a value of US$ 985 million. These figures show that, in comparison with the year 1993, this has increased by 26% by weight and 8% by value. Non-oil exports are mostly made to the following countries: Group 7, including Germany, Britain, France, U.S.A., Canada, Japan, western Europe, and west countries members of EEC, ECO Islamic countries, and other Islamic countries. 

FreeTrade Zones & Economic Special Zones

The establishment of free trade-industrial zones is one of the findings of global economic system in the 20th century for attraction of foreign investments, transfer of technology, production of export goods, expansion of employment opportunities, and penetration to global markets. These zones have been successfully established in many developed and developing countries including Iran. At present, three free trade zones have been established in southern Iran: Kish Island, Qeshm Island and Chahbahar. According to the authorizations made by the laws of the First, Second, and Third Five-Year Social, Economic, and Cultural Development Plans, the establishment of other free trade zones is approved for transit, processing, and export of goods which are called Special Economic Zones. These are Sirjan Special Economic Zone and Bandar Anzali Special Free Economic Zone. Each of these free zones has considerable potentials and facilities for investment, production and services. In addition to the economic functions of these zones, the development of tourism is included in the agenda of planning for free zones.  


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