Rohani pledges to boost production, kick-start Iran’s economy

Rohani has promised reforms that would help in boosting production as part of efforts to kick-start the country’s sanction-hit economy, according to an article published by the Financial Times.
Since he took office last month, Rohani has made improving the country’s economy a priority. He has gathered a group of experienced technocrats, many of whom were sidelined by the previous government, to help.

Following is an excerpt of the article.

When the entire economic team of Iran’s new cabinet paid a rare visit to the chamber of commerce, industries and mines last week, the country’s entrepreneurs and industrialists felt a rare glimmer of hope after eight years of steadily worsening economic news.

The politicians appealed to business leaders for help in boosting production as part of efforts to kick-start the country’s sanctions-hit economy, and promised reforms that would help them.

In a surprise move, Hassan Rohani, the new centrist president, also turned to the elite revolutionary guards to do their bit for the country.

The new cabinet earlier this month urged parliament to revise the budget to take into account a 30 per cent decrease in projected revenues.

Mismanagement by ex-president Mahmoud Ahmadinejad’s government also contributed to the dire state of the economy. The struggling private sector spent his eight years in power buffeted by sanctions, deprived of access to imported raw materials and machinery, and starved of investment as the president instead gave cheap loans to the poor and allowed a rapid expansion of imports of consumer goods that all but crushed domestic production. Most Iranian factories currently either operate at extremely low capacity or are facing bankruptcy.

Even Ahmadinejad’s privatization program failed to stimulate the sector, as most state-owned companies were handed over to quasi-state-owned entities.

Rohani insists Iran’s problems can be overcome through “moderate” policies at home and abroad. He and his advisers have promised to ease banking and customs regulations, and to crack down on smuggling, which undermines domestic industry.

“The government’s economic team knows that it needs the private sector to put the economy back on track,” said Mehdi Fakheri, an adviser to the head of Iran’s Chamber of Commerce.

However, the sector is currently “small and weak and on its own is not really capable of helping the government tackle its huge and extensive economic problems,” said one manager.

And, while Mr. Fakheri said the business community was “cautiously optimistic” about the new government’s reversal of policies, analysts caution the private sector is also waiting for the beginning of a new round of Iran’s nuclear negotiations with major powers to see if sanctions are at least partly eased.

“Any structural reform will be a huge challenge for the government of Rouhani and we will see a lot of resistance,” said an Iranian economist.

“Iran’s economy has lost its equilibrium and the private sector cannot do much in particular if major western companies remain absent.”