Iran - Economic development



Iran's first development plan (1949–56) foundered because of the lack of oil revenues during the nationalization dispute and also because the IBRD refused to lend the hoped-for one-third of the projected development expenditures. The second plan (1956–63) also ran into financial difficulties when the domestic budget consumed a larger proportion of the oil revenues than expected. An austerity program from 1960, however, facilitated economic recovery. The third plan (1963–68) was successful, and the period witnessed rapid economic growth. This plan placed emphasis not only on the building of an infrastructure but also on quick-payoff projects making use of local resources. The private sector exceeded the target planned for investment. Substantial foreign aid, varied in its sources, was also forthcoming, and foreign investment in Iran totaled more than $2.7 billion. The fourth plan (1968–73) was far more successful than the previous ones, with most of its objectives realized beyond expectation. The mean annual GNP growth was 11.2%, as compared with the projected figure of 9%. Similarly, per capita GNP rose to about $560 ($300 had been the goal).

In its revised form, the fifth plan (1973–78) provided for infrastructural development and other expenditures. However, a lag in oil revenues led to rescheduling of the plan for six years instead of five and the postponement or slowdown of individual projects. Because of political opposition and social unrest during the last year of the shah's reign, the plan was abandoned in 1978. The Islamic government that came to power in 1979 cut economic development funds because of a shortage of revenues, but in 1983 it proposed its own five-year development plan for 1983–88, with allocations totaling $166 billion and emphasis given to agriculture and service industries. However, the government's cutbacks on oil production (and, consequently, of the oil revenues that were to finance the plan), coupled with the diversion of resources to the war with Iraq, made it impossible to fulfill the plan's goals. The plan was revised twice after its introduction; in January 1986 the Parliament approved the outline of the revised plan, details of which were not available. The original plan called for 15.5% of development funds to be spent on agriculture, 5.3% on oil, 52.2% on industry and mines, and 27% on services.

The five-year plan (1989/90–1993/94) authorized up to $27 billion in foreign borrowing. It aimed to increase productivity in key industrial and economic sectors and to promote the non-oil export sector. The 1994/95–1998/99 plan aimed at investing money in transport, particularly in the railroad system and in the construction of a public underground for Tehran. Other projects were aimed at revitalizing the petroleum sector and developing the natural gas sector.

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