Wednesday, December 17, 2008

Report on the First Conference on Iran's Economy

This was a most promising gathering of economists and doctoral students interested in Iran's economy hosted by University of Illinois at Urbana-Champaign (UIUC). Some of the eminent names in Iranian studies and economic research attended the conference, among them (in alphabetical order) Professors Firouz Gahvari, Hassan Hakimian, Guity Nashat, Vahid Nowshirvani, Hashem Pesaran, Djavad Salehi-Isfahani and Hadi Salehi Esfahani. The younger generation included several doctoral students from UIUC, Virginia Tech, USC, UT-Austin, Berkley, Cambridge (UK) and Goethe University (Germany). Nobel laureate Gary Becker from University of Chicago offered commentary on research on Iran’s economy. Professor Hashem Pesaran from Cambridge was the keynote speaker. The meetings were held in Illini Union.

The conference was conspicuous for several reasons. The articles presented stand apart from the mainstream research in their insight, analysis and implications. A few works even went as far as implementing new information theory methodologies to study economic issues in Iran.

The works of doctoral students were impressive both in their efforts to utilize advance theories and analytical tools and in their struggle with original data from the field. Each and every paper was welcome by several comments from well informed audience and the following discussion usually brought up new questions for further research. This was a world apart from usual gatherings where people have little idea about the realities of daily economic life in Iran and thus they are content by what they hear.

The conference also was a significant organizational success. All in academia know that organizing such events is no easy task. Special thanks go to Professor Hadi Salehi Esfahani for initiating the idea of such gatherings and coordinating the efforts and resources needed for organizing this conference and to his colleagues; Professor Firouz Gahvari and Dr. Ali Toossi Ardakani and to Iranian graduate students in economics department at UIUC, who assisted in all phases of the conference and were generously hospitable. UIUC[1] has been among the first campuses to admit Iranian graduate students to the doctoral program in economics directly from Iran and its sponsorship of this conference was a new peak in this institution’s support for research on Iran’s economy.

This certainly is but a beginning. The second conference at USC in September 2009 is expected to be attended by a larger number of researchers and doctoral students. The idea is to have annual meetings that bring together all economists who are interested in Iran’s economy with academicians from Iran; unfortunately visa problems prevented Iranian economists from attending the first conference despite organizers’ efforts and wishes. The challenges ahead are many particularly for the young researchers who have to seek employment and to qualify for tenure. They ought to balance their interests in Iran's economy and the necessities of their career paths.

The signs are promising; Iran is a taboo or deal breaker topic in academic circles no more. The growing number of doctoral students in economics from this country guarantees a continuous access to the observations from field and a dynamic link with Iranian academic centers. The road ahead is long, but there is hope that great things can be accomplished. The first Conference on Iran's Economy has confirmed and reinforced hopes for dynamic, productive and ground breaking research on Iran's economy.

[1] Another school was Virginia Tech, whose students collaborated with a few research papers offered in this conference.

Thursday, December 11, 2008

First Conference on Iran's Economy

Tomorrow the First Conference on Iran's Economy will take place at University of Illinois Urbanna-Champaign. This gathering stands out for two reasons: first it is attended by many who have been working on Iran's economy for the past three decades. Second a number of young researchers are presenting their work in this conference, among them a few doctoral students and recent graduates. Thus it marks the first event where the younger generation of economists interested in Iran join the older generation who kept the work going despite all difficulties and turmoil of past three decades.
There will be a second gathering in September at USC and interested parties and researchers are invited to submit their work. Iran's economy after another sharp increase in oil prices is going through aftershocks now. Its rising inflation, the huge supply of college graduates, its success in checking population growth and fighting poverty, while inequality persists in society, make studying it the most intreseting undertaking.

Friday, November 07, 2008

Iran and US Election

It is interesting to notice that how closely Presidential campaigns in the States were followed by international audience. In Iran many kept track of primary elections and then the combat between Barak Obama, President Elect, and Senator McCain with enthusiasm. For them it was unbelievable to see an African American with a Kenyan father on the road to the White House.
In the days leading to the election Iranians enjoyed the competition while many officials followed the old line that USA foreign policy is independent from the ruling party. This statement neither subdued hopes nor reduced expectations that an Obama presidency would be better for Iranian people. Many believe that even a change of tone in Washington would cool down the tensions and would facilitate diplomatic approach and negotiations.
Iran-USA relations always have been a tricky process filled by political minefield. Both sides have to be careful of domestic reactions and interest groups while planning to approach each other. The prevailing assumption is that Iranian politicians believe that success in opening political relationship with the States would result in an immense increase in one's prestige and political influence. Thus many political groups would interfere in the process or would interrupt it to deny their rivals the credit not because they oppose the notion itself.
This argument neglects the fact that often radicals of both sides enjoy a best response situation. They provide each other with incentives, motives and reasons to remain radical. It also puts too much weight on the political gains of such a relationship. Many politicians on both sides have gained more opposing the other side than advocating diplomatic relations. Why this time could be different? Would it be different simply because of the “change” agenda?
Although some say “Change” has created expectations, there is little doubt that realpolitik deals with incentives, gains and strategies. From this point of view both countries are in a position to gain from a negotiation. If we assume that new administration will seek a stronger Iraqi government and move toward a reduced presence in Iraq then Iran’s assistance would be of value. Should it be secured it will result in a more stable Iraq and facilitate regaining stability in Iraq. Thus requiring it might create positive gains.
On the other hand if the price of oil continues to decline then Iranian government might appreciate lifting the sanctions and access to international banking system. It also might consider it as a positive gesture to see the regime change is not part of the agenda in Washington.
President-elect’s victory was welcome by many social groups in Iran, including youth, business community, women and students. There are several ways that the new administration can show them good faith: increasing cultural and academic exchanges, allowing Iranian private airlines access to American aircrafts and parts for their purely civilian purposes that would reduce the fatality rate of air travel in Iran, and exploring common business interests; for too long both sides have been focused on oil industry however there are other fields that both sides can collaborate. Doing so would increase the popular demand for relations with the States and politicians can seek diplomatic solutions without appearing to compromise their standards.

Wednesday, November 05, 2008

So It is Settled

“Impeachment has been Accepted and from this day Mr. Kordan cannot be functioning as the minister of interior. Majlis has expressed its lack of confidence.” With these sentences Dr. Ali Larijani the speaker of Iranian Parliament made it official that Mr. Kordan had lost his job after 90 days in office. Your correspondent does not want to exaggerate the significance of this event; however it was an important development, one that cannot be ignored.
Our story began when Mr. Kordan, seeking the approval of Majlis told MPs that he hold an honorary degree from Oxford, that prestigious eminent tower of academic traditions. After hearing his credentials and Mr. Ahmadinejad's enthusiastic support MPs went ahead and voted for Mr. Kordan. It did not end there.
Dr. Tavakoli a prominent conservative MP who is the Head of Majlis Research Center and runs Alef ( news website did not find Mr. Kordan’s answers to the questions about his degree satisfactory. He sent an inquiry to Oxford asking if they had granted Mr. Kordan a degree in the past. Oxford denied even hearing of a Mr. Kordan. Dr. Tavakoli’s website uploaded Oxford University’s letter. And school sent out a news release to the effect. The story now was picked up by the foreign press; Guardian, Washington Post and LA Times circulated the related stories.
While society, weblogs and media were filled with stories and jokes about this event, conservative faction and MPs were facing a serious question. Although many bureaucrats and officials claim degrees from schools, both domestic and foreign, neither of them ever did so in an official session of Majlis and none had been contradicted. This was an obvious breach of the values advocated by the conservatives. They had no other choice but to seek Mr. Kordan’s resignation.
Several conservative MPs joined Dr. Ahmad Tavakoli and Dr. Ali Motaharri, another conservative MP from Tehran whose father, Morteza Motaharri was the most prominent ideologue of Islamic revolution. They asked for Mr. Kordan’s resignation, he rebuffed them. They requested the President to fire him, and the President rebuffed them too. So impeachment was the only way.
Days leading to the impeachment witnessed some interesting events. Mr. Kordan accepted that his diploma could be a forgery but said that an individual who had claimed to be Oxford representative in Tehran had offered him the document on school’s behalf. That individual identity remains unknown. An aide to Mr. Kordan and President was caught offering 5 million Thomans to MPs for repairing Masjids (Mosques) in their constituencies. Instead of a receipt he had them sign a withdrawal from impeachment request. After being slapped by a fellow conservative He was banned from entering Majlis building.
The day of impeachment came, while Americans were electing a new president, Iranian MPs were firing the person in charge of holding elections. The outcome was celebrated by conservatives, moderates and reformers alike. The impeachment also pushed the cabinet to the edge of confidence. One more change in the cabinet would force President Ahmadinejad to ask for the vote of confidence for the government from Majlis, according to Iranian constitution; an opportunity that many of his critiques would welcome.
The hero of the hour is certainly Ahmad Tavakoli. Your correspondent has been a critique of Mr. Tavakoli's political views, which are conservative, and I am not a conservative by any stretch of the word, and his economic beliefs including his support of government’s role in the economy, yours truly advocate a free market and participating in the global markets. However it must be pointed out that he preformed his duties as a MP immaculately. He investigated Mr. Kordan’s credentials, provided evidence that contradicted them and acted upon hard evidence to challenge him. He was able to rally a group of MPs to impeach the minister and he gave president every opportunity to avoid a confrontation. Many including your correspondent believe that is the true function of any parliament. That is why democracy is efficient, that is why legislation must be independent of executive and that is why elections must be free.

Friday, October 24, 2008

Social Prestige & Numbers in Iran

You walk into a wireless phone store in Tehran and you want to sign up for a new line. The standard price is 280'000 Thomans, roughly 300 USD, however you can end up spending as much as 4'000'000 Thomans, 4000 USD, on a new line. My friend told me.

In Iran cellular network has different codes from the cities, for example Tehran area code is 021, while cellphone codes are 0912, 0913 and 0917. And they are not the same.

The first cellphone code in Iran was 0911 and then later it became 0912. If you have a 0912 line it means it is awhile that you have a cellphone. You are not some kid just getting rich, you have class. You have old money. 0913 still is OK, you live in Tehran, good city kid who bought his cellphone couple of years ago and have been making money. You are in the circle. 0917... well that is not good news at all! you make some fast cash recently and you do not have any social standing. More than one friend told me in Tehran if your number begins with 0917 no chance a girl accepts your number!

There is no surprise that demand for a cellphone number varies with the number you can get. 280'000 can get you a basic line, but it is a poor signal for your prestige. So you might want to spend a little bit more, actually a lot more, to stay in the circle.

Brands define you in Iran; your school, your neighborhood, your car and etc, even before you start talking. But this phone number thing is taking it into a new level. And why is it like this? Why people invent brands in a society already poisoned by branding and labeling.

Sunday, October 19, 2008

Bazar Said "No" to Value Added Tax

Iranian government has introduced a value added tax (VAT) and gave the treasure authorization to collect this new item from businesses and Bazar across the country. The treasury issued an order and set a date to start the collection. Things seemed to be under way however...... .

However President Ahmadinejad's administration underestimated Iranian Bazar greatly. First in Isfahan, then in Mashhad, then in Tabriz and finally in Tehran Bazar closed down and Bazaris went on strike opposing the new tax measure.

Government retreated first by canceling the order temporarily for two months and then for time being. Tehran's Bazar stayed on strike demanding the new measure to be canceled permanently. For a government that talks of bold measures it was not exactly a triumph.

While many debate that VAT is a measure to protect consumers from over taxation and some argue that little time had been spent on preparing the public for this measure, it seems that many miss the point communicated regarding the policy implementations in Iran: You do not mess with Bazar!

An increase in taxes is not something Iranian shopkeepers and Bazar's tradesmen submit to willingly. There was little doubt that they would react to such measure. and It must be noted that they can.

It does not need reminding that Bazar or marketplace is Iran's most ancient economic institution. So its network of connections includes the elite, the clergy, the industrial entrepreneur and the consumer. It is well aware of its connections and its power. It also benefits from the fact that everybody else is convinced that its motivations are purely economical. So Iran's Bazar benefits from that rare luxury that many other institutions lack: maneuverability.

Its reaction to this new measure only confirms this reality. Reacting to a measure that was well intended it communicates a clear message to the administration, in Iran to protect the consumer Bazar is not willing to take on more taxation.

Many might welcome more government's subsidies, the traditional way of disturbing the wealth of oil in the society, but the declining oil prices are not empowering more subsidization either. Government has only two choice ahead: either to sacrifice development for the sake of consumer by diverting its resources or its popularity with Bazar for the sake of its popularity with consumers. Neither is an attractive prospect.

Monday, October 06, 2008

Bail Out Ejects the Free Market in Iran

The history of economic thoughts and economics in Iran reads like ancient Greek tragedies. In a country where all ideas have a political role to play, even if they do not want to, free market and neoclassical economic theories have found themselves at odds with politicians more than once.
In Pahlavi era they were not welcome while a centralist government reigned over economy with a tight grip, and while most of Iranian intelligentsia was inclined toward Socialist and Marxist notions. A free market was equivalent of heresy.
In the post revolution era ideologists and politicians vacillated between absolute control of economy and privatization.
Ironically the first major nationalization program was designed and proposed by Mr. Sahabi a member of the provisional government and Mr. Bazargan’s liberal moderate cabinet. The revolutionaries might have their disagreements over many concepts such as democracy and freedom of speech however they all opposed economic freedom and free market resolutely.
Only recently during Presidents Rafsanjani and Khatami politicians reconsidered their stands and welcome some notions of private ownerships. Development plans called for extensive privatization of industries and a new interpretation of article 44 of constitution was introduced that ended the government’s monopoly in economic activities. It even seemed the most ardent critiques of free market have accepted the necessity of private free market at last.
However the new crisis in American financial markets has fueled the arguments of those who advocate an unlimited role for the government in the economy and distrust free market and free market ideas. President Ahmadinejad went as far as saying that assuming free market regulates the economy is “a great lie that benefits thieves.” There is no doubt that promoting a free economy in Iran has become more difficult.
Such statements are nourished by the fact that many Iranians, intellectuals and politicians alike, are ignorant of economics as a science and believe their experience of economy can substitute analytical tools and methodological studies of the economy. They often confuse the science with the phenomenon and instead of believing in price and inflation as signals believe in them as control instruments of the economy.
For time being many from all parts of political spectrum in Iran refer to the ongoing crisis as the greatest defeat of capitalism, however one wonders what would happen if this crisis forces down the price of oil. Would then a private free market become a good idea again?

Monday, September 22, 2008

Governor of Central Bank of Iran Left the Building

When was asked to resign a few months ago Mr. Mazaheri told the reporters: "I have told the President he has to fire me, I will not resign." The governor of Central Bank of Iran may be the last member of cabinet who spoke out against President Ahmadinejad's economic policies, advocated by Mr. Jahromi the minister of labor.
The rift between two reached a new height when Mr. Jahromi wrote a letter to the President asking him to fire both of them. It seems the President prefers to let Mr. Mazaheri go. Mr. Mazaheri is the 12th member of administration who is being replaced. Like Mr. Danesh-Jafari the former minister of economic affairs, it seems he too failed to persuade the other members of administration that injecting cash into economy causes inflation.
Mr. Mazaheri has served in several cabinets in the past; however his term as the governor of Central Bank is the most remarkable one. While many of his colleagues advocated lowering the interest rate and some even thought of dismantling the banking system he became the voice of reason. He argued that lowering interest rate amidst rising inflation is not a wise move. He also argues that financing short term return projects is not advisable.
His refusal to lower the interest rate might as well save the economy. His refusal to open the banks’ coffers to finance Mr. Jahromi’s short term investment programs might prevent the stagflation. His departure was unexpected, but it also signals that the President once again sided with his minister of labor. It seems now the President has the key to the coffers of Central Bank.

Monday, September 15, 2008

Colleges Go Domestic in Iran

Summer is coming to an end in Iran a season of impatient and anxious anticipation for hundreds of thousands of high school graduates who had participated in Iran’s National University Entrance Exam or as the dreaded test is known: Konkour.
Iranian universities and colleges do not act independently in admitting students, like many other things in the country admission to universities is centralized, with the exception of Azad University network having its own national entrance exam.
Konkoor is coordinated by a national organization, called “Sanjesh” or National Test Center. All high school graduates and pre-college students take it on the same day across the country. Then they submit a college-major selection card to this organization, this card includes all of their choices of places and the majors they would like to study in. A computerized algorithm chooses what they can study based on their rank, calculated based on their score.
For example if a person’s first choice is to study Electrical Engineering at University of Tehran, with a capacity of 25 students, and his rank is 55 he is admitted if and only if his rank is among top 25 people who wanted to study this field.
There is no wonder that filling this spreadsheet or “Entekhab e Reshteh” (literally means “subject selection”) card is a thriving business and hundreds make millions in it. Thus some fields in the higher education[1] are better than others and the best of the best enroll in them, although they might be clueless as to the future. Given the rigidity of the system and bureaucracy involved with changing majors within the school system the field one is accepted in, is the field he or she graduates in.
Given the discrepancies of among provinces in the quality of education and infrastructure, Iran is divided intro three regions, each with their own share of total student seats in the public universities. This system has guaranteed a fair chance of admission for the students from less developed areas. This year this system has changed.
In a strange move National Test Center executed a new law that allocates 65% of any university’s seats to the local population of its region. The new system allocates 65% of the seats in Iran’s best universities, which are located in Tehran the capital, to the residents of the first region. This has deprived many talented students from enrolling in these schools causing them to challenge these results.
It is not clear that if this new law has been actually ratified by the legislation and some MPs have voiced their objections to its implementation. In the meantime Iran’s Higher Education Ministry moved to remedy the situation by adding 10% to the seats at Iran’s top universities to accommodate those who are not satisfied by the new system; a rather short term patching of a faulty strategy.
In defending localizing universities some argue that such system guarantees the residents of a province to study in that province and to “serve” in that province. However many ask how this would create sustainable growth since the high quality universities are in the most developed areas and such a decree denies the less developed areas of country fair access to high quality higher education. One must admit that there are many scratching their heads in Tehran wondering as to causes of such policy.
[1] Economics is not usually among the first choices. Engineering majors and medical studies are the first choices and business majors and economics are not as favored. Most unfortunately this has created a gap in Iran’s higher education.

Sunday, September 14, 2008

Provincial Offices in Iran and Women

The expanding service sector, growing number of private contractors and an increasing female college graduate population have increased both female workers participation rate and female employment in Iran. This has introduced a new phenomenon to provincial offices of government agencies and ministries: female engineers and representatives of consulting firms and contractors.
Wrapped in traditions and old understandings of one’s roles and duties the local administrators vacillate between denial and acceptance. A recent example is that of Transportation Ministry Provincial Office in Kerman. They simply banned female representatives of their contractors and consulting firms from entering the building. Reported by Tabnak website currently this office only answers men and letters delivered by men.
Reading the related article your correspondent was amazed to read the comments of other readers. While some were outraged and severely critical of such decision, some were actually supportive of such a decision. These were divided mainly into two groups.
First group included those who believed since there are unemployed men in the country; women should not have been employed in the first place. One even said: “If we had logic in our decisions in this country, jobs would have gone to men first and then unfilled positions to women.” This argument does not rest on productivity and the benefits of a competitive labor market.
The second group constituted of those who simply said women get through the official system in Iran, because they are attractive. This absurd generalization of the fact of matter is denying the abilities and skills of hundreds of women in Iran who work hard and efficiently and get through the system because of their persistence.
Reading these arguments one has no choice but to point out that the absence of economic analysis of the realities of labor market has given rise to popular misconceptions and beliefs of female labor force, unemployment and the causes of unemployment. Men are not unemployed because some women are employed and women are not more efficient because they are attractive! In the void created by these misconceptions it is not difficult for some local administrators go as far as banning women from entering their building!
The complexities of Iran’s society and its culture and the different agendas of its so many localities make development such an elaborate matter. Coming to such cases one has to notice that there are some provincial communities who advocate such policies. Iranian women battle for economic self-sufficiency and equal employment rights has been a long one, but it is far from over. One way to assist them is to remind such communities of the facts of the matter and the realities of one’s incentives in a labor market.

Wednesday, September 10, 2008

Ramadan, Government and an Increased Demand

It is Ramadan, the month of fasting in Iran and the rest of Islamic world. Even in stores on Devon Street in Chicago one can see the food menu for this month: dates, coconut dates, milk, sweets and etc.
Given the fast lasts from dawn to dusk, the believers need meals rich in calories. Thus there is an increase in demand for meat, chicken, milk and in Iran for sweets such as Bameyeh and Zoulbia (soaked in honey they make any sweet tooth person happy and are the nightmare of those who care about their shapes). The demand increases and thus the equilibrium price rises. Under normal circumstances this would be a business cycle of market, but when inflation is passing 27% it is going too far for middle class and low income households in Iran.
In response to the price hike and in order to provide the populace by affordable food products, government has taken upon itself to distribute inexpensive chicken, meat and other products. Thus there are queues across the country for these products. The success of this effort is not known and hard to measure.
Government as a distributer of products and goods is an old image in Iran. The inefficiencies and failed experiences of the past have failed to pursue current administration to stop meddling in the market. With oil price at an all time high it is inconceivable for the government to think anything else but that it can face any challenge with a pocket full of cash. It also is inconceivable for the public not to be able to afford their basic needs in this holy month. But the truth is inflation is taxing Iranian households’ budgets. Government feels obliged to do exactly what it does to keep the public happy, no matter if it makes them to stay longer in queues.
However it seems government’s generosity with oil revenue and its funds is taxing veteran politicians’ patience. Many have been criticizing government’s frequent withdrawals from oil revenues. Most recently Dr. Rowhani a former Secretary of National Security Council charged by saying: “It seems some consider it their weekly duty to empty the coffers, a golden opportunity has been offered to us that it is lost now. What have been done with the oil money besides buying bananas and oranges?”
It seems time for more serious approach has come.

Tuesday, August 26, 2008

USD is Gaining on Rial

There has been an increase in USD versus Iranian Rial in Tehran currency exchange markets. However I am not sure if this increase is due to USD gaining against Euro, or it is partially due to inflationary conditions of Iran’s economy. The high inflation usually causes household to seek other ways to save in Iran. The list of investments and savings is topped by purchasing properties and houses, which usually results in an increased in housing prices. The next item is purchasing gold and hard currencies.

An increase in USD value in Iranian markets could be due to increase in popular demand to save in hard currencies such as USD and Euro. I also wonder if sanctions have something to do with it, by limiting the number of suppliers of USD to Iranian merchants and private sector. One simple increase in an economic index and so many questions!

Friday, August 22, 2008

An Ironic Moment

[I am back since it is more difficult not to write]

In an ironic moment of history Hadi Saei, an alderman in Tehran’s city council and a reformist, won Iran’s only gold medal in Beijing Olympics. Iranian athletes achieved only two bronzes and one gold medal. Although many hold international titles, particularly in wrestling, Iranian athletes’ achievements are not as expected or promised.

A frustrated public and many infuriated fans put the blame squarely on the government’s door. Numerous bloggers and fans used every opportunity to criticize Vice President AliAbadi, the chairman of National Organization for Sports, and to some extend Mr. Kaffashian, head of Iran’s National Olympic Committee. This was the costliest attendance in Iran’s history with a budget of 300 billion Rials, or 30 million USD.

Saturday, July 19, 2008

Here it goes

I posted roughly 378 posts since I started writing here. Mostly about Iran, some were links, some were my own notes. But now is time to stop this, at least for awhile.
Thanks for visiting.

Sunday, July 13, 2008

The French Out and The Russian In!

Following Total decision to abandon developing Southern Pars, Gazprom, Russian natural gas monopoly OAO, stepped in to fill the void. Its Chief executive Alexei Miller met Iranian President Mahmoud Ahmadinejad in Tehran to talk business. Later the heads of Gazprom and National Iranian Oil Co. discussed ''creating a joint enterprise to carry out exploration and production of gas and oil fields, construction of oil and gas processing facilities, and transport inside Iran”.

This development increases the cooperation between Iran and Russia in the energy sector, a field where Russia is seeking to play a more prominent role. It also reduces the mutual interests between Iran and EU. This adds to incessant decline in the volume of trade between Iran and EU countries.

An increasing number of Iranian businesses, both semi-private and private ones, had to start working with Chinese and Russian counterparts. Their European partners halted their business dealings with Iran following UN implemented sanctions. This has weakened those who advocate accommodating EU countries and UN Security Council over its nuclear issues. They had been arguing that Iran’s persistence has cost its economy dearly. However shifting the major business interests to Russia and China has enabled the government to argue that Iranian businesses do not have any common ground with EU any more.

The unfortunate fact is that EU partners in Iran are mainly private sector, while Iranian firms in the new business ventures are either publicly owned or are related to the public institutions. One wonders if sanctions are hurting Iranian private sector most, the only group that actually have incentives to encourage moderation.

Tuesday, June 24, 2008

I Announce You Husband and Wife!

According to Islamic law a man and a woman can say their vows themselves and be married, as simple as that, however like everywhere else marriage is no simple affair in Iran. Usually a clergy or a licensed person or sometimes a well-established judge performs the ceremony and then the marriage is registered in the official registry. In the past centuries performing marriage ceremony has been one of the sources of income for the clergies, although it never has been their monopoly.

Still in this ceremony the authority is not that of the office, but it rests with the couple. Those who perform the ceremony ask for the power of attorney first to perform the ceremony and they say their religious vows on behalf of the couple. (This is the part that a bride should wait three times to say; “yes”)

It has been a long and ancient custom to have this ceremony performed by an individual of high standing in the society and good reputation. Thus many grand ayatollahs, Sufis, men famous for their honesty or virtues are usually asked to perform this ceremony. Former President Khatami is no exception in this matter. The photo, taken from, shows him after performing the ceremony for Amir Mehdi Jouleh a screenplay writer.

What is interesting about this photo? Well in a society where wearing a tie is officially discouraged how often you see a former president with a groom who is wearing a pink tie!

Wednesday, June 18, 2008

The End of Socialism in Economic Policy Making

The new speaker of Majlis, Dr. Larijani, told reporters that the era of socialist economic policies is over. He emphasized the producing wealth must be encouraged since it guarantees a continuous growth.

He vowed that Majlis would not allow any law contradictory to the new interpretation of Article 44 of Iranian constitution, which allows for extensive privatization, to be passed. He also promised that new interpretation will become law very soon. This legitimizes privatizing several public enterprises and ends the government’s monopolies in several others. It seems that the economy is presumed to be the main task as hand.

On the other hand the government accepted that any further reduction of interest rate is not advisable, a victory for the head of Central Bank. While banks continue to implement a %12 interest rate, it is decided that the government pays %2 in subsidies to the industry to reduce their expenses.

Although it seems the tide is turning and after a few years of populist projects, high inflation has wised up some to their true cost. However President Ahmadinejad is still determined to go ahead with his great surgery of the economy. One only can hope, that rationalism prevails yet another time.

The era of socialism might be over, unfortunately its influence on Iranian intellegtsia and some politicians is not.

Saturday, June 14, 2008

Soccer, Development and Decision Making in Iran

To contradict those who argue there is one single will in Iran one only needs to follow the news of soccer in this land of footballers. It is the most popular sport in Iran with fans from all ranks of society, all walks of life and both genders, with female fans still banned from attending the games in the stadiums and yet they go disguised as boys or behind the fences to see their favorite teams play. Its popularity is so widespread that even President goes to national team’s exercises and all of its affairs are followed very closely by most enthusiastic of fans. And may be it is because of that, its confederation IRIFF, the players and the coaches have gained a certain space of maneuverability.

While the world of soccer is watching Euro Cup 2008 Iran’s national team is going through qualification for the World Cup. After much debate Ali Daee, former team captain and Asia's best player in 2000, has become team's manager and coach. The other potential candidate Afshin Qotbi was put aside, although he led his team, Persepolis, to become the champion of Iranian league. Like any other coach Ali Daee prefers some players to the others. It is not a secret that he does not like Ali Karimi, Asia’s Best Player in 2004 and one of Iran’s most celebrated footballer.

Karimi was banned from playing in the national team after he made numerous criticisms towards the IRIFF. And obviously Ali Daee did not feel obliged to include him in the team. Figures such as Iranian President Mahmoud Ahmadinejad and Hassan Khomeini, the grandson of the founder of Islamic Republic intervened to have him reinstated. Although IRIFF officially has pardoned him, the coach of national team does not feel obliged to field him yet. Something odd in a country where people are supposed at least to seem that they follow the official lead.

It is interesting to notice that soccer is the first place where President Ahmadinejad found his opponents to be too formidable. Last year after a long and politically charged debate as to who should lead IRIFF he had to ask Mr. AliAbadi the chairman of Iran’s Sports Organization to step down as a candidate. FIFA had threatened to boycott Iranian teams from international competition if the government would not have withdrawn its candidate from the election for the IRIFF chairmanship, which is considered an NGO. The prospect of having Iranian teams banned from international fields proved to be too terrifying even for the current cabinet.

Looking at this example one is obliged to think that may be popular support and interest is what plans to achieve sustainable economic development lack in order to succeed in Iran.
Where soccer teams succeed to divert policies that hurt their chances to attend international competitions, Iran’s industrialists and economists fail to convince politicians of the benefits of globalization and free competition. Where national team coach exercises a free hand in choosing his players and is chosen by an NGO, Iran’s manufacturing sector is mainly run by the government appointees and its private sector has to yield to the government’s influence and interfrence from time to time. The contrast could not have been greater. May be after all what development lacks in Iran is some soccer fans!

Wednesday, June 04, 2008

Rumor has it

Several Iranian news outlets reported yesterday that it is a strong possibility that Mr. Mazaheri, head of Central Bank of Iran, is going to be replaced by Vice President Parviz Davoudi. Should this change take place it will be the first time that a senior member of government, second only to President, trades his office for the seal of Central Bank. It would also signal Mr. Ahmadinejad’s persistence in pursuing his economic policies and projects, such as merging major public banks, despite all the criticism and objections from all parts of political spectrum in Iran.

Mr. Mazaheri has made it clear that he would not lower interest rates and he would not agree to government’s plan to merge banks. Despite the pressure from the government it seems he has been successful so far to protect banking system in Iran. Many observers believe that the first of the new Majlis is to save the economy. It is most likely that the new Majlis would not remain silent in this matter. Replacing the head of Central Bank would not be as easy as some might have thought.

Monday, May 26, 2008

Saving or Dismantling an Economy?

It is not a secret that President Ahmadinejad does not like the banks. He does not believe in them and considers them and their functions as a threat to himself and a barrier to combat unemployment and to increase production. There is no surprise that his acting minister of economic affairs has introduced a decree to disband all major banks and to replace them with zero interest rate saving funds. These funds can lend money only according to regulations set by the government. Iran’s private banks continue to exist but only as investors. Public banks would stop offering long-term saving accounts, and be banned from offering any service or account with an interest rate.

The government has thought of taking this step although Iran’s supreme leader has approved of privatizing publicly owned banks in Iran by re-interpreting Article 44 of the constitution and although privatization is the focus of currently in place 5 years development plan. This would stop the shares of at least 3 Iranian banks to be offered through Tehran Stock Exchange to the private investors and would send terrifying shockwaves through Iran’s economy. Although this project is nowhere close to implementation, it has horrified many of experts and technocrats in Iran.

Economy has proved to be a challenge no one in the government thought it could be. When President Ahmadinejad despite experts’ arguments and his former minister’s of economic affairs counsel decided to lower interest rates even further no one expected the governor of Central Bank of Iran Mr. Mazaheri to hold his ground. He disinclined to communicate President’s orders to the banks and objected this decision in strongest terms. It is now rumored that his days are numbered. It also is rumored that he has told the President that he would not resign his post.

The debate does not end here. Dr. Tavakoli a prominent conservative and member of parliament and the chair of its research institute told reporters that 46% of short run projects that government has put in place to fight unemployment do not exist. Dr. Jahromi, the minister of labor and architect of President Ahmadinejad’s economic policies denied this report and called it misinformation. It seems except for a few close associates few admire government's economic stand.

In the meantime inflation causes the prices to increase even higher, the prices have reached new heights in real estate market and consumers are squeezed even more in groceries and super markets. One wonders if disbanding the banks would have the effect government expects it to have, or it would intensify the crisis the economy is facing now.

Thursday, May 08, 2008

It is First of May!

Walking down the streets of Tehran in 80’s and early 90’s one would have seen the old fading revolutionary slogans: “Long Live 11th of Ordibehensht (First of May) the Workers’ day! Long Live the Workers! Down With Capitalism!” Using the 11th of Ordibehesht from Iranian calendar, some older ones date to early years of revolutions would have been read: “Long Live the First of May! The Day of Proletariat! Dawn with Capitalist Imperialism!”

These were testimonials to the leftist inclinations of early revolutionaries. Except for a few merchants of Bazar and some of the traditionally religion few felt obliged to advocate the ownership rights or a free market. Advocating capitalism was almost a crime and an intellectual suicide. Justice was the word of the day.

In following the message of justice Iran adopted one of the costliest labor codes in the region. It makes it impossible to fire a worker; so many bankrupt firms continue to keep their labor force failing to pay their salaries. Many entrepreneurs prefer to hire illegal workers from Afghanistan and neighboring countries instead of hiring Iranian workers, to avoid dealing with the labor code. Ignoring the necessities of market and profitability of production has become a norm in approaching the labor issues in Iran.

Today the questions of efficiency, productivity and the issue of unpaid employment are all valid and legitimate topics for the discussions on Iranian economy. However many instead of looking into the causes of events, still concern themselves with short-term remedies and the events. Certainly it is tragic when a worker is not paid, and there are reports of factories where workers have not been paid for several months, but many of these firms have been bankrupt for several years now and they need to adjust the number of their employees. The restrictions set by the labor code prevent the entrepreneurs from maneuvers that would save their businesses. No sales and no revenues are translated into no income, but few observe that.

It is the first of May again. May be it is time for Iranian workers to demand freedom of choice, instead of an ambiguous justice and protections that doom the future of their employment and make it an unpaid one.

Wednesday, April 30, 2008

So It Rumbles

The problem these days with writing on Iranian economy is the number of subjects to write and not the lack of a topic of interest. The most noticeable event was the change of the guard in the ministry of Economic Affairs. Dr. Danesh Jafari, whose immediate departure had been a topic of rumors in capital, left his office not so quietly. In his farewell address he gave an account of internal conflict over the economic policies in Iranian government.

He highlighted the lack of belief in the principle concepts of economics theory, the lack of trust in experienced individuals and the lack of belief in the 4th development plan as the road map of development in Iran. He told his audience: “the government does not consider the 4th development plan as an obliging document and yet it has not introduced a substitution.”

He mentioned the friction between the government and other bodies and organizations. He also criticized those who do not know much about economics and economic affairs and create crisis through misinformation. He offered a history of these events, such as accusing the managers of insurance companies of fraud, accusing an unknown high official of accepting bribes to grant license to import cigars, accusing tax services of being unfair and some other incidents.

He particularly named Dr. Jahromi the minister of Labor as someone who opposed his line of policies by saying: “Whatever we did to persuade this dear friend of ours, Dr. Jahromi, that publishing money does not create jobs, was unsuccessful.” His account was the headlines of Iranian papers the day after and forced the Vice President to deliver a speech to defend the government’s economic policies right there and then.

Dr. Jahromi is already a known name in policy making circles. To many he is the main leader of those who advocate a further reduction of interest rate and oppose the policies advised by the economists in the Central Bank of Iran and Economic Affairs Ministry. He already made that well known by writing an open letter to the President criticizing the monetary package suggested by the Central Bank to control inflation accusing it of hurting production.

In his letter Dr. Jahromi wrote: “In last year private banks by using the agreed upon rate of return charged much higher rates than what government approved.” He recommended: “There must be investment companies to prevent banks from investing directly.” He highlighted the policy regarding banking sector by saying that it is a matter of policy to limit the banks to banking services and to prevent them from investing. His reason for such an approach is Iranian banks “natural” desire to invest in service sector where a short term profit is available and their reluctance to invest in long term projects.

Dr. Danesh Jafari departure is assumed a victory for Dr. Jahromi and his supporters in the cabinet. However many experts continue to warn against the government’s economic policies. Many say that adopting such policies would increase an already high inflation even more. In response President Ahmadinegad in a recent speech in Qom accused those with special interests in banks, customs and monopolies to conspire against the government causing the inflation.

The rising housing prices, the global food crisis and the forecasted drought and above all rising inflation that according to the Central Bank continues to rise all draw a challenging picture for Iranian economy. And the critiques of the government have wasted no time in blaming government policies. However at the end of the day the issue is not one of the policy but of believing in economics as a science. As many economists point out readily: “The prevailing opinion is that of engineers and not that of economists in policy making in Iran.”

Sunday, April 13, 2008

A Roadside Conversation on Inflation in Iran

Katalaxy blog has a note on its author’s conversation with a cab driver in Tehran that I found very insightful. He wrote:
I was walking out of Mehrabad Airport in Tehran looking for a lift to Sa’adat Abad[1]. The cab drivers were yelling their fares from 8’000 to 10’000 Thoman[2] , so I passed. Then someone said: Sa’adat Abad 5 Thoman (meaning 5’000 Thoman). It seemed fair and the cheapest. So I stopped and said:
- Two months ago I went this road for 4’000 Thoman, 25% increase in just two months

He said:
- Two months ago the year was the year of national unity, this year is the year of innovation and invention
He was right, I laughed and got into his car

I love this story because it some how outlines how an Iranian consumer adjust his or her attitude toward inflation. Sometimes he or she does it by a smart comment with some reference to political realities or objectives set by authorities.

[1] A neighborhood in northwest of Tehran, mostly recent constructions It was developed rapidly in 1980’s and 1990’s.
[2] One Thoman is 10 Rials, although Rial is official currency people always use Thoman in their dealings, daily shopping and business activities. One Thoman also stands for 1’000 Thoman or 1’000’000 Thoman, depending on where the conversation is happening. (And most recently for 1'000'000 Thoman, this notion is used in real estate market).
[3] Reader surely observes that the increase in fare is as high as 100% for some other cab drivers.
[4] Iranian new year begins with the first day of spring. In New Year day in their official greetings the officials usually call people to concentrate their efforts in achieving a moral objective, last year this objective was Islamic national unity. This year's objective is achieving technological advancement through innovations.

Monday, April 07, 2008

Norouz and Domestic Tourism in Iran

Iranians celebrated their new year, the first day of spring, by traveling. Those who could have afforded it flew to Dubai to celebrate the coming of spring with excessive shopping and attending shows that are banned in Iran. Many grunt that Dubai’s prosperity and glamour owe much to Iranian travelers and tourism.

Those who could not afford it took on the road. To preempt any public discontent government added 100 liters to all gas ration cards for Norouz, uploaded the rations for next 2 months and took the extraordinary and much demanded step of allowing gas stations to sell fuel at a price close to market one. Iranians used up to 79 million liter fuel during these days. Showing a 6 million liters increase compared to the last year.

Local businesses also thrived in these days. According to Iran Cultural Heritage Organization 6 million tourists visited Mashad the seat of Khorasan e Razavi province and 5.75 million went to Mazandaran, north of Alborz Mountains and south of Caspian Sea. Sistan and Baluchistan in southeast, a usually remote destination, witnessed a two fold increase in the number of spring time visitors.

As usual Norouz reminds authorities of the need for more hotels and tourism infrastructure. For the time being many cities improvised by opening public schools and kindergartens to visitors and allow them to tent in parks and other public places. It also reminded people of how dangerous roads could be. According to ISNA news agency 770 individuals were killed in the road accidents.
[1] pic is from

Sunday, February 17, 2008

Valentine's Slip over Effects in MENA

A decade ago St. Valentine’s Day was a north of Tehran occasion in Iran, and not many heard of it. Today even in Herat in west of Afghanistan shopkeepers decorated in red with hearts in windows because of Valentine’s Day. How this happened?

Although there is no statistical evidence to support this claim, but it seems we witness a slip over effect in the case of Valentine’s Day in Middle East countries. At the beginning the youth used this occasion to express their feelings, since it was something hip and cool. It became fashionable after a bit.

At the beginning it was a few shops in northern Tehran, then it became many stores in many cities, who learning there is demand they began to supply. Now it is a well known custom across the country. Ten years later the teens are all grown up adults who still use this occasion to express their feelings toward their spouses. A change many shopkeepers have noticed in Tehran, telling BBC that now they are shifting their stock to suite the taste of married couples, who happen to spend more than other couples.

Of course the transition is not smooth everywhere. In Saudi morality law enforcement announced that any display of color red in stores is forbidden and any sale because of Valentine’s Day is illegal and punishable. While in Iran authorities have decided to close their eyes and ignore the occasion, either because of upcoming election or the fact that now many married couples participate in it as well, elsewhere in the region hardliners are digging their heels to make one last stand to a matter of heart.

Still the increasing popularity of Valentine’s Day tradition in the region sets an example to what open access to information and cultural exchange can bring to the region. It also emphasizes that once public wants and demands something they hardly can be stop in pursuing it. Especially when domestic suppliers can supply the demand. After awhile the system either needs to adjust itself to new realities or to ignore it. … or to run to store and buy a chocolate box with a red rose if he does not want to sleep on sofa on Valentine’s Night.
* Photo is from BBC website

Tuesday, February 12, 2008

Iran Parliament and Women in Higher Education

Iran’s Parliament (Majlis) Research Center recently has completed a study of women in Iran's higher education. According to this report currently Iranian women constitute 65% of student population in Iran’s higher education. This is a two fold increase compared to 32% in 1983, the base year in the study. Iranian female high school graduates share of participants in the nationwide universities’ entrance exam also has increased to 65% from 42% in 1983.

This also means male students form about 35% of Iran’s higher education, and their share of participants in nationwide universities’ entrance exam has fallen from 68% to 35%, less than half of this rate in 1983. These observations indeed signal a significant shift in Iran’s higher education structure and high school graduates willingness to pursue a college degree. So many hypotheses come to mind that can furnish a lifetime of scholarship.

First it seems Iranian men are no longer eager to receive a college degree. This is an enormous shift in society’s cultural beliefs. In a society where diplomas used to say so much about one’s qualities, Iranian men decision to forfeit a college degree could be the first sign that today many consider and evaluate the opportunity cost of higher education first and foremost. Given the high unemployment rate and particularly the high unemployment rate among college graduates, this seems a rational decision. Going to college does not appeal to an Iranian man, if it does not guarantee a job.

Second it seems Iranian women demand for higher education has been increasing steadily. This phenomenon offers a paradox. If men finds it more expensive to pursue higher education how come women demand it even more. There are a number of answers that come to mind and each demands investigation. These hypotheses range from: finding a better match as a husband to finding better jobs or gaining freedom or achieving social prestige and respect. Many suggest these as answers without offering any economic model or hypothesis testing.

One also might suggest declining fertility rate, increasing marriage average age and increasing divorce rate as contributing factors. To this one must add the existing volatility in many households across country that requires husbands and wives to seek employment. Still there has been no model quantifying these factors’ contribution to this phenomenon.

Reading Salehi-Isfahani’s recent writings on education system in Iran some intriguing ideas would come to mind. Among them the question of skill development in an economy where higher education is somehow disconnected from economy and there is no market signaling needs and market demand does not affect resource allocation in higher education sector.

Since many believe that higher education in Iran is not focused on skill development, then recent observations could also mean that Iranian men have found some other venues to develop their skills and they might be paying to receive necessary education somewhere else. For example no one knows what the gender mix is in Microsoft Certificate programs in Iran, usually held by private institutes that are not considered part of higher education and can charge students hefty tuitions by the promise of higher employability.

The other obvious question is that if the increase in women enrollment means women will develop more skills than men and would be able to be more productive. Given the high unemployment rate of college graduates the answer does not seem to be positive. Then why women are more eager to pursue a college degree?

Unfortunately it seems the report is silent about these. Instead it focuses on a longtime concern of traditional social groups and conservatives in Iran. It asks if these developments would alter the balance between Iranian women and men! It also questions the productivity of the budget allocated to higher education because of these changes. It recommends a gender based admission policy in schools with 30% to 40% of the capacity allocated to male students, 30% to 40% to female students and the rest to be decided competitively.

Thursday, January 31, 2008

Conference on Iran’s Economy at University of Illinois

Department of Economics and the Center for South Asian and Middle Eastern Studies (CSAMES) at the University of Illinois at Urbana-Champaign (UIUC) have initiated a call for papers on Iran’s Economy. This conference is going to be held at Urbana-Champaign this coming December. Program is chaired by Hadi Salehi Esfahani, University of Illinois at Urbana-Champaign and M. Hashem Pesaran, Cambridge University. Among its members there are: Djavad Salehi-Isfahani, Virginia Tech and
Mohammad Tabibian, former deputy of Management and Planning Organization. For more information please visit:
Spread the word this is going to be a great gathering of the economists who work on Iran’s issue.

Sunday, January 27, 2008

Afshin Jafari Prize Call for Paper Submission

Afshin Jafari was a brilliant graduate of Institute for Research in Development and Planning (IRPD) in Tehran, a pilot master program in economics where economics was being taught following neoclassic tradition. Ranked first in his class he joined IRPD as a faculty and researched after his graduation.
In 2003 he passed away from cancer most unexpectedly at 29 years of age. In his memory and in the gratitude of his passion for economics research, his classmates, friends and faculty have established Afshin Jafari Prize for the best graduate level paper in economics. The third round of this award is being conducted this coming spring and a call for paper submission has been circulated please visit: for more information.
This year there will be an especial award for the best paper in environment economics.
Please share this information. Submissions are being accepted in either Persian or English.

Sunday, January 20, 2008

A Notice Has Been Served

Infrastructure! Infrastructure! Infrastructure! Probably any economist with her dying breath would yell: Infrastructure! When oil price began its increasing trend, many Iranian economists also joined each other to press the case for infrastructure. However President Ahmadinejad won the competition by promising the public oil money. Last week a member of Majlis said: “Mr. President, The people of my constituency do not want the oil money; please do not cut the gas!” Snow has served Iranian government a notice that how inadequate the infrastructure is in Iran and how unprepared public executive are for such emergencies.

It is hard to draw an accurate picture of how heavy snowfalls and gas cuts have affected Iran in last week. Following Turkmenistan decision to stop its natural gas exports, using a maintenance excuse, to secure a higher price from Iranian government, gas pressure fell down in many cities and towns across Northern parts of Iran. This disturbed daily life for many households who rely on natural gas for their daily activities and shut down many small businesses, including bakeries. Distorting supply of bread resulted in a price hike for this most essential item on Iranian table.

Heavy snowfalls and severe cold increased demand for heat and demand for natural gas and heating houses in temperatures as low as -4’ F. This forced government to decide to cut the flow of natural gas from industrial sector and to divert it to residential and city consumers. This is a short term solution that affected the industries and forced many to question the robustness of investment returns in an industry subject to such demands.

Transportation sector was the next victim. Many roads were shut down by snow and cars were trapped on highways such as Tehran-Zanjan route, a major western highway. Passengers had to sleep over for three days at Iran’s largest international airport: Imam Khomeini Airport located 19 miles south of Tehran. Runways were closed by snow and aircrafts’ wings froze. Airport authorities canceled up to 100 flights. After 3 days of chaos the head of airport was dismissed, becoming the first authority to lose his job because of severe cold.

The recent energy-weather crisis in Iran, a country rich with oil and natural gas resources, may result in many questions and encourage a few enterprising ideas. Today more than 13 million households are natural gas consumers. Diversifying resources and developing natural gas fields in south become more and more important; a point that some already have started to criticize the present administration about. One wonders if this means an increase in the opportunity cost imposed by recent sanctions.

That is not all. 15’000 industrial units and 47 power plants rely on natural gas as well. Cutting the gas from industries in the time of crisis does not seem to be the perfect solution and in the long run would hurt industries. Power wise some might argue that given the growing domestic reliance on natural gas, developing a nuclear power plant is an alternative that reduces the negative effects of such extreme weather. Of course that is not as easy as it sounds.

The recent events have given power to those who have been arguing for infrastructure development in the past few years and criticizing the government on spending too much on irrelevant projects that might bring in votes, but not sustainable development. An example of such projects is the subway connection between Tehran and Imam Khomeini International Airport. Designed to make the airport more accessible, it has not been finished. Had it been completed, passengers wouldn’t have had to pay close to $150 to cab drivers to get back to Tehran.

Meanwhile government’s handling of economic affairs has been criticized by the both sides of aisle. Dr. Tavakoli an economist, a conservative member of Majlis and a president Ahmadinejad’s supporter, had to say in anguish: “The engineers do not understand and do not appreciate economics as a scientific methodology.” Government’s recent request for 1.2 billion dollars to import necessary products does not seem to be addressing the fundamental issues of Iran’s economy.

Wednesday, January 09, 2008

Budget and Snow

Severe cold and heavy snowfalls surprised Iranian government and people. Following an interruption of gas imports from Turkmenistan and the gas cuts in some cities amidst brutal cold weather Iranian government had to shut down schools, universities and government offices. In Tehran alone heavy snow resulted in heavy traffic and interruption of daily life. City’s 11’000 workers were struggling to clean the streets in time. Meanwhile Majlis informed the President that snow or no snow it expected the budget to be presented to Majlis in time. He went with a new budget and a new style.

Presenting Iran’s first budget after disbanding Budget and Management Organization, President Ahmadinejad took pride in simplifying the annual budget. Usually Iran’s annual budgets had been well prepared documents that identified sources of income, allocated them to different agencies and determined the priorities for spending. The present document does the allocation without determining the priorities. Prioritizing and deciding on spending have left to government agencies.

According to Etemad daily paper funding for all national agencies have been allocated through 39 organizations and only these organizations have received a funding article in the budget. Through this tactic President Ahmadinejad and his cabinet have gained the power to allocate funds to the subset organizations without seeking approval from Majlis. Majlis only approves the total budget for head agency without having any control over its distribution. The head of agencies can shift funds between different programs up to 30% of their initially allocated budget. For example Ministry of Higher Education can transfer up to 30% of university A budget to university B.

Government also will determine the financial protocols governing its working dynamics with National Iran Oil Company. Previously legislation body would have determined this. The significance of this decision multiplies when one notes the rising price of oil and the fact that oil revenue is the major source of revenue and national income in Iran. While some arguing that such a step will reduce Majlis’s ability to act as a control body, President is happy that “the new budget could be understood by any literate Iranian.” Thus its transparency is controlled by the people’s understanding of its mechanism.

President also has requested permission to withdraw 1.2 billion dollars from Iran’s currency saving fund. This fund established in order to save the increased oil revenue. Despite the fact that Iran’s estimated oil revenue reached 120 billion dollars in last two years; the fund has around 8 billion dollars. President expressed hopes that Majlis allows a withdrawal of 2 billion dollars. He argues that approaching Iranian New Year, Norouz, necessitates such a sum to ease out inflation and to lower prices in market, which usually increase during Iranian New Year shopping season in February and March.

Currently Inflation is a major concern in Iran. According to Iranian daily paper; Donya-e-Eghtesad (World of Economy), last December inflation rate passed 17% mark. It continues on an increasing trend. According to some sources money supply has doubled from 70 thousand billion Thomans to 140 thousand billion Tomans. Meanwhile government is moving to import more goods in order to control prices at a domestic level and to ensure population welfare. Already some economists argue that such policy is equivalent to subsidizing imports; an approach that would affect domestic producers and farmers most drastically. They warned that it might result in more dependence on oil and a sharp divergence from Iran’s 4th five years development plan. It seems government might have to wrestle with more than increasing oil revenues.

Meanwhile snow continues to fall and roads are in desperate need of being reopened and gas pressure is falling in some cities with a falling temperature. Average Iranian family is gearing up for a cold winter.