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.
Friday, October 24, 2008
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?
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.
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.
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.
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.
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.
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