Vol-7, Special Issue3-April, 2016, pp750-760 http://www.bipublication.com
Case Report
Iran’s Socioeconomic Development after JCPOA (Joint Comprehensive Plan
of Action) Relying on Economic Resiliency and Using Strategic Planning
Mahmoud Seifi1 and Zohreh Maleki2*
1PhD in Finance- strategic management and human resources
and management development assistant,
Alborz Province Management and planning Organization 2MA in Governmental Management and Member of Young Researchers
and Elite club of IslamicAzad University of Karaj *Corresponding author: Email: Z63maleki@gmail.com
ABSTRACT:
Within recent years, and through intensity of west sanctions against Iran, aiming to stop Iran’s peaceful nuclear program, new word (Resistive Economy) has been added to Economic Literature in Iran. The term “Resistive Economy” has been imported to Iran’s Economic literature in 2010. Resistive economy is an economic strategy corresponding to “Economic resiliency” and “Economic Springiness “. This type of economic planning is a literature which has been raised first against international sanctions. Then after the end of sanctions and by the time –being, we require especial definition of economic resiliency and economic springiness considering other economic limitations existing including; the decrease in oil revenues and the necessity to get out of inflation and stagnation. For this reason, it is necessary to have a correct cognition of Iran’s economy and its major problem, soin this paper,we are to answer this question,that what strategic plans we are going to benefit in order to achieve social and economic development after JCPOA?The objective is that using SWOT matrix, while identifying existing strengths, weaknesses and threats within the country, a strategic planning relying the economic resiliency is provided for economic and social development, as this concept has been a strategic view and it is essential that our studies and actions to be according to key principles in strategies. For this, 8 strategies have been considered as different strategies to get out of the society’s present situation and the realization of considered social and economic development. While we should consider that SWOT analysis (before nuclear agreement, lead to WT strategies meaning defensive, while for social and economic and for social and economic conditions after JCPOA, analytic results of this paper has been lead to WO meaning(conservative) strategies changes.
Keywords:Economic Resiliency, Economic Springiness, Strategic Planning, Socio- Economic Development.
[I] INTRODUCTION
It has been more than 200 year since the start of modern economy‘s life through publication of famous book “The study of the nature and reasons of Nations’ wealth “, by Adam Smith 1776. Economy has witnessed developments, theorizing and many controversial topics during its 200 years of life. Regarding this science, the exchange of votes has created plenty of schools, branches and specialties. Moreover, human
building the idealistic society is not a secret so that it could be known as today’s priorities. The priority which based on it, global measurements and equations are shaped. The expression of “development” has been introduced inclusively after World War II. The developed modern societies have reached to principle legalities of Economics through history and they have fixed up their economy through application of the above- mentioned legalities. Towards the above- mentioned task, these societies have also achieved the facilities to provide vital needs and prosperity together. However, it is obvious that, there are still many difficulties remained unresolved for them. Though, the societies in transition, have incurred much more essential difficulties here [1].In this unreliable and flustered world today,socio –economical systems face numerous risks which have low predictability and Human knowledge is little regarding their effects and consequences. The best way to tackle those risks is to promote national resiliency. In this approach, a system is resilient which can attract constant and permanent risks and adopt the quickly changing conditions without losing function [12]. First and the most basic and vital need of society and people at present is to provide cultural understanding on “Economic Development Necessity” and to classify this necessity as “the main vital benefit for all sections of the society” and its acceptance by all social and political groups [1]. Waller (2001)know resiliency as positive adaption of an individual in response toun pleasant conditions(threats and damages). Resiliency is not just stability against damages and threats, and passive status facing dangerous conditions, but it is an active and constructive participation with in the surrounding environment In other words, can be said that resiliency is an individual‘s capability of establishment of bio-psycho balance in dangerous situation [4].Resiliency in systems is defined as maintaining system performance in case of
has had defensive status (WT).Whereas the research results ahead has led to strategies with changing strategies approach or conservative ones( WO strategy).
[II] THEORETICAL FRAMEWORK
2.1. Economic Strength meaning Economic resiliency in Economic development literature
Economic strength definition is that even in pressure process, economic growing trend is preserved and its vulnerability is reduced and it is less damaged [14]. economic strength means an economy that considering all internal and external Weaknesses and strengths and external threats and opportunities make scenario and it has a plan for any conditions and measures the environmental status ,and knows external and internal very well and it reacts appropriately to the changes [7].economic strength is an especial designing and modeling of economic conditions and mechanisms which is designed actively ,based on country ‘s economic environment according the presumption of maximum pressure and sanctions ‘existence. Economic strength is theoretical foundation of modeling a special type of economy which has prepared itself to face sanctions more than before. Economic mechanism is business environment, tradesmen, and external issues, financial and intermediate inputs. Economic strength is designed based on an assumption that the country is always in ideological conflict with the hegemonic system and any economic impact from the west might affect the country in any second. In such circumstances, economic sanctions are not threats but they are especial opportunities under which economic strength strategies application can be facilitated through power, and national consensus [17].economic strength, is an economy based on retrofit, repairing structures, existing old economic rules and inefficient institutes, which means we can somehow prune and delete reworking, and elimination of growth and development obstacles through a scientific and
instrument [3].Generally, economic springiness could be dynamic and/or static. Static economic springiness defines as the power and /or the capacity of a system to absorb and / or become flexible against the risk and /or loss. In its more general view which has also considerations; dynamism and stability in itself, economic springiness is called: the power of a system to recover a stable shock. Also, we should differentiate between two types of economic springiness.
1- Inherent economic springiness- the capability is the ability in normal condition means the power to substitute other inputs as an alternative to inputs facing problems through external shocks, or the power of markets for reallocation of resources in response to the price signs. This type of Inherent Economic springiness has been an economy and it is not policy –made one.
2- Adaptive Economic Springiness- the capability resulted by creativeness and extraordinary effort, which means raising the power to substitute inputs in business operations , or markets reinforcement through completing the information on supplier and the applicant so that they can find each other. This type of economic springiness does not itself exist, but it is completely policy made [13].Another look of this approach is that the risk of economic destruction due to external shocks is impacted by two factors. First factor is the rate of inherent economic vulnerability of the country, and the second factor is the economy‘s power to face external shocks and /or economic springiness. The difference between these two will determine the economic risk in the country [2].Martin et al have stated four variables on this:
1. The springiness for the resumption of changeable form and performance after a chaos and disorder
2. Springiness as turning back to a stage or the path before shock – recovery speed
3. Springiness as the capability to absorb shock- structure stability and performance
4. Springiness as the power to maintain system core performance through coping structure and operation[8].
2.2. Economic Springiness strategies according to Rose(2004)
Two strategies of economic springiness include; recovery management and relief operations. Both two strategies might improve inherent economic springiness. None of them has been preferred to other so far. Relief operations typically operate for the reduction of the failure probability and also the reduction vulnerability through the promotion of economic strength. Recovery management usually operates towards providing lateral aids to firms and families impacted by the condition there and also the reduction of recovery time. The first part (meaning lateral aids) has no compatibility with economic springiness, because economic springiness emphasizes on social groups’ self- reliance and wider concept of the resistance ability. However, the approach of recovery time reduction has a key role in economic springiness concept development consisting more dynamic elements. Economic springiness has application capability in three levels:
1. Minor level including; firms, families and individual organizations
2. Middle level including; economic parts, individual markets or cooperative groups Huge level including, the combination of units
and individual markets considering such a combination because of interactions in economy is not defined as a simple sum of units and markets [14].
2.3. Research Background
follows; curbing speculations and corruptions, the functionality of masses of people, self- reliance, priorities and resistance culture. Originally, curbing speculation and corruption refer to the reduction of non- productive activities which abuse market turbulences and fluctuations. To the author, in an economy based on speculation and brokerage, productive part has damaged most, and economic mechanism will lead to towards outbreak of price bubbles and intense fluctuations. This type of economy has had less stability and resistance facing external pressure and it is shattered quickly [11].SeyedHossein Mir Moezi (2012) in paper “Economic Strength “emphasizing on Leadership Point of view, seeking to provide a clear interpretation of Economic strength and he is after to explain it in a coherent theory format and he believes that the economic strength is an especial shape of Islamic economy which emerges when in an all over enemy’s attack situation when the existence of Islamic system is in danger. He emphasizes that in Islamic economic system at this status, there are huge strategies designed which converts the threat to opportunity and causes growth spurt through changing objective priorities and consequently in strategical principles and huge policies and jihad spirit governance on people and government economic behavior. Allah MoradSeif (2012) in a paper “Proposed model for Islamic republic Economic Strength“,which was first raisedby revolution leader. To him, the enemy is after separating people from the Islamic system regarding the subject of economic threat. Studying leader’s statement, the axes and components of economic strength are extractable. To him, the economic strength causes that in pressure condition upward trend of economic growth (and efflorescence) to be maintained within the country and its vulnerability is reduced. Economic strength formation will have important results which have been stipulated in the leader’s statements. Also, economic strength
would have conditions and requirements that the following are among them; using all governmental and public capacity,development of economic conditions through the application of article 44 policies, private sector empowerment and reduction of oil dependency. Iran economic strength model can be proposed with four main components including; economic growth, economic justice, economic stability and economic springiness according to the components extracted from the leader’s statements. Economic springiness strategies are including; quadruple items, strategies: deterrence, neutralization strategies, absorption and recovery, and distribution and weakening strategies. In this paper a sample was provided for each strategy. The important issue is that in Iran’s economy a set of quadruple strategies should be applied simultaneously and proportionate to different items. Heidari and Vahidi (2014) have dealt with the assessment of development factors and the achievement of economic strength in a SWOT model format, and they have provided different strategies to get out of the present economic status and the realization of considered economy meaning” economic strength. One of the sectors that the economic strength can get into it,and can be mentioned as; dependence to one product economy and exporting petroleum, relative poverty and the gap in the society, administrative and economic corruption, Business environment and unemployment of the educated ones,the existence of caught capital which is caused by the ordered currency and interest rates, lack of attention to social capital and symbolic capital.
priorities list meaning opportunities and threats ahead for the country is provided and also we will analyze internal conditions meaning weakness and strengths of political and socio– economical system in the country which is impacting this issue, from the perspective of SWOT Matrix.
1. Recognition and classification of external factors(opportunities and threats) and external factors(weaknesses and strengths)
2. Providing Extracted SWOT matrix
3. Determining strategies for country’s development
3.1. External factor evaluation
Environmental opportunities underhand the political and socio- economic system of Iran: The opportunities as external factor could impact positively on functional parameters of the issue and create competitive advantage. Among the opportunities ahead of our country for the development, following could be stated:
1- Getting out of global sanctions is the most important opportunity ahead of us now and the government also is benefiting this opportunity and condition. In fact, this has been the most important chance and consequently there will be many other opportunities and other chances are in the next priority.
2- Iran’s geopolitical position regarding commodity transit to any commercial destinations and transferring oil and gas to CIS countries (Middle Asia) and Europe. 3- Out breaking political issues and crisis within
the region in one hand and relative political security and stability in Iran within the middle east region on the other hand.
4- The change in global view towards Iran and providing the conditions for Iran Joining World Trade Organization (WTO)
Environmental threats under hand of Iran’s economics, social and political system:Threats as external factor could impact negatively on functional parameters of the subject and reduce
competitive advantage which creates positive actions.Among the threats under headof our country for the development,could be stated as below:
1- The reduction of international oil and gas price and lack of required coherence among OPEC members.
2- Outlook of not decreasing international oil and gas price (considering Shale Oil and Gas extraction technology, America)
3- Security, social and economic threats against Iran from Israel and some Arab countries in the region
4- Brain Drain and Entrepreneurs’ immigration.
3.2. Internal factor evaluation
Iran’s Economic,social and political system strengths:The strengths are those internal factors that could impact positively on functional parameters of the subject and create competitive advantage. The existing strengths in our country for the country’s development can be stated this way:
1- Incentives and hopes created among people and those active in economy and industry due to international sanctions removal.
2- Skilled and efficient internal human resources.(of course non- skilled work forces are also considerably high)
3- Government’s success in restraining inflation. 4- Recent rules and policies in absorption of
capitals, technological knowledge and foreign technologies.
5- Considerable existence of natural resources 6- Country’s appropriate conditions regarding
international and local tourism industry in all dimensions; Religious, historical and natural. Country‘s weaknesses in social,economic and
political system:
1- Constant pressure on the government due to paying cash subsidies, in terms of financial resources consumption.
2- Constantand monthly pressure on the government due to cash payment of subsidies, in Terms ofinflation effects in the country’s economy.
3- Accumulated unemployment of educated people and also unskilled work forces. 4- Water resources crisis as the development
essential in all sections. 5- Environmental pollution crisis
6- The dependence more than enough to imported commodities.
7- UniaxialEconomy (Dependenceon Petroleum export).
8- Governmental Economy (no domestic economy) and high governmental costs. 9- More than enough span of duties of policies of
the government and the increase in public discontent of public services.
The weakness of private sector and general unwillingness to invest on manufacturing, industrial and tourism sectors.
[IV] DISCUSSION
Providing EvaluationMatrixSWOT:
Types of feasible strategies will be considered through SWOT matrix procurement. Therefore, the most effective strategies and solutions for the realization of social and economic development are determined through using SWOT analysis as below:Meanwhile in designing and codification of strategic priorities, SWOT method has also been used by social and economic experts who had role in codification of sixth (five year plan) of Islamic Republic of Iran’s development.
The most important explanation is that SWOT analysis before nuclear agreement leads to WT strategies meaning defensive, Analysis results of this paper has led from SWOT method to WO strategies meaning the changing strategies(conservative) approach , This is however that for social and economic conditions after JCPOA.Strategy1- policies to attract foreign
capitals, technological knowledge and international technologies,using global market and .joining WTO(World Trade Organization) towards social and economic development: The possibility of the followings are created; attracting more foreign investment directly or indirectly, the increase in Iranian firms’ access to the financial facilities of international financial institutes, provision of the base to purchase modern technologies and equipment, removal of obstacles regarding marketing for internal products and also diversify non- petroleum products’ export and exiting from one product economy. The above strategy is one of most important strategies of the reduction negative impacts of joining Iran to WTO which necessitates the empowerment of the production structure and optimization of manufacturing factors towards increasing efficiency, performance, products’ quality and better competition in World trade. In the following, we refer to our country’s requirement for joining WTO:
Economic infrastructure, through recognition of relative advantages in different economic sectors. Legal Infrastructure through coordination of country’s regulations such as; the constitution, labor law, the law for foreign investment, insurance laws and regulations, Taxes and Customs law with WTO regulations.
Theempowermentofmanufacturing institutes in supplying commodities with high quality, Appropriate and less final price.
Raisingup industrial commodities’ export share Creation of stable political and Economic security.
Coordinating between monetary, financial and currency policies.
Country’s customs reform
Creation and development of Free and especial trade and economic zone
state owned enterprises, downsizing the government, transfer of semi-finished projects and also transfer of governmental firms through policies of principle 44 of the constitution:
A)Privatization of governmental services which are non-sovereign ( Governmental duties) Such as:
Governmental interference in providing Healthcare, education, social welfare, employment, natural monopolies (Water, power, food, security and . . .)
The affairs that governmental interference in them regarding profiting and earning ,or people not entering such affairs( because of incapability or other obstacles )to accomplish them and manufacturing – trading tasks and services have been including these affairs , and in addition to the government ,it could be performed by people (private sector).
Affairs done with the objective of protecting public from deviation (defining as critical status) and preserving Governing norms of the society. Advertisements and religious and cultural activities are of these affairs.
B)Reduction of Governmental staff with organizing human resources, structures and organizations
C)Reducing costs through privatization in order to complete and utilization of govern mental projects , transferring governmental semi- finished construction projects to private sector through capital market( at the moment there are more than 400 thousand billion tumans,semi- finished governmental project) D) Policies of Article 44 constitution: limitation of governmental economy and Economic liberalization are the important consequences of article 44 of the constitution. Resilient, dynamic and active economy requires strategic planning based on making economy people out through giving more attention and space to those active in private sector, and resolving obstacles and problems of this sector.
Private sector is as the motor and main motivator of the economic and industrial growth which could realize government’s development objective by the utilization of its capital and attraction and participation of non- governmental capitals, optimization of human resources and application of efficient management, while playing its role in economic and industrial growth of the country.
To explain that no. 2 strategy, in addition to all results including general satisfaction of public services and simultaneous to that reduction of governmental costs, bears another important result indirectly which has been an increase in private sector employment in the country that will follow general security and social welfare and could also resolve cultural problems. Therefore, providing job opportunities as an indirect result of this strategy is considered necessary.
Strategy 3- getting out depression simultaneous with inflation control:
other decisions made in monetary and financial system. At the moment, inflation has been converted to an economic disease and this issue has caused that in international arena, the country gets in trouble and on the other hand the import increases, just because the prices are high inside the country, which of course multi rate currency practically pays subsidies to the imported commodities.(Of course, it should be considered that in the past the most important factor impacting on currency rate control has been the currency injection to the market by the government that unfortunately this strategy will damage the uni-rate currency approach intensely.)The economy does not have any output in inflation condition and for this the internal manufacturing does not increase, unemployment increases and consequently high rate of unemployment in the society and the increase in social corruptions, which also consequently social, political and security costs has been increased and this issue will make the country away from the realization of development therefore, in case all the mentioned items andthe previous policies are changed, the government will gain success tocontrol inflation and depression simultaneously.Strategy 4- Independence to Petroleum income:
The reduction of Oil and Gas price and in coherence among OPEC members and outlook of no increase in global price of Oil and Gas considering Shale Oil and Gas extraction and appearance of Non- fossil energies has made the necessity of independence to oil income more tangible. Mechanisms of economic area should be reviewed in a way that all cases that follows country’s dependence, are identified and decide on them. In less important cases these areas could be diverse and plural so that the dependence rate of the country to be decreased. In especial cases is also possible that a complete replacement to be considered. Some policies regarding this issue that should be brought up, are: Replacement of current incomes instead of
oil income like; taxes, transit incomes , tourism industry , light and conversion industry which has required a low cost work- force and at present could convert unemployment threat to revenue opportunity, has been important too.
Strategy 5-Utilization of foreign businesspartner and multiplicityofcountries having business interactions, bothindustrial and academic:
Those countries in the world with superior academic and technology and the valid companies interested to invest in Iran should be preferred to others. If a country is developed in various fields of industry and prioritized activities such as; food, drug and other light industries and non- pollutant like: products with high technology, clothing and so on, it will be converted to major exporter and it also could achieve many technical and industrial progresses in these fields, therefore country’s survival is guaranteed, and social and economic pressures to the society decreases. Energy area and conversion small industries are also two other important fields which could be considered specifically.
The important point in this strategy has been that in the past due to financial and business sanctions, countries in contract with Iran have been limited and in the contracts and generally those countries has benefited the most of this issue that in present situation the ability to change these types of monopolies are essential and possible.
Strategy 6- Paying attention to scientific elites and Entrepreneurs:
the conditions should be in a way that elites advance their work without any obstacles.
What is the concern, is not foreign sanction,but the concern regarding manufacturing and business obstacles within the country which sometimes acts more intense than the sanctions.
Strategy 7- Full and proper implementation of targeted subsidies
At first stage of implementation of targeted subsidies, the maximum governmental power has been towards cash payment of the subsidies to all people in the society.Now,the Government should change implementation direction towards objectives like: manufacturing, employment and utilization increase and energy consumption reduction and the promotion of social justice indices. Though in legislation, and the issues stated by the government,some part of the targeted subsidieshas been allocated to production and health, but the more important issue than the allocated budget are the policies supervising the “targeted subsidies”which shouldleadto these objectives;Especially,these policies in energy sector should be applied in a way that the manufacturing sector and poor ones to bear minimumpressure. It is essential that to implement the plan in a way that social justice indices including; health care, education and more opportunities in social, economic and cultural fields improve rather than just to suffice on paying the subsidies in cash and the allocation of goods ‘basket.
Strategy8-Benefiting Iran’s Geopolitical situation Iran plateau and the Caspian Sea adjacent to Persian Gulf region, has made Iran to one of the most important geopolitical points in the world. Undoubtedly, one of the variables effective on the formation of international policy and also strategically topics and development policies in any country, is its regional environment and different geopolitical dimensions. Considering the concentration of energy resources in countries around Persian Gulf and sea routes being raised as the best route to transfer energy and other
business exchanges and also tourism industry, it seems that using this potential in different shapes will be effective in Iran’s development. The development sea ports, dry ports,free and special economic zones and also renting some ports within Persian Gulf region to those countries with no access to free waters, could have many advantages for Iran.
Also oil clearance with oil manufacturing countries in North of Iran (Swap Name sake and name sake)also could be revived after years.
In addition to the above issues, there are some points ,which are not however considered as a strategy ,but they are inevitably parallel the afore-said strategies accomplishing , and are essential in order to achieve the objectives ,also the following points are including and should be considered:
1- Economic security is effective on most of the objectives, but it’s under Judiciary and legislative authorities.
2- All mentioned policies depend on powerful, motivated and participant human forces. 3- Governmental organizations are captured by
bureaucracy and inertia.
4- Strengthendiscipline, health and transparency of three branches are essential
[V] CONCLUSION
essential and inevitable to achieve success and development objectives of the country.
REFERENCES
1. Azimi,Hossein, (2012), “Un development orbits in Iran”, vol-3, Ney Publication,Tehran. 2. Briguglio, L.,Cordina, G., Farrugia, N., Vella, S, (2008), “Economic Vulnerability and Resilience: Concepts and Measurements”. Research Paper, No. 2008/55, UNU-WIDER. 3. Briguglio, Lino, Piccinino, Stephen, (2011),
“Growth and Resilience in East Asia and the Impact of the 2009 Global Recession”. Available
at:http://www.um.edu.mt/data/assets/pdf_file/ 0011/141959/Growth_with_Resilience_in_As ia_5Dec2011.
4. Conner, KM, Davidson, JRT, (2003), Development of a new resilience scale: The Conner-Davidson resilience scale(CD-RISC). Depression and Anxiety 2003; 18: 76-82.5 5. Heidari, Hossein Ali, Vahidi, Ali,
(2014),“Strategic planning for economic strength development using SWO matrix, the position of accounting and Management in modern world of business, economy, culture”, First National Conference, Iranian Strategical Management Association, Aliabad Katoul. 6. Heidarzadeh Hanzaei, Alireza,(2012),
“Economic Strength, dos and don’ts “Capital Market.No.30.
7. Hosseinzadeh Bahraini, Mohammad Hossein,Meshqat, Bahar, (2013), “Economic Strength a strategy for development” No. 11. 8. Martin R, Sunley P, Gardiner B, Tyler P,
(2013), Resilience and Local Economic Growth Paths, presentation for the Cambridge Local Economic Growth Conference 2013, p 11–12.
9. Moezi, Seyed Hossein, (2012), “Economic Strength and its requirements emphasizing on supreme leaders “viewpoint “, Islamic Economy, No.47.
10.Nakano, K.T. and Fuji, S., (2011), an empirical analysis of national economic resilience using macroeconomic data before and after the global financial crisis. Available at:
http://trans.kuciv.kyotou.ac.jp/tba/images/stori es/PDF/institute_paper/maeoka_resiliencesub mitted.
11.Narimani, Meisam, Asgari, Hossein (2012), “Economic Strength conceptual framework”, First Conference on Economy.
12.Qiyasvand, Abolfaz, Abdolshah, Fatemeh, (2015), “Concept and assessment of Iran’s Economic Resiliency”, Economic Research and Quarterly, fifteenth period, No.59, pp 161-187.
13.Rose, Adam,(2004),”Defining and Measuring Economic Resilience to Disasters”, Disasters Prevention and Management, Vol, 13, No.4. 14.Seif, Allah Morad, (2012), “Proposed Model
for Economic Strength, Islamic Republic of Iran (based on Supreme Leader point of view), Afagh Amniyat quarterly, fifth year, No sixteen.
15.Seifloo Sajjad, (2014), “Concept of Economic Strength”, Research and scientific Publication (Knowledge of Islamic Economics), fifth year, No2.
16.Shirvani, Amir, Moradi, Ehsan, (2012), “Differentiations of Economic Strength and resisting economy, Capital Market, No.33, P28.
