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Page added on October 8, 2016
Why Iran is not the next China?
Iran is a major power in the Middle East, with a population of over 80 million and strong military capabilities. It is the third largest economy in the Middle East and North Africa (MENA) region after Turkey, and Saudi Arabia, with an estimated Gross Domestic Product (GDP) of over $400 billion. Importantly, Iran ranks second in the world in natural gas reserves (behind Russia), fourth in proven crude oil reserves (After Venezuela, Saudi Arabia and Canada).
Iran is rich with natural resources for growth and the statistics point to a potential bonanza. With 70 percent of the population whom was born after the Iranian revolution in 1979, many are well-educated or skilled workforce, offering a strong foundation for economic growth.
Certainly, Iran is expected to be one of the fastest growing economies in the MENA over the next five years with real GDP growth projected at an annual average of 4-4.5 percent. Although the Iranian government is more optimistic as its sixth five-year (2016-2021) development plan envisages an annual economic growth rate of 8 percent. In the broader picture, Iran’s “Vision 2025” has a bigger ambition: Becoming the Middle East’s top power by the year 2025.
Iran has also set itself an ambitious target: boosting its oil production from 3.8 million barrels a day to 5 million by 2020. However, the country needs $200 billion in foreign investment over the same period to achieve that target. Most estimates suggest that Iran will not produce more than 4.2 by end of the current decade.
Despite the rosy picture, Iran remains a minefield for foreign business and investors. Unlocking Iranian economy’s growth potential will require serious and deep reforms.
Dr. Naser Al-Tamimi
The World Bank projects that Iran’s exports of oil and oil products could increase from 1.27 (mb / d) in 2014 to 2.53 (mb / d) by 2020. As for gas, Iran is set to be the largest driver of gas production gains in (MENA) region in 2015-2021, with the International Energy Agency (IEA) expecting an annual output to rise by 29 billion cubic metres (bcm) of natural gas to 199 (bcm). That said, domestic demand is set to rise by 26 (bcm) to 195 (bcm), so it’s not a game changer in short and medium term.
Iran has huge potential across almost all sectors, particularly automobile, petrochemicals and consumer goods. The country has the second-largest petrochemicals industry in MENA region after Saudi Arabia and has the ambition to double its production capacity to 120 million tonnes by 2025.
On top of this, Iran is looking to significantly increase production of aluminium, steel, and copper within the next decade as it possesses 7 percent of the world’s total mineral reserves and already has the largest mining industry in the region.
The automobile sector, Iran’s second largest sector after energy, has strong potential to make the country a regional hub for export to neighbouring states as Tehran is optimistically hoping to triple its current production to 3 million vehicles by 2025.
Above all, Iran benefits from its strategic geographical location, the country has potential to develop into a key transit point for East-West trade. However, all transport infrastructures are in need of modernization. The World Bank’s Logistics Performance Index for 2016 places Iran at 96 globally out of 160 countries. Some estimates indicate that Iran’s infrastructure investment needs are at staggering $1 trillion over the next decade.
Not the next China
Despite the rosy picture, Iran remains a minefield for foreign business and investors. Unlocking Iranian economy’s growth potential will require serious and deep reforms.
Central in these efforts according to the IMF “will be promoting the private sector, attracting foreign investment, reducing the cost of doing business, and enhancing transparency and governance.”
However, under the prevailing political developments in Iran, sectarian tensions in the region and the fears of neighboring countries of Tehran’s intentions; the theory of “Iran is the next China” will be difficult to materialize in medium term for the following reasons:
1. Economic Growth: Although China’s policy of opening up to the outside world in 1979 coincided with Iranian revolution, but the difference in growth rates between the two countries was very wide. China has managed to achieve an average growth of almost 10 percent between 1980 and 2015, while Iran’s economy grew by only 2.5 percent for the same period. Looking forward, even with the slowdown in Chinese economy, the country is expected to record growth rates in the range of 6 percent in the medium term (2016-2021), comparing with 4-4.5 percent for Iran. Interestingly, Chinese economy in 1980 was equivalent to around 3-fold the Iranian GDP (market value), but the gap widen significantly in 2015 to more than 29-fold. Iran’s per capita income was higher more 8-fold than per capita income in China in 1980. Last year, China’s per capita income was double than the Iranian one according to the latest IMF data. Importantly, Iran still dependent on the energy sector, relying on 80 percent of its export’s revenues on oil sales, and most of its trade conduct with Asia. While China’s exports are more diverse, and neighbouring countries are heavily dependent on the performance of its economy.
2. Foreign Policy: Since the 1970s Chinese leaders have realized that without improving their country relations with neighbouring and western states, it will be difficult to achieve high rates of economic growth. The Chinese famous leader Deng Xiaoping’s 24-character strategy: “keep focused on domestic economic growth, stresses the importance of keeping a low profile on the world stage and do not challenge western countries” dominated China’s foreign policy for more than three decades. In Iran the opposite has been evolving or as Henry Kissinger once said that Iran has to decide “whether it is a nation or a cause.” Until then, most the Iranian potential will remain untapped.
3. The domestic politics: When China launched its reforms in 1979; there was a broad consensus among the Communist Party leaders that without economic openness, and improving relations with the West the regime could collapse. Iran has several competing power centres; although the Supreme Leader Ayatollah Ali Khamenei is the true centre of power in the country. Judging him by his recent speeches, one can say that he is maintaining an uncompromising approach towards social/political reforms and the United States. While the Islamic Revolutionary Guard Corps (IRGC) which has substantial business interests comprise around 30-40 percent of the overall Iranian economy will make sure that any reforms will not seriously threaten its stakes. This situation will for sure conspire against achieving very high rates economic growth rates, as it was the case in China.
4. Demographic Shifts and diverse population: Although China has concerns about separatist movements in Tibet and the Muslim region of Xinjiang, but currently they do not represent a serious threat. Importantly, Han Chinese constitutes almost 92 percent of China’s total population. The demographic picture in Iran is quite different. According to the CIA World Factbook Iran’s population reached 82.8 million in July 2016. Persians comprise over 60 percent of the total, with the minorities (Azeris, Kurds, Arab, and others) accounting for nearly 40 percent. A recent analysis of Stratfor noted that Iran is taking hits from minority groups throughout its borderlands. Although Iranian security apparatus still have upper hand, but the question is if Iran will be able to keep the lids on in the longer term. Indeed, there is growing attractiveness of Persian nationalism, and this trend is expected to rise as the regime’s ideological appeal weakens. Should this happen, it may increase the sectarian divisions and have serious repercussions in Iran. In parallel with the complex demographic picture, youthful population is another potential risk to political stability. According to UN statistics, around 40 percent of Iran’s population were younger than 25 years in 2015. The official unemployment rate was above 12 percent last year, but unofficial estimates put it closer to 20 percent, with youth unemployment likely to be even higher.
All in all, if the nuclear deal between Iran and the great powers survives against the odds, there is no doubt that the Iranian economy will get bigger and could double within a decade. However, it is unlikely under the current circumstances that Iran will become a regional superpower or the next China by 2025.
________________________
Davy on Sat, 8th Oct 2016 12:12 pm
“no doubt that the Iranian economy will get bigger and could double within a decade.” LOL
David Kuperman on Sat, 8th Oct 2016 2:10 pm
Iran does not want to be China. Iran is Iran.
Supream1 on Sat, 8th Oct 2016 2:28 pm
Iran canñot be a china or añy emerging nation
Since its only true asset is petroleum
Then there the issue of internal problem
No will invest money in a nation if its cannot make a profit and feel secure
Mosj on Sat, 8th Oct 2016 2:46 pm
Despite so much sanctions imposed by west and US on the country and in fact on the people of Iran, that is itself against the human rights, when it comes to medical technologies and medical requirements, the country is fortunately developing. Like any other nation, it has its own problems. The problem with human rights is essentially a big problem. However, some human right problems exist in countries that control over 90% of the world media. But politics is based on money not human right concerns. The human right should be concerned for all countries.
Ravindernath Kumar on Sat, 8th Oct 2016 2:57 pm
Just because the Iranians are human like the Chinese doesn’t mean they should be as smart as the Chinese.
mark on Sat, 8th Oct 2016 3:21 pm
I like to know what other Country could have survived under crippling sanctions for the past 38 years ! The only real Country in the ME is Iran and the rest are just tribes with flags. Iran’s unity has been testes over and over again by big powers and can not be undermined, because Iranian people are first and foremost are IRANIANS.
Dokht on Sat, 8th Oct 2016 3:22 pm
@ Ravindernath Kumar: Same goes with Indian :), LOL,but not to worry you will eventually evolve next life.
lohani on Sat, 8th Oct 2016 3:39 pm
Very strange.
Peak Oil (forgets) to mention the crippling sanctions imposed by United States et all ( at the behest of the American boss, Israel) for most of the past decade might have stunted economic development in Iran.
The severe punishment was meted out for SUSPICION on that part of the executioners that Iran MIGHT want to make nuclear bombs one of these days by refining uranium to under 5% purity. Not withstanding the fact that uranium needs to be refined to 95% purity to make FUEL for the bomb; or that it is LEGAL to refine uranium to 20% purity under NNPT( the nuclear non proliferation treaty), of which Iran is an early signatory.
Meanwhile, all the nuclear weapons in the ME are in Israel; and Israel has REFUSED to join NNPT and be accountable for her 200+ nuclear warheads !
The upshot: I agree with Peak Oil that the neighbors of Iran are expected to put roadblocks, including the use of illegal and coercive means, to stunt her growth.
lohani on Sat, 8th Oct 2016 3:46 pm
Why should Iran be the next China.
Iran is a nation of 800 millions vs almost 1.4 billions in China.
That population number comes with both upsides and downsides; advantages and disadvantages.
Whose smart idea is it to put Iran up against China.
It is like saying a apple is not an orange.
How dumb !
lohani on Sat, 8th Oct 2016 4:02 pm
To: Suprem1
Human capital is another asset Iran has.
As of September 2015, 93% of the Iranian adult population are literate.
In 2008, 85% of the Iranian adult population were literate, well ahead of the regional average of 62%. This rate increases to 97% among young adults (aged between 15 and 24) without any gender discrepancy.
Faramarz Fathi on Sat, 8th Oct 2016 4:29 pm
Ravindernath Kumar :
Evidently you don’t know anything about Iran and its people. Faramarz Fathi
Davy on Sat, 8th Oct 2016 4:45 pm
GTFOH , Lohani, 800MIL, you are thinking of the other “I” nation dumbass. Go back downstairs to your Xbox.
Boat on Sat, 8th Oct 2016 4:59 pm
lohani,
You from Iran? Any chance your from the same mosque as mak and greggiet?
bh on Sat, 8th Oct 2016 5:08 pm
In the Domestic Politics section it said “the Islamic Revolutionary Guard Corps (IRGC) … has substantial business interests comprise around 30-40 percent of the overall Iranian economy [and] will make sure that any reforms will not seriously threaten its stakes. This situation will for sure conspire against achieving very high rates economic growth rates”.
The author did not go into detail, but the IRGC is considered a terrorist organization, so anyone doing business in Iran MUST stay clear of the IRGC AND its subsidiaries, which is not an easy task.
GregT on Sat, 8th Oct 2016 5:45 pm
“Any chance your from the same mosque as mak and greggiet?”
Another epic failure from the master of nonsense himself, Kevin. I have to give you some credit though Boat, you certainly do have an active little imagination.
Bella on Sat, 8th Oct 2016 5:48 pm
Ravindernath Kumar (Hindi) how do you rank Indian’s “smarts” for remaining British slave for 300 years?
This article fails to point out the genocidal sanctions against Iran, the 8 years long bombarding and killing of millions of Iranians by Iraq, Saudi Arabia, Kuwait, and United States, it fails to point out that Iran has been self-sufficient and survived despite the sanctions, Iran has ENERGY resources to support its economic growth, and it fails to point out the fundamental cultural difference, that materialism is not at the core of Iranian cultural values.
Jahanshah on Sat, 8th Oct 2016 6:05 pm
All the filthy, warmongering, delusional, murdering Ayatollahs and their followers will end up dead in the sewers. BUT IRAN WILL NEVER DIE!
Boat on Sat, 8th Oct 2016 6:52 pm
greggiet,
I suspect you wrap your head and chant death to Zionist infidels. Are you required to till with the bones of a goat or will they let you use a tiller. Is it Shiea that gives life in your desert? You don’t strike me as a Kurd.
Boat on Sat, 8th Oct 2016 7:21 pm
Jahanshah on Sat, 8th Oct 2016 6:05 pm
Are you JuanP? So are you required to hate from birth?
azy.modares on Sat, 8th Oct 2016 8:44 pm
This massage from descendant of Family that free Iran and brought constitution, but they did not take kingdom, beacause we did not want to sell our country got killed by poppet king(shah father),AND AFTER WE GONE HUMANITY GONE FROM IRAN
Only talk about Iran(Persia)(GREATEST CULTURE IN HISTORY) should be only for Human rights and give them back trillion dollar for stolen and damages to the great Iranians that got killed or hurt by USA , England ,ISRAEL or their own government
Iran brought trillion for US and Europe but Israel sucked trillion and our jobs, NOW tell me how is US ally
But people that stole hundred of billions they control Iranian and US media and they don’t want Me Or any body talk about damages to Iranian people and their heros
Bible SAY, Devil comes to do three things, kill, steal, destroy
England “killed” my Great Royal family in Iran( Greatest calture in History) then “steal” oil, and then later USA/Israeli arm dealers “destroy” by making Eight year war with the help of Sadam Hosuin, one million Iranian died Or Injured, same as eight million American die or injure, YES we are that criminal and we been for last 400 year
IRAN (PERSIA),BROUGHT CIVILIZATION AND CULTURE FOR THOUSANDS OF YEARS
Brought Humanity thousands years ago by Profit “Zartosht“ His three Basic Teaching was, Think Good, Do Good, Say Good
Iran(Persia)(GREATEST CULTURE IN HISTORY) is feeding the world for last Thousands year by knowledge and recently by oil, is time to have peace and give Them some back to people that England, USA, Israel,or others hurt for last 90 year
Obama said, Iranians are,extraordinary people with extraordinary history
Bush said, Iranians are great people with fantastic history
Next time they say, Israel is our ally, say no Great People of Iran(Persia) is MORE
sundial2011@yahoo.com on Sat, 8th Oct 2016 10:26 pm
who cares
David on Sat, 8th Oct 2016 11:41 pm
It is evident you dont know anything about Iran and Economy. Any single sanction that was imposed on Iran would have been enough to topple any of the countries in MENA region but Iran not only survived but during the same time developed its nuclear infrastructure, Space program, Missile program and lots of others. Of course with the share of its problems as well. Dont even compare us the China, they have been copy cats since history can remember. No country in the whole MENA and Asia has weight enough to sit at the big boys table and negotiate with them. the truth is the US does not even consider them as a country just tribes they just dont says these days. I am certain Iran can rise up to its potential if it can sort its internal politics and I am sure that will also happen.
itna on Sun, 9th Oct 2016 2:52 am
Please!!!!! There is lots of problem in Iran.Human right is as worse as China .Most of rivers drained,30% of drinking water is remained.Crime and rubbery is everywhere .I do not like China model economy,selling low quality products to world.Iran bought lots of these horrible products for decades.In Iran,there are hardliners and Ghods revolutionary forces who control more than 50% of economy .Most of the investment is oil and gas would go to their pocket and of course to their wars in Syria and Yemen,Also,to Hezbollah in Lebanon .In addition of a these issues,there are corrupt banks lending money to a mafia called “Clerics family circle” .There are trillion Rials vanished during less than 10 years by loans that this mafia grabbed and never repaid.Most City Halls are very corrupt and infrastructures are crumbling .Pollution in Air,Water is every where in Iran. Most big cities have overwhelmed by over population and till 2016 iran’s population increased to 82 million.Just in about 2 or 3 years ,population has grown from 80 to 82 million.There are very limited and scarce agricultural and natural resources (water) for this huge population growth.Iran ranked 136 in transparency international ranking in corruption.If you remove corruption,you dismantled regime pillars .However since 1953,some Iranian’s are striving for democracy of their own type ,but in fact with all foundation of democracy tailored to their culture .iran’s possible and only chance is this democratic peaceful movement .in Middle East,most nations get used to dictatorship and corruption and civil war but in iran that is not the case for the people.
Tigran on Sun, 9th Oct 2016 3:47 am
Iranians(Arian race) are 95% population of IRAN.
non-Arians( 5%):
are semitics -2%(arabs 1350000 & jewishes20000)and Turko-Mongolian(Turkmens 850000-Uzbeks10000-Kazakhs6000-Iranian Hezare100000-Barbar150000)+3%.
majority of Iranian arabs are Shiites(1100000) and minority are sunni(250000).
Arians (95%)include of:
64% Persians(63% Shiites-1% sunni-in laristan)
11% Azeri and qashqai and other Turkish languages(all are Shiites)
8% Kurdish(shiites 50% and sunni 50%)
4% lur and bakhtiayri and Lak(all are Shiites)their languages is so close to persians
2% baluchi
5% Gilak and talesh and mazani and deylami and tabari and Gorgani(just teleshi are sunni. others are shiit)-their language is so close to persians
1% Armenians-Ashuries-Zoroasterians-Georgians-and etc
Tigran on Sun, 9th Oct 2016 4:00 am
it is interesting that know main industries specially steel and iron, and automobile factories in india r for Iranian origin people(Persians-zoroasterians) in puna and mombai.
they r most inteligant people n creative in india.
itna on Sun, 9th Oct 2016 4:52 am
yes we are very creative,we make Pride a car from Kia Motors that is completely outdated.it kills people in road and pollutes environment .Also we produce Samand and other low quality cars that kill thousands in roads and we do not care because we are creative.then we sell you japanese and german cars with price ten times more expensive than that of original price .since you cannot afford to buy it iran,then you will buy cheap dangerous iranian made cars.that is called monopoly of producing crap
Riaz on Sun, 9th Oct 2016 5:09 am
@Dokht @Bella…..All you f**hies in the west and Europe destroyed cultural values and robbed the people around the world, now talking about humanity, knowledge and slaves. You call that exploration. After much of sufferings, we in the ME and Asia are evolved in far than you mo*** F*****s. As Rodrigo Duterte said “go to Hell”
ahmad on Sun, 9th Oct 2016 7:40 am
Nobody mentioned anything about Court Area which is the most important point in any country.What about Iran? the most corrapted court in the world.
don’t you think for any kind of development anywhere,anytime first you need a reliable court and some good judges.
Mohammad on Sun, 9th Oct 2016 11:02 am
While Iranian leaders investing and exporting religious beliefs they can not become like China
Farhang on Sun, 9th Oct 2016 7:58 pm
Iran will never be another China under the present circumstances with its high levels of corruption, strangling rules and regulations specially for investments and its role through proxies of interfering in the affairs of all countries which is a drain on the country’s resources.
lohani on Mon, 10th Oct 2016 12:12 am
Farhang
Are you Iranian?
Why should Iran be China? Iran should be Iran.
You probably are describing the current situation why you talked about corruption, and restrictive rules and regulations.
Countries do change. The Chinese corruption problem is world famous. They also have had archaic rules making it expensive to do business. I hear that they are fighting corruption and simplifying rules.
Why do you think that this would not happen in Iran?
lohani on Mon, 10th Oct 2016 12:25 am
Boat
Read your own posts.
Do you have anything to say besides insults?
Feeling threatened by truth and facts.
Are facts antisemitic for you guys?
Face this simple truth: Iranian population is several folds yours. Her population is educated. She has plenty of natural resources.You have good skills in extracting US largess. I will give you that. Any natural resources beside the little gas field?
The draconian sanctions instigated by you guys has helped to make Iran more self reliant than in the Shah era.
I think Iran is going places, in spite of you.
lohani on Mon, 10th Oct 2016 12:36 am
How old is Ayatollah Ali Khamenei?
Why do “analysts”, such as this one from Peak Oil, assume that he will never die?
Using the example of China. Mao was a big influence. BUT HE DIED.
He would not have recognized the China of today had he come back from death.
Boat on Mon, 10th Oct 2016 7:19 am
lohani
I am American. I am pro Muslim and pro Jew. I respect religions but they have their place. Their place isn’t running governments.