Iran

V

Economy

Although agriculture historically was the most important sector of Iran’s economy, its share of the gross domestic product (GDP) has been declining since the 1930s due to the rise of manufacturing. Meanwhile, the mining sector, which is dominated by the production of oil, has grown rapidly since Iran nationalized its oil fields in the 1950s. Factory manufacturing has experienced periods of both rapid growth and stagnation. Trade and commerce activities have expanded with the country's increasing urbanization. During the late 1970s the Iranian economy appeared ready to grow to a level on par with the world’s developed countries, but the 1979 revolution and the subsequent eight-year war with Iraq strained all economic sectors. However, the need to produce for the war effort actually spurred industrialization, as did government spending on infrastructure development.

In the early 21st century the service sector contributed the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture. About 45 percent of the government's budget came from oil and natural gas revenues, and 31 percent came from taxes and fees. Government spending contributed to an average annual inflation rate of 13 percent in the period 2000-2005. In 2005 the GDP was estimated at $190 billion, or $2,780.70 per capita. Because of these figures and the country’s diversified but small industrial base, the United Nations classifies Iran's economy as semideveloped.

A

Government Role in the Economy

Government planning plays an important role in Iran’s economy. Since the late 1940s the government has designed and implemented multiyear planning programs with the goal of industrial diversification. After the 1979 revolution, the government continued the industrialization that the shah had pursued but emphasized economic self-sufficiency, which required greater investment in agriculture. However, the flight abroad in 1978 and 1979 of most of the social and political elite, along with their capital (estimated at more than $28 billion), combined with the costly war with Iraq in the 1980s, left Iran’s economy severely damaged.

After the war, the Iranian government declared its intention to privatize most state industries in an effort to stimulate the ailing economy. The sale of state-owned factories and companies proceeded slowly, however, and most industries remained state-owned in the early 21st century. The majority of heavy industry—including steel, petrochemicals, copper, automobiles, and machine tools—was in the public sector, while most light industry was privately owned.

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B

Labor

In 2005 Iran’s labor force was estimated at 27.5 million, of which women accounted for 34 percent. Unemployment stood at about 15 percent. The agriculture and service sectors employed the greatest number of workers. Although there are numerous government-affiliated trade associations, there are no independent labor unions in Iran.

C

Services

Urbanization has contributed to significant growth in the service sector. In 2005 the sector ranked as the largest contributor to the GDP (45 percent) and employed 45 percent of workers. Important service industries include public services (including education), commerce, personal services, professional services (including health care), and tourism. The tourist industry declined dramatically during the war with Iraq in the 1980s but has subsequently revived. About 1,659,000 foreign tourists visited Iran in 2004; most came from Asian countries, including the republics of Central Asia, while a small share came from the countries of the European Union and North America. The most popular tourist destinations are Eşfahān, Mashhad, and Shīrāz.

D

Agriculture

Iran’s agricultural sector contributed 10 percent of the GDP in 2005 and employed 25 percent (2005) of the labor force. Since 1979 commercial farming has replaced subsistence farming as the dominant mode of agricultural production. Some northern and western areas support rain-fed agriculture, while other areas require irrigation for successful crop production. Wheat, rice, and barley are the country’s major crops. Total wheat and rice production fails to meet domestic food requirements, however, making substantial imports necessary. Other principal crops include potatoes, legumes (beans and lentils), vegetables, fruits, sugar beets, sugarcane, fodder plants (alfalfa and clover), nuts (pistachios, almonds, and walnuts), spices (including cumin, sumac, and saffron), and tea. Honey is collected from beehives, and silk is harvested from silkworm cocoons. Livestock products include lamb, goat meat, beef, poultry, milk, eggs, butter, cheese, wool, and leather. Major agricultural exports include fresh and dried fruits, nuts, animal hides, processed foods, and spices.

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