Why Iran must seriously act to address rent seeking
While the top elites of the Islamic Republic are recognizing the need to address mismanagement of the Iranian economy, the core issue remains the rent seeking that is thwarting genuine reform.
The major economic downturn over the past few months poses the question of whether Iran will ever manage to exit the crisis mode within its economy. A number of remedies have emerged over the past few weeks to help decision-makers manage the current economic crisis. Yet there is a need to look at the core problem that has undermined sustainable economic development in Iran.
Recently, the Tehran Chamber of Commerce presented 12 strategies addressing the economic crisis, including the discontinuation of the lower exchange rate and an overhaul of foreign exchange and customs policies, a rationing of subsidized fuel and a new approach to protecting the lower income classes and liberalizing foreign trade, especially exports and imports of basic goods.
In August, a group of economists wrote an open letter to President Hassan Rouhani outlining the key issues in the economy. The economists offered a number of remedies and also underlined that the key issues are structural and the conditions have deteriorated due to the “public distrust in state institutions.” They pointed to the need for the government to reduce its role in the economy to that of a regulator as opposed to being a key economic player.
In May, internationally recognized economist Mohammad Hashem Pesaran advised Iranian decision-makers to focus on job creation through the promotion of “light industries, services and tourism” and also to create a competitive environment where the private sector can compete with semi-state institutions.
