Iran: Weak Economy Challenges Populist President

Impoverished children in Tehran (file photo) (AFP) WASHINGTON, July 21, 2006 (RFE/RL) -- The biggest problems facing elected officials in Iran are economic ones, particularly double-digit unemployment and inflation. These factors dogged President Mohammad Khatami during his term in office (1997-2005), and the reformists' focus on civil-society development resounded poorly with people who often could not afford meat with their meals.

Mahmud Ahmadinejad's campaign promise that Iran's oil revenues would end up on Iranians' tables, therefore, contributed greatly to his winning the 2005 presidential election. In recent weeks, Ahmadinejad has pledged to do more to resolve the country's unemployment problem, but national media and parliamentarians have become quite critical of the administration's failures in this area.

Battling Joblessness

Unemployment is one of the country's biggest problems, Ahmadinejad said on July 11, IRNA reported, and job creation is a major aspect of the government's development plan. "The government intends to tackle the unemployment problem with assistance from the people and principled planning," he told residents of the town of Malekan in East Azerbaijan Province.

The Central Bank of Iran reported that the unemployment rate was 12.1 percent as of March 20, 2006, Fars News Agency reported on June 5. The overall population was 68.6 million and the working population was 22.3 million. Yet some economists believe the unemployment rate could be as high as 20 percent, and they add that underemployment is a major problem.

Deputy Minister for Labor and Social Affairs Ebrahim Nazari-Jalali provided a slightly higher joblessness figure -- 12.4 percent -- in a July 3 interview, IRNA reported. He went on to say that the government is determined to reduce this to 8.4 percent by 2010 by creating 900,000 jobs annually. Jalali added that the government has earmarked 180 trillion rials ($20.5 trillion) for small businesses in an effort to create jobs.

Ahmadinejad discussed economic policy in a June 7 interview with state television, saying that officials have held many meetings on employment generation. Ahmadinejad also noted the allocation of 180 trillion rials for projects that he predicted will produce quick results. Ahmadinejad made the same points during speeches in April.

These job-creation targets are ambitious and the government has failed to meet similar goals in the past. The government aimed to create 3.8 million jobs (760,000 a year) from 2000-05, in an effort to reduce unemployment to 11.5 percent. Yet it conceded that only 2.3 million jobs (431,000, 493,000, 690,000, and 700,000) were created from 2000-04.

Economic Populism

Western journalists noted Ahmadinejad's popularity with average Iranians when they assessed his standing a year after his election. "The Wall Street Journal," for example, reported on June 22: "The president's popularity is soaring thanks to...his embrace of economic populism." "Ordinary people marvel at how their president comes across as someone in touch, as populist candidate turned caring incumbent," "The Washington Post" reported on June 3, adding that Ahmadinejad shows "a relentless preoccupation with health, housing and, most of all, money problems."

The populist touch is good politics, but it is not always easy to translate into a sustainable economic policy. In early June, 50 scholars wrote to Ahmadinejad and warned him about the state of the economy. They criticized his economic policies as inflationary and counter to previous economic plans. The economists highlighted grievances like excessive state intervention in business and restrictive employment regulations. They pointed to increased imports and government spending and noted broader issues they say contributed to economic problems.

Lack Of Expertise?

Iranian media also criticized the president's economic policies and their impact on employment. "Kargozaran" newspaper -- which is connected with the technocratic Executives of Construction Party -- commented on June 1 that the government recently made three decisions that were meant to create jobs and protect domestic production, but the decisions did not account for the interdependence of economic factors. For example, interest rates at banks were reduced by 2 percent, but the rush to borrow forced the government to withdraw $5.1 billion from the foreign-currency reserves. In another case, import tariffs were increased by roughly 5.2 percent, and this led to an increase of up to 1,500 percent in the prices of household goods, cellular phones, shoes, and textiles. The government's increase in the minimum wage for temporary workers led to large-scale layoffs.

An analysis in the pro-reform "Mardom Salari" on June 19 noted that although Ahmadinejad promised during his campaign that people would benefit directly from oil revenues, he and his associates subsequently denied any such statement. Meanwhile, one mistake by the government cost 50,000 people their jobs, the article continued, and the overall unemployment rate has increased. Mohammad Khoshchehreh, a former adviser to Ahmadinejad, said 100,000 people have been laid off since March, and many of those who still have jobs will not get raises or have not been paid for months.

The Ahmadinejad administration has failed politically and economically, the pro-reform "Etemad-i Melli" editorialized on July 13, and unemployment, inflation, and a general reduction in public welfare are the outcome of its policies. The Strategic Council for Foreign Relations (Shora-yi Rahbordi-yi Ravabet-i Khareji) was created to utilize the views of more experienced individuals in the area of foreign policy, the article continued, and a similar step is needed in the economic arena.

Lawmakers Air Critical Views

Ahmadinejad defended his efforts during a July 9 meeting of cabinet members and provincial governors-general. "The government's economic policies are quite transparent and based on planning and reason," Ahmadinejad said, according to IRNA. This is not the impression of some members of parliament, who presumably are in close contact with their constituents and see the impact of government economic policies first-hand.

The administration's policies have led to unemployment, Ardabil's Nureddin Pirmoazen said during the June 18 session, as well as high prices, inflation, and recession, "Sharq," "Resalat," and "Jomhuri-yi Islami" reported on June 19.

"Today, unemployment has turned into one of the greatest problems of youths and their families," Tehran's Alireza Mahjub said during the June 18 session, "Jomhuri-yi Islami" reported on June 19. "Today the unemployment issue has even affected middle-class families and the educated classes of society. Unfortunately, this crisis is growing worse every day." Mahjub added that job security is a major problem.

The nation is facing significant economic difficulties, Nahavand's Mohammad Taqi Kavianpur said during the July 9 session. "The source of most of these problems is the unemployment of educated and job-seeking youths," he asserted, accoring to "Jomhuri-yi Islami" on July 10. He said the government has consistently failed to achieve its job-creation goals, and its reliance on trial-and-error furthers unemployment.

"If we don't settle the problem of unemployment the government will face a challenge much more serious than the energy shortage crisis," Miandoab's Assadullah Tabeh warned on July 11, "Jomhuri-yi Islami" reported the next day. Tabeh hinted that unemployment has had the greatest impact on the country's poorest people.

During a conference in Mashhad on July 11, Tehran representative Mohammad Khoshchehreh said the government's monetary, commercial, and employment policies are not coordinated, Mashhad television reported. A focus on the agriculture and construction sectors, Khoshchehreh continued, would help create jobs.

Worker Dissatisfaction Produces Unrest

The difficulties faced by workers come to the fore during occasional strikes and other labor actions.

Speaking on behalf of dismissed state bus-company employees on July 15, Said Torabian said six people were arrested at a demonstration that day, ILNA reported. Another three went to the Labor Ministry to meet with officials and were arrested there. Ali Jahanbakhsh, director of the political-disciplinary office of Tehran's Governorate-General, said on July 15 that a permit for a July 16 bus-drivers demonstration in Tehran was denied because the event would cause traffic problems, ILNA reported.

High prices for energy exports are bolstering the Iranian economy (Fars)

More than 200 workers at a Tehran soft-drink factory began a strike on July 10, ILNA reported. The majority of the workers are on contract, rather than being permanent employees, and they say they had not been paid for the first three months of the Iranian year (which began on 21 March) and have not received all their benefits from the previous year.

Employees of the Industrial Growth and Development business in Azerbaijan Province signed a petition on June 29 protesting their mass dismissal, ILNA reported. The petition noted that although one group of workers was dismissed, the firm continues to employ people who have officially retired or are filling two positions.

Employees of a china and porcelain factory in Tabriz staged a protest on June 27 against five months of wage arrears, ILNA reported. During that time, workers told ILNA, they only received a onetime payment of 500,000 rials (roughly $57). The factory's managing director told ILNA he would pay the employees as soon as he can, but there has been a slump in demand for the plant's products.

Ahmadinejad's statements indicate that he is aware of the unemployment situation. The financial cushion provided by high earnings from oil and gas exports, however, means that serious and potentially painful steps are not necessary in the short term. According to International Monetary Fund statistics, oil and gas exports brought in $55 billion this year, compared to $23 billion in 2002-03. Foreign-currency reserves are approximately $47 billion and could reach $62 billion by the end of the year. As long as these funds are available, the government can continue to ease the difficulties of unemployment through subsidies and other forms of charity rather than embarking on systemic reforms.