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Eminent economists consider single commodity economies as undesirable and impractical phenomena. The dangers of reliance of an economy on a single, raw material or commodity has occupied the thoughts of policy makers more than that of economists. Political changes and power games of industrially developed nations have endangered the incomes derived from single commodities.

For almost a century, Iran's economy was based on oil revenues which created a huge dependency. The Islamic Revolution in Iran illuminated the negative aspects of this dependency. All economists, oil experts and politicians are convinced that the economy of the country must be severed from reliance on oil. Oil incomes must gradually, but firmly, be used for changing the industrial and economic infrastructures of the country. Oil is an important national resource and the share of future generations in this wealth must be considered. Instead of believing in the inexhaustibility of oil income, people should increase productivity and reduce consumerism. By emphasizing on work creativity and economizing, the country can develop and blossom.

Oil income must be used to make the country's agriculture self-sufficient and develop its industries. International conspiracies and plots which are opposed to national development or public welfares should not be allowed to materialize. On the other hand, its resources, raw materials, cultural background, weather, geographic location, skilled workforce, traditional industry, crafts and social structure lend Iran the potential for production of non-oil goods and the opportunity of not relying on oil.

Oil is not going to remain a cheap and accessible source of fuel forever. In various corners of the world, including India, Brazil, Indonesia, etc., chemists are laboring to find substitutes for oil. All over the world, people are against the use of hydrocarbons and fossil fuels. Therefore, the day is not far when oil will cease to be a reliable source of revenue. Iran has other sources of income, besides oil. Items of world repute can be developed to become sources of national revenue. Income from export of carpets, caviar, pistachio, decorative stones, handicrafts, fresh/dry fruits and nuts and techno-engineering services can, with proper planning, replace oil revenues. The Supreme Leader of Iran said: "My sincere aspiration is that, with the work and zeal of the people of Iran, there will be a day when we can cap the oil wells and have an economy without oil." So non-oil exports is evidently the desire of the highest authority of the country. In fact, the message served as a pace-setter for the countries policy-makers and ministries to gear non-oil exports closer to that of oil revenues.

The Minister of the Industries, Nematzadeh remarked: "One should note that export of raw materials, which has no valuer added, is not an honor for us. We should export our thoughts, creativity and work. That is a worthwhile endeavor." The fact that one should not rely on export of raw materials has been accepted by economically advanced countries. Third world countries have also acknowledged this fact but have no practical plan for implementing it. The Islamic Republic of Iran, in spite of having the ideological support of the Leader and its Constitution, does not have a specific strategy. Some movements can be noticed, but what has been accomplished is not enough. Non-oil exports need long-term, comprehensive and progressive planning.

Non-Oil Exports After the Islamic Revolution

After the Revolution, a major restructuring occurred in the economy of Iran. In the industrial sector, the unavoidable conditions, flight of entrepreneurs and capital to foreign countries, enormous debts of industrial units to the banking system and the undesirable features of Iran's industry led to economic stagnation. Under those conditions, the country's foreign trade and industry was controlled by the government. The banking system which was on the verge of bankruptcy was nationalized. The imposed war, the West's economic embargo, the drop of oil prices in 1984 and decline of foreign exchange income were factors which affected the economic growth of Iran. In general, the post-Revolution condition of Iran prevented adoption of a strategy for economic development. In the industrial sector, the government's emphasis was on completion and creation of heavy industries, maintenance of existing industries and prevention of bankruptcies. Industries faced problems of lack of skilled manpower, shortages of foreign exchange and imported raw materials.

As a result, foreign trade policies and goals of the country were reviewed. Due to the government's foreign trade control, centers for procurement and distribution of imported goods were established. During this period, intermediary goods had the largest share. The share of consumer goods declined from 26.36% in 1979 to 18% in 1988, while intermediary goods showed as increase in growth.

In 1979, the Central Bank abolished the earlier exemption of exporters from making foreign exchange declarations in order to encourage non-oil exports. A multiple system of exchange was established and banks were required to purchase foreign exchange derived from exports of goods at the preferential rate. Multiplicity of exchange rates were created with the goals of encouraging exports and supporting productive units (in continuance of the policy of import substitution).

After the Revolution, a definite strategy for development did not exist; however, the government made some haphazard attempts to encourage exports. This is due to two reasons: Firstly, the ineffectiveness of import substitution strategies, especially between 1961 and 1971, and the foreign dependency of the economy. Secondly, the foreign exchange crisis, which developed especially after 1985. Export promotion was not a long-term policy or part of an economic restructuring by the government. It was a solution sought to overcome the economic crisis.

The composition of exported goods was important during this period. Compared with the period before the Revolution, the share, of industrial goods in total non-oil exports declined from 30% in 1978 to 3.2% in 1980, then gradually increased and reached a maximum of 22.4% in 1988. Traditional and agricultural goods were major export items, like in the past. One of the strategies of the government during the First Five-Year Economic Development Plan was making industries self-sufficient in procuring foreign exchange needs through exports. This policy not only protected domestic industries but also activated commerce and exports.

Non-oil exports registered a good growth during the First Plan and its share in the country's total exports doubled. But it was not able to approach the target set in the Plan. The total non-oil export revenues during the Plan was USD 11.7 billion, whereas the Plan had set an amount of USD 17.8 billion. However, the change in the economic infrastructure and increase in Gross National Product and foreign trade made non-oil exports to flourish. The value of these exports rose from USD 1.0 billion in 1989 to USD 4.3 billion in 1994. The rapid growth of non-oil exports is considered as a positive aspect of governmental enterprise. More than USD 100 billion was invested in the industrial and economic structures of Iran in the First Plan. This trend continued in the Second Plan and created a strong base for economic growth and non-oil goods production. Development of non-oil exports and reduction of reliance on oil sales for meeting foreign exchange requirements are goals of the Second Economic Development Plan.

Regulations and Policies of Non-Oil Exports

The foreign exchange rate is not the sole determining factor in non-oil exports. Regulation have significant effect on non-oil export performance. For example, policies concerning foreign exchange declarations, use of non-bank foreign obligations, customs, etc. all affect exports. Non-oil exports can only be considered as successful when all revenues derived from this source returns to the economy of theountry.

During 1993-1994, all revenues from exports did not return to the banking system. According to some economists, this was due to the existing psychological ambiance and exchange rate fluctuations. Under such conditions, exporters expected an increase in exchange rates and hence, delayed in offering their foreign exchange for sale. On the other hand, as importers, too, expected an increase in the foreign exchange rates, they purchased their foreign exchange requirements prematurely. This caused an imbalance in the supply and demand of foreign exchange and pushed exporters toward profiteering.

In May 1995, the government announced a new policy for foreign exchange. New regulations were imposed for exports and imports. He exchange rate was fixed at IRR 3000 for USD I and this rate was declared as unchangeable for one year. The government wanted to create stability in exports for at least a year. However, the government's decisions were not limited to fixing the exchange rate alone. Other regulations were also reviewed and revised.

According to the new regulations, non-oil export proceeds were to be returned to Iran. The government decided, in terms of priorities, to utilize the foreign exchange for imports of raw materials, machineries, other needs of productive units, essential goods and services. It aimed to support the Iranian Rial, prevent foreign exchange use in domestic transactions and support the increasing trend of non-oil exports. Thus, a six-article by-law for market control was codified and approved by the Council of Ministers.

The new regulations and fixed rated are bound to have different effects on non-oil exports of industrial, agricultural and traditional goods. As agricultural and traditional goods require low levels of foreign exchange, they will benefit from the new policy. They are ahead of the projections made in the Plan. The average annual export of traditional and agricultural goods amounted to 29.5% set in the Plan.

The situation is different for industrial goods. These goods can also become sources for foreign exchange revenues but they simultaneously consume foreign exchange in the process of production. This makes industrial production more vulnerable to the new regulations. The new regulations compel the cxporters to transact only with the government in order to obtain the necessary foreign exchange. The government will only be successful if it acts on time and avoids cumbersome, lopsided regulations. If an exporter cannot earn foreign exchange at a desirable price, he will be tempted to sell the export earnings on the black market which will harm the national economy. Consequently, the non-oil export sector will stagnate and the government will not be able to achieve its goals. The government can create stability in the foreign exchange and export market with the cooperation of exporters. The profits resulting therefore can then boost non-oil exports as well as national economic growth.