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(Interview with Dr. Mohammad Tabibian, Member of Scientific Staff of Planning and
Development Research Institute)
Salaam (Morning Daily)
May 31, 1998
By: Mohsen Shamshiri
Summary: What our esteemed readers will read in the following column are some viewpoints expressed by an economic expert regarding the new government's economic strategy. Dr. Mohammad Tabibian who is a member of the Scientific Staff of Planning and Development Research Institute, believes that the present problem of the economy is production. Later, he says, when production is shaped, it should be considered how the production is distributed. In his opinion a strategy in which everything is good can exist only in one's imagination. "In the real world we must endure expenses," Dr. Tabibian notes.
Text:
ON THE PRESIDENT'S RECENT INTERVIEW ABOUT ECONOMIC AFFAIRS:
On the basis of President (Seyyed Mohammad) Khatami's recent economic interview (Feb-March 1997) it can be said that he has paid attention to the fundamental points. But it seems no specific strategy has been formulated or presented by the government.
On the basis of the decision-making makeup in Mr. Khatami's cabinet, some of economic experts in the country were guessing that probably the absence of any declared strategy and any commitment to a specific strategy means the government, to solve the economic problems will import the basic commodities and will distribute them against coupons or will use other similar methods and in this way will support the people's livelihood by imports and that in connection with the budget problems it will increase the liquidity to make up for the rial revenue shortcomings.
I hope this has not been a correct sum up. What is wrong with this policy? Such a policy can open the way for politicians in the executive agency. Because it solves the livelihood problems by import of chicken, meat, rice and cooking oil. And it can create the illusion that creating new liquidity may solve the financial problems. But such a policy may create very undesirable results in the coming years.
In his recent speech, the President was paying attention to questions of increased production and investment and assisting the domestic production. This intention is in conflict with that policy. Because if the government imports consumer goods without caution that will be noiseless hammer for destruction of the production capacity at home.
And if the government's expenditures are met by the Central Bank system it will be inflationary. Various studies show that a high level of inflation is detrimental to production. Therefor (accepting) a high level of inflation by increasing the liquidity is contrary to the viewpoint that the honorable President has stated.
We hope the government's strategy is one based on preserving the macro equilibriums and reduction of the liquidity to help the economy.
ON THE DISTRIBUTION PROBLEM AND SOCIAL JUSTICE REFERRED TO BY THE PRESIDENT:
There are a number of worrying points in confection with the honorable President's recent interview. It seems he is considering the economic problem of the country to be one of distribution.
The distribution problem has bee one of the old problems in the country. The impression of the governments has always been that there are some resources and incomes and that they must only distribute them. This is the most dangerous impression of the state of economy. Because on the basis of the same impression grounds for investment and production in the country were ruined in the past.
If there is such an idea in the mind of the government or the President it is in conflict with the first idea, i.e. investment and attention to production.
The present problem of the economy is production. Later, when production is shaped, it should be considered how the production is distributed.
It seems many are considering the main economic problem to be distribution whereas the main issue is production. Our problem is the absence of satiable grounds for production and commerce. Investment in the production area is weak.
ON THE STATE OF ECONOMY WHICH WAS DELIVERED TO MR. KHATAMI BY THE PREVIOUS GOVERNMENT IN 1997:
We must compare the economic situation in 1997 with 1989, when the government was delivered to Mr. Hashemi.
Naturally, Mr. Khatami is in a very better economic condition. Extensive investment grounds have been prepared. The infrastructure has been built and is ready to a large extent. But there have been problems in many areas. Of course the great volume of the investment and the capacity established creates a problem. If the government does not have coherence and specific plans and its activities are not at a suitable level even maintaining that capacity will itself be a big problem.
ON THE ECONOMIC RECESSION AND THE DROP IN THE INFLATION RATE IN THE RECENT YEARS:
In my opinion when (former president) Mr. (Akbar) Hashemi's so-called economic reform strategy was stopped under various political pressures the economy began a downward trend. According to the Central Bank figures the GDP has every negligible growth. The consumer expenditure of the households at adjusted prices are declining. This shows the real income of our households is decreasing and it shows since 1373 (beginning March 1994), after the halt in the course of economic reforms, the economy has been facing recession.
Of course the inflation has decreased since 1375 (beginning March 1996). If we consider it carefully this drop in the inflation has not been because of the proper economic policies. Why? Because during this time the liquidity has increased a lot and the government's budget has increased too. What has been the reason for the drop in the inflation rate in the past two years then? It has been the drop in the production and investment and the drop in the velocity of the money in circulation. Because almost all the activities of the private sector have been stopped one way or the other because of various confrontations and lack of confidence, etc. The government managers have become demoralized because of the problems created for the municipalities and other problems which have not been publicized up at much as the municipalities.
The exports and imports are facing fundamental problem because of the exchange problems. The exports have suffered a lot of losses. Therefor, if the economic activities are resumed and production increases because of the increase in the velocity of money in circulation there will be a severe inflationary shock and invariably we shall face a high inflation rate unless the government can by means of proper economic policies reduce the inflationary pressure.
If it decides to add to the economic recession or give it continuation the inflation will subside on the surface but we will have much more difficult economic complications in the future.
In particular we know that multitudes of our youths are entering the labor market. The number is twice the number of jobs that our system can create. We need to create new jobs. Every year more than 600,000 youths reach the working age whereas our country did no create more than 300,000 jobs in the boom condition. And we are now in the recession conditions. Therefore the problem of the youth will be a big problem, to the extent of a crisis, in the future.
Some of the people in the new government imagine this problem can be solved by cultural or other similar methods, but that is not feasible. Of course improvement of the cultural conditions of the youth is necessary and useful in its own place but young people need useful activity and conditions should be prepared for their employment and useful work.
The problem of the economy will not be solved by holding sessions and by having talks. The problem and the crisis will not wait for the results of the two-year-long sessions.
ON THE FOREIGN DEBTS, BUDGET DEFICIT AND LIQUIDITY:
The economic condition has been deteriorating since the halt the reforms in 1373 (1994).
When various factions were active to stop the policies of Mr. Hashemi's government a number of pretexts used to be brought up. One was social justice and another one was cultural problem. If we pay attention since the halt in those policies the economy has been facing recession and the income distribution has become worse. In other words the share of the low-income groups has declined. And as regards the cultural offensive, etc. no considerable positive event has taken place. The interesting point, however, is that all those groups and factions which made a lot of efforts to stop Mr. Hashemi's policies are now silent.
In other words it is as if all that hue and cry was for halting the economic progress of the country. And now the lot of the underprivileged strata has worsened and the figures show this well.
Therefore, some may conclude those talks were mostly an excuse. There is no talk about those things anymore whereas the economy is in recession and jobs are not created.
This is hostility to economic growth which exists in our backward culture. The government should investigate why there is hostility towards economic development in our country. In fact the per capita production on our country in the past 20 years has had a sluggish trend. The per capita production has increased, but it has had a sluggish trend and this is dangerous for a 20-year-old system.
If the government wants to take cultural steps, one way of that is fighting that idea. I was hearing from some people that the new government wants to pay less attention to the economic problems and in return pay more attention to the cultural problems. But in my opinion if there is such an impression it is a gross mistake.
If there is no economic progress neither society nor politics nor culture can be stable. Accordingly, confronting those opposed to the economic development of the country is an important point.
The Central Bank has not given the figures of foreign debts. In my view now there is no major problem and the crisis has been resolved and the problem has been solved to a considerable level. Mr. Hashemi received about $12 bn debts from the previous government. During the term of the government (before Mr. Hashemi's) there was war. But there were also some assets which were spent.
Therefore, Mr. Hashemi delivered less net debts to the government after it.
Another problem is the budget deficit. Perhaps the dimensions of it are under control to some extent, but the problem is not going to be solved as long as we do not have a defined strategy. For instance the real budget deficit is a sharp increase in the liquidity and that does exist. This has been our economic problem and it cannot be confronted easily.
The government mentioned a few economic cases in the recent months which will not be successful if they are not within the framework of a strategy, and will even create their own specific problems.
One issue has been the sale of partnership bonds. It is true that the government's borrowing from the public is better than its borrowing from the Central Bank and will create less inflation. But if this is not combined with certain steps to make certain investments profitable in the future for the government to pay the principal and the profit of the bonds two things will happen: Either the government will have to avoid paying the people's money by using various pretexts - and this will eliminate the confidence. Or it will have to borrow again in three years' time to pay the existing previous debts and to borrow to carry out its projects. As a result the debts will accumulate.
Another point raised has been selling the state companies. If they are sold to the banks or to specific individuals that will be self-defeating. If they are transferred to the people that must have its own proper mechanism. In other words if they are going to be transferred to the people the government should not expect any revenue. The shares should, in principle, be distributed among the people free of charge. Therefore, if this is not within a strategy it will face its own specific problems and will lead to another failure.
It should be made clear that everything has its own cost. If they want to do something beautifully and in the best way and without any expenditure, including political and social expenditure, that cannot be done. A strategy in which everything is good can exist only in one's imagination. In the real world we must endure expenses.
ON RELATIONSHIP BETWEEN ECONOMIC REFORMS AND POLITICAL REFORMS:
In the present conditions the solution of the economic problems, given the experience of the past years, has a political dimension. To be able to solve the economic problems the political problems must be solved.
Perhaps in the present framework naturally the things the government has begun seem to be positive and correct -although the details are not clear for me and many others.
The political problem which must be solved is the political organization of the country. As long as we do not have disciplined and organized political formations such as parties there is no possibility for political groups' adopting proper economic policies. Why? Because in conditions similar to our present conditions political groups will be content with securing the positions of power. When the positions of power are divided the other problems are gradually forgotten and attention is paid more to keeping the balance rather than solving the problem, a thing which can be controversial and cause quarrel.
Right now the political groups in the Majlis, in the country and in the government are not committed to any plan and do not give account for any performance. They are even half open and half secret. In other words at the time of elections various factions come out from a half-secret condition and call on the people to vote for them. But after that they go in the shadow again.
ON WHETHER HE MEANS THEIR COORDINATION AND HAVING TRANSPARENT POLITICAL POLICIES:
Not that they should have coordination with each other. Every group must have a program. For instance we hear about the Militant Clerics League (MRM), the Militant Clergy Association (JRM) and the Executives of Construction at the election time. Later there is no mention of them except when there are talks about securing the positions.
It is natural if political groups compete with each other for various positions within the framework of the law. The important point is their having programs. They should say they want to do certain things and are going to stick to that and shall accept the responsibility for what happens.
Right now they are neither saying what programs they have nor in principle declare their existence. As a result when problems surface they reproach others, either foreigners or other groups. Or they reproach some individuals and vague phenomena and do not accept responsibility whatsoever.
ON COORDINATION AMONG ECONOMIC OFFICIALS SUCH AS DR. NOURBAKHSH, DR. NAJAFI, DR. NAMAZI, SHARIATMADARI AND...:
As long as it is not known to which group and party Dr. (Hossein) Namazi (Minister of Finance and Economic Affairs) belongs and what policy and programs he is after and as long as it is not known to which group and party Mr. (Mohsen) Nourbakhsh (Governor of the Central Bank)) belongs and to what program he is committed coordination and high efficiency cannot be expected.
One very clear example of that was the debate about party system and pluralism.
There was so much debate about parties in the press before the election. But following the allotment of the positions there has been no talk of it anymore. If political officials say what programs they have or to what they are committed to they shall have to give account later.
One problem is that we are saying we are establishing political groups in our country, but we see that on the list of the permissions for the Islamic societies of students and graduates there is also the society of kebab shops whereas that is not a political society but a trade association.
A political formation is like a party, announces a program in elections and is committed to its program. In our country people are voting for individuals, but they do not know precisely what they are going to do.
These things prevent solution of the problems. If Mr. Khatami can do a fundamental thing it can be in connection with formation of political groups. Because as long as there is no move in that direction political groups will face problems and tension at the time of allocation of seats - like the problems of the universities and... (sic). We should be in a condition that those tensions will not be created. Such things would not be in the interest of the country whatsoever. Perhaps it will be in the interest of this or that group. Demonstrations and those things may result in the retreat or advance of a faction, but they are not in the interest of the country. Such steps are not political activities at all. Political activity is fraternal and organized participation by all for resolving the problems of the country. It is not creation of tension for allocation of the seats. These are problems which can prevent the economic progress of the country in the future even more than now.
ON CIVIL SOCIETY AND ECONOMIC REFORMS IN IRAN:
About the issues of civil society which is raised again it must be said it is vague. The one who initiated this idea has been the honorable President. The election slogan of the President was establishment of a civil society, but he has not presented a definition of civil society on the basis of the foundations of its executive activities.
Naturally that has an economic dimension too. Many people whose views are important for me and seem to be correct in the country and some famous international thinkers believe that a civil society can be shaped only on the basis of free economic activity. In other words if the livelihood of the people or big strata of the people is not under their own control, decisions and pens are not under their control. But if the people's livelihood is under their control and there is economic freedom the decisions are at their own disposal.
The Japanese government intervenes in the economy of the country more strongly than the government in our country. The government in our country has a preventive economic role. These things must change and people must have (economic freedom). In the same way that Mr. Khatami has said attention should be paid to investment security, ownership security, managers' security, decision-making security, freedom of exchange and relations and trade and deregulation and elimination of the obstacles and regulations in the way of the activities of the people, elimination of the obstacles to foreign trade and...
In my view these steps are the prerequisite for establishment of a civil society. A civil society is shaped on the bed of a free and blossoming and booming economy.
ON HOW THE GOVERNMENT CAN COPE WITH THE PRESENT CRISES AND DIFFICULTIES BETTER:
After the presidential election Mr. Khatami had an interesting initiative for formation of the government. He involved many managers and experts in determining candidates for ministerial portfolios.
If that activity had continued and qualified, seasoned and working candidates had been elected from among the middle-rank managerial levels on the basis of the views of the said strata the country would have had a working and skilled cabinet.
But that was stopped for whatever reason and the cabinet was shaped on the basis of the fixed political relations in the country. This is why the present government is more political than the cabinet of Mr. Hashemi but it does not seem to be active from the executive viewpoint.
This is why if it is going to go forward with this working organization there are a number of big problems in our way.
One is the oil crisis. If the drop in the oil price continues for about six more months its effect will show itself in the next year and the year after that.
Much thought should be given to the drop in the oil price. If the government cannot make people more active with proper policies and if the people are not mobilized for resolving the economic problems we will face many economic difficulties.
But if it succeeds and the excess regulations and the obstacles are removed and if the big monopolies which include the foundations and the big state companies are controlled and the government encourage the people there is hope that the economic trend will change. Otherwise there will be more problems in the future.
ON THE RESOURCES AND POSSIBILITIES OF THE NEW GOVERNMENT AND EXTENT OF PARTICIPATION AND COOPERATION OF THE PEOPLE AND THE POLITICAL GROUPS:
I am not a political person. In my view the government has so much authority and so many levers that it can work very well. It can work several times the present level.
I have two humble proposals to every official. Instead of reproaching others one should consider what are his levers and what are his powers and resources. If the levers available to the government are used well a lot of work can be done.
ON WHETHER THIS MEANS THE PRESSURE GROUPS HAVE NO EFFECT AND THE GOVERNMENT CAN CONTINUE ITS WORK:
I agree that those problems do exist, but despite all that the government has so many levers at its disposal that if it wants to work there will be no obstacle in its way.
Personally, I have not seen any place that the government could have worked better if the opposition was not doing a certain thing.
Sometimes it is seen that a minister has left his work and talks about affairs in the working area of others. For instance his duty is to upgrade the technology in the country, but he leaves his work and talks about other things such as distribution of income.
About Mr. Khatami's job there is so much work to do. There is enough work for two full presidential terms. The moves by the pressure groups and other obstacles must not be an excuse for not making efforts and not continuing the construction.
The economic reforms should continue along the political reforms and political and cultural organization.
Encountering and making deals and compromises with various political groups and making the work progress through political and social problems are among the responsibilities of a political manager.