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Summary: A survey of the composition of capital goods imported to the country indicates that the ratio of these goods in the agriculture sector to the whole capital goods imports is a mere 6 percent between 1978 and 1994.

The volume of investments in the agriculture sector between 1979 and 1994 did not increase but rather declined, being the lowest in other sectors. During the same years, there was not a direct relationship between the value added of the agriculture sector and capital accumulation at the fixed price of 1361 (1993-1994).

Agriculture sector and non-oil exports

The monetary value of non-oil exports during the 1973-1977 period did not have a downward trend and this trend continued until the last years of the 1970s (except in 1979).

It is worth mentioning that despite efforts made during the post-revolution era to boost export of non-oil commodities, the foreign exchange income from non-oil exports have not been considerable. However, we should admit that the volume of non-oil commodities exported have gradually increased since 1982 as shown in table 10. The boost in non-oil exports from 1986 onwards was due to the incentives offered by the government to increase non-oil exports such as offering foreign exchange with discount to exporters, allowing import of goods in return for exports and purchasing the hard currency incomes from export of non-oil goods at the floating rate of foreign currencies in 1990.

By offering foreign exchange and national currency facilities, purchasing letters of credits and canceling foreign exchange obligations for exporters in return for import of goods, the ground has been paved for boosting non-oil exports since 1991.

As seen in the table 10, the monetary value of non-oil exports climbed from 1.3 billion dollars in 1990 to 2.6 billion dollars in 1991.

A survey of non-oil exports between 1989 and 1993 and its comparison with the goals of the First Five Year

Economic Development Plan reveals this fact that the goals of the plan in the said years have not been materialized. In other words, the foreign exchange earnings in the said years were 66 percent of the figure envisaged in the plan. However, the export of agricultural products has been successful with respect to the goals of the First Plan (Table 11).

It is to be noted that the boost in the non-oil exports continued until the year 1994 but emergence of relatively high fluctuations in the foreign exchange rates in the second half of 1994 prompted the government to enforce hard currency control policy and the continuation of the said policy in 1995 caused the non-oil exports to drop by 1,597.3 million dollars. Following the adoption of this policy, the value of agricultural crop exports faced a 30 percent decline to reach 791.5 million dollars from 1,125.7 million dollars. In general, the most important reasons for the decline in non-oil exports over the past two years have been mentioned as follows:

1- Obliging exporters to sign an accord to return the foreign exchange income they gain from export of non-oil commodities to the banking system

2- Stabilizing the rate for purchase of foreign exchange earnings of the exporters

3- Omitting the incentives related to the foreign exchange incomes from export of non-oil commodities

4- Lack of long term programming for promotion of exports, resulting from constant changes in import permits and export regulations

5- Lack of fixed and long term policy

As for export of agricultural products, apart from the aforesaid problems, there exist other difficulties and bottlenecks such as transportation problem, lack of terminals for export of goods, lack of knowledge about world markets, problems related to packaging and international standards, organizational and institutional weaknesses, instability of policies and planning, shortage of information and competition power on international markets.

For example, in 1993, production of potatoes enjoyed a good status and its price on markets (50 rials per kilograms) was much less than its harvest cost. Despite its pledge to purchase this product at a guaranteed price, the government failed to purchase surplus production of this crop on time, as a result of which in a city like Gorgan, northern Iran, tens of tons of potatoes went bad or buried again under soil. As a natural reaction, the farmers refused to produce enough potatoes in 1994, causing this product to become rare on markets and prompting the government to import potatoes. According to the statistics released by the United Nations Food and Agricultural Organization (FAO), Iran was an importer of potatoes between 1990 and 1994.

At any rate, it seems that by removing the aforesaid problems and stabilizing policies and planning, the government can attain its goal of increasing non-oil exports particularly export of agricultural products.

It is to be noted that the most import agricultural products now being exported include fresh and dried fruits, pistachio, raisins, caraway seeds, caviar, all kinds of hide and leather, animal intestine and sweet roots.

Agriculture sector and import of capital goods

A survey of the composition of capital goods imported to the country shows that the ratio of imported capital goods in the agriculture sector to the whole imports of capital goods from 1973 to 1978 has been 8.1, 7.3, 8.3, 6.2, 5.1 and 3.7 percent respectively. The aforesaid average ratio in the 1978-1994 period is very low (around six percent). This inequality in the import of capital goods has occurred at a time that export of agricultural products accounted for a major part of the whole exports. The share of the agriculture sector in the whole non-oil exports from 1978 to 1994 has been 45.6 percent on the average. On the other hand, the share of industrial and mineral capital goods imported to the country in the said period in the whole imports stood at 54 percent (Table 12).

Conclusion

Presently, the agriculture sector is one of the most important sectors of the Iranian economy, accounting for 27 percent of the gross domestic product, 20 percent of the employed population and 25 percent of the foreign exchange revenues gained from non-oil exports. In addition, studies show that the productivity of work force (the ratio of value added to the employed population) in the said sector was higher than the industry, mining and services sectors in the 1979-1994 period. The return of capital (ICOR index) of this sector during the 1974-1994 period has been 1.1 percent against 5.1 percent in the industry and mining sector and 11.1 percent in the services sector.

Another important point is that despite the significance of agricultural products for the Iranian economy, the potential capacities of this sector are not fully utilized. Around 40 percent of the whole agricultural lands throughout the country are excluded from the process of production. Furthermore, about 50 percent of the total agricultural lands are under dry farming. The irrigation efficiency in Iran is less than one third which reveals the fact that 53 billion cubic meters of waters are wasted in Iran annually. Therefore, in order to prevent waters from being wasted and increase irrigation efficiency, it is necessary that rain-fed lands be turned into irrigated lands, work force undergo training, technological level be upgraded and necessary measures be taken to make fundamental investments in this sector.

Despite its importance, the volume of investments made in the agriculture sector during the 1974-1994 period did not increase but on the contrary experienced a downward trend, standing at the lowest level compared to other sectors.

Furthermore, the studies relating to the 1974-1994 period reveals this fact that there was not a direct relationship between the value added of the agriculture sector and capital accumulation (at the fixed price of 1982). In fact, the growth of value added in the agriculture sector (at the fixed price of 1982) during the said period has stood at 4.9 percent while capital accumulation has had a 3 percent decrease per year.

Meanwhile, the amount of development and current budgets allocated by the government to the agriculture sector, which during the pre-revolution era constituted a small part of the government's development and current payments, did not increase as much as they should have, after the revolution. Moreover, over 50 percent of the development credits of the agriculture sector has been spent as current expenditures. Therefore, it is imperative that the development and current budget of this sector be raised and necessary measures be taken to ensure that development credits be spent on development projects instead of being spent as current expenditures.

On the other hand, the ratio of imported capital goods in the agriculture sector to the whole capital goods imports has been a mere 6 percent between 1978 and 1994, while in the said period 45.6 percent of the total non-oil exports belonged to the agricultural products.

Studies show that the agriculture sector is facing problems and bottlenecks for export of its products. Of course, with removal of these problems and adoption of stable policies and planning within the framework of macro economy, it is hoped that export of non-oil goods particularly agricultural products would improve.

In conclusion it should be admitted that in recent years the government has taken effective measures in infrastructural fields such as construction of dams, drainage systems in farms, and improvement of pricing system for crops. However, it is strongly recommended that the aforesaid supportive policies be maintained and the prices of agricultural products be balanced because: First this will cause the production factors (agricultural input) to be utilized in a better manner, and their excessive use which has no economic justification be avoided. Secondly, these reforms will strengthen the motive of producers for further production and gaining more incomes. Thirdly, this will serve to cut wastage during production and consumption. In the fourth place, this will improve exchanges between the agriculture sector and other economic sectors, thus stemming the tide of immigration from rural areas to urban areas.