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Economy

Although agriculture historically was the most important sector of Iran’s economy, its share of the gross domestic product (GDP) has been declining since the 1930s due to the rise of manufacturing. Meanwhile, the mining sector, which is dominated by the production of oil, has grown rapidly since Iran nationalized its oil fields in the 1950s. Factory manufacturing has experienced periods of both rapid growth and stagnation. Trade and commerce activities have expanded with the country's increasing urbanization. During the late 1970s the Iranian economy appeared ready to grow to a level on par with the world’s developed countries, but the 1979 revolution and the subsequent eight-year war with Iraq strained all economic sectors. However, the need to produce for the war effort actually spurred industrialization, as did government spending on infrastructure development.

In the mid-1990s the service sector contributed the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture. About 60 percent of the government's budget came from oil and natural gas revenues, and 40 percent came from taxes and fees. Government spending contributed to average annual inflation rates exceeding 20 percent. In 2000 the GDP was estimated at $105 billion, or $1,650 per capita. Because of these figures and the country’s diversified but small industrial base, the United Nations classifies Iran's economy as semi-developed.

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A:   Government Role in the Economy

Government planning plays an important role in Iran’s economy. Since the late 1940s the government has designed and implemented multiyear planning programs with the goal of industrial diversification. After the 1979 revolution, the government continued the industrialization that the shah had pursued but emphasized economic self-sufficiency, which required greater investment in agriculture. However, the flight abroad in 1978 and 1979 of most of the social and political elite, along with their capital (estimated at more than $28 billion), combined with the costly war with Iraq in the 1980s, left Iran’s economy severely damaged.

In the 1990s the Iranian government sought to privatize state industries to stimulate the ailing economy. In 1991 about 45 percent of large industry was government-owned. The majority of heavy industry—including steel, petrochemicals, copper, automobiles, and machine tools—was in the public sector, while most light industry was privately owned. That year the government announced plans to privatize 400 state-run factories; however, the actual sale of these companies proceeded slowly. A five-year development plan for the period from March 1995 to March 2000 calls for the creation of 2 million new jobs, primarily through stimulation of the private sector, especially industry.

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B:   Labor

In 2000 Iran’s labor force was estimated at 19.7 million, of which women accounted for 27 percent. Unemployment stood at about 10 percent for the labor force as a whole, although the unemployment rate for women and men aged 16 to 25 exceeded 20 percent. The agriculture and service sectors employed the greatest number of workers. Although there are numerous government-affiliated trade associations, there are no independent labor unions in Iran.

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C:   Services

Urbanization has contributed to significant growth in the service sector. In 2000 the sector ranked as the largest contributor to the GDP (59 percent) and employed 45 percent of workers. Important service industries include public services (including education), commerce, personal services, professional services (including health care), and tourism. The tourist industry declined dramatically during the war with Iraq in the 1980s but had revived significantly by the mid-1990s. About 1,700,000 foreign tourists visited Iran in 2000; most came from Asian countries, including the republics of Central Asia, while a small share came from the countries of the European Union and North America. The most popular tourist destinations are Eşfahān, Mashhad, and Shīrāz.

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D:   Agriculture

Iran’s agricultural sector contributed 19 percent of the GDP in 2000 and employed 23 percent (1996) of the labor force. Since 1979 commercial farming has replaced subsistence farming as the dominant mode of agricultural production. Some northern and western areas support rain-fed agriculture, while other areas require irrigation for successful crop production. Wheat, rice, and barley are the country’s major crops. Total wheat and rice production fails to meet domestic food requirements, however, making substantial imports necessary. Other principal crops include potatoes, legumes (beans and lentils), vegetables, fruits, fodder plants (alfalfa and clover), oil seeds, nuts (pistachios, almonds, and walnuts), cotton, sugarcane, sugar beets, herbs, spices (including cumin, sumac, and saffron), tea, and tobacco. Honey is collected from beehives, and silk is harvested from silkworm cocoons. Livestock products include lamb, beef, goat meat, poultry, eggs, milk, butter, cheese, wool, and leather. Major agricultural exports include fresh and dried fruits, nuts, animal hides, processed foods, and spices.

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E:   Mining

Although the mining sector contributed 17 percent of the GDP in 1996, mineral extraction in Iran employs less than 1 percent of the labor force. Petroleum has long been the country’s most important mineral resource. Since 1913 Iran has been a major oil exporting country. In the late 1970s it ranked as the fourth largest oil producer and the second largest oil exporter in the world. Following the 1979 revolution, however, the government reduced daily oil production in accordance with an oil conservation policy. Further production declines occurred as result of damage to oil facilities during the war with Iraq. Oil production began increasing in the late 1980s due to the repair of damaged pipelines and the exploitation of newly discovered offshore oil fields in the Persian Gulf. By 1999 Iran’s annual oil production was 1.3 billion barrels; two-thirds was exported. Iran also has the world's second largest reserves of natural gas; these are exploited primarily for domestic use.

Although the petroleum industry provides the majority of economic revenues, about 75 percent of all mining sector employees work in mines producing minerals other than oil and natural gas

. These include coal, iron ore, copper, lead, zinc, chromium, barite, salt, gypsum, molybdenum, mica, silica, talc, uranium, and gold. The mines at Sar Cheshmeh in Kermān Province contain the world's second largest lode of copper ore. Large iron ore deposits lie in central Iran, near Bafq, Yazd, and Kermān.

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F:   Manufacturing

Iran has a long tradition of producing artisan goods, including carpets, ceramics, copperware and brassware, glass, leather goods, textiles, and woodwork. Iran’s rich carpet-weaving tradition dates from pre-Islamic times, and it remains an important industry. Large-scale manufacturing in factories began in the 1920s and developed gradually. During the Iran-Iraq War, Iraq bombed many of Iran’s petrochemical plants, and the large oil refinery at Ābādān was badly damaged and forced to halt production. Reconstruction of the refinery began in 1988 and production resumed in 1993. However, the war also stimulated the growth of many small factories producing import-substitution goods and materials needed by the military. By 2000 manufacturing contributed 16 percent of the GDP and employed 18 percent of the labor force. Important manufactured products included petrochemicals, steel, carpets, textiles, cement, processed foods (including refined sugar), copper wire, aluminum, electronics, refrigerators, footwear, appliances, paints, plastics, automobiles, machinery, railroad cars, leather, furniture, cigarettes, utensils, glass, paper, and handicrafts.

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G:   Forestry and Fishing

Although they contribute very little to the GDP and employ a small percentage of workers, fishing and logging are important industries in specific regions. Logging takes place primarily in the forests of the Elburz Mountains, where various deciduous and conifer trees are harvested for construction, furniture, pulp, industrial uses, and fuel. Fishing fleets operate out of several ports on the Caspian Sea, the Persian Gulf, and the Gulf of Oman. Caviar harvested from Caspian Sea sturgeon is an important export item. Grouper, shrimp, and tuna caught in the Persian Gulf are important for the domestic and export markets. Various species of rock lobsters are caught in the Gulf of Oman.

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H:   Energy

Between 1979 and the mid-1990s Iran quadrupled its electric power output through the construction of several new natural gas, combined cycle (using both gas and steam), and hydroelectric power stations. Thermal plants supply 93 percent of the country’s electricity, and hydroelectric facilities provide most of the rest. In 1975 the government began building a nuclear power plant at Būshehr, on the Persian Gulf coast. The partially completed plant was bombed during the war with Iraq. In 1995 Russia signed an agreement to finish construction of the plant.

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I:   Transportation

Iran has an extensive paved road system linking most of its towns and all of its cities. In 1998 the country had 167,157 km (104,000 mi) of roads, of which three-fifths was paved. There were 30 passenger cars for every 1,000 inhabitants. Trains operated on 5,995 km (3,725 mi) of railroad track. The country’s major port of entry is Bandar-e ‘Abbās on the Strait of Hormuz. After arriving in Iran, imported goods are distributed throughout the country by trucks and freight trains. The Tehrān- Bandar-e ‘Abbās railroad, opened in 1995, connects Bandar-e ‘Abbās to the railroad system of Central Asia via Tehrān and Mashhad. Other major ports include Bandar-e Anzalī and Bandar-e Torkeman on the Caspian Sea and Korramshahr and Bandar-e Khomeynī on the Persian Gulf. More than 30 cities have airports that serve passenger and cargo planes. Iran Air, the national airline, was founded in 1962 and operates domestic and international flights. All large cities have mass transit systems using buses, and several private companies provide bus service between cities. Tehrān and Eşfahān are in the process of constructing underground mass transit rail lines.

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J:   Communications

The press in Iran is privately owned and reflects a diversity of political and social views. A special court has authority to monitor the print media and may suspend publication or revoke the licenses of papers or journals that a jury finds guilty of publishing antireligious material, slander, or information detrimental to the national interest. In 1996, 32 daily and 470 nondaily newspapers were in circulation. The majority of these are published in Persian, but newspapers in English and other languages also exist. The most widely circulated periodicals are based in Tehrān. Popular daily and weekly newspapers include Hamshahri, Jomhuri-ye Islami, Kayhan, Resalat, Salaam, Sobh-e Emrooz, and the Teheran Times (an English-language paper).

The government runs the broadcast media, which in 1995 included 3 national and more than 50 local radio stations, as well as 3 national and 28 local television stations. In 1997 there were 263 radios and 71 television sets in use for every 1,000 residents. There were 149 telephone lines and 33 personal computers for every 1,000 residents. Computers for home use became more affordable in the mid-1990s, and since then demand for access to the Internet has developed. In 1998 the Ministry of Posts and Telecommunications began selling Internet accounts to the general public.

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K:   Foreign Trade

In 1998 Iran exported 918 million barrels of crude oil per day. In the mid-1990s annual foreign currency revenues varied depending on the international price of oil; non-oil exports brought in $4 to $5 billion annually. Major non-oil exports include carpets, chemicals, steel, fresh and dried fruits, nuts, animal hides, textiles, copper, and caviar. The country’s leading purchasers are Japan, South Korea, Italy, South Africa, and Greece. Since the value of Iran's imports generally is less than the value of its exports, the country maintained a favorable balance of trade for most years between 1989 and 1997. Principal imports include machinery, chemicals, transport equipment, iron and steel, wheat, rice, live animals, and scientific instruments. Primary suppliers of imports are Germany, Japan, Italy, France, the United Kingdom, Argentina, and South Korea.

Iran has had no direct trade with the United States since 1995, when the U.S. government banned all commercial and financial transactions between U.S. companies and Iranian public and private entities. The United States took this action because it believed Iran was planning to develop weapons of mass destruction and was supporting international terrorism. Iran is a founding member of the World Bank, the International Monetary Fund, and the Economic Cooperation Organization (an organization promoting economic and cultural cooperation among Islamic states).

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L:   Currency and Banking

Iran’s unit of currency is the rial. The official exchange rate averaged 1,764 rials to the U.S. dollar in 2000. However, rials are exchanged on the unofficial market at a rate as much as four times higher. In 1979 the government nationalized all private banks and announced the establishment of a banking system whereby, in accordance with Islamic law, interest on loans was replaced with handling fees; the system went into effect in the mid-1980s. The banking system consists of the central bank, which issues currency; eight commercial banks that are headquartered in Tehrān but have branches throughout the country; two development banks; and a housing bank that specializes in home mortgages. The Tehrān Stock Exchange trades the shares of more than 400 registered companies.

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