Sunday, January 27, 2008

Grand Ayattola's misguided advice!

Grand Ayattola Noori Hamadani accused the State TV and Radio stations of promoting riba in Iran. He said there are many “good economic” text books about interest-free- banking but their “ teachings” are not applied by decision makers in the IRI. In his view, reporting the bank rates by the TV and Radio stations is actually an indication of promoting riba by these means. Sometimes ago, he added, there were some talk about reducing these rates, and a few steps were taken, but regretably this process came to an abrupt end. He said extending poverty is not part of our Islamic ideology and added that he hopes that by mine utilisation and better use of uncultivated lands and more efficient use of forests and seas “ poverty would be eliminated” from Iran. In his view, the real cause of poverty is the payment and receipt of riba. This said, however, it is not clear how could you remove interest in an economy where the annual inflation rate, while variously estimated, is certainly more than 20%? Those steps that Noori Hamadani referred to, have led, inter alia, to a flood of liquidity to land and real estates and purchase of gold and foreign assets, pushing their prices up. The house price inflation which has become unbearable for many, is mainly due to unwise intervention of the state in the banking sector. It would have been nice to see that people like Noori Hamadani instead of encouraging this type of harmful intervention, would choose to support the government and the Central Bank of Iran .

Wednesday, January 23, 2008

Mr Government: Stay out please....

I am not sure if I understand why ministers in Iran are not serious people! Let me explain. If you follow what they say, in most cases, it is almost impossible to take them seriously. For instance, the Minister for Industry and Mines advised car makers in Iran that " try to export your products". In view of " massive investment" in this industry, the government and people have " a special expectation"- in terms of increasing exports and acquiring new markets. So far, this is fine, but the Minister must know, that exports would not increase by decree from this or any other governments. Your product must have certain advantages to be demanded or wanted by global consumers. It may be price, or it may be better quality, or a combination of both. In the case of Iranian cars, let us be honest about it, these cars can not compete with cars available in the world market. From what one reads in the press, these are not reliable, and not fuel efficient and furthermore, they are pricy- given these attributes, quite expensive. Apart from these reports in the press, the reaction of Iranian consumers is my evidence for this, i.e. whenever they can, they prefer not to buy the local produce. At one level, in a shortage economy like Iran, paying lip service to quality may be expected, but, at the same time, if Iran is to move out of its current economic mess, there in no other way. The quality of what is produced here must improve. There must be specific programmes and political will to improve quality. Given what has happened in Iranian economy in the past 50 years, if not longer, could I say, Mr Government, could you please stay out of this!
I shall express my views on what should be done in other posts, for the time being, thank you for reading this piece. What do you think?

Saturday, January 19, 2008

Gloves are off in Iran!

Roohani, the current chief of Strategic Research at the " Majma-e Tashkhis-e Maslehat", in a blistering attack on Ahmadi Nejad- without naming him- said, " what is a greater sin? A female not covering her hairs fully, or giving false statistics to the nation?" and went on to say, " what is worse, if a Muslim fails to fast during the month of Ramezan, or, if the affairs of the Islamic Government be left in hands of those who have no qualification and right to be in these high positions?" In another religious gathering, Ayattolah Tavassoli went one step further and claimed that " views of Imam Khomaini" are being falsified for factional interests. He did not name anyone either, but, it is clear which group of people he had in mind. It has also been reported that Mr Ahmadi Nejad wrote a "harsh letter" to the Speaker of Iranian Parliament, Haddad Aadel, in which, he is said to have attacked the MP's for their comments and criticisms of his government. In his recent TV appearance, Ahmadi Nejad claimed that Majlis was " responsible" for rising inflation in the country and in due course, a large number of MP's responded negatively to his claims. In this " harsh letter", the text of which has not been released, the President is quoted as having claimed that the MP's interfere too much into the affairs of the Executive branch of the IRI.
Time would tell what more is likely to be revealed. By the look of it, it seems that gloves are off, or, are coming off.

Tuesday, January 15, 2008

Let us pray for an end of Petro$ in Iran!

An Iranian economist argues here that the Iranian government does not understand the causes of inflation. In another piece, he accuses the government to have increased the scale of poverty in the country. Another Iranian scholar argued here that despite all the claims by the government, it has no idea about how to reduce inequality and spread justice. Professor Taghavi suggested here that government programmes for job creation have been a total failure. He compares and contrasts the economies of Iran and Korea and concludes that a drastic change in the direction of the economy is needed. A Member of Parliament, Alikhani goes a little further and says that inflation could not be controlled by “command”, “ as it is the government which is fuelling inflationary pressure in the economy”. The Housing Minister, however, reveals “government’s programmes” to combat house price inflation by declaring that the “government would no longer participate in new house building” but, would only “ guide, support and regulate” house building in the country. Returning to the question of comparing Iran with Korea, it should be pointed out that Korea has followed an export-led growth model and developed while Iran has been and still is bogged down with a consumption-led supplied by imports models which is financed by Petro dollars which is effectively destroying the productive basis of the economy. Given what one can see in Iran these days, there does not appear to be any light at the end of the tunnel. One can only hope for either an end of oil or a collapse in the oil price in the international market.

Friday, January 11, 2008

Crisis of legitimacy in Iran

I have not written anything here for many months. To be honest with you, I do not know why! Obviously, I was busy, who is not, but that will not explain this. Whatever the reason, I will try to be more active.
Just a few points:
The next general elections are underway and already a number of parties have decided not to participate. One such party, The Movement for Freedom [ Nehzat-e Azadi] [MF] has even asked for international observers to oversee the elections. On the other hand, form the grand Ayattolah, Khamene-ee to other members of the government and even Ministers in the former President Khatami's government attacked MF and claimed that Iranian people would not accept this. I have no means of knowing if that is the case. What I do know, however, is this, if they have nothing to hide, why are they afraid of International observers? Would it not be better for the IRI to have this endorsement, i.e. international observers confirming that these elections were free and fair. I fear that as in the past, we would have the general elections, but that would not be free or fair, and hence, the crisis of legitimacy would continue.
In the past few days, Iran suffered a serious Cold rush! Surprisingly though, the government has closed down the economy in order to save gas and electricity and yet, PoorMohammadi, the Interior Minister claimed that " Crisis management" is far more advanced in Iran than in the US or in Europe!
You can read an interesting piece here, in which it is said that about $14 billion of " oil revenue" is not accounted for!
Other evidence seems to show that this sum is more likely to be larger. I will return to this in my future posts.
I offer my sincere apologies for my inactivity in the past several months.