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U.S. DEPARTMENT OF STATE
IRAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                               IRAN

                     Key Economic Indicators
     (Millions of Iranian rials (IR) unless otherwise noted)


Years ending March 20             1991-92   1992-93   1993-94

Income, Production and Employment:

Population (millions)                55.8      57.0     62.0
Real GDP  /1
  (billion 1985 rials)             16,871    17,647   18,176
  (million USD)                    59,800    65,000   66,950
Per Capita GDP USD                  1,071     1,140    1,140
Real GDP Growth (pct.)  /1            8.6       4.6      3.0
GDP by Sector:  (pct. of GDP)
  Manufacturing                      21.2      21.0     21.0
  Agriculture                        23.3      23.3     23.0
  Petroleum                          21.2      21.0     21.0
  Services                           35.5      36.0     36.0

Money and Prices:

Money Supply (M1/billion rials)    14,300    17,000      N/A
Interest Rate on 
  Short-term Deposits (pct.)          6.5       7.0      N/A
Wholesale Price Index 
 (1985 = 100) End-Year              417.1     547.6      712
Consumer Price Index 
 (1985 = 100) End-Year              346.6     411.0      534
Exchange Rate (IR per USD)
  Basic Rate                         67.4      67.1    1,740
  Floating Rate                     1,440     1,540    2,200

Balance of Payments and Trade:  (millions of U.S dollars)

Total Exports (FOB)  /1            18,415    19,280   15,400
  Exports to U.S.  /2                 0.8       0.2      0.5  /3
Total Imports (FOB)  /1            24,975    24,000   17,800
  Imports from U.S.  /2               749       616      169  /3
Trade Balance                      -6,560    -5,720   -2,400
Current Account  /1               -10,300    -5,000   -5,000


N/A-- Not available.

1/ Estimate.
2/ Year ending December 31.
3/ January-August, 1994.



1.  General Policy Framework

    In 1994, Iranian President Rafsanjani's political opponents
blocked and even rolled back several important elements of his
economic reform program.  Military spending continued to burden
the economy.  Reschedulings of $10 billion of Iran's official
debt brought temporary relief, but the country is finding it
difficult to obtain significant new credits and may face a new
debt crisis.

    Economic uncertainty and parliamentary opposition to
economic liberalization resulted in the postponement of the
regime's second Five-Year Plan (FYP), which was originally to
have gone into effect in March, 1994.  The government now
states that it will have the FYP in place by March, 1995.  In
late 1994, senior government and parliamentary figures were
highlighting features of the new FYP which emphasizes social
justice concerns over economic liberalization.

    Rafsanjani's administration had to retreat from one of its
hardest-fought victories of 1993 -- the unification of exchange
rates -- when the Iranian rial plunged from an open market
value of about 1,400 to the dollar in March 1993 to over 2,500
to the dollar in the spring of 1994.

    The large influx of imports which came with postwar
reconstruction after 1989 abated due to the 1993 credit
crunch.  The government's efforts to improve its credit
position have led to a significant import compression.

    There are no diplomatic relations between the United States
and Iran.  The current state of political relations has acted
generally to discourage a U.S. business presence in Iran. 
Moreover, U.S. trade restrictions and the Iranian foreign
exchange shortage are major deterrents to reviving significant
economic ties with the United States.  Despite these problems,
there is a modest trade relationship; U.S. exports to Iran
peaked at $749 million in 1992.  However, because of its
economic problems, Iran's purchases of U.S. products have been
steadily declining since then.


2.  Exchange Rate Policies

    Iran moved from its former three-tiered system of legal
exchange rates to a unified exchange rate of on March 20,
1993.  However, because of public outcry at the declining
international purchasing power of the rial, the government
intervened throughout the summer of 1993 in an effort to hold
the exchange rate at about 1,700 rials to the dollar, using up
billions of dollars in scarce foreign exchange.  When, in the
spring of 1994, the rial dropped as low as 2,800 to the dollar,
the government reimposed complicated import controls which
amount to foreign exchange rationing for most transactions. 
There has also been a return to government-subsidized
preferential exchange rates for the import of selected consumer
goods, another drain on scarce foreign exchange resources.


3.  Structural Policies

    The banking, petroleum, transportation, utilities, and
mining sectors are nationalized.  The government has announced
its intent to begin limited privatization in banking and
finance, but so far has not been able to implement its plans. 
At the time of the revolution, radicals were put in charge of
bonyads (foundations) which inherited much wealth confiscated
from the former elite.  They retain control of many large
industrial and trading enterprises, and are politically
powerful opponents of privatization.

    The petroleum sector is the economy's traditional
mainstay.  Iran's current maximum sustainable capacity is
around four million barrels per day (mbd), according to the
government.  Iran's OPEC quota is 3.6 mbd.  Capacity is
constrained by the natural decline in the productivity of major
onshore fields, delays in implementing necessary gas
re-injection projects, and a shortage of experienced
personnel.  Without large infusions of capital, the oil sector
may have difficulty maintaining current production, much less
achieving the government's publicly-stated goal of five million
barrels per day (mbd) of sustainable capacity.     .

    The government did not meet its projected petroleum
revenues in 1994 due to soft oil prices.  The government sells
petroleum products domestically at about 10 percent of the
world price, thus cutting exports and encouraging
over-consumption.


4.  Debt Management Policies

    During the eight-year war with Iraq, Iran contracted almost
no external debt.  From 1988 through 1992, Iran borrowed large
amounts, primarily in the form of short-term trade credits
(often covered by creditor government guarantees), in order to
increase domestic living standards, rebuild its petroleum and
industrial sectors, and modernize its armed forces.

    The credit crunch of 1993-94 crippled Iran's trade.  A
series of bilateral reschedulings with official creditors in
1994 did not include significant new credits.  Several export
credit guarantee agencies, including those of Japan, France,
Germany, and Italy, have either suspended coverage for Iran or
are considering new loans only on a case-by-case basis.


5.  Significant Barriers to U.S. Exports

    The U.S. prohibits the export of items on the U.S.
Munitions List, crime control and detection devices, chemical
weapons precursors, nuclear and missile technology, and
equipment used to manufacture military equipment.  As a result
of the Iran-Iraq Nonproliferation Act, passed by Congress and
signed by the President on October 23, 1992 all goods exported
to Iran which require a validated export license are subject,
upon application, to a policy of denial.  This affects all dual
use commodities.  Iranian exports to the United States were
prohibited by order of the President on October 29, 1987. 
Exceptions to the embargo of imports of Iranian oil are allowed
in connection with payments to U.S. claimants awarded by the
U.S.-Iran Claims Tribunal at The Hague.  U.S. sanctions have
had a deleterious effect on U.S. exports to Iran.  However,
Iran's current financial problems can be considered the most
significant barrier to the export of U.S. goods and services to
Iran.


6.  Export Subsidies Policies

    In a countervailing duty investigation on Iranian
pistachios, the U.S. pistachio industry alleged that a foreign
exchange subsidy was available to exporters in Iran.  Although
countervailing duties were imposed, the U.S. Department of
Commerce was never able to verify the existence of this program
because of a lack of cooperation from the Iranian authorities
and a paucity of information from the growers.


7.  Protection of U.S. Intellectual Property

    Iran is not a member of the World Intellectual Property
Organization, but is a signatory to the Paris Convention for
the Protection of Industrial Property.  Patent protection is
below the level of protection in the United States.  Iran has
not adhered to any of the international copyright conventions.


8.  Worker Rights

    a.  Right of Association

    Article 131 of Iran's Labor Code grants workers and
employers alike the right to form and join their own
organizations.  In practice, however, there are no real labor
unions.  A national organization known as the "Worker's House,"
founded in 1982 as the labor wing of the now-defunct Islamic
Republican Party, is the only authorized national labor
organization with nominal claims to represent all Iranian
workers.  It works closely with the work place Islamic councils
that exist in many Iranian enterprises.  The Workers' House is
largely a conduit of government influence and control, not a
trade union founded by workers to represent their interests.

    The officially sanctioned Islamic labor councils also are
instruments of government influence and not bodies created and
controlled by workers to advance their own interests, although 
they have frequently been able to block layoffs or the firing
of workers.

    There is also a network of guild unions, which operates on
a regional basis.  These guild unions issue vocational
licenses, fund financial cooperatives to assist members, and
help workers to find jobs.  The guild unions operate with the
backing of the government.

    No information is available on the right of workers in Iran
to strike.  However, it is unlikely that the government would
tolerate any strike deemed to be at odds with its economic and
labor policies.

    b.  Right to Organize and Bargain Collectively

    In practice, the right of workers to organize independently
and bargain collectively cannot be documented.  It is not known
whether labor legislation and practice in the export processing
zones differ in any significant respect from the law and
practice in the rest of the country.  No information is
available on the mechanism used to set wages.

    c.  Prohibition of Forced or Compulsory Labor

    Section 273 of the Iranian Penal Code provides that any
person who does not have definite means of subsistence and who,
through laziness or negligence, does not look for work may be
obliged by the government to take suitable employment.  This
provision has been frequently criticized by the Committee of
Experts (COE) of the International Labor Organization (ILO) as
contravening ILO Convention 29 on forced labor.  In its 1990
report, the COE noted an indication by the government in its
latest report to the Committee that Section 273 had been
abolished and replaced for a trial period by a new provision
approved by the Parliament.  The Iraqi government, according to
the COE, stated that the new provision was not incompatible
with Convention 29, and promised to provide a copy after the
provision was translated.  The COE noted that the Government of
Iraq had indicated in its 1977 report that similar regulations
concerning unemployed persons and vagrants had been repealed,
but had not yet complied with the Committee's request for a
copy of the repealing legislation.

    d.  Minimum Age for Employment of Children

    Iranian labor law, which exempts agriculture, domestic
service, family businesses, and, to some extent, other small
businesses, forbids employment of minors under 15 years
(compulsory education extends through age 11) and places
special restrictions on the employment of minors under 18.  In
addition, women and minors may not be used for hard labor or,
in general, for night work.  The extent to which these
regulations are enforced by the Labor Inspection Department of
the Ministry of Labor and Social Affairs and the local
authorities is not known.

    e.  Acceptable Conditions of Work

    The Labor Code empowers the Supreme Labor Council to set
minimum wage levels each year determined by industrial sector 
and region.  It is not known if minimum wage levels are in fact
issued annually or if the Labor Ministry's inspectors enforce
their application.  The Labor Code stipulates that the minimum
wage should be sufficient to meet the living expenses of a
family and should take into account the announced rate of
inflation.  It is not known what share of the working
population is covered by the minimum wage legislation.

    The labor law establishes a six-day workweek of 48 hours
maximum (except for overtime at premium rates), with one day of
rest (normally Friday) per week as well as at least 12 days per
year of leave with pay and a number of paid public holidays.

    According to the Labor Code, a Supreme Safety Council,
chaired by the Labor Minister or his representative, is
responsible for promoting work place safety and health and
issuing occupational safety and health regulations and codes of
practice.  The Council has reportedly issued 28 safety
directives.  The Supreme Safety Council is also supposed to
oversee the activities of the safety committees that have
reportedly been established in about 3,000 enterprises
employing more than 10 persons.  It is not known how well the
Labor Ministry's inspectors enforce the safety and health
legislation and regulations nor whether industrial accident
rates are compiled and show positive trends (Iran does not
furnish this data to the ILO for publication in its Year Book
of Labour Statistics).

    Given the large segments of the economy exempted from the
labor law, the effects of the war with Iraq, and the general
lack of effective labor unions, it is unclear to what extent
the provisions of Iran's labor law affect most of the labor
force.

    f.  Rights in Sectors with U.S. Investment

    The U.S. investment which remains in post-revolutionary
Iran, as reported to the U.S. Department of Commerce (see table
below), is residual investment in the petroleum sector.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                               (1)
Total Manufacturing                                      0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                          0
Banking                                                  0
Finance/Insurance/Real Estate                            0
Services                                                 0
Other Industries                                         0
TOTAL ALL INDUSTRIES                                    (1)     

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic
Analysis

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