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WEEKLY NEWSLETTER
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Iran
Index
The first phase of modern industrial development occurred under
Reza Shah in the 1930s. When Mohammad Reza Shah succeeded his
father in 1941, he began a planning process designed to hasten
economic modernization. During the mid-1950s, the state encouraged
and supported the building of fertilizer, sugar-refining, cement,
textile, and milling plants. By the late 1950s, the government had
provided a role for private business by authorizing generous
credits from the Plan Organization.
Industrialization led to a rapid increase in manufacturing
output. Many new industries were established between 1962 and 1972.
The impressive new range of domestic manufacturing enterprises
included iron and steel, machine tools, agricultural implements,
tractors, communications equipment, television sets, refrigerators,
car and bus assembly, and petrochemical products.
Higher oil revenues in the 1970s accelerated economic
development. A number of large-scale industrial projects were
undertaken during the period of the Fifth Development Plan
(1973-78), with government investments concentrated in
petrochemicals and basic metal industries as well as crude oil
production. Domestic and international private investment was
projected to furnish 64 percent of a planned total of US$11 billion
for manufacturing investments between FY 1973 and FY 1977. The
economy proved incapable of absorbing such feverish growth,
however; some projects were postponed, and completion dates were
extended for others. Nevertheless, industrial production grew at
close to 20 percent per year, and a diversified industrial base was
established. By FY 1975, manufacturing and mining (excluding
electric power and construction) contributed about 10 percent of
GDP.
Shortages of skilled labor and equipment adversely affected
production from 1977 onward. Business failures and a generally
declining economy led to strikes and political instability in 1978
and 1979. The flight of capital and factory owners after the 1979
Revolution led to the nationalization of industries in the summer
of 1979. The decline of the industrial sector was hastened by the
war with Iraq; Iraqi bombing of petrochemical and steel plants in
Abadan, Ahvaz, and Bandar-e Khomeini in 1980 and 1981 caused
further disruption. Recovery began in 1982, but only among smaller
industries. Efforts to revive the larger industrial and
petrochemical plants began in 1982 and 1983. As a result of
technical advances, the Esfahan steel mill was expected to produce
700,000 tons of iron rods in FY 1987--enough to meet domestic
needs. In May 1987, Iran's minister of mines and metals reported
that twenty exploration projects were underway, aimed at supplying
raw materials for the country's steel plants.
The war with Iraq slowed industrial production but also created
a new industry, the manufacture of prosthetics. In August 1986, the
head of the Iranian Rehabilitation Agency stated that more than 2
million handicapped individuals had sought the rehabilitation
services offered by his agency in 1985 but that the agency was
capable of serving only 40,000 newly handicapped persons annually.
In response to this need, Iran reportedly planned to increase to
six the number of factories producing artificial limbs and other
prosthetic devices.
Data as of December 1987
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