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Last Updated: Monday, 24 May, 2004, 17:31 GMT 18:31 UK
Iran's entrepreneurs see calm future
By Miranda Eeles
In Tehran

Market in Tehran
Iran's private sector remains small and undeveloped
With a new conservative-dominated parliament set to start work in Iran at the end of May, there are concerns over the future of economic reforms begun by President Mohammad Khatami.

Conservatives regained control from the reformists at the last elections, with much of their campaigning centred on the economy.

Now, many are wondering if they will revert to a more closed economy.

Iran has a small but growing number of entrepreneurs who have profited from the president's liberal reforms over the last few years. They will be watching the parliament closely.

Potential risks

Hirbod Jenabzadeh owns a tortilla chip factory about an hour's drive west of Tehran. Business is booming and he is about to install an expensive new production line, with the aim of increasing productivity by 40%.

Page from Bereshter Online site
The main problem was attracting finance
Hirbod Jenabzadeh
Mr Jenabzadeh left Iran with his family after the revolution in 1979. He was educated in England and returned to Tehran in 1992.

At that time, the war with neighbouring Iraq was over, rules on military service had been relaxed and Mr Jenabzadeh wanted to make the most of Iran's primitive private sector.

He decided to launch tortilla chip firm Bereshter, a potentially risky start-up in a country that was not used to flavoured snacks.

"The main problem was attracting finance. It was very difficult," he says.

"Another problem was attracting good quality management for a new set up, a product that is unknown, a company that is unknown."

Access to credit is one of the main obstacles facing entrepreneurs in Iran.

Banks are reluctant to give loans to small private businesses, forcing start-ups to go to the bazaar - the traditional form of money lending where interest rates are exorbitant.


But there have been changes.

Over the last few years the government has started to reform the economy and Mr Jenabzadeh is confident the new parliament will not revert to the past.

Abdi Fatah, managing director of Pars Online
Even Ayatollah Khamenei has said IT is good for the country
Abdi Fateh, Pars Online
"I don't see any reason why a government would want to stop the economical developments that have occurred," he says.

"The hardliners never stopped the privatisation bill, they have never stopped the new foreign investment bill - so I am confident the economic programme that is going on will continue."

One firm that is confident the future is secure is Pars Online, Iran's leading independent internet service provider.

Founded by partners Madjid Emami and Abdi Fateh, Pars Online is now expanding beyond internet services to telephone access, setting up data networks across the country.

Managing Director Abdi Fateh is not worried about the new parliament.

"I think as far as the internet or IT is concerned, things are getting better every year," he says.

"Even Ayatollah Khamenei has said IT is good for the country. They've realised that it is not something you want to block completely.

Growing use of the internet is "a trend the world is going in (for). It's better if we are part of it rather than block it out," he adds.

Jobs needed

The challenges facing Iran's conservatives are huge.

The most pressing problem is job creation. To keep official unemployment figures at the current rate of about 15%, the government needs to create close to 800,000 jobs a year.

Iran's state bloated and inefficient sector cannot absorb such huge numbers of new workers.

Nor is there any independent regulatory authority to monitor government policy and how far it meets the needs of the market and society.

Many economists believe the government needs to transfer activities from the public to the private sector.

Although there has been some progress towards economic liberalization, it has been limited and insufficient, says economist Mehdi Khajenouri.

"Our cultural characteristic today is such that it doesn't lend itself well to long term productive planning", he says.

In Iran, "the natural tendency is to rely on quick oil money" because "we have had a high income from it" but the country needs to find an alternative, he says.

There are not many formulas to solve the challenges facing Iran, but job creation through private enterprise is one of them.

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