January 2012, No. 62

Editorial

Trade at Service of Production

Today, there are ample possibilities and required capacities as well as capable and committed work force in the country which should be activated in line with the growing progress of the Islamic Iran.

Dr. Mehdi Ghazanfari, Minister of Industry, Mine and Commerce

Export-oriented and targeted production is a stimulant for economic growth of the country in line with which boosting sustainable employment would become possible. In this regard, adoption of appropriate mechanisms for trade development, would be an important step towards realization of this target in the course of which paying attention to sound engineering of the inputs (whether work force or capital), especially inputs involved in linking production and trade are of great importance. Furthermore, creating an export production channel is another strategy as a result of which expanded and effective impacts could be developed over different areas such as encouragement of rivalry, reduction of production costs, improvement of efficiency and production quality of commodities, boosting efficiency of production factors, attracting foreign investment and especially creating job opportunities.

Today, there are ample possibilities and required capacities as well as capable and committed work force in the country which should be activated in line with the growing progress of the Islamic Iran. Preservation of the available employment capacities and moving in the direction of providing maximum job opportunities by communicating "general employment policies" on behalf of the IRI Supreme Leader, policy making axes in the labor market and responsibilities of executive bodies in this connection have well become clear.

Parts of the responsibilities mentioned in the general employment policies such as identification of domestic production as Islamic and national value, promotion and strengthening of culture of labor-production-entrepreneurship, creation of sustainable job opportunities, improvement of business environment and upgrading its indicators, paying more attention to subsidies and developing a comprehensive market information system are among responsibilities of the Industry, Mine and Commerce Ministry and the direction of the movement of the newly-established ministry has been well sketched in the labor market.

Operational axes for implementation of the instructions of the Supreme Leader are clear in theoretical and practical terms. Equipment of trade infrastructures, development of sustainable employment, alignment of policies of production sector, organizing import, production and export cycle and development of export-oriented production are among major points in this respect. 

A. Equipment of trade infrastructures

Although the main axis of challenges in the field of trade has been based on reducing tariffs and other trade bottlenecks with an aim to enhance the interests obtained through trade, however, under the status quo trade facilitation is being considered the dominant dialogue in international debates. In fact, trade facilitation through reducing costs of transactions, would prepare the ground for reduction of finished costs of domestically manufactured goods and by increasing competitive power in both foreign and domestic markets, and boosting the motivation for investment in the field of related commodities and creating job opportunities in its proportion.

Trade should be facilitated and serve production in order to make production beneficial and obviously in this case employment would reach a desirable state.

In better words, trade should be facilitated and serve production in order to make production beneficial and obviously in this case employment would reach a desirable state. Truly, reduction of transaction costs will have an outstanding impact on the development of trade, production and employment.

One of the main policies in reducing transaction costs (either domestic or foreign), is development of trade infrastructures which often has a multi-dimensional nature and its effects are demonstrated in different areas (finished costs, productivity, distribution system, etc.).

Exports boom and boosted foreign trade would not become possible except by providing a suitable ground and for this purpose completion of the infrastructural network has been placed among priorities of the commercial sector policies. Completion of trade infrastructures in the two software and hardware fields is the main factor for facilitating trade process, through which they indirectly create high employment opportunities. Meanwhile, due to the type of application, technological depth and investment level, they enjoy high employment capacities directly.

B. Development of (sustainable) employment at Industry, Mine and Commerce Ministry

The new global trade environment has placed implementation of plans for offering competitive products to the world market top on the priorities of the world countries. In fact, production boom and increased employment opportunities are prerequisites for presence in the world markets. As long as export-oriented production is not compatible with the world standards, exports would not be generated and as a result production and sustainable employment would not be realized. Such an important task would not be accomplished except through forging unity among production and trade. In this regard, and with an aim to establish the required fields to increase Iran’s presence in the world markets and offer high quality products, merger of ministries of Industries and Mines with Commerce and forging the Ministry of Industry, Mine and Commerce has been crystallized while preserving principles and regulations of a competitive market. More accurately, the important achievement of this merger is establishment of a river of production and distribution of commodities in the course of which, while defects in the value cycle are removed, grounds would be paved for more sustainable employment which would be possible through implementation of more accurate policies.

C. Improvement of business environment

The business environment is among indicators determining the amount of activities. More accurately, improvement of business environment simultaneously with escalation of domestic competition would not only increase employment opportunities but would prepare the ground for its sustainability. Because under these circumstances new corporations would continue their activities with more guarantees while enjoying the possibility to enter the market more extensively,.

Improvement of business environment depends on different elements such as gaining access to the comprehensive market information bank (whether information on corporations or commodities), facilitating access to financial resources, empowerment, creating market solidarity, consistency in the rules and regulations and eliminating nuisance regulations as well as improvement of the entrepreneurship and innovative environment. It is from this perspective that it could be hoped creation of jobs opportunities would be effective through ensuring sustainability.

D. Aligning policies of production sector

Aligning policies of the production sector in the economy is among key factors for sustainable development. In this regard, unity of procedures among small and medium size enterprises is among strategies to realize such a goal which is manifested within the framework of industrial cluster shaping. This, through targeted activities of production companies, would provide for reduction of production costs and required grounds for increasing production and employment accordingly. In addition, production guilds, as a collection of small and medium size production enterprises, with regard to the outstanding role they play in supply, preparation and distribution of commodities and services in the final chain of provision and transition of information related to the market and liquidity from producers to the consumers are considered a major lever in the movement of economic cycle by emphasizing on increased employment.

In further elucidation of the subject, it should be said that at present over 2.5 million guilds are active in production, distribution, services and technical services which, by a 30% share in gross domestic product and employment of at least 5.7 million work forces, play a great part in the production and employment of the country. Obviously, in the new economic condition of Iran created in the aftermath of the merger of ministries of industries and mines with commerce, appropriate opportunities have been provided among production sectors, especially small and medium size corporations, for creation of unity of procedure and solidarity among production sectors, especially small and medium size corporations. In the light of this condition, while preparing appropriate grounds for making consolidated and unified policies and placing them in the macro production plan, required grounds would be prepared for attraction and employment of more work forces. Furthermore, with the unification of policies in the trade and industry sectors small and medium size corporations would take steps in line with increasing productivity and export production capability.

E. Re-organization of import, production, export cycle

Under the new economic environment, intermediary products have been changed into an important portion of the international trade process. On this basis, re-framing the structure of production sector which is generally based on the intermediary operations and establishment of capital equipment, enjoys high importance. Further elucidating on the subject, it should be said that with regard to the fact that over half of the 70% of the country’s imports are intermediary and capital goods, creation and direction of the indeterminate flow of imported commodities into domestic industries and production of export goods, would play a special and important role in the industrial development of the country.

In other words, organizing the import-production-export cycle of the country by establishing new routes in an effort to utilize forces which have been trained for deployment of imported technologies through intermediary and capital commodities in the production process and production of commodities with high technology which could compete in the world markets, would cause industrial and export development. Another point which should be heeded here is attaching value to the domestically manufactured products through which prevention of import of unnecessary commodities would be taken into consideration and it would be regarded a mechanism for support of domestic products and sustainability of employment.

F. Expansion of export-oriented production as a prerequisite to boost employment

Export-oriented and targeted production is a stimulant for economic growth in line with which boosting sustainable employment would become possible. In this regard, adopting appropriate mechanisms for trade development, would be an important step towards realization of this target in the course of which paying attention to the sound engineering of the inputs (whether work force or capital), especially inputs involved in linking production and trade are of great importance. Furthermore, creating an export production channel is another strategy as a result of which expanded and effective impacts could be developed over different areas such as encouragement of rivalry, reduction of production costs, improvement of efficiency and production quality of commodities, boosting efficiency of production factors, attracting foreign investment and especially creating job opportunities.

With the creation of such an environment, the custodians of production would be the same custodians for domestic and foreign marketing. In fact, it should be said that production devices while directing institutions towards productive activities, in line with acquiring sound and dynamic information of target markets, measuring requirements and monitoring demands on behalf of domestic and foreign consumers and new and sustainable presence in the existing markets, are bound to establish specialized units.

Obviously, taking each of the mentioned measures necessitates attraction and employment of skilled manpower which, in addition to creating grounds for increased employment, would blow fresh blood into the veins of production units of the country.

Generally, it should be said that although the desired policies of the newly emerged ministry could provide the required ground for employment, such an important task could not be accomplished except in the light of removing the existing problems and challenges in different economic sectors and improvement of the required infrastructures. Furthermore, realization of this important target requires overall cooperation and interaction among executive bodies. However, it is expected that in the light of sound and appropriate implementation of these policies, in addition to preservation of the existing employment status, over 610,000 new job opportunities would be created through industrial, mining and trade activities in the country.