Iran’s New Industrial Policy to “Transform Political Economy”

Through these processes, IDRO in its own words intends to “lessen its role as a holding company” and “turn into an industrial development agency.” With the conclusion of the Renault, Alstom and Transmashholding contracts, these pledges are no longer just wishful thinking. Instead, they represent a clear path for Iran’s industrial policy.

Moreover, IDRO’s stated focus on supporting development with a “particular emphasis on new, hi-tech and export-oriented industries” is also reflected in the recent contracts. In the case of Renault, the unprecedented deal includes stipulations that the company establish a research and development center in Iran and earmark 30% of output for export. In short, Renault will treat Iran as part of its global supply chain, defining a model of Iranian industrialization that treats globalization as a driver of revitalization rather than as a cause for resistance.

Despite these significant developments and the strong evidence for the transformation underway, critics of economic engagement with Iran use a dated and inaccurate vision of Iranian state enterprise in order to advocate against trade and investment. They also fail to contextualize state ownership in Iran within the larger global history of the country’s political economy.

The move from active operation to passive shareholding as the defining feature of state ownership is one that has been witnessed in each region in which globalization has taken hold. The vestiges of this transition remain; passive state ownership of major industrial companies remains very common globally, and perhaps especially in Europe. Tellingly, the French state owns 19.74% of Renault.

If anything, IDRO’s recent successes are the harbinger of a potential transformation in Iran’s political economy that needs to be recognized and nurtured. Both the country’s leadership and its labor force deserve the opportunity to enact economic liberalization in measured steps and count upon foreign engagement and investment as key drivers of reform.

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