One negative consequence of the deficient business climate is lack of efficiency, which has been another weak point in the track record of the Rouhani administration. In fact, the government has stated that efficiency growth would contribute 2.5% of the planned 8% annual growth in the 6th Five-Year Plan (which starts March 21).
Nonetheless, there is no evidence that efficiency will grow at the planned level. The government has failed to address some of the issues that pave the way for higher efficiency: These include subsidies, lack of competitiveness, dominance of semi-governmental entities in some economic sectors, opaque tender procedures and so forth.
Another sector that requires serious government attention is banking. Experts agree that the majority of the Iranian banks are overstretched. Toxic assets, including bad loans, make up about 40% of the bank assets in Iran. The situation is dire, and a number of Iranian banks are on the verge of bankruptcy.
As such, the government will have to help the banking sector and pave the way for the merger of a number of banks in order to secure their survival and also prevent a major financial crisis. In a move to ease the financial tensions in banks, the government introduced the “Law to Remove Barriers to Production,” which tasked banks with selling up to 33% of their immovable assets; however, a recessionary property market has complicated the situation and has left banks with a tense financial position.
In the meantime, economic concerns — and especially unemployment — remain as key issues in the country’s political discourse. In his speech to the Assembly of Experts on March 8, Supreme Leader Ayatollah Ali Khamenei complained about the economic conditions and said, “If all crucial tasks with regard to the Economy of Resistance had been carried out, Iran would have been able to see a tangible difference in the country’s economy and people’s lives.”