How Iran can address its Informal Economy

In paving the way for an increase in formal employment, the government has to also pay attention to the need for proper and functioning workforce representation. The lack of organizations that understand and represent the interests of various labor categories is a serious flaw in a country where the government is the largest employer and also the de facto representative of the working class.

Furthermore, addressing the massive smuggling activity in the country needs to become a top priority. Unfortunately, the intense external sanctions that the country was subject to prior to the implementation of the nuclear deal paved the way for extensive smuggling and money-laundering activity. Now that most of the sanctions have been lifted, the pushback against interest groups that benefited from the sanctions regime has proven to be very challenging.

According to parliament member Yahya Kamalipour, there is a lack of resolve in the official institutions to counter the “mafia structure around the smuggling of goods and hard currency.”

There are valid ways to push back against Iran’s informal sector and consequently improve the government’s fiscal position as well as the overall welfare of the society. However, the state as a whole needs to engage in a broad and comprehensive reform process, which will require a political will on par with the will that generated the nuclear deal.

(Picture credit:Mehrad Watson)

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