Between the period of 1959 - 1971 the volume of Iran's foreign trade was relatively small. By way of example, Iran's oil and non-oil exports amounted to no more than $4 billion and it's imports capped at $2.5 billion. With the massive increase in international oil prices precipitated by the 1973 boom in oil prices, Iran had a massive windfall in export earnings which in turn led to a rise in its import volumes as well. As a result, by 1977, Iran's exports (oil and non-oil) stood at $24 billion and her imports stood at $18 billion, reflecting a six fold increase over a short three year period. However, due to over reliance on the single commodity export of oil since 1977, Iran has experienced repeated continuous ups and downs due to fluctuations in the international oil market.
Despite this situation, until 1985 (except for the period between 1980
-81 immediately following the revolution) Iran managed to maintain a surplus
with its trading partners. However from the years 1985 -1993, the country
began to run trade deficits. Between 1985 - 1989, a drop in international
oil prices combined with heavy expenditures due to the Iraqi invasion of
Iran was the primary culprit behind this drop. These deficits were then
exacerbated with the end of the war and the implementation of the First
and Second Plans. Having implemented eight years of import compression
policies, the implementation of steps for the de-regulation and liberalization
of the economy and massive demand for all manner of goods required to re-build
war damaged
areas led to an unprecedented import boom, with imports peaking in
1991 at a record figure of $25 billion. However, a concurrent fall in international
oil prices led to major macro economic imbalances including a deteriorating
balance of payments and the emergence of external debt arrears.
The resulting trade deficits combined with growing external debt arrears caused Iranian policy makers to massively scale back imports while concurrently implementing a massive drive for the development and nurturing of non-oil exports so as to diversify the economy away from oil. These steps led to significant gains to Iran's economy as evidenced by the fact that by 1994, total oil and non-oil exports amounted to $ 19.4 billion, reflecting an increase of $1billion over the preceding year. Of particular note is the fact that of this figure, $14.6 billion was acquired from the export of crude oil and petroleum by-products while $4.8 billion was derived from the export of non-petroleum goods. In terms of value, oil exports displayed a rise of 2% over the preceding year, whereas non-petroleum products displayed a massive 30% percent rise over the previous year. It is estimated that during the First Plan alone, non-oil exports multiplied by 4.8 times .
The ability to undertake such a transformation is due to an overall transition in the structure of the Iranian economy, which has come about as the result of an overall macro economic policy aimed at the creation of wider markets for trade, an expanding array of tradable commodities, larger capital inflows and improved access to technology. Iran has made marked shifts away from oil over dependence and public sector driven growth to private sector initiatives and a diversified industrial base. As such the commodity patterns of trade of Iran have mirrored the results of Iran's macro economic policies. This can be reflected by the following steps:
(i) The diversification of Iran's economic structure so as to minimize exposure to external factors via the creation of an industrial base that is self sustaining and independent from the oil sector. The results of these policies can be evidenced by the fact that while in 1972 the export of capital goods stood at 0.8%, raw materials at 50% and consumer goods at 40%, by 1995 these figures stood at 2.6% for capital intensive goods, 27.1% for raw materials and 71.2% for consumer goods. As mentioned earlier , during the same time frame, non-oil goods displayed a rise of ten fold. These figures indicate that in addition to a growing manufacturing base in Iran, exporters have been inclined to create greater value added on their export goods.
(ii) Increase of the value added of natural resources by way of downstream processing. As explored in Chapter 2, nowhere has this policy been as evident as in the petrochemical sector. Benefiting from Iran's massive hydrocarbon resources, this sector has had a fourteen fold surge in output from 0.8 million tons in 1989 to approximately 11 million tons per year currently. As a result, with expansion plans now encompassing the construction thirty more large scale projects, Iran is predicted to reach production of thirty million tons per annum of petrochemical products earning an approximate $15 billion in export revenues, poising Iran to become the largest manufacturer of petrochemical products in the region.
(iii) The fulfillment of domestic demand to the maximum extent possible while concurrently increasing exports by capitalizing on Iran's relative advantage in certain products. Benefiting from a skilled labor force, low cost and abundant availability of utility inputs and raw materials, thousands of light and heavy manufacturing operations exist across Iran
in areas as broad ranging from food processing to the manufacture of aircraft (see Chapter II). Because of high consumer demand at home, many manufacturing units have only recently become export conscious. By 1998, close to $ 1 billion of manufactured goods were under export which reflect a thirteen fold increase over the $76 million exported in 1989, the first year of the First Five Year Plan.
The effects of these policies can be seen in the sharp effect that they have had on import patterns due to the coming on -stream of major automobile, steel, petrochemical and agricultural processing plants. By 1996, Iran had decreased its intermediate good imports by 21.1% while concurrently increasing the import of capital goods by 13.7%, reflecting the shift of imports towards domestic manufacturing units. A cursory look at the results of these trends between the periods of the first three months of 1998 as compared to the first six months of 1997 shows:
