Diversification, Employment and Development: Towards A Long-Term Strategy for an Oil-Exporting Country; The Case of Iran

The study proposes a long-term development strategy for Iran as an oil exporting country to meet two long-term development goals: employment creation and diversification. In order to provide jobs for the rapidly growing active population-let alone face the challenge of unproductive employment and underemployment-by the end of the decade, between 900,000 to 1,100,000 jobs should be created each year. There is also an urgent need for diversification given the exhaustion of the oil reserve within about 30 years; economic and political risks of dependence on oil; and lack of employment opportunities in the oil sector. To provide an alternative to oil exports within a generation, non-oil exports need to expand by an annual average rate of 11 to 15 per cent. To attain the objectives of diversification and employment creation, there is a need for a dual policy in the choice of sectors and industries. For diversification, selection is to be made among manufacturing goods based on some proposed criteria. For employment creation, labor-intensive activities in other sectors are to be encouraged. It is argued that agriculture needs to increase yield per acre. Foreign exchange earnings and employment will increase through the promotion of tourism, heath and construction services. Finally, appropriate institutional and organizational frameworks need to be put in place.