Speech of H.E. Eng. Ali Naghi Khamoushi, President ICCIM/IBCCIM
On
Iran's Standing in the Reconstruction of Afghanistan

At the BICC Seminar: Iran & UK, The Business and Trade Connection 2002*
Thursday 14 March 2002, United Royal Services Institute, Whitehall

Your Excellencies,
My Lord,
Mr. Ambassador,
Ladies and Gentlemen,

First of all, I would like to take this opportunity to thank you for holding this historic seminar, which has apparently been organised by the British Iranian Chamber of Commerce in response to IBCCIM's initiative to study co-operation and partnership between our two countries for reconstruction of Afghanistan. If successful, such co-operation can be a turning point in the history of economic relationship of the two countries. Since I have been asked to speak about the bilateral relationship especially with regard to the potential partnership in the reconstruction of Afghanistan, before I begin, I should remind you as I mentioned once before that I have had the privilege of directing the Iran Chamber of Commerce over two decades following the request - and vote - of the Iranian business community. The ICCIM is the only legal and private institution in Iran, which acts as the voice of all economic enterprises, and also as the advisor to the three governing bodies in our country.

Furthermore, I have been active in the industrial sector for over 40 years. I have also had political, executive, and parliamentary responsibilities as well. I have had my university degree from your country and therefore I am aware of such bilateral economic issues to some degree.

As you are well aware, after the Second World War, Iran like any other developing country embarked on centrally planned economy by the government, especially during the last few years prior to the revolution, when Iran received large sums of foreign exchange due to sudden increase in oil revenues.

In 1979, when the formation of the transition of private sector was only few decades old, by announcement of centrally planned economy by the government, efficiency of this sector began to deteriorate. And with the start of the Iraqi imposed war against Iran, no change in this system of economy was possible.

However at the end of the war, it was deemed necessary to begin privatisation of economic activities in Iran. Thus these views were incorporated in the two five-year plans. Yet despite a six percent economy growth during this period was not up to expectations.

Based on experience gained during execution of these plans, and a quick look at the third plan, it was decided to relinquish as much as possible and only retain those fields which private sector is capable to undertake.

Our Supreme Leader has declared recently that "in normal conditions, the three government, co-operative, and private sectors shall be dealt with in equal terms," which is expected to pass the Majlis - our parliament - and become a law. In other words, the private sector has been authorised to operate in every economic area.

In addition, with the changes made to liberalise the economic policies, to have a presence in the international markets, and to join the WTO, which I'll quickly mention later, and despite some oppositions to the foreign investment by a small minority, the promotion of foreign investment is moving forward at full steam.

Something still not clear to me is that how with a long history of economic relations with Iran, Britain's share in the Iran's foreign trade - which is around 35 billion dollars annually - is so small. Or how when bilateral political relations get colder, trade relations grow further and vice versa!

I should remind you here that we, as a peace-loving nation looking for peace and harmony in the world and in the region, want to expand our economic relations with your country. We look forward to calm in the region, because economic development is not possible without it.

We, who ourselves have been victims of terrorism, by all means oppose terrorism and fight it, so when some people talk about Iran in other ways, such hypocrisy hurts us. But soon you'll be witness that everybody will admit the truth is different.

I'll also make a quick reference to the conditions mentioned earlier:

- Today, the private sector has more possibilities for success than the government sector.
- The foreign investment in all fields, whether direct or in partnership with Iranian private sector, is promoted in every level, however there's a limit in relation to the government projects, which is 49 to 51.
- Transparent, simple and very attractive tax conditions are being created with the ratification of the amendment to the direct tax law, which consists of a fix 25 percent tax over the annual revenue for the companies.
- Private banks have been allowed to start operation, and so far several have been established.
- Unification of the foreign exchange rate, which will be very effective and influential in Iran's foreign trade, especially in revenue return and foreign investment.
- Fundamental changes have been made in the current procedures of import/export regulations, including in the customs, and etc.

They clearly show that ground is ready for the two countries to co-operate even more, and we also look forward to a special relationship in creation of small and medium size enterprises in various fields.

Now that collaboration in the reconstruction of Afghanistan can function as an example of our bilateral co-operation in the various other fields, I therefore confine the rest of my today's speech to the issue of Afghanistan.

In this regard too, since surely most of the ladies and gentlemen here are familiar with Afghanistan, and its issues and problems, especially its characteristics, history, culture, and ethnic diversity, or at least have access to these information, I refrain from taking your time by introducing them, and only take a quick note that Afghanistan gained its independent political stand after the 18th century; is in the northeast of Iranian Plain; had been part of Persia since the ancient times and has been our neighbour for quite some time. Despite cultural and ethnic diversities between Afghan and Iranian ethnicities, we have always shared common grounds, which helped the two nations to have friendly relations through time. These commonalities include Farsi language, Islam religion, some common ancient costumes and traditions, being neighbours, and so on: important factors, which can prove to be the most effective and influential, in the reconstruction of Afghanistan. Yet for this and other reasons, which I'll mention later, one should accept the fact that Iran has a special and unique place in the region. This standing can be better understood by a short review of natural, geographical, physical, and economical features of the region in general, and Afghanistan's in relation with its neighbouring countries, especially Iran, as well as other conditions occurred during the last several decades, in particular.

As a result, it seems that a brief review - using a very comprehensive study made about Afghanistan - can help to get a better image, since not to mention its poor historical/natural background because of 20 years of civil war, especially the Taleban ruling of the country in the more recent years, it now is a ruined land with most of its inhabitants as refugees, and in need in of their essential needs.

In other words, as a Central Asian country with an area of 652,225 square kilometre, Afghanistan is a mountainous land with very high mountain ranges, including Hindu-Kush, which have separated its northern parts from the southern regions. Although it has resulted the cities such as Herat, Kandahar, Kabul, Jalal-Abad, and Mazar-e Sharif, to enjoy a special strategic importance, not only politically and militarily, but also economically, they mean that a large amount of Afghan land is useless for agriculture. Therefore the main characteristic of Afghanistan's fertile lands is "small farms" which are being utilised very inefficiently, and as a result are in real need of complete enhancement.

The highest peaks of these mountains, as high as 5,000 metres, are in the east of the country, and moving towards south and west, namely approaching Iran, the land gets flatter and flatter. It means that crossing into Afghanistan from unpaved and mountainous roads towards east and north, namely from Pakistan, Tajikistan, Uzbekistan, and Turkmenistan are very difficult, time-consuming, and costly when compared to Iran's access to the country. Iran's access to cities such as Herat are relatively easy. To prove that; in the past, to carry goods to the former Soviet-occupied countries, they used the Harirood waterway which pours into the Aral Sea after a two thousand five hundred kilometre journey. It is definitely too long and transportation through it is done with primitive means.

The population of Afghanistan, of which we do not have a reliable figure since 1990, is said to be in excess of 22.5 million. Population figures for Afghanistan carry disturbing facts, such as:

- Only 22 percent of the population live in cities, and 78 percent are in rural areas, or tents.
- The population growth is said to be 3.8 percent, with 43 percent of the population being under 15 years of age.
- The mortality rate among Afghan infants is 161 in every thousand, and life expectancy among Afghans is 44 for women, and 43 for men.
- Literacy rate for men is 48.1, and for women 78.1 percent.
- Elementary education is mandatory for children between 7 and 13, but only 30 percent of boys and 3 percent of girls can receive education.
- Only 29 percent of Afghan people living in towns have access to clean drinking water, while this figure for villagers is only 12 percent, 22 percent on average.
- The GDP of Afghanistan is said to be around 21 billion dollars, with a per capita share of 800 dollars.
- The GDP of Afghanistan consists of 64.4 percent in agriculture sector, 20 percent in the industry sector, which mostly consists of handicrafts, and 15.6 percent is for service sector.
- The unemployment rate before the Taleban took power was 8 percent, but it seems to have increased to over 20 percent of the active population.
- The rate of inflation in 1995 was around 240 percent, and there are reports that after Taleban were removed from power, and following more increase in inflation, the Provisional Government has decided to change the national currency to tackle this problem.
- Afghanistan's foreign debts at the end of 1996 was in excess of 6 billion dollars.
- Despite agriculture being the major economic activity of Afghans, however, Afghanistan needs to import food from abroad to meet daily requirements of its people. But it is certain that such a shortcoming could be overcome, and agricultural industries could be created with the implementation of short-term plans.
- The foreign trade balance according to the latest available figures from 1997, was 376 million dollars, of which 525 million was the result of imports, and 149 million from export.
- From the transport and communications point of view, the situation is very difficult, especially when one considers the 20 years of civil war, during which not only very little was done in this regard, but also the simplest means of transportation and road system was destroyed. The main Afghan road network is believed to be around 21,000 kilometres, and it is reported that only 3,753 kilometres of which is paved or semi-paved.
- In the transportation sector, in total there are 31,800 vehicles in Afghanistan, which are in various configurations and conditions.
- The railway in Afghanistan is only 24 kilometres long!
- Afghanistan is very ill-equipped when considering the infrastructure facilities - from water, electricity, swage, telephone, roads, railway, airports, and welfare, to schools, hospitals, sport facilities, libraries, museums, and so on. In these areas Afghanistan is in real need of help and rebuilding.

As already mentioned, Iran enjoys a unique and special place to work with Britain, compared to other economic hubs, whether neighbouring or not, and can - in partnership with the British companies - meet not only all the Afghan needs in both rebuilding the infrastructure and daily requirements, but also the whole region, because for example:

- Iran and Afghanistan enjoy commonalities such as: Farsi language, common religion, traditions, and neighbouring spirit and etc, which are considered the main factors behind any success in performing projects in third party countries.
- The presence of over 2.5 million Afghan refugees in Iran, the majority of which are working for the construction contractors, and having working experience in this field, they could well be used in any joint projects in Afghanistan.
- Iran's easy access into Afghanistan, when compared to other countries, especially the neighbouring countries.
- Accessibility of all necessary goods, including consumer goods, or raw materials, building materials, and heavy construction equipment needed for joint projects in Afghanistan.
- Iran enjoys a competent work force, stemmed from 50 years of planning, and implementation of economic-social and cultural development plans by professionals and consulting engineering, construction, manufacturing and subcontractor firms, with cross-border experience in every field; including road building and construction of housing, bridge, dam, power plant, airport, hospital, leisure centres; agriculture centres, as well as hotels and tourist facilities, and also creation of an industrial structure in all fields, including agricultural, food, handicrafts and textile industries, exploiting underground and on the ground water resources, implementation of irrigation networks and water supplies for both agriculture and rural consumers; pipe laying, telecommunications, gas pipe lines and other basic projects, and finally indispensable interrelationship of the two nations.

Therefore I would like to once more express my appreciation to the BICC, especially Your Excellency Lord Temple-Morris, and the honourable members of the BICC Board, and also the Trade Partners UK, which sponsored this seminar. At the end I should emphasise on this fact that it would be in favour of British companies and economies of the two countries, to help engage small and medium size enterprises in the reconstruction of Afghanistan, and to meet the requirements of the neighbouring Central Asian countries by creating a permanent task force in each of the BICC in London, and the IBCCIM in Tehran.

Thank You

* Sponsored by Trade Partners UK