Rouhani banks on small businesses to generate big growth
Even though they constitute more than 85% of businesses in the country, Iran's small- to medium-sized enterprises generate a mere 14.7% of GDP and less than 30% of employment, leading the administration to focus on boosting this crucial sector.
TEHRAN, Iran — To achieve its target of 5% economic growth this year, the administration of President Hassan Rouhani is seeking to revive small- and medium-sized enterprises (SMEs) by continuing to focus on attracting foreign direct investment into slumbering industrial estates. Yet, in spite of the injection of $1.8 billion worth of foreign direct investment into SMEs in the three years since Rouhani took office, the reality is that almost two-thirds of small- and medium-sized enterprises in Iran have reportedly been shuttered.
The importance of reviving SMEs should not be underestimated. In developed economies, they are among the major drivers of economic growth, greatly contributing to both gross domestic product and job creation. Indeed, in high-income countries, SMEs on average generate more than half of GDP and account for over 60% of employment.
According to a report authored by Iran's Islamic Parliament Research Center, previous Iranian administrations have never paid sufficient attention to the development of SMEs. As such, SMEs in Iran account for a mere 14.7% of GDP and less than 30% of employment — even though they constitute more than 85% of enterprises in the country. Iran has long suffered from what is termed the "missing middle" phenomenon, meaning that there is a myriad of obstacles involved in doing business.
