Transcript Dr. Abolfazl Shahabadi

In the name of Allah
2ndInternational E-Conference on
Economy under Sanctions
Dr. Abolfazl Shahabadi
E-Conference Scientific Chair
Associate Professor, Faculty of Economics and Social Science, Bu-Ali
Sina University, Hamedan, Iran
22 September 2014
Toroud Shomal Research Company
 For the second time, Toroud Shomal Research
Company has established an international EConference on Economy under Sanctions to
motivate other organizations and scientific
societies to study the results of sanctions in an
academic manner.
Acknowledgments
I want to thank the professors, colleagues and
reviewers for their remarkable efforts in
collaboration with this conference and appreciate
the scholars’ participation in the conference.
With the help of their high quality research the
conference aimed to the peak of success.
Conference Goals
 Introducing the damaging effects of sanctions;
 Scientific communication between Iranian and
foreign researchers;
 Present the scientific capabilities of the
Islamic Republic of Iran;
 Using the results of the conference
Theme and Sub-Theme
 Explain the economic conditions of sanctioned
countries;
 From the perspective of macro-economic
variables;
 Explain the economic conditions under
sanctions
from
the
perspective
of
microeconomic variables;
 The impact of sanctions on the production and
trade of energy (oil, gas, etc.);
Theme and Sub-Theme
 Economic sanctions and social variables
(general health, health, Racism, Poverty,
migration, food security, environment, Social
Capital, etc.);
 Economic sanctions and international politics
and law (human rights, democracy,
humanitarian aid, etc.);
 Terms of economic sanctions and international
monetary and financial systems;
Theme and Sub-Theme
 The impact of sanctions on banking and
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international trade;
Economic sanctions and Doing business,
entrepreneurship, SMEs;
The impact of international sanctions on
international organizations and companies,
FDI & FPI;
The nature and models of sanction;
Manage sanctions;
Theme and Sub-Theme
 Typology of sanctions;
 Sanctions and resistive economic;
 Management of organizations in terms of
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sanctions;
Reduce the social and economic effects of
sanctions;
Geneva agreement and its consequences
Military economy;
Resistive economic;
Definitions Economic Sanctions
 Sanction
is manipulating the economic
relations and cooperation to achieve political
goals. In fact, sanction is a foreign policy
instrument which allows the executer to oblige
the targets, in line with political purposes.
 Restrict freedom in foreign trade by prohibiting
the trade of certain goods and the provisions of
certain services
Economic Sanctions
 Are ordered for foreign and security policy
reasons against:
 Legal and natural persons ("personal")
 Countries ("country-specific")
 Prohibition of any trade whatsoever with or for
the benefit of the addressee
 Full embargo
Three Types of Economic Sanctions
1. Financial sanctions – freezing of funds and
other assets
2. Trade sanctions – products
 Arms embargoes (e.g. military equipment,
nuclear technology)
 Other goods embargoes (oil of Iranian origin,
"blood diamonds")
 Dual-use items
Three types of economic sanctions
3. Trade sanctions – services
 Prohibition of technical and financial aid
 Investments
 Prohibition of fulfillment of claims
 Transport
 Travel restrictions
 Insurance
Evaluate Trade Sanction
 Which one is worse? The sanctioned or the
killer?
Depends
 If the sanctioned has low export supply
elasticity or import demand elasticity, then it
will get hurt dramatically due to the trade
sanction; otherwise, it would not.
 Now consider a case that the sanctioned has a
high export supply elasticity
 But the killer faces different import demand
elasticity
What Factors Affect the Sanction’s
Effect?
 Trade openness: the smaller openness level,
the less importance of international trade, the
higher the elasticity is.
 Characteristics of the importing products:
luxury or necessity?
 Duration of the Sanction: the longer the
sanction, the smaller the impact is.
 Sanction Coverage: the more the countries’
participation, the larger the impact is.
Categories Economies of the World
Knowledge Based Economics
 Endogenous economic growth and exportoriented
 Economic growth is primarily a function of
natural comparative advantage and acquired
 The main weight of products the function of
(human capital, innovation, R&D, R&D
Spillover, entrepreneurship, ICT, etc)
Categories Economies of the World
Resource-Based Economy
 Exogenous growth and Fluctuations in
economic growth
 Economic growth is mainly a function of
natural comparative advantage
 Production is mainly a function of traditional
factors of production(Labor, physical capital
and natural resources) and imports of
intermediate goods and capital
 Low demand for factors(human capital,
innovation,
R&D,
R&D
Spillover,
Categories Economies of the World
Investment-Driven Economy
 Exogenous growth and Fluctuations in
economic growth
 Mainly based on natural comparative
advantage and comparative advantage
Imported
 Reliance on technology imports
 Low Competitiveness
 Low participation in the global economy
 Low per capita income
The Reasons for the Absence of
Expansion of New Production
Factor Markets
 Lack of scientific management
 Lack of understanding the economic structures
 Lack of economic strategy consistent with the
economic structure
 Non-optimal allocation of resources
 Macroeconomic policy inconsistency
Picture Brief of the Economy of the
Islamic Republic of Iran
 With the abundance of natural resources and
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oil wealth
Frequency of human capital and many young
workers
Science and technology upgrades in some
fields
Expanded relationships with emerging
economies (BRICS)
Significant infrastructure
Geopolitical importance and …
Picture Brief of the Economy of the
Islamic Republic of Iran
 Exogenous
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growth and Fluctuations in
economic growth
Oil- Dependent Economy
Low share of intangible assets in total assets
Low per capita income compared with
developed countries
Low hi-tech exports
High Unemployment
High inflation rates
Picture Brief of the Economy of the
Islamic Republic of Iran
 High share of service sector in GDP during
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development plans
Reduce the share of oil and agriculture in GDP
during development plans
Dependence of economic activities to import
Low Competitiveness
Low participation in the global economy and
…
On the other hand
Suggestions
For the following purposes
 Increasing share of productivity growth in the
economic growth
 Sustained economic growth and sustainable
 Control inflation
 Increased capital accumulation (physical,
human, social, foreign, natural and financial)
Less use of natural comparative advantage
and a strong emphasis on acquired
comparative advantage
Suggestions
For the following purposes
 Reduce unemployment
 Balanced distribution of income and wealth
 Expansion of the balance of payments
 Increasing the competitiveness
 Reduce dependence on oil exports
 Modify consumption patterns
 And …
Suggestions
It is necessary
 Scientific Management
 Economic reform through the coordination of
macroeconomic policies (monetary, financial,
foreign exchange and trade) to the policies
innovation, entrepreneurship, education and
research and technology)
 More interaction with regional organizations
such as D8, G77, Shanghai cooperation
organisation, OPEC and …
Suggestions
 More interaction with neighbors
 Relations with emerging economies
 Enable foreign policy to facilitate trade and
investment
The End