Challenges to Economic Upgrading of Iranian Economy

Abstract

The main purpose of the paper is to summarize the challenges that the Iranian economy will face in the economic upgrading process and to provide possible solutions for the Iranian economy to move up in the global value chain. To achieve these goals, the data related to the global competitiveness index were studied to gain insight into the current situation of the Iranian economy. Findings reveal that despite the immense revenue source of Iran from exporting gas and oil, the Iranian economy is not competitive globally, and Iran is confronted with serious shortcomings in the globalization path. Data show that the performance of Iran in different factors of competitiveness (institutions, macroeconomic environment, labor market efficiency, goods market efficiency, financial market efficiency and innovation) is poor. Since Iran has many benefits from potential capabilities such as a young workforce and plentiful natural resources, it is recommended that Iranian government consider a functional and process upgrading strategy to improve the performance of Iran in global competitiveness. It is also important to focus on research and development processes for moving along the global value chain curve, in order to move towards the higher value creating activities. These internal development processes are very important for the country to maintain the upgrading process even under the unfavorable international political circumstances.