A Welcome for Capitalists

As the most economically successful nation in the Moslem Middle East, Iran is enjoying the pleasures of material progress--and suffering from some of its discomforts. In Teheran, where the population has mushroomed beyond 2,500,000, automobile traffic is both heavy and frightening, more chaotic than it is in Tokyo, Bangkok or Beirut. Middle-aged women gaze disapprovingly at the miniskirted teenagers. Many Iranians can afford to buy the autos and clothes of their choice because the Alaska-size country no longer has an economy based on "the three C's": cotton, carpets and caviar. Under the prodding of the Shah, Mohammed Reza Pahlevi, Iran's widely diversified gross national product has increased 10.5% annually since the mid-1960s, and last year per-capita income rose from $303 to $328.

Much of this growth has been brought about by foreign investment, which has been attracted by Iran's stability, rich resources and potential as a gateway to awakening Asian markets. Even beyond the investment in oil, U.S. companies have pumped $150 million into Iran in the past five years. The Shah wants much more outside investment. Last week, at his personal invitation, 32 chairmen, presidents and other high executives of some of the largest North American corporations arrived in Teheran for a six-day conference with Iranian officials to investigate further possibilities for bringing in private capital. It was probably the largest array of top U.S. businessmen ever to assemble in a developing country for an investment conference. The companies that they represented have combined annual sales of $36 billion, more than double Iran's gross national product.

During their visit, the American businessmen were scheduled to be received by the Shah. To encourage more foreign-capital inflows, the Iranians announced that private investors will henceforth be allowed to own majority stakes in joint ventures with the government, and that special export subsidies will be granted for products that they make in Iran and ship abroad. Said Economics Minister Hushang Ansary: "We will give investors ample opportunity to get wealthy."

Foreigners are already doing well in Iran. In the southern town of Shahpur, one of the world's largest petrochemical plants, a $240 million venture involving the government and Allied Chemical Corp. as equal partners, went into operation last week. A $33 million caustic-soda plant was opened at Abadan last year; 74% of it is controlled by the government and 26% by B.F. Goodrich Co. At Kharg Island, a $45 million sulfur plant, built by Iran and a subsidiary of Indiana Standard Oil Co., recently began operations. Reynolds Metals Co. is putting up a $45 million aluminum plant at Arak in western Iran. In Teheran, Caterpillar Tractor Co. this week will open a $10 million parts and service headquarters, the largest in the Middle East, to maintain its big yellow tractors and graders as they change the face of the country.

Wrung Out. The Shah's current five-year plan calls for $10.8 billion in development spending. Oil, which is the economy's basic fuel, must pay much of the bill. Last year the Shah demanded slightly more than $1 billion in revenues. To meet that goal, the European-American consortium that brings out more than 90% of the nation's oil increased production by 14.8% to well over 1 billion bbl. a year. But with the glut in world markets, the consortium could sell only enough to raise $930 million and had to make up the difference with an advance payment of $80 million. Recently the nine companies involved agreed to the government's latest demand for $1.155 billion in 1970 oil receipts; this will probably require another advance, of $145 million.

Since there is a limit to the money that can be wrung from oil, the government is giving increased attention to the transformation of the southwestern province of Khuzestan into a huge agricultural-industrial complex. In addition, great copper deposits are being mined in the Kerman area of central Iran. A dozen major dams are under construction around the country.

Activity has been so intense that Iran's economy is showing obvious signs of overheating. Prices, which had risen only 1.5% a year for four years, rose 3.6% in 1969, reflecting in part higher costs for essential imports like steel. Still, Iran's credit abroad continues to be excellent, largely because of its oil revenues. Whatever the pressures on the economy, they are no match for the will of the Shah, who is determined at all costs to transform Iran into a modern state.

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