In the first part of our article on the UNCTAD report on Iran, we mentioned that on the path towards a knowledge-based economy Iran has developed a strong educated human resource base. In this part we will illustrate other aspects of the progress which Iran has made towards achieving this goal.
Upon the realization of the need to shift from a natural-resource-based economy to a knowledge-based economy, policymakers in Iran, through different policy measures and initiatives, have tried to facilitate the transition. Laws that aim to support knowledge-based firms (KBFs) have been devised and as of October, 2016 2732 KBFs have been benefiting from the facilities, both financial and non-financial. Today these firms account for almost 70,000 employees and $6.6 billion in annual turnover.
Thriving KBFs rely upon solid infrastructure, which has improved significantly in recent years. Mobile phone penetration rate has increased from 12% in 2005, to 93% in 2015 and 44% of the population used the internet in 2015, compared to the 8% in 2005. Despite these facts, ICT infrastructure requires higher investment to facilitate e-commerce and e-government, and to improve ICT services and make them more efficient for businesses.
Other types of infrastructure are also critical to develop a diverse economy. Transportation infrastructure in Iran needs huge investments for modernizing and increasing capacity in road, aviation and maritime transportation. High production capacity and distribution, good coverage and quality, the need to improve efficiency of electricity production, distribution and energy intensity, and a recent and gradual shift towards renewable energies are the main features of Iran’s power infrastructure.
The government has added to its efforts to build schools, universities, laboratories, S&T parks and incubators. S&T parks were introduced by the government in 2002 to facilitate the development of a knowledge-based economy. There are currently 39 active S&T parks in Iran. These parks provide space, facilities and other incentives for KBFs to develop new technologies/products/services and to commercialize research results. As of today, Pardis Technology Park, for example, accommodates more than 150 KBFs. Innovation accelerators and innovation centers have also been on the rise in recent years.
Investments have also been made to establish incubators and laboratories to develop and produce marketable technology-based products and processes. Reportedly, 170 incubators, 12,594 research and technology development laboratories, 233 private research institutes, 356 research institutes affiliated with universities, and 71 research institutes affiliated with the government, were active in 2016.
To increase funding for R&D, from the current 0.47% of the GDP, a figure way below target, to 1% of the GDP, the government has implemented a rule that requires public organizations and agencies to spend at least 1% of their budget on R&D. Another interesting fact about R&D funding in Iran is that unlike in many developed countries where the private business sector accounts for most of the R&D, in Iran the business sector only accounted for 20% of the total R&D spending in 2010. In the same year, the government and the higher education system financed 41% and 37% of R&D spending, respectively.
While it can be confidently stated that Iran has made significant progress towards a knowledge-based economy, especially in terms of human resources and infrastructure, the overall impact of STI on the economy remains inadequate. To utilize the full potential of these resources emphasis should be placed on creating new patents and producing export-oriented innovative products/services.