Iran in pursuit of a knowledge economy – Malaysia Sun (press release)

On 19 May 2017, Hassan Rouhani was elected President of Iran for a second four-year term. Among the challenges he will face: the pursuit of transition to a knowledge economy in a context of low foreign direct investment (FDI).

Although the Iranian economy returned to positive growth in 2016 of about 6.4%, this rebound can largely be ascribed to the return to near-capacity oil exports since the United Nations' Security Council's endorsement of the nuclear agreement in July 2015 led to the easing of international sanctions. According to the World Bank(1), integration of Iran's banking sector with the global banking system has been slow since the sanctions were lifted. This has impeded the foreign direct investment to Iran and trade which will be crucial for the development of Iran's non-oil sector.

A focus on using human capital to create wealth

The UNESCO Science Report recalls that the government first set its sights on moving from a resource-based economy to one based on knowledge in its 20-year development plan, Vision 2025, which was adopted in 2005.

This transition became a priority after international sanctions were progressively hardened from 2006 onwards and the oil embargo tightened its grip. In February 2014, the Supreme Leader Ayatollah Ali Khamenei introduced what he called the 'economy of resistance', an economic plan advocating innovation and a lesser dependence on imports that reasserted key provisions of Vision 2025.

Vision 2025 challenged policy-makers to look beyond extractive industries to the country's human capital for wealth creation. This led to the adoption of incentive measures to raise the number of university students and academics, on the one hand, and to stimulate problem-solving research and industrial research, on the other.

For instance, in order to ensure that 50% of academic research was oriented towards socio-economic needs and problem-solving, the Fifth Five-Year Economic Development Plan (2010'2015) tied promotion to the orientation of research projects. It also made provision for research and technology centres to be set up on campus and for universities to develop linkages with industry.

Vision 2025 foresaw an investment of US$ 3.7 trillion by 2025 to finance the transition to a knowledge economy. It was intended for one-third of this amount to come from abroad but, so far, FDI has remained elusive. It has contributed less than 1% of GDP since 2006 and just 0.5% of GDP in 2014.

Much of the US$ 3.7 trillion earmarked in Vision 2025 is to go towards supporting investment in research and development by knowledge-based firms and the commercialization of research results. A law passed in 2010 provides an appropriate mechanism, the Innovation and Prosperity Fund. According to the fund's president, Behzad Soltani, 4600 billion Iranian rials (circa US$ 171.4 million) had been allocated to 100 knowledge-based companies by late 2014. Public and private universities wishing to set up private firms may also apply to the fund.

Domestic expenditure on research stood at 0.7% of GDP in 2008 and 0.3% of GDP in 2012. Iranian businesses contributed about 11% of the total in 2008. The government's limited budget is being directed towards supporting small innovative businesses, business incubators and science and technology parks, the type of enterprises which employ university graduates.

Most high-tech companies are state-owned

Some 37 industries trade shares on the Tehran Stock Market. These industries include the petrochemical, automotive, mining, steel, iron, copper, agriculture and telecommunications industries, 'a unique situation in the Middle East', recalls the UNESCO Science Report.

Within the country's Fifth Five-Year Economic Development Plan (2010'2015), a National Development Fund has been established to finance efforts to diversify the economy. By 2013, the fund was receiving 26% of oil and gas revenue.

Most of the companies developing high technologies remain state-owned, including in the automotive and pharmaceutical industries, despite plans to privatize 80% of state-owned companies by 2014. It was estimated in 2014 that the private sector accounted for about 30% of the Iranian pharmaceutical market.

The Industrial Development and Renovation Organization (IDRO) controls about 290 state-owned companies. IDRO has set up special purpose companies in each high-tech sector to co-ordinate investment and business development. These entities are the Life Science Development Company, Information Technology Development Centre, Iran InfoTech Development Company and the Emad Semiconductor Company. In 2010, IDRO set up a capital fund to finance the intermediary stages of product- and technology-based business development within these companies.

Broad internet access will be essential for the development of a knowledge economy. In an interview with NBC News in September 2013, President Rouhani pledged to expand internet access, which reached 31% of the population in 2013. 'We want the people, in their private lives, to be completely free', he said. 'In today's world, having access to information and the right of free dialogue and the right to think freely is a right of all peoples, including Iranians. The people must have full access to all information worldwide.' By 2016, one in two (49%) Iranians had internet access.

A surge in university rolls

In line with the goals of Vision 2025, policy-makers have made a concerted effort to increase the number of students and academic researchers. To this end, the government raised its commitment to higher education to 1% of GDP in 2006. After peaking at this level, higher education spending stood at 0.86% of GDP in 2015.

Higher education spending has resisted better than public expenditure on education overall. The latter peaked at 4.7% of GDP in 2007 before slipping to 2.9% of GDP in 2015.

The result has been a steep rise in tertiary enrolment. Between 2007 and 2013, student rolls swelled from 2.8 million to 4.4 million in the country's public and private universities. Some 45% of students were enrolled in private universities in 2011. There were more women studying than men in 2007, a proportion that has since dropped back slightly to 48%.

Enrolment has progressed in most fields. The most popular in 2013 were social sciences (1.9 million students, of which 1.1 million women) and engineering (1.5 million, of which 373 415 women). Women also made up two-thirds of medical students.

One in eight bachelor's students go on to enroll in a master's/PhD programme. This is comparable to the ratio in the Republic of Korea and Thailand (one in seven) and Japan (one in ten).

Science and engineering attracting more PhD graduates

The number of PhD graduates has progressed at a similar pace as university enrolment overall. Natural sciences and engineering have proved increasingly popular among both sexes, even if engineering remains a male-dominated field. In 2012, women made up one-third of PhD graduates, being drawn primarily to health (40% of PhD students), natural sciences (39%), agriculture (33%) and humanities and arts (31%). According to the UNESCO Institute for Statistics, 38% of master's and PhD students were studying science and engineering fields in 2011.

There has been an interesting evolution in the gender balance among PhD students. Whereas the share of female PhD graduates in health remained stable at 38'39% between 2007 and 2012, it rose in all three other broad fields. Most spectacular was the leap in female PhD graduates in agricultural sciences from 4% to 33% but there was also a marked progression in science (from 28% to 39%) and engineering (from 8% to 16% of PhD students).

Although data are not readily available on the number of PhD graduates choosing to stay on as faculty, the relatively modest level of domestic research spending would suggest that academic research suffers from inadequate funding. At the time of preparation of the Fifth Five-Year Development Plan (2010'2015), the government was still optimistic about raising research spending to 3% of GDP by 2015.

A surge in the research pool

According to the UNESCO Institute for Statistics, the number of (full-time equivalent) researchers rose from 711 to 736 per million inhabitants between 2009 and 2010. This corresponds to an increase of more than 2 000 researchers, from 52 256 to 54 813. The world average is 1 083 per million inhabitants. One in four (26%) Iranian researchers is a woman, which is close to the world average (28%).

In 2008, half of researchers were employed in academia (51.5%), one-third in the government sector (33.6%) and just under one in seven in the business sector (15.0%). Within the business sector, 22% of researchers were women in 2013, the same proportion as in Ireland, Israel, Italy and Norway.

'Once more recent data become available, we may find that the business enterprise sector has been hiring more researchers than before', suggests the report. The number of firms declaring research activities more than doubled between 2006 and 2011, from 30 935 to 64 642. The increasingly tough sanctions regime oriented the Iranian economy towards the domestic market and, by erecting barriers to foreign imports, encouraged knowledge-based enterprises to localize production.

A desire to interact with the world

The Fifth Five-Year Economic Development Plan (2010'2015) fixed the target of attracting 25 000 foreign students to Iran by 2015. By 2013, there were about 14 000 foreign students attending Iranian universities, most of whom came from Afghanistan, Iraq, Pakistan, Syria and Turkey.

In a speech delivered at the University of Tehran in October 2014, President Rouhani recommended greater interaction with the outside world. He said that 'scientific evolution will be achieved by criticism ['] and the expression of different ideas. ['] Scientific progress is achieved, if we are related to the world. ['] We have to have a relationship with the world, not only in foreign policy but also with regard to the economy, science and technology. ['] I think it is necessary to invite foreign professors to come to Iran and our professors to go abroad and even to create an English university to be able to attract foreign students.'

According to the report, there is a lot of scope for the development of twinning between universities for teaching and research, as well as for student exchanges. One in four Iranian PhD students are already studying abroad (25.7% in 2012). The top destinations are Malaysia, the USA, Canada, Australia, UK, France, Sweden and Italy. In 2012, one in seven international students in Malaysia was of Iranian origin. Malaysia has the advantage of being one of the rare countries which do not impose visas on Iranians. It is also a Muslim country with a similar level of income.

Although sanctions have caused a shift in Iran's trading partners from West to East, scientific collaboration has remained largely oriented towards the West. Between 2008 and 2014, Iran's top partners for scientific collaboration were the USA, Canada, the UK and Germany, in that order. Iranian scientists co-authored almost twice as many articles with their counterparts in the USA (6 377) as with their next-closest collaborators in Canada (3 433) and the UK (3 318).

Iran has submitted a formal request to participate in a project which is building an International Thermonuclear Experimental Reactor (ITER) in France by 2018. This megaproject is developing nuclear fusion technology to lay the groundwork for tomorrow's nuclear fusion power plants. The project involves the European Union, China, India, Japan, Republic of Korea, Russian Federation and USA. A team from ITER visited Iran in November 2016 to deepen its understanding of Iran's fusion-related programmes.(2)

Iran is also stepping up its scientific collaboration with developing countries. In 2008, Iran's Nanotechnology Initiative Council established an Econano network to promote the scientific and industrial development of nanotechnology among fellow members of the Economic Cooperation Organization, namely Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan.

Iran hosts several international research centres, including the following established between 2010 and 2014 under the auspices of the United Nations: the Regional Centre for Science Park and Technology Incubator Development (UNESCO, est. 2010), the International Centre on Nanotechnology (UNIDO, est. 2012) and the Regional Educational and Research Centre for Oceanography for Western Asia (UNESCO, est. 2014).

Malaysia is Iran's fifth-closest collaborator in science and India ranks tenth, after Australia, France, Italy and Japan. One-quarter of Iranian articles had a foreign co-author in 2014, a stable proportion since 2002. Scientists have been encouraged to publish in international journals in recent years, a policy that is in line with Vision 2025.

The volume of scientific articles authored by Iranians in international journals has augmented considerably since 2005, according to Thomson Reuters' Web of Science (Science Citation Index Expanded). Iranian scientists now publish widely in international journals in engineering and chemistry, as well as in life sciences and physics. Women contribute about 13% of articles, with a focus on chemistry, medical sciences and social sciences. Contributing to this trend is the fact that PhD programmes in Iran now require students to have publications in the Web of Science.

(1)World Bank profile of Iran, 2016

(2)ITER team visits Iran (2016)

Source: Ashtarian, K. (2015) Iran. In: UNESCO Science Report: towards 2030; full chapter on Iran.

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Iran in pursuit of a knowledge economy - Malaysia Sun (press release)