Which Iranian Businesses have been Affected by Coronavirus?

The spread of coronavirus has affected the businesses of many people around the world. In Iran too, which is officially the third-largest coronavirus center, according to official statistics many existing jobs have come under threat from the uncertainty.

Temporary and permanent closures threaten many businesses around the world, but Iran's case has a major difference with the rest of the world.

In the world economy, the coronavirus outbreak is a new and unpredictable crisis that has disrupted all forecasts and expectations in the manufacturing and service sectors. Travel and tourism, major airlines, retail businesses have all been seriously affected by the outbreak pandemic. The distribution system of staple goods in advanced European and American countries has also been disturbed by public concern. The world's financial markets are experiencing unprecedented collapse. Large western banks are worried about a recession that cannot yet be accurately measured in depth and duration.

In Iran, the situation is different. The coronavirus disaster came to pass not in a stable context, but in an already collapsing economy that had little hope of rebuilding in the short run even before coronavirus. The accumulated economic, social, and political crises of the past decade have passed the threshold of tolerance for Iran's various economic sectors. Many businesses were closed or half-closed before the outbreak began. From large and small industrial plants and workshops to small service firms have been struggling to break even before the public health situation. But economic activity in Iran has been meaningless for years: it is a country whose domestic capacities are diminished by inflation and with a devalued national currently, and the loss of national revenue and the impact of sanctions has eroded the basis for sound foreign trade.

The coronavirus outbreak may be likened to a major earthquake that has shaken the foundations of the world's economy; the stronger the economic structure of countries, the more resilient they are to withstand the earthquake. How can the half-ruined structure of the Iranian economy withstand this terrible crisis? Which parts of it will collapse earlier than others? Which areas are most vulnerable? Which jobs are more at risk? And what is the number people whose jobs are endangered?

Coronavirus outbreak risks for private sector

As a general rule, job security is higher for public and government employees. Salaries may be lower in most public sector jobs but employment in the private sector is more at risk from external shocks.

According to 2018’s year-end disaggregated statistics from the Iranian Statistics Center (updates were not available on the Iran Statistics Center website as of the time of writing this report) about 84 percent of Iran's labor market is in private sector and about 16 percent is in the public and government sector.

According to official statistics, employment in Iran is estimated to be around 24 million people and the private sector employs over 20 million people. The population is more exposed to job insecurity and the impact of coronavirus outbreak than those in the public sector.

The risk is not equal for all private sector employees. In general, conditions for workers are more fragile than employers and business owners. Iran has maybe just under a million employers. Ten million employees work for them and another nine million are technically “self-employed.” The last group comprises a diverse range of workers, from day laborers to freelance workers, and the impact of the coronavirus crisis on them is significant.

That said, if we assume that employees in government jobs and private-sector employers have a relatively higher security margin; and that only a quarter of private-sector workers, day-laborers, and freelance workers are affected by the coronavirus crisis, there would be about five million jobs at risk. This means that the livelihood of something like 17 million Iranians would be affected.

 

Coronavirus outbreak risks for business groups

The Monetary and Credit Council announced 11 March 10 examples of businesses that will be subject to three-month loan deferral. These are:

1- Ready-made food production and distribution centers, including restaurants, buffets, reception halls, cafes, deli shops.

2- Tourism centers including hotels, hotel apartments, tourist complexes, motels, guesthouses, inns, pilgrim centers, tourist centers, accommodation centers, service areas, and entertainment centers.

3- Intracity and intercity public transport including air, road, rail and sea transport.

4- Travel and tourism offices.

5- Production and distribution of garments.

6- Production and distribution of bags and shoes.

7- Distribution centers for nuts, dried fruits, confectionery, ice cream, and juice.

8- Sports and recreational centers and complexes.

9- Cultural and educational centers and complexes.

10- Manufacturing, distribution, and sales centers for handicrafts.

Disaggregated statistics from the Iranian Statistics Center show that some 2.5 million people work in the "Motor Vehicle Drivers" job group. The population in "services and retailers" sector is about 3.5 million people. The population in "offices and administrative workers", some of whom are in tourism, cultural services, sport, and handicraft-related industries, is about 900,000. The population of unskilled workers is about 2 million and the population of skilled industrial workers is about 8.3 million.

Assuming that only half of this population is affected by the spread of coronavirus in Iran, we have to admit that the income of about 5 million people and the livelihood of nearly 17 million Iranians will be affected.

 What can the government do?

Governments in countries with stable economies provide crisis management and support packages when a major crisis occur. These packages are of two types:

One of the packages is designed to restore the economy to prosperity and to rescue at-risk jobs – perhaps by lowering bank interest rates. This is one of the measures that western economies have taken in recent days.

But this is impossible in the Iranian economy. The situation is so volatile that touching the bank interest rate will, in the shortest possible time, causes disruption in the relative balance and would cause chaos in the markets and high inflationary tensions.

Other types of support packages are tax breaks, payment deferred, or even loans and grants to small businesses. In Iran, such packages are usually offered in times of crisis. But how well will they work?

In the example above, the question is how effective it is to postpone three months of bank payments – given the serious damage being done to the structure of service businesses?

Or how effective is it to postpone the cost of utilities compared to taking losses now?

Or how much should the promise of financial aid and grants be used to account for the loss incomes of families who, according to official reports, spend over 5 million tomans [$334] in a month in big cities?