What Should Iran Ask from China?
Part 1 (Automotive)
An Iranian minister visits China in January of 2022 to sign a 25-year economic plan between Iran and China. As he returns, there is an unsolved question in his mind: “What should we ask from China?”
Well, this article tries to answer that question.
Before answering that question, let’s get to know the two countries better.
China is a communist country with 22 provinces and five autonomous regions with their own local government. Those regional governments have more legal authority than the province with regards to cultural issues and have received government’s financial support and tax deductions.
China is home to 1.4 billion people within 9.6 million Km2. Now, the one-child policy was effective in reducing China’s population growth, bringing the country’s growth rate to 0.55% in 2015 and later 0.39% in 2020. This policy came with unintended consequences for a traditional Asian country where boys are more favored for the workforce by tipping the population scale towards males where the sex ratio at birth is 117 boys per 100 girls.
It’s worth noting that China’s foreign policy officially mentions, it will not seek hegemony and will not interfere in the internal affairs of other countries. China believes that all countries, large or small, should be treated with respect. It will judge any case in international affairs on its own merits and advocates that all countries govern their relations in accordance with the United Nations Charter and the norms governing international relations. To put things in context, China supports peaceful negotiation and consultation to resolve international disputes and strongly opposes terrorism and the proliferation of weapons of mass destruction. Moreover, it respects the diversity of civilization and the whole world…Well, only if it had stayed that way, because all these policies have clearly changed since 2019. A change that has legitimized a more active role for China on the world stage, including engaging in an overt ideological struggle with the west to preserve their national pride. This diplomacy is known as “warrior wolf diplomacy”.
China’s economy today is based on private property receiving foreign investment of $149 billion in 2020, up 6% from 2019. However, the government still dominates the strategic infrastructure sectors of the economy, such as energy production and heavy industry. Having said that, private investment is growing rapidly.
China’s focus on science since the 70s and more particularly during the past decade has allowed them to thrive in various grounds. Chinese supercomputers are now among the most powerful in the world, and the use of industrial robots has grown significantly. China launched its first satellite into space in 1970, becoming the fifth country to do so independently. China became the third country to send humans into space independently in 2003, and in 2011 unveiled a replica of its space station, which is scheduled to be launched in the 2020s.
How about Iran? Well, Iran has a population of 84 million people with a growth rate of 1.3% in 2020. From 1957 to 2017, an average of one million people were added to Iran’s population each year, increasing its population 8 times in about a century. However, in recent decades, fertility in the country has declined and the population is moving towards aging, forcing Iranian government to provide encouraging programs for Iranian families to deliver more children. Iran’s aging population will hand over a heavy burden of generating a GDP suitable for 80 million people on the hand of few manpower.
Iran’s foreign policy includes denial of hegemony, preservation of the comprehensive independence and integrity of the country, defense of Muslim rights, refusing to align with the dominating world powers, and peaceful relations with non-combatant states. The slogan “Neither East nor West, Islamic Republic” with its deep-rooted and historical anti-communist and anti western-style of democracy undertones is considered one of the core political philosophies of this country.
Although Iran’s economy is known as an inefficient economy that relies on oil and gas, it has significant infrastructure in the service, industrial and agricultural sectors that power its economy. The Iranian government directly owns and manages hundreds of economic entities. Iran’s private sector activities include small-scale workshops, agriculture, manufacturing, services, medium-sized construction, mining, cement production, and the metal industry. It must be said that Iran has received direct foreign investment of $428 million in 2018 while being impacted by 36% inflation rate; which is a perfect example of the impacts of US sanctions.
Now that we have a better understanding of these two countries, let’s discuss suggestions I have for Iran’s minister that cover areas from politics, legal, socio-economic to technology.
Automotive
Malaysia Proton Holding DRB-HICOM announced in 2019 that it had sold a 49.9% stake in Proton to China’s Zhejiang Geely Automotive Holding. Following the entry of Geely China as a shareholder in Proton, Proton Holding acquired intellectual property to design, develop, manufacture, sell, market, and distribute Geely Boyo, Geely Benio, and Geely Giaji to Brunei, Indonesia, Malaysia, Singapore, and Thailand.
In 2018, Proton announced the launch of the first Proton sports utility vehicle based on the Geely Boyo, introducing local design elements to the Malaysian market. The first batch of Proton X70 will be imported from China under a local name, followed by localization programs that are underway with the development of the Tanjong Malim plant. Following the tax exemption programs for electric vehicles by 2022, Proton announced the roadmap for hybrid products, PHEV and BEV for the future.
While no specific electric model is mentioned, it is possible that the new technology used by Geely and Proton will be driven by Geely’s new propulsion brand, Leishen Hi-X.
Suggestion
Iran’s ailing car manufacturing industry that provides ~5 million jobs could significantly benefit from this 25-year deal. Given the inability of responsible ministries to address the low quality and high cost of cars while trying to keep those jobs, perhaps the only way to address those problems is to use new technologies in the automotive industry.
Why? First of all, Iran must accept that their presence in the red ocean of gasoline automobiles is not a winning strategy. And realistically continuing that century-old trend will end up crippling Iran’s automotive industry, drowning it entirely, while there is a blue ocean of electric vehicles slowly but surely taking over the world.
With 99% access to electricity in rural and urban areas of Iran, manufacturing and replacing cars with their electric counterparts seem to be THE answer. Here’s an example: After the invasion of Iraq by the US, almost all landline infrastructure in Iraq was destroyed. But the need for landlines was replaced by cellphones and internet access via mobile devices. Therefore Iraqis jumped from one technology to the next. And who was there to quickly seize the opportunity? Iraqi mobile operators.
Iranian car manufacturers can make the same leap into this market by receiving electric propulsion technology which the Chinese are suited to supply. This kind of presence of Chinese can be facilitated by buying stocks with the investment model in new production lines. The kind of investment that can revitalize Iran’s car industry by creating and localizing the next generation of propulsion, providing labor training, saving domestic gasoline consumption, and providing much-needed environmental benefits.
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Hope you found this helpful so far. Be on the lookout for the next parts that will cover topics such as debt diplomacy, oil, workforce, and more!
