By Edmund Blair
Reuters – Outside the gates of Tebed Spinning Company in this industrial town west of the Iranian capital, a group of laid-off workers grumble that the president’s vow to slash unemployment did not save their jobs.
Mohammad Bozorgi Alamuti and fellow workers, laid off three months ago, listened intently when President Mahmoud Ahmadinejad spoke in the town in June, delivering the usual pledges to protect workers’ rights and revive the economy.
But the workers say their employers did not pay attention.
"The president said some beautiful words but practically nothing has been achieved. The government, the officials, the managers don’t listen," Alamuti said outside the plant where he waits to plead his case when company executives enter or leave.
The president has grabbed headlines in the West for his defiance in a dispute over Iran’s nuclear programme, tough talk that plays well at home. But what ultimately matters to Iranians like Alamuti is whether he delivers on economic promises.
Ahmadinejad swept to power in the Islamic state last year pledging to spread Iran’s oil wealth more fairly — a message he hammers home at regular rallies. But many economists say his policies aren’t working.
The world’s fourth largest oil producer may be enjoying an oil windfall, but economists say the government is fuelling inflation by priming the economy with petrodollars and undermining private business with interventionist policies.
"At this time, there is a high possibility that the economic conditions get worse, while the people’s expectations have risen because of the slogans about welfare from the government," 50 economists wrote in a bluntly worded, open letter in June.
"If the promises of the government do not come true, the people’s confidence in the government will fall and, faced with international threats, our national security will be endangered," wrote the economists, mostly university professors.
Trade unions exist in Iran but their power is limited and authorities quickly snuff out protests over living conditions.
But while workers may not take to the streets if Ahmadinejad does not deliver, some analysts say any disappointment could come back to haunt him in the next election.
The authors of the letter also said officials were being appointed with little regard for qualifications and complained about poor budget planning. Some critics say Ahmadinejad, a pious revolutionary, has been pushing extra funds to conservative religious bodies
One of the authors’ major concerns was a possible surge in inflation, which now stands at about 10 percent.
Economists and the central bank say the government is firing up inflation by dipping into an oil dollar fund designed for investment or budget support in times of hardship but which is now being tapped for current spending despite record oil prices.
"Inflation ultimately hurts the people that the new president is trying to help. He is a populist but if inflation takes off, then he is not going to be very popular," said Richard Fox, a senior director at Fitch Ratings in London.
Rising prices are a common gripe. In the bazaar of Qazvin, a city near Alborz, stallholder Ali Akbar Mohammadi, an Ahmadinejad voter, says higher prices are hurting his turnover.
"People don’t have enough money and things have become expensive," said Mohammadi, 60, standing beside a rickety cart where he sells sandwiches. "(Ahmadinejad’s) promises were great but so far we haven’t seen any result."
The central bank has limited ability to control prices. It needs parliament’s approval to issue paper to soak up liquidity and, in April, was ordered by lawmakers to cut lending rates to single digits by 2010 despite warnings about inflation risks.
The government blames businesses for seeking inflated profits. Businesses say they are passing on new costs, including a more than 20 percent hike in the minimum wage to over $160. The figure rises depending on experience and the job involved.
Some businesses laid off workers because of the rise and say it is getting tougher to compete with foreign firms.
"Our industry is not competing with China on technology it is competing on labour costs," said Siamak Namazi, managing director of Tehran-based Atieh Bahar Consulting.
At the Tebed Spinning Company in Alborz, the management says it laid off about a third of its 400 workers temporarily, while it installed new equipment to compete with Chinese imports. Alamuti and his friends fear their jobs have gone for good.
Economists say Iranian businesses are wary of investing in what they see as an unpredictable policy environment. This slows job creation in a country where official unemployment is around 12 percent. Unofficial estimates are much higher.
Many foreign investors are also steering clear for fear a nuclear dispute with the West could escalate and lead to U.N. sanctions, a step threatened by the United States and Europeans.
"Western investment obviously has taken a hit," Namazi said.
For the time being, economists say Ahmadinejad and his government have a cash cushion to meet the investment shortfall. The central bank, for example, lends foreign currency to Iranian firms importing goods when they cannot find Western creditors.
But, even with the oil windfall, economic growth of 5.4 percent in the year to March was lower than forecast.
Alamuti and other Ahmadinejad voters are still waiting for the good times the president promised.