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Printed for the Cabinet. February 1949

CONFIDENTIAL

C.P. (49) 44

28th February, 1949

CABINET

Copy No.

31

PERSIA'S SEVEN-YEAR PLAN

MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS

IT has now been announced that the Persian Majlis passed the Bill for the Parsian Seven-Year Plan on 16th February in substantially the form in which it was presented to them by the Majlis Commission.

:

11

2.

2. The Plan was first announced in the Spring of 1946, but this Plan, which would have cost a total of about £450 million was far beyond the financial capacity of the Persian Government and in order to arrive at a more selective programme and to be able to judge which schemes were economically sound, the Persian Government invited a Commission of United States engineers to visit the country! The Commission arrived at the end of 1946, and after completing their investiga- tions, they submitted a report to the Persian Government in July 1947. The general finding of the Commission was that Persia's major efforts should be directed towards an increased efficiency in agricultural production and it was emphasised that industry should be left to develop slowly and naturally. The planners prepared a list of schemes which they considered should be carried out under the $250 million programme. The present Bill is based on this report and envisages a development programme to be carried out in seven to eight years at a cost of 21,000 million rials or, at the official rate of exchange, some £160 million to be expended as follows:-

Years covered

··1948-49

Expenditure in. million rials

1949-50

1950-51

1951-52

1952-53

1953-54

1954-55

1955-56

1,000

2,000

2,800

3,200

3,500

3,600

3,600

2,200

...

3. The importance of the present Plan lies in the fact that it is the first attempt to carry out a long-term Plan of economic reform in Persia which has been effectively prevented in recent years by the lack of continuity in Governments (there have been some ninety Governments in the forty-two years since the proclamation of the Constitution); and according to Article 1 of the Law the Plan is designed for the purpose of increasing the productive capacity and expansion in the volume of exports, preparing public requirements at home, improvement in agriculture and industry, exploitation of mines and other resources especially oil, completion of means of transport, reforms in public health and for carrying out measures in the development of the country, raising the general standard of life and education, bettering employment conditions and reduction in the cost of

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livingge or these various purposes; the total sum availage as beeps allotted as follows:-

Million rials

Agriculture and irrigation

5,250

Motor-roads, railways, ports and aerodromes

5,000

Extension and development of industries, exploration and

exploitation of mines

3,000

Iranian Oil Company

1,000

Extension of post, telegraph, wireless, radio and telephone Building of cheap houses

750

1,500 *****

Creation of water-systems and supply of power to the

provinces

1,000

Prevention of disease and prophylactic measures with the

object of improving public health

1,500

Aid to educational institutions and training of technical

experts

1,000

800

Scientific studies and research map-making preparation of

statistics and other works of public utility

Prisons.

200

4. The question of financing the execution of the Plan has still to be settled and is likely to present difficulties as the sum available from the Anglo-Iranian Oil Company's royalties which have been earmarked for development projects. inside Persia over the next seven years will depend on the result of the Company's present negotiations with the Persian Government. The Persians have also still to negotiate a loan for specific development projects from the International Bank. These difficulties should not, however, prevent the Government proceeding with the first year's programme and, provided the political situation permits, the Persians should be in a position to make a start shortly on those essential measures of economic development to which I attach the greatest importance as the only sure defence against Communism.

5: The Government have already engaged an American group-Overseas Consultants Incorporated to draw up a report on the priorities to be given to the various projects included in the Plan, and an advance party of this group, with which the British firm Sir Alexander Gibb and Partners, is associated is now in Tehran. Mr. Murray, of the British Middle East Office, has been asked to supervise the statistical work and the Americans have also agreed in principle to the engagement of an expert from the Port of London Authority to advise on port clearance problems. According to the law as now passed the report which is to be prepared by this group is now to be submitted to the Persian Planning Organisation within three months.

"

6. The Bill provides for a Supreme Planning Authority, consisting of an Advisory Council of seven members, a Board of Control of six members and a Managing Director. Under the original draft, the Advisory Council would be appointed by the Shah on the proposal of the Government and would hold office for the whole period of the programme. The Managing Director would be appointed for three years, but his appointment could be renewed for the remaining period of the Plan. The Board of Control would be elected by the Majlis and would hold office for two years. The Government of the day would be connected with the Planning Organisation through the Board of Control which would have the right to report direct to the Government and might be charged by the Govern- ment to carry out investigations. The Planning Organisation are required to obtain the approval of the Council of Ministers before employing foreign experts who may be employed for a period not exceeding one year after the period of the execution of the programme. In passing the law, the Majlis have amended the draft Bill to ensure that all appointments to the Planning Organisation should be approved by them before being confirmed by the Shah and have stipulated that, credits under the Plan should only be used for paying technical personnel and not for increasing salaries. They have also laid down that the Planning Authority is to be staffed with Civil Servants drawn from Ministries, who will continue to

salaries.

Page 3 Bul

3Buff&ould seem

receive their present C

.

Page 488 received full details of these amendments,3

of that the Majlis have now imposed a stricter control on the authority of the Advisory Council to carry out the programme on its own authority once it has been

3

approved by the Seven Year Plan Commission of the Majlis. This is unfortunate, as it may compleate the practical application of the Plan. Ragehowever 88 be hoped that the Persians will appreciate the necessity for engaging foreign experts to assist the Planning Organisation in the detailed execution of the programme and that these advisers will be able to prevent to some extent the Government of the day frittering away the sums allotted to the various projects in the grant of fictitious contracts to their friends and supporters. Both His Majesty's Govern- ment and the United States Government have on all possible occasions stressed the importance of economic development and reform to the Shah and to the Persian Government. It is to be hoped that the satisfactory co-operation established between the American group of Overseas Consultants and the British firm of Sir Alexander Gibb and Partners in the initial planning stages of the programme is symptomatic of the collaboration which can be expected in the measures which are to be taken in the later stages to raise the standard of living in Persia and to improve the social and economic position of the Persian peasant, who has for so long been exploited by a small and wealthy minority of land-owners and merchants.

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Foreign Office, S. W. 1,

28th February, 1949.

E. B.

Page 34.