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Iranian Economy: A Geographical Gap in the Distribution of Wealth

The latest data from the Statistics Center of Iran shows that about 54% of the country's GDP in 2019 was concentrated in only five provinces. 

The Tehran province, where the sprawling capital city of Tehran is located, had the highest share of the GDP among the 31 provinces, at 21.7%. The oil-rich but otherwise extremely poor province of Khuzestan, which recently witnessed widespread and bloody protests, ranks second.

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In this macro-division, the Bushehr province, like Khuzestan, ranks highly, in third place, due to its oil, gas, and petrochemical investments.

Khuzestan received the highest share of Iran’s national budget, in 2021, at more than 4.8 trillion tomans. This high budget allocation is because the government allocates 3% of the oil sales to underdeveloped oil-rich regions of Iran.
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The Qom province received the lowest provincial budget, in 2021, which is about 696 billion tomans.

For a more meaningful comparison of the 2021 provincial budget, it is crucial to consider the population variable in the calculation and analyze the per capita budgets for each province.

Calculating the per capita budget share, Khuzestan loses its first place and the Ilam province replaces Khuzestan at the top of this list.

The lowest per capita of the provincial budgets goes to Tehran, replacing Qom at the bottom of the list.

Construction and infrastructure projects, statutory obligation to allocate resources to underdeveloped provinces, 3% oil revenue allocation to oil-rich provinces, and implementation of development programs in divested localities are among the factors of budgetary modifications.

The provinces’ significant contributions to GDP and their national budget allocations do not translate to the prosperity of their people. A closer look at provinces’ households’ income levels clarifies this.

For example, Khuzestan, the province that boasts the second-largest economic contribution in Iran and has received the highest amount of provincial budget allocation in 2021, suffers from the highest absolute poverty rate and is high on the misery index. According to the household income and expenditure statistics of 2019, the average household income in this province is below the national average.

Observations on the regional data provided by the Statistics Center of Iran in 2009 show that the share of "mining" (oil production) in the total GDP of Khuzestan is 69.7%, and the percentage of "electricity, gas supply" in the total GDP of Bushehr is 56.5%.

Although heavy industries and oil and gas production have increased Khuzestan and Bushehr’s respective contributions to the GDP, it has not generated very much income for their people. Data about the household income and expenditure from the Statistics Center’s report in 2019 show that the average household income is about 13% lower than the national average in both Khuzestan and Bushehr provinces. In addition, the high cost of operations of oil, gas, and petrochemical industries and the need for highly skilled specialists and mid-level engineers have required a significant and much-criticized import of talent from other regions of the country. As a result, these industries have not created employment opportunities for the populations of these two provinces.
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Construction and infrastructure projects launched by the nationally allocated provincial budgets have not contributed to creating meaningful employment opportunities for the local population either. Most of the created jobs are low-level construction and ancillary services jobs, and skilled laborers are mostly migrated from other regions. According to the workforce analysis of the Statistics Center, in 2019, the unemployment rate in both the Bushehr and Khuzestan provinces was higher than the national average, with Khuzestan’s unemployment rate being 45% higher than the national average. 

Tehran is the only province that, despite its low share of the annual budget, has both the highest contribution to the GDP and the highest income level. A large number of government offices in the capital and an increased number of private businesses could explain this anomaly. In addition, the existence of numerous factories and production units in Tehran is another factor that contributes to both the high-income rate and the province’s high GDP contribution.