Economy of Iran

Agriculture contributes 9.5% to the gross domestic product and employs 17% of the labor force. About 9% of Iran's land is arable, with the main food-producing areas located in the Caspian region and in northwestern valleys. Some northern and western areas support rain-fed agriculture, while others require irrigation. Primitive farming methods, overworked and under-fertilized soil, poor seed, and water scarcity are the principal obstacles to increased production. About one third of total cultivated land is irrigated. Construction of multipurpose dams and reservoirs along rivers in the Zagros and Alborz mountains has increased the amount of water available for irrigation. Agricultural production is increasing as a result of modernization, mechanization, improvements to crops and livestock as well as land redistribution programs.

The International Institute for Strategic Studies estimated Iran's defense budget at $7.31 billion, equivalent to 2.6% of GDP or $102 per capita, ranking it 25th internationally. The country's defense industry manufactures many types of arms and equipment. Iran's Defense Industries Organization (DIO) has produced its own tanks, armored personnel carriers, guided missiles, radar systems, guided missile destroyers, military vessels, submarines, and fighter planes. It has also developed a sophisticated mobile air defense system dubbed as Bavar 373.

Estimates of service sector spending in Iran are regularly more than two-fifths of GDP, much government-related, including military expenditures, government salaries, and social security disbursements. Urbanization contributed to service sector growth. Important service industries include public services (including education), commerce, personal services, professional services, and tourism.

Iran's retail industry consists largely of cooperatives (many of them government-sponsored) and independent retailers operating in bazaars. The bulk of food sales occur at street markets with prices set by the Chief Statistics Bureau. Iran has 438,478 small grocery retailers. These are especially popular in cities other than Tehran where the number of hypermarkets and supermarkets is still very limited. More mini-markets and supermarkets are emerging, mostly independent operations. The biggest chain stores are state-owned Etka, Refah, Shahrvand, and Hyperstar Market. Electronic commerce in Iran passed the $1 billion mark.

Although tourism declined significantly during the war with Iraq, it has subsequently recovered. About 1,659,000 foreign tourists visited Iran, mostly from Asian countries, including the republics of Central Asia, while about 10% came from the European Union and North America. Several organized tours from Germany, France, and other European countries come to Iran annually to visit archaeological sites and monuments. In 2003, Iran ranked 68th in tourism revenues worldwide. According to UNESCO and the deputy head of research for Iran Travel and Tourism Organization (ITTO), Iran is rated among the "10 most touristic countries in the world".