The Impact of Foreign Investment on Iran,s Economic Growth: Import Substitution and Export Promotion Strategies

This article is an experimental survey that deals with the impact of foreign trade and investment on the growth of economy in Iran. The growth occurring under foreign investments has been tested and examined under the trade strategies in the years between 1340 – 1380.The results show that this growth is much more considerable under export development strategy than import substitution. In other words when the policy of import substitution is practiced, the government supports more intensely the domestic industries which can divest the foreign investors of getting into competition with them. The result is a decrease in foreign investment share in the overall growth of the economy, whereas this is really high in the alternative situation or the time when the export expansion strategy is effected. In sum, the study confirms the Bhagwati theory in the case of Iranian economy.