Policy and decision makers, experts and authorities attending the First International Conference on Privatization in Iran are unanimous in their views that the current privatization plans and policies are at best superficial and must be restructured.
The four-day meeting opened Saturday at the Iran International Conference Center in north Tehran to discuss the major challenges confronting the privatization agenda and review its two-decade history in Iran.
Addressing the conferees, President Ebrahim Raisi underscored the need for "a critical and precise reconsideration" of past privatization practices.
“Whatever happened in the name of privatization in the past was indeed government takeover by another name.”
He added that “The government still exerts control in most privatizations of the past, either openly or in disguise,” noting that change in the existing norms is inevitable.
Raisi recalled divestment over the years of government property to banks, municipalities and the Social Security Organization as examples wherein “privatization in its true sense never happened”.
In the past privatizations merely resulted in change of ownership and in practice governments continued to exercise control over most of what was ostensibly sold.
He said his government is trying to learn from past experience and give more voice and space to the private sector.
In the same vein, the Economy Minister Ehsan Khandouzi said privatization projects have so far failed to serve the intended aims.
“Privatization was meant to empower the private sector and expand its role and share in the economy, ease financial burden of the government and promote competitiveness” he told the meeting.
Restoring investors’ trust, he said, could be a potential game changer in the future course of privatization. To this end, he said the ministry is working on a bill to amend sections of Article 44 of the Constitution.
Article 44 of the Constitution, compartmentalizes the economy into three main parts: public, cooperative and the private. It obliges the government to transfer 80% of the shares in state-owned and affiliated companies to nongovernment entities.
Outlining the ministry’s privatization plans, Khandouzi said 187 state-controlled companies are on the divestment list with government divestible stake ranging from 3% to 100%.
Debt Swap Is Not Privatization
The minister spoke of cases when past governments simply transferred ownership of assets in lieu of their ballooning debts.
As an example, he recalled most government assets were transferred to the Social Security Organization, a non-government entity operating under the tutelage of the Labor Ministry.
SSO is the biggest insurance company covering private sector workers and the self-employed. Most government debt to SSO pertains to the government (unpaid) share of workers’ insurance premium that reportedly runs into trillions of rials.
Hossein Qorbanzadeh, head of the Iranian Privatization Organization, recently said that the government will divest its stake worth 2,100 trillion rials ($7 billion) in assorted companies to clear its debts to public organizations before the current fiscal year is out in March 2023.
Addressing the conference, Head of the Iran Chamber of Commerce, Industries, Mines and Agriculture Gholamhossein Shaf’ei strongly censured the privatization mechanisms in which the government swaps its unpaid debts.
The senior private sector official singled out governments for viewing privatization as a source of revenue for deficit spending describing it as a “big mistake”.
Struggling with unending budget deficits, most governments as a matter of policy sought to secure funds from privatization schemes.
As stipulated in the 2022-23 budget law, the government expects to generate 710 trillion rials ($2.3 billion) from divesting its stake in several listed companies.
