The private sector has proposed the elimination of command pricing in the seventh five-year development plan (from the fiscal 2023-24 to 2027-28) in order to restore impetus for investment and boost production.
The upstream document has been submitted to the parliament with a two-year delay. The bill is expected to be approved by legislators by the end of September and before the start of the 2024-25 budget formulation process.
Under the circumstances, the private sector is convinced that the bill needs amendments, especially to the issue of mandatory pricing, Iran Chamber of Commerce, Industries, Mines and Agriculture wrote in a report published on its website.
“The pricing of a wide range of goods and services by the government under the excuse that heavy subsidies are given to certain industries is a wrong move taken by the government, which has drawn the criticism of the members of Iran’s chamber of commerce, private sector activists and businesses,” it said.
It went on to say that without paying attention to the increasing costs of production, which in many cases is caused by jumps in foreign currency prices (devaluation of national currency), sanctions, unstable laws and regulations, etc., the government has put itself in charge of pricing. This has reduced investment, declined production and even led to the bankruptcy of businesses.
“If the government is forced to price a certain commodity under special circumstances, it is expected to pay the price difference of the commodity with regard to the market rate. In fact, the government should pay for market regulation and not anyone else,” it added.
Iran Chamber of Commerce as the advisor of the three branches of power (legislative, judiciary and executive) has compiled a proposal package for the 7th FYDP. One clause in this proposal puts emphasis on the prohibition of the pricing of products and production services of all companies whose shares are traded on the stock exchange, especially with regard to goods and products offered in the commodity exchange and companies whose ownership is completely private.
The subject of command pricing has been the talk of the business community and experts for long.
Business analyst Nima Namdar wrote for Donya-e-Eqtesad: “Government controls and command pricing have brought desperation. Bad economic conditions and sanctions have become an excuse to justify government interventions in businesses. But what has worsened the situation is the combination of lack of knowledge, corruption and lack of accountability. The quality of human resources in the government has decreased and the power of monitoring and decision-making in government institutions has been entrusted to those who, even if they want to, do not have the capability and characteristics necessary for monitoring and making good policies. Most government agencies do not care about the costs they impose on companies and the harm they bring to companies through trial and error, and they only seek to minimize their own risk.”
Economist Vahid Shaghaghi Shahri wrote: “It must be acknowledged that the historical experience of Iran’s economy indicates the predominance of the command economy approach and at different junctures, the approach of imposing command pricing has been considered. The institutionalization of Iran’s economy has also been formed based on the approach of command economy. In fact, institutions such as the Consumers and Producers Protection Organization and other organization for monitoring the behavior and performance of the market have been established to monitor and control the market and to prevent price deviation in the market. In the author’s point of view, the absence of competitive markets, the extent of monopolies in various industrial sectors, the government and the private sector give-and-take and the development of a quasi-state economy have prevented competition in the Iranian economy. And this issue has also been used to justify the formation of command economy and expansion of regulatory institutions.”
Mousa Ghaninejad, a prominent economist, wrote: “In the current situation where Iran’s economy is dominated by the government and almost all prices are set by fiat, how can we talk about the growth and prosperity of the private sector? The formation of brands is imaginable in the presence of the real private sector and in a free and competitive environment, otherwise branding is impossible in the framework of crony capitalism and semi-governmental companies whose management is temporary and unstable, and when the system is feudalistic. It is no wonder that in the Iranian society, which has educated and elite manpower at different levels, we still do not have a “unicorn” startup on a global scale. As long as the command economy rules the country and the closed domestic and foreign business environment does not allow the growth of the real private sector, it will be futile to hope to see successful brands and startups, even if we potentially have the necessary and sufficient abilities to achieve that goal.”
