The Economy Minster Farhad Dejpasand says most of the properties divested by the government have merely resulted in change in ownership and in practice the government continues to exercise control over them.
In a talk with the semi-official Tasnim News Agency, Dejpasand in a rare rebuke took issue with divestment schemes in which the government transfers ownership in lieu of its ballooning debts.
Transferring government ownership of state companies in exchange for repaying debts account for 15% of the total government's divestment. This cannot be considered privatization per se, he said.
"Divesting assets in lieu of debts did not result in the reorganization of management because the majority of government assets were transferred to legal entities, which directly or otherwise, are indirectly controlled by the government. Almost 15% of the divestments were made in this manner. This is an economic plague.”
Dejpasand said companies that are divested in this way are not necessarily responsible for their performance. "The government apparently will be responsible for its performance as owner and manager. But when it has no ownership it can avoid responsibility".
The issue has also made effective supervision over such companies difficult, Dejpasand said, implying the sale of giant petrochemical companies that he did not name.
In the past most petrochemical plants were owned by the Oil Ministry which were ostensibly sold to pension funds that are managed by the Ministry of Cooperatives, Labor and Social Welfare.
In a case this week, the government agreed to cede its shares in four refineries and three other state companies to settle its debts to three banks, namely Bank Mellat, Bank Saderat Iran and Tejarat Bank.
SSO Top of the List
The majority of the government assets have been 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 of the government debt to SSO pertains to the government share of workers’ insurance premium that reportedly runs into trillions of rials.
Earlier in July, the government agreed to repay its debt worth 320 trillion rials ($1.28 billion) to the SSO by divesting a portion of its shares in nine state-owned companies, including South Aluminum Corporation (SALCO), Damavand Petrochemical Company, Heavy Equipment Production Company (HEPCO), Iran Tourism Development Corporation, Imam Khomeini Oil Refining Company of Shazand, Jajarm Alumina Plant, Zarshouran Gold Mines, the Mining Industries Development Company, Machine Sazi Tabriz Group and Iranian Tobacco Company.
The companies are managed by the investment arm of the SSO, known by its Persian acronym Shasta. Sahsta controls nine holdings operating in a wide range of sectors, including petroleum, petrochemicals, pharmaceuticals, cement, transportation and finance. It increasingly adding to its gigantic size.
Regarding the challenges divestment plans usually encounter, the minister pointed to the known (but hardly ever reported) obstruction by government officials and managers of state-owned companies.
“Due to such and other snags, the government had to delete 600 companies from a list of 1,700 in 13 years since the [so-called] privatization began” as per principles of Article 44 of the Constitution.
"About 900 companies out of the remaining 1,100 were either sold to the private sector or divested in lieu of debts. The rest were either liquidated or merged," he said.
He added that there are plans to cede 325 companies that account for 16% of the total companies selected for privatization.
Justice Shares
Dejpasand pointed to a measurey b the previous governments to offer government shares in major state-run companies in refineries, metal, automotive and other industries to low-income people under a scheme known as "Justice Shares", adding that these shares account for a massive 14% of the government privatization projects.
Justice Shares were given free to the six lowest income deciles almost a 15 years ago. Shareholders were not allowed to sell the shares until last May.
The Justice Share portfolio includes 49 state-owned companies in the auto, metal, mining, and agriculture, petrochemical and banking sectors. Close to 50 million Iranian owns the shares.
The scheme was launched in line with amendments to Article 44 of the Constitution obliging the government to downsize and reduce its massive and unhelpful footprint in the economy.
