In recent decades, Iran’s economy has been grappling with a major challenge, namely government intervention in the economy at various levels, which started at the beginning of the 199 Islamic Revolution with the nationalization of industries.
The three ministries of Heavy and Light Industries, Mines and Metals assumed responsibility for the production sector and the Ministry of Commerce carried out tasks such as market regulation in foreign commerce with large-scale companies and a broad institutional framework in the field of distribution and supply of goods.
More than a decade into the merger of the two ministries, the media are reporting news about the impending separation of the commerce wing from the Ministry of Industries, Mining and Trade and the formation of a new organization or ministry.
Ali Hayatnia, an economist, prefaced his write-up for the Persian economic daily Donya-e-Eqtesad with this note. A translation of the text follows:
Weighing in on the separation of the body in charge of production and trade requires deep reflection on the role and scope of the government’s intervention and its effects on the improvement or decline of these two sectors.
Economic experts have before them the experience of developed countries; they know that government is not a good regulator of market relations and disrupts the natural order resulting from the supply and demand mechanism. The concern of economic policymakers regarding the separation of the Ministry of Industries, Mining and Trade, despite the fact that a decade has passed since the integration of these two wings and the stabilization of its institutional framework is questionable. In addition, the formation of a new institution is in conflict with the law, including the Sixth Five-Year Development Plan (2017-22).
Paradigm of Developed Countries
All developed countries have an organization for policymaking in the field of production and trade, which eases their smooth functioning and prevents conflicts in these sectors. At the time of the existence of the two ministries of industries and mines, and commerce, many government directives and instructions of the trade sector inflicted losses on the production sector. At that time, many industrial and production policies were not in line with the commercial strategies of the country.
The unified management of the two sectors promoted efficiency and helped the better regulation of production and trade. Going back to the costly and challenging experiences of the past will definitely hit the production and trade process.
It seems that the government is willing to boost its intervention in the market with the formation of the Commerce Ministry. The agile governments of developed countries have prevented the squandering of resources and corruption by limiting the role of the government to the two issues of policymaking and supervision, and non-interference of the government in the internal order of economic factors.
The direct relationship between the size of the government and corruption is clear to the world. Therefore, in order to reduce systemic corruption, there is no other way but to reduce the government’s role in the economy.
In fact, the division of the ministry makes the government more inefficient. For years, the government’s intervention in the economy has led to a waste of resources, an imbalance in the market of goods, money and capital, and non-optimization. Therefore, the formation of new institutions will fuel concerns in this regard and compound the imbalances.
The regulation of the government in the production and trade sectors will result in optimization, only if it reduces its interference. Moving toward aggregation and downsizing is the right course of action, and not divergence and magnification of roles and missions.
