Equality has been on the Islamic Republic’s agenda since its inception. And Iranian governments have tried various policies based on different economic theories to close the gap between the rich and poor, with different rates of failure.
The policies mostly backfired by reduced productivity or high inflation—effectively putting assets out of the poor man’s reach.
After a three-decade spell of socialist economics and government-run economy, the state changed its footing and started down the path of an open economy. New laws were passed to allow private ownership of banks and other financial institutions.
Stock market regulations were overhauled in 2005, giving rise to countless brokerages and now, investment banks. The government began to privatize its companies, though major stakes ended up in the hands of other state organizations.
Amid these moves, the government was tasked by the parliament to give away some of its stakes to the poor at a discount in the Third Five-Year Development Plan (2001-6). It was later postponed and moved to the fourth FYDP. The aim was to make stock ownership more common and to give the poor a chance to reap the benefits of capitalism. The shares were called “Justice Shares”.
In actuality, each Justice Share represents a claim on a portfolio of stocks. Some of the companies on the portfolio were not half bad, some were accruing losses. The portfolio has changed throughout the years, in some cases illegally.
At present, each Justice Share is estimated to be worth around 10 million rials ($288 at market exchange rate).
The government of former president, Mahmoud Ahmadinejad, kicked things off with much publicity. Justice Shares were given to the six lowest income deciles of Iranians.
To prevent the owners from selling their shares immediately, their resale was barred; though no one could sell anything anyway, as owners did not know what they owned in the first place. So, the owners could only receive the dividends from the shares. In the past decade, the share paid dividends only twice.
However, the execution was riddled with ambiguity and fault. For example, the government was mandated to put up 40% of Bank Mellat’s stocks for Justice Shares in 2007. It sold a quarter of those stocks to the ‘public’ in 2008, despite its illegality, Donya-e-Eqtesad newspaper quoted Seyyed Jafar Sobhani, advisor to the head of Iranian Privatization Organization, as saying.
Also, Justice Shares were to include shares in automakers SAIPA and IKCO. Instead, the government put in an additional 16% stake from Isfahan Refinery Company, bringing 56% of the company’s shares under the Justice Share portfolio. The law stipulates that only 40% of a company’s stocks can be used for the Justice Shares.
Sorting Things Out
A decade on, the administration of President Hassan Rouhani is sorting things out and moving back to the legal framework that was set in the beginning. The 16% stake in Isfahan Refinery Company is being removed from the Justice Shares portfolio, along with stakes in 21 other companies that cannot turn a profit.
“The file on those eligible for Justice Shares was closed on 29th of Esfand (March 19, 2016),” said Sobhani.
Now the government is moving to give the stocks in Justice Shares to the 49 million owners so they can sell them if they please. 37% of the stocks have been given away so far. The aim is to finish this phase before the end of next March.
“Eligible people will know the exact amount of their assets and how much Justice Shares they own from the beginning of 1396 [Iranian calendar year starting March 21, 2017],” said Sobhani.
So, a plan to make the poor stock owners and distribute wealth more equally has achieved little.
