Domestic Economy

Privitization Shrouded in Controversy

Privitization  Shrouded  in Controversy
Privitization  Shrouded  in Controversy

Head of Iran’s Chamber of Commerce, Mines, Industries and Agriculture Gholam Hossein Shafe’ie has criticized what he called “disproportionate implementation” of Article 44 of the Constitution. He argued that what has so far been done in the name of privatization is against the Article 44 of the Constitution, IRNA reported.  

“According to the Article 44 Committee only 13.5%, and based on General Inspection Organization’s estimates only 5% of share transfers have resulted in ‘true’ privatization,” Shafeiee said on Sunday on the sidelines of a major economic conference held in the capital Tehran.

An executive order for privatization, envisaged by Article 44 of the Constitution, was issued by the Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei in July 2006.

According to the Article 44, the government can cede 80 percent of the shares of major state-owned enterprises to the people with the aim of improving economic development, social justice and alleviate poverty.

Implementation of the Article 44 has been shrouded in controversy since its inception in 2006.  Many experts and economic activists believe that privatization in Iran is an unlikely practice given the overall economic structure that is to a large extent monopolized by certain institutions, which benefit the most from the so-called privatization policy.

“Article 44 has been reduced to a mere change in ownership,” Shafe’ie said, noting that ownership has been shifted from the government to semi-government bodies through a process that is never disclosed to the public.

These entities also enjoy exclusive access to inside information that is usually denied to the public, enabling them to run rent-seeking businesses free of challenge and competition. Such rampant practice has been addressed by President Hassan Rouhani on several occasions.  

“Iran’s economy should break free from monopoly and rent-seeking practices. All government bodies should be transparent in their economic activities,” Rouhani said on Sunday, implicitly referring to the institutions that have been running rent-seeking and clandestine businesses by evading regular government oversight.

Another major problem is that the private sector, which is supposed to benefit from the privatization program, has never been properly defined.

“We have been facing problems regarding implementation of Article 44, because no such private sector, as it was envisioned in the Article 44, exists in reality,” Masoud Nili, a senior economic advisor to the president, said in an interview with national TV.

His remarks came after Rouhani called on Saturday for “economic competitiveness and transparency,” which he said would ultimately create a fair environment for anyone who wishes to embark on economic activities.

The government’s handling of privatization has been subject to severe criticism by business leaders in Iran. On Sunday, the head of Tehran’s Chamber of Commerce, Mines, Industries and Agriculture, Yahya Al-e Es’haq, said that the establishment’s efforts to make the economy privatized have deviated from its initial goal.

He said, by definition, privatization is not supposed to generate income for the government, rather “it should lead to more efficient use of the country’s resources.”

As part of a broader policy, the Rouhani administration promised to speed up privatization, vowing that 27 huge companies, 76 large companies, 31 medium companies, and 31 companies of other sizes are to be privatized by the end of 2014.

Huge companies are those with share value of over 10 trillion rials (about $403 million) and large companies are those with share value of over one trillion rials (about $40 million).