Economy, Business And Markets

Broader Support for Cooperative Share Trading

Broader Support for Cooperative Share Trading Broader Support for Cooperative Share Trading

Market officials have reiterated support for a plan to privatize cooperatives and allow their shares to be traded in the stock market.      

Bahman Abdollahi, head of the Chamber of Cooperatives, told IRNA that the cooperative sector is ready to put its whole weight behind a plan to allow these firms to enter the capital market.

 “The new management of the stock exchange has a high opinion of cooperatives’ activity in the stock market and aims to help [these firms]. This will mean a fundamental break from the past when there was opposition and resistance to the presence of cooperatives in the exchange,” said the official.

Mohammad Fetanat, head of the Securities and Exchange Organization, also stressed his full support for the plan.

According to the Constitution, the cooperative sector should take up a central role in the economy alongside private firms and the state.

After the reinterpretation of Article 44 of the Constitution a decade ago, a list of policy guidelines was offered in which the privatization of cooperatives became part of the government policy, giving rise to the concept of “joint stock cooperatives”.

However, soon after the constitutional and legislative changes, efforts to allow cooperative share trading stalled and talks became bogged down in definitional nitpicking.

During the two presidential terms of Mahmoud Ahmadinejad, Mohammad Abbasi, then-minister of cooperatives, tried in vain to privatize the cooperative sector. Most notably, officials found it hard to bring the definition of a cooperative profit structure in line with those of private firms. The head of Exchange and Securities Organization at the time was also reluctant to allow cooperative share trading alongside private firms on the stock market.

According to Article 35 of the Fifth Five-year Economic Development Plan (2011-16), which was signed into law by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei in 2009, cooperatives should constitute up to 25 percent of the capital market by the end of the plan. The realization that the government looks set to miss this target has renewed efforts to strengthen the capital base of cooperative firms so that they could expand economic activity.

As the private sector faces recession and has been blamed for excessive dependence on credit and nominal, rather than real, parameters, the cooperative sector could be an appropriate and more viable economic alternative.

The increasing interference of large domestic institutional investors has also worried a government eager to see dynamic growth of small- and medium-sized enterprises. Because of their unique decision-making structure that does not give out votes according to the amount of owned shares, cooperatives could also cripple efforts by large investors to dominate the economy.

Recent trading statistics from Iran Fara Bourse show that cooperatives’ over-the-counter trading is on the rise. On June 21, IRNA reported that more than 7.7 million shares with a value of close to 12 billion rials were traded at the Bimeh Taavon Co., one of the largest insurance cooperatives in Iran. Behnam Mohseni, head of the PR department at IFB, said: “Transactions at Bimeh Taavon should be seen as representing the cooperative sector in IFB and a full result of the bourse’s readiness to allow share trading in the base market for cooperatives.”

The base market at Iran Fara Bourse does not allow free share trading but is based on auction and mutual agreements. Officials hope that the plan to turn cooperatives into joint stock firms will be send to parliament in the coming months.