Economy, Business And Markets

Laws, Business and Constitution

Laws, Business and Constitution Laws, Business and Constitution

Economic activity rests on the legal framework.

As economic recovery is the prime subject of Iran’s politics and policy, the government recently introduced a stimulus package for boosting non-oil exports while the lifting of sanctions is meant to usher in an era of economic expansion.

Parliament Speaker Ali Larijani, however, is championing changes in the Iranian Constitution for the benefit of free enterprise. A sound idea in principle, but impractical as economist Mousa Ghaninejad contends.

Iran’s Constitution was written nearly four decades ago after the victory of the Islamic Revolution. Due to the monarchy’s relations with the West, anti-capitalism sentiment ran high. The end product sees the government holding the economic pie and leaves the public breadcrumbs to squabble over.

Larijani says the constitution favors centralization, while the economy should be left to private businesses, foreign and domestic.

Mahmoud Sadri, a columnist with Tejarat-e Farda weekly, agrees and points out some parts of articles 43, 44 and 45 of Iran’s Constitution, which leave too much in the hands of the government.

The constitution divides the economy into government, cooperative and private sectors. The private sector is left with “parts of agriculture, livestock farming, industry, commerce and services that complete government and cooperative economic activity, according to the constitution.

Others like Alireza Behdad, another columnist, say the law is fine but its interpretations are wrong.

“What really stands out is the subjective treatment of the economy by officials and political groups. This hinders the private sector,” he said.

Behdad believes the focus should be on eradicating populism and socialist thinking. He argues that competent managers should be placed in key positions and organizations.

Good laws are hard to misinterpret. They should not leave room for that. And yes, the constitution concentrates too much on the government. Ultimately it needs revamping. But should the constitution be the focus of here and now?

Economist and open market advocate Ghaninejad hits the nail on the head, saying changing the constitution is time consuming, costly and ultimately out of the parliament’s jurisdiction. Any change requires a nationwide referendum.

“I don’t think authorities are inclined to do that. But the government and parliament can carry out deep reforms, within the framework of the current constitution,” said the economist.

Most of the bureaucracy hindering business have nothing to do with the constitution and are part of normal laws and directives enacted by the government. These laws can be swiftly phased out, without creating any new bureaucratic structures.

According to Ghaninejad, part of the constitutional barrier against private business was resolved a decade ago with the reinterpretation of Article 44—which took a while itself—but the execution was appalling.

A study sanctioned by Minister of Roads and Urban Development Abbas Akhoundi found that in the decade to 2013, over 1,000 trillion rials ($28.8 billion at market exchange rate) of government property were “privatized”, but only 3% of that ended up in private hands.

Iran has bloated laws. The misinformed idea that a free economy harms public interest along with profiteering from that state economy are hindering and diverting reform efforts.

Reforms also have great political cost, as conservatives carry a lot of weight in politics and mostly favor a quasi-state economy.

As Ghaninejad says, a lot can be done by the government, without the need for referring to the parliament. They just have to find the courage to do them.