Economy, Business And Markets

Majlis Cognizant of Business Birth Pangs

Majlis Cognizant of Business Birth PangsMajlis Cognizant of Business Birth Pangs

As the opening up of Iran's economy to global entrepreneurship and trade continues after years in the wilderness – something Morgan Stanley described as the biggest thing for the global economy since the fall of the Berlin Wall – the need for meaningful economic reforms is being acknowledged by key figures across the political spectrum.

The country's sclerotic trade, labor and social security laws–some of which have not been modified in decades – have made the overall climate particularly unfriendly, if not utterly hostile, to free enterprise. The predominant role of the government in the economy is another major obstacle to sustainable growth and job creation.

An event was held Sunday by the Iran Chamber of Commerce, Industries, Mines and Agriculture, the Iran Chamber of Cooperatives and Iran Chamber of Guilds to host a group of MPs to an "Iftar" in Tehran to break the Ramadan fast.

The meeting, which was aimed at cementing ties between the increasingly assertive private sector and the new Majlis, became a venue for both lawmakers and business leaders to table their concerns about the economy and reemphasize the need for real change.

Mohsen Jalalpour, the ICCIMA chief, who was fresh from his fourth speech to the new legislature – a record for a business figure– said that that opportunity was indeed unprecedented.

"This is a strong indication from the legislative body about how seriously it cares about economic issues and how determined it is to weather these hard times to achieve a resilient economy with the people at the center," Jalalpour said.

Jalalpour, as spokesman of the domestic business community, asked the lawmakers to tap into the wealth of practical knowledge accumulated over centuries by those plying their trade in the non-government sector of the economy.

Business Climate

He reiterated that the country's top priority should be to improve the  business climate – a fact emphasized by the Leader Ayatollah Seyyed Ali Khamenei, who is of the opinion that foreign investment alone is not the panacea for all the economic ills and "internal resources" should be mobilized as well.

Jalalpour expressed concern about Iran's place on the ease of doing business index (created by the World Bank Group), saying the country's performance worsened in 2016 and now ranks 167 among 180 nations.

He sounded the alarm about the pernicious effects of the "underground economy," saying that if a business-friendly environment is created, problems such as the smuggling of goods, tax evasion that are now strangling the national economy, would become a thing of the past.

"Therefore, I think the main issue is to convince both our own people and foreigners that we are really keen on investment and job creation."

Majlis Priorities

Mohammad Reza Pour Ebrahimi, head of the Majlis Economic Affairs Commission said the parliament's first moves will include reviewing the sixth economic development plan (2016-2021), which the government will soon resend to the Majlis for approval.


"Our second priority is to help overhaul the structure of the country's financial and economic institutions which are under the yoke of government control," the lawmaker said.

Pour Ebrahimi vehemently criticized the way Article 44 of the Constitution (which calls for the reduction of government role in the economy) was implemented. The overblown and botched "privatization process" initialed by the former administration had led to less, not more, economic efficiency.

He considered the privatization process a "step backward" that in some cases had even exacerbated the condition of large companies compared to the time when they were under state control.

"Before Article 44 was implemented most of the firms were operated by the Ministry of Industries and Trade or the Ministry of Oil and therefore governed by one decision-making body. When privatization came in, it apparently sought to minimize government role in the management of these companies by selling their shares to the public."

"For instance, according to the process, 40% of the shares should have been given to the public in the form of Justice Shares, which has now become a ground for  one of the darkest sectors of the economy ruled by a gigantic Mafia," he said. The so-called Justice Shares are an obscure concept, not clear whether they belong to the private sector or the government, he rued.

In selling off state companies to the private sector, the senior lawmaker said, "Based on the procedure, 20% of the companies remained in the hands of the government, and the rest have been bought, albeit ostensibly, by private entities. Seen at close range, we come to understand that all their managers are appointed by the government."


He said as almost all such companies are run by inefficient state-affiliated bodies, no single body accepts responsibility for their performance or the lack of it. "This is not privatization."  

The lawmaker singled out the Social Security Organization as a notorious example of the unhelpful government role in the economy, saying while the government has zero involvement in funding the organization, all SSO managers are appointed by it.

The third point highlighted by the MP was the lack of "oversight" over the implementation of laws which he pledged will be significantly strengthened in the new parliament.

Mohammad Reza Kateb, a member of the Majlis presiding board was the last speaker who warned that in the 2016-17 budget law 90% of the credits are for "spending" and only 10% could be spent on "infrastructure" and "asset ownership."

He echoed calls of prominent economists and academia for the government to downsize and create more space and voice for private enterprise. "As long as the size of the government remains huge, we cannot succeed in our goals."