Open and Aboveboard

The past week saw Iran’s diplomatic outreach bear fruit. Long sessions of political horse-trading that led to the nuclear agreement and in effect spared a volatile region the dangers of brinkmanship, is now being compounded by President Hassan Rouhani’s men admonishing western capitals for failing to uphold their share of the historic deal signed last July.

It must be said that a complex web of obstacles has kept Iran from reaping the full benefits of the accord with the six world powers, namely the residual US sanctions to a creeping sense of Iranophobia, thanks in part to the previous government’s scorched-earth policies and the confusion surrounding the terms of the deal.

The hindrances in realizing the sanctions relief has been grist to the mill of naysayers who were (and still are) highly skeptical of, and opposed to, any form of rapprochement with the West and fiercely against any concessions on the nuclear energy program.

The recent unfolding of events, however, has swung the pendulum in the favor pragmatism. Last Friday the US Treasury Department released new guidelines for dealings with Iran that makes it a lot easier for the country to trade in dollars.

The news particularly brought the long-sought relief to private businesses whose dealings had been hobbled by restrictions on the use of the greenback. The clarifications from the Treasury’s Office of Foreign Assets Control also remove a blanket ban on foreign transactions with Iranian firms that may be controlled by a person who remains subject to US sanctions.

Also last week, the head of the International Monetary Fund met with Iran’s Economy Minister Ali Tayyebnia on the sidelines of the annual meetings of the IMF and World Bank Group in Washington. In a first such meeting after 20 years, Christine Lagarde pledged to use her good offices to help remove barriers that hinder Iran’s restoration of ties with international lenders and financial institutions.

She also said she will press American officials to remove the existing hurdles. In an interview with the Financial Tribune on the sidelines of the event (to be published soon), the IMF first deputy, David Lipton, commended the Rouhani administration for its hard-earned achievements in bringing down inflation and initiating reforms in the banking sector.

On a similar note, the IMF had earlier released an upbeat assessment of Iran’s economy, projecting an improvement in sustainability in 2016-17 suggesting that better economic conditions herald more robust growth prospects for the nation of 80 million people.

These positive developments, however, should not obscure the fact that the country is still wrestling with serious economic problems, nor should it provide a reason for government complacency.

  What Next?

As the government approaches its final months in office, it should push the economic reform agenda more aggressively. Low growth and recession continue to batter the economy. Government debt to banks and the increasingly alarming conditions of banks evidenced by the ballooning debt to the central bank plus the surge in broad money supply are all symptoms of a struggling economy.

But the main grievance of the private sector and independent analysts seem to center around the fact that Iran’s economy, still heavily state-controlled, essentially lacks the transparency and fair competition needed for business growth and entrepreneurship.

In its latest board meeting on Sunday, Iran Chamber of Commerce issued an official statement, complaining about an unlevel playing field which has stacked the odds against those who do not have access to special interests and rent-seeking sources. The business community made a clarion call for the transparency of data and a clampdown on pervasive corruption in the public sector.

The government, which has claimed the mantle of combating monopolies and corruption, should indeed intensify its efforts by first and foremost making all key economic data public.

On Sunday, the Central Bank of Iran Governor Valiollah Seif, broke the bank’s silence on withholding growth rates after more than a year and a half, revealing that the economy had grown by 5.4% in the first quarter ending June 20. While that is welcome but still different from the growth rate published earlier by the Statistical Center of Iran– we should all hope transparency becomes the norm rather than the exception.

For the government and other state actors to conduct business in an open and aboveboard way is not an option to be taken lightly: it’s the only sure way to promote the business climate , create jobs and instill sustainable growth–even if in the short-term that may prove to be unpalatable.