Economy, Business And Markets

Economy Minister Reiterates Business-Friendly Strategy

Finance Desk
In spite of the sharp decline in crude oil prices over the past two years, the Iranian government–unlike its oil-rich neighbors–has refused to use its sovereign funds and has even put aside the 20% share of oil revenues in a rainy-day fund
Gov’t Supporting Pro-Business Agenda
Gov’t Supporting Pro-Business Agenda

Economy Minister Ali Tayyebnia said the administration of President Hassan Rouhani has come a long way to salvage the country's economy from years of inefficiency and mismanagement by implementing reforms in key areas.  These reforms, according to him, focus on supporting private enterprise, organizing the government's massive debts and overhauling the tax system.

The minister, who had taken part in a monthly Boards of Representatives Meeting of Iran Chamber of Commerce, Industries, Mines and Agriculture on Sunday, acknowledged that the country is "not yet where it should be", although it has succeeded in turning the country around by putting it on a path of transparency.

"The conditions are grim and problems still persist but what matters is finding viable solutions for these troubles,'' he told the assembly of the country's business leaders.  

Admitting that he was ambivalent about publicizing issues like the volume of government debts, Tayyebnia went on to reveal that the current level of the administration's and public-sector companies' debts held by contractors and other entities stand at a whopping 6-7 quadrillion rials ($152-177 billion).

Tayyebnia, who has been praised for his efforts in bringing down the runaway inflation to single digits for the first time in nearly three decades through fiscal discipline and the central bank's tight monetary policy, is facing criticism from the private sector for doing little to pull the country out of a long-running recession.

ICCIMA's board members used the opportunity on Sunday to air their grievances about the entrepreneurial climate remaining unfriendly and unnecessary regulations still hampering business growth.     

The minister tried to assuage the business community’s fears  by pledging his full assistance for resolving the private sector’s concerns, saying that he had President Hassan Rouhani’s word to go ahead with any plan that would help the businesses and the economy.

In particular, Tayyebnia referred to the government’s initiative in developing the debt market from 2015 onward and its determination to engage the private sector in issuing bonds and reduce its reliance on the banking system for finance.

“Only four years ago, there wasn’t even an office for assessing the government’s debt,” he told the gathering.   

He said that the government has only tapped the debt market only when it had to, referring to the sale of 10 trillion rials ($254 million) worth of Murabaha contracts for wheat in October on the Iran Fara Bourse over-the-counter market.  

Gholamhossein Shafei, the head of ICCIMA, had earlier expressed his concern about the government’s ability in fulfilling its commitments as it plans to issue more Islamic Treasury Bills to finance its spending.

  The Path Forward

The minister announced that in spite of the sharp decline in crude oil prices over the past two years, the Iranian government–unlike its oil-rich neighbors–has refused to use its sovereign funds and has even put aside the 20% share of oil revenues for a rainy day.  

“We have even received offers from foreign governments such as South Korea to sell our sovereign bonds in these countries but due to some reasons, we have so far decided not to tap into international debt markets,” he said.

He struck an optimistic note by announcing that Iran’s debt-to-GDP ratio–at around 40%–was relatively low compared to other countries, including some advanced economies.

Tayyebnia, who is also a former Tehran University economics professor, traced the root of all the chronic woes besetting the country to its reliance on oil sales. He announced that the government is determined to increase its tax revenues in a way that would do the least amount of harm to small- and medium-sized enterprises.

“We have been wrong in the past to grant tax exemption to certain entities, which only put the pressure on mainstream businesses that work with absolute transparency,” he said.

He announced that a computerized system of taxation is in the final stages of completion, which would eliminate any physical contact between taxpayers and taxmen as well as the grounds for corruption and tax evasion.

Among other measures, he referred to the value-added-tax system that in future will be levied on consumers and not manufacturers.

Tayyebnia also touched upon the issue of privatization–another source of private sector grievance–saying that with the exception of one case mandated by the parliament–the incumbent government has divested its assets only to the private sector rather that the semi-government sector, which was prevalent in the former administration.

“At the end, it all boils down to the fact that we have institutionalized transparency and we know [through data] what is going on in the economic sectors,” said Tayyebnia, adding that improving the business climate would remain the government’s top priority in its final months in office.

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