Economy, Business And Markets

Case Against Bisecting a Ministry

The inherent flaws and foibles within the Ministry of Industries, Mining and Trade won’t disappear with the government’s move to bisect it into two: ‘Industries and Mining and ‘Commerce’. Ali Akbar Saberi, a former deputy industry minister in his write-up in the Financial Tribune’s sister publication, the Persian-language Donya-e-Eqtesad cautions against haphazard measures that have been tried and tested in the past only to get failing grades.

What follows is a free translation of his opinion piece.

Merger of the Ministry of Industries and Mines and the erstwhile Ministry of Commerce in fiscal 2011-12 was one of the few measures taken by former president Mahmoud Ahmadinejad that ostensibly was aimed at downsizing. However, what he in fact did was far from merger as the word is technically defined.

The centralized statecraft Ahmadinejad and his men were in love with was indeed an impediment to downsizing in the true sense of the word.  Sadly enough, the government of Hassan Rouhani assigned the portfolio of this ministry to someone who did not have the skill, competence or determination to efficiently coordinate the missions of the ministry, despite his exceptional ability in executing major projects. Rather than pushing for institutional reforms, he (Mohammadreza Nematzadeh) adopted a hands-on approach that resulted in pervasive presence of the already bloated public sector in everything commerce and production. Needless to say the help-starved private enterprise was left in the lurch yet once again.

It is rather unfortunate that the government should go down the same tried and tested  path by  planning to split the Ministry of Industries, Mining and Trade. I believe the breakup of the two sectors ‘industries and mining” and ‘commerce’ was not successful in the first place for the following reasons:

1. The existing army of dysfunctional and inefficient industrial entities is a clear sign of the disappointing performance of the ministry in issuing permits that more often than not was and is one aspect of rent-seeking. Truth be said, the ministry was in fact the patron and distributer of nepotism, to say the least.

2. There were six industrial towns in late 1970s. Now there are 940 such places across the country. One should ask has local production, employment and our ability grown by 150 times? Conventional wisdom would have it that the non-existence of an organization defined largely as impotent and ineffective for almost four decades is better than its being. Instead of helping manufactures grow and prosper on the regional and international stage, the ministry has messed with everything under the influence of parliamentarians and local officials.

3. A good part of what the ministry has done after the 1979 Islamic Revolution such as import of basic goods and their distribution is in fact the prerogative of the private sector that only led to government’s unwanted role and influence in trivial matters. Its long-list of inefficiency and anachronistic concerns  had one major impact: Prices went through the roof along with it the cost of living.

4. In the early years of Iran’s industrialization, there was a general office of industries in the Ministry of Economy. One of the primary features of industries then was that they  operated entirely on their own, fulfilling their needs by drawing on their own skills and initiative. As oil prices started ascending the government made windfalls and started to interfere in production issues under the pretext of speeding industrial development. One of the handiworks of the government was the launch of assorted organizations such as the Industrial Development and Renovation Organization. Fifty years since inception,  IDRO seems simply unable and unwilling to run a handful of leading manufacturing companies.

5. Based on the bitter experience of Iranian government interference in production and commerce, the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei decided to communicate the revolutionary policies of Article 44 of the Constitution, which redefined private sector participation in the economy. The process aimed at promoting the mechanisms of a market economy and underpin privatization.] Now the question is why as little as 5% of industries has been handed over to the real private sector? The fact of the matter is that underperforming and failing organizations have long enjoyed government backing, overt or covert. And when the government decided to sell the loss-making firms to private businesses, obviously without government subsidies, no one in their right minds was interested.

Production and trade are links in the same chain. Breaking this chain comes at a monumental  cost and harms competitiveness. One primary objective on the development agenda should be trade. Most of the activities of the ministry are unnecessary and it’s better to eliminate them or delegate responsibility to the private sector instead of splitting the ministry. It should be up to the Trade Promotion Organization to handle most of the related jobs now under the domain of the ministry.

Moreover, the creating new ministries means unwanted and unhelpful paper work and the waste of precious time of private industries and businesses, not to mention overlap and confusion in delineating tasks of ministries working for and involved in more or less on field of work. And then one really wonders what really happened to downsizing and learning from past experience.


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