Head of the Iran Chamber of Commerce, Industries, Mines and Agriculture says the government must make fundamental changes to rules governing divestment of state-owned property.
Referring to Article 44 of the Islamic Republic Construction, Gholamhossein Shafe’i complained that the “government has flouted its main duty to empower private enterprise.”
Urging the new administration not to lose valuable time, he said: “The government has to develop a new mechanism to move its privatization policy forward,” the ICCIMA website reported.
Article 44 compartmentalizes the economy into three main parts, namely public, cooperative and private. It obliges the government to transfer 80% of its shares in state-owned and affiliated companies to nongovernment and private owners.
One flaw in privatization policies enforced by the government, Shafe’i said in most cases “it is [only] the ownership of the company that is divested” and the government continues to exercise control over the ceded companies even after privatization. In other words, the privatizations have resulted only in change of ownership. Period.
“Mere ownership [not control] of the divested property is obviously not enough to realize the provisions of law. Private enterprise is more focused on management than ownership.”
“We should accept the fact that there are fundamental flaws in the privatization policies that are mostly related to rules,” he said.
As per rules when an asset is sold to private owner(s), the government is supposed to support the newcomers. The support mainly includes loans to help the divested property maintain viability and progress. According to Shafe’i, this aspect of the obligation has been widely disregarded by successive governments.
“Under the present circumstances, private companies have lost interest in the government privatization schemes. This would be to the detriment of all if plans and procedures are not changed.”
To encourage private investors to participate in the divestment plans of the government, the ICCIMA boss proposed formation of a joint commission comprising representatives from the private sector, cooperatives, judicial, legislative and government officials to amend the controversial privatization process and regulations.
Debt Mountain
Taking issue with the inefficient privatization policy, independent economists and experts point to numerous cases in which the government transfers ownership in lieu of its ballooning debt.
Former economy minister, Farhad Dejpasand, earlier said transferring government ownership instead of clearing the debt mountain account for 15% of the total government divestment.
As an example, many key government companies and factories have been transferred to the Social Security Organization, a major non-government entity operating under the tutelage of the Labor Ministry.
SSO is the biggest insurance company covering private sector workers and the self-employed in Iran. Most of the government debt to SSO pertains to the unpaid government share of workers’ insurance premium that reportedly runs into trillions of rials.
