Privatization is intended to be a bridge between a state seeking greater efficiency and a private sector seeking profitable opportunities. But in Iran’s current climate of economic and political uncertainty, this bridge is increasingly fragile. The 2025/26 budget sets ambitious revenue targets—215 trillion tomans from divesting state-owned shares and more than 325 trillion tomans from selling government assets. Yet achieving these figures appears unrealistic under present conditions. More importantly, the push to meet these targets risks distorting the very logic of privatization and weakening the role of genuine private-sector participation.
Uncertainty is the natural enemy of investment. When the economic environment becomes unpredictable, productive investment stalls, development slows and private actors retreat. Privatization is, at its core, a form of private investment: the private sector assumes management or ownership of economic assets based on clear expectations of returns. When those expectations cannot be reliably formed, the process loses both momentum and meaning. Under such conditions, the state may resort to administrative interventions—price controls, mandated valuations or rushed transactions—to meet budgetary forecasts. These measures may help close fiscal gaps in the short term, but they undermine the credibility of the privatization program.
At its best, privatization functions as a structured economic project. The state seeks improved performance and reduced inefficiency; private investors seek profit and operational opportunity. Both sides maximize their own interests, but only within an environment where rules, forecasts and incentives are transparent and stable. The more predictable the economic and regulatory setting, the easier it becomes for investors to evaluate risks and returns. Conversely, the more opaque the outlook, the lower the appetite for investment and the greater the difficulty for the state to transfer ownership or managerial responsibility effectively.
Foggy Environment
In today’s foggy environment, the risks are multiplying. Real private-sector investors are increasingly reluctant to participate, while quasi-state entities—actors with unclear governance structures and limited accountability—fill the vacuum. Their growing presence dilutes competitive dynamics and weakens the capacity of markets to allocate resources efficiently. For an economy facing tight fiscal constraints and limited administrative bandwidth, relying on such actors is neither sustainable nor productive. Long-term growth of productive sectors requires the capital, expertise and discipline of a genuine private sector, not the expansion of opaque intermediaries.
If uncertainty persists, the government may continue to pursue privatization through administrative pricing and directive-driven sales—methods that depart sharply from market principles. Such transactions may secure short-term budget revenues, but they risk mispricing national assets, eroding public trust and further discouraging authentic private-sector engagement.
Privatization, to succeed, requires clarity—clarity in rules, in expectations and in the economic horizon. Iran’s challenge today is not simply to sell assets but to create the conditions under which real private investors are willing to buy them. Without such conditions, privatization loses its purpose, and the economy loses one of its most important tools for reform and renewal.
