The Iranian government started moving towards market economy by privatizing its vast industrial holdings over a decade ago. But the effort was marred by corruption and the stakes ended up in quasi-state hands, leaving the economy worse off than before.
The administration of President Hassan Rouhani, however, is breaking away from past policy, saying it is pursuing privatization in the true sense.
These new efforts have met heavy resistance from within the government and other state entities like the parliament.
Shining a new light on the administration’s limitations was Economy Minister Ali Tayyebnia, who says his ministry “does not have room to maneuver”.
“Government companies have become centers of corruption and rent distribution,” said Tayyebnia to reporters earlier this week, IRNA reported.
“They have pushed me over the edge during the past two years.”
Tayyebnia’s outburst of anger is unprecedented though he did not stop there and rapped other state powers, like the parliament as well.
In the decade to 2013, over 1,000 trillion rials (about $29 billion) worth of government property was “privatized” under a new interpretation of Article 44 of Iran’s Constitution. Of that, only 13% ended up in the hands of private owners, according to Iranian Privatization Organization’s statistics.
But that share has been diluted to below 3% after some changes in ownership, Tayyebnia said, citing Minister of Roads and Urban Development Abbas Akhoundi.
The bulk of the stakes went to quasi-state companies and organizations under murky deals—the government repaid debt or exchanged assets with stocks and private bidders were kept out of deals.
Government companies reported to ministries and were overseen by Supreme Audit Court of Iran–tasked with controlling financial activities of all ministries, institutions, government companies and other organizations benefiting from the state budget.
However, quasi-state companies lack any oversight, close their books to the government and are run as inefficiently as ever. The state of privatized companies is now worse than when they were run by the government.
Who is curtailing Tayyebnia’s privatization campaign today? Members of parliament fear new public offerings will wind up like the old ones or are afraid of job cuts to companies located in their electoral provinces.
Ministries fear the loss of their leverage and government managers have various reasons to keep their companies off private hands.
Examples are abundant. Naysayers have blocked ownership transfer, postponed initial public offerings on the pretense of restructuring, changed financial records by adding debt to the balance sheets and even cut off power supply to privatized companies.
The economy minister is fighting back, defending privatization and keeping quasi-state companies at arm’s length. This year all of the stakes sold off were handed to real private owners, up from 85% a year before and a leap from the previous decade.
“I am holding my ground to some extent. If privatization is supposed to be done like the past, I prefer not to be the minister and have my name on this disaster,” Tayyebnia said.
