2003 / No. 26
Achieving 80 Percent of
One of the most
important recent discussions with regard to transferring companies was
pricing their stocks.
The privatization figure for (the
Iranian calendar year) 1382 is inflationary (unreal) and is by no means
achievable. The 80-percent realization of privatization has become possible
with much difficulty. Therefore, more attention must be paid to budgetary
figure during upcoming years.
The sudden acceleration of privatization
brought about the happiest day for the Iranian economy. Seyed Ahmad Mir-Motahari,
head of Iran Privatization Organization, who came under serious fire for
offering 860 billion rials worth of stocks during the first half of the
current Iranian calendar year (started 21 March 2003), told reporters that
9,400 billion rials of stocks has been presented on the stock exchange by the
end of fall, thus brushing aside many charges. A couple of days earlier, Mehdi
Karbasian had broken the same news with much fervor. It seemed that each of
the government’s top economic officials had decided to take the credit for the
declaration. The 80% realization of the privatization objectives for the
current year, although faced by a 20% budget deficit, is promising. The
privatization drive in the country, which practically started from the middle
of the Third Economic Development Plan, was progressing at a snail’s pace. The
sudden acceleration of the trend, in addition to indicating closer cooperation
with Iran Privatization Organization on the part of most state-run companies,
is further evidence of the convergence among economic officials or the
beginning of improvement in the country’s economic management. On the other
hand, since the main axes of the Fourth Economic Development Plan include
privatization and competitiveness, one can be hopeful that the first step
would be taken in the same direction, although there is a long way from
providing the grounds to finishing the job.
Privatization, a Compensation for Budget
Deficit: One of the
objections raised by many privatization experts is shifting revenues earned
through this process to compensate the government’s budget deficit. Based on
the Third Plan Law, revenues earned through privatization would be used for
making up for the budget deficit. Therefore, no change can be made in the
process before the end of the Iranian calendar year 1383 (2004-05). Referring
to this fact, Seyed Ahmad Mir-Motahari said, "We intend to allocate
privatization revenue sources to improving structure of companies during the
Fourth Economic Development Plan. We also plan to do away with employment
problems resulting from relocation of manpower of transferred companies
through two unemployment insurance and job training funds." He stipulated that
at present, selling government assets as a source of revenue has been totally
neglected in the most governmental economies of the world.
Organization was drafting the bill of privatization law, which would be
soon presented to the government.
Head of the privatization organization
emphasized that privatization was characterized by defining new opportunities
for the participation of the private sector in economic activities and
downsizing the government. Therefore, the government must not transfer
ownership of its assets to the private sector in order to earn new revenues.
Mir-Motahari, who practiced austere
policies for presentation of shares on the strength of false stock prices and
to encourage committed transfer of stocks during the first half of the current
year, announced the establishment of a transfer basket that included more than
9,000 billion rials worth of governmental shares. He added, "The current plan
includes transfer of half a million governmental stocks. The shares include
priced stocks of three companies of Sadra, Sanayeh Azarab, and Machine Sazi
Arak worth 4,400 billion rials, the priced shares of two cement production
companies worth 2,000 billion rials and 1,200 billion rials; shares of
petrochemical companies whose letter of attorney has been given to the
organization by the National Petrochemical Company (NPC). All the shares are
managerial and controlling shares and there is a high willingness in the
market to buy them. Also, the letter of attorney for presenting shares of
Karoun Cement, Avangan, Nirou Klor and Abfar companies has been offered by the
Ministry of Energy."
While announcing the presentation of 1.5
million shares belonging to 10 other companies, the official stated that the
shares were worth 1,000 billion rials, whose related advertisements have been
frequently published in the press.
"We are planning to price the shares of
160 more companies. In addition, presenting small stocks is also underway," he
Interpretation Offered by Stocks Pricing
Authority: One of the most
important recent discussions with regard to transferring companies was pricing
their stocks. Previously, the authority in charge of transfer determined the
price under supervision of certain commissions. Since this pricing method had
raised many questions, pricing was handed over to Iran Privatization
Organization. Referring to this, Mir-Motahari says, "Some 50 audit institutes
and centers cooperate with the organization and carry out stock pricing
according to certain standards. In addition, official experts from the Justice
Department and Iran Privatization Organization quote their own prices and the
final price is set by a specialized commission taking into account the above
three price quotes."
The official noted that the value of the
stock exchange, return of investment as well as many other factors is taken
into consideration when determining prices. He also announced design of a
‘Privatization Model’ that would cover all the national demands; and that Iran
Privatization Organization was drafting the bill of privatization law, which
would be soon presented to the government.
"In this model, we have tried to pave
the way for more participation of the private sector in the national economy
by improving the government’s structure (through downsizing the government).
Boosting production level, exports as well as productivity of companies are
the main axes of this model. After that, we will try to make the most
practical decisions that would lead to protecting employment at transferred
units," he noted.
The Budget Law for (the Iranian
calendar year) 1382 has stipulated that 14,000 billion rials of governmental
assets must be ceded to the private sector. Although, about 80% of the figure
would be realized during the current year, which is unprecedented in the
country’s history of privatization, the remaining 20% is still in limbo. The
fact that about 45,000 billion rials of budgetary projections would not be
realized is a considerable issue. Head of Iran Privatization Organization
stated that the deficit was inevitable.
The budget deficit which has been
nagging national economy year in and year out, like many other concepts, has
changed name and is mainly referred to as ‘non-realization of government’s
revenues’. Also the problem with privatization would not solely be solved
through offering stocks, but the next step should be paying attention to time
and assessing the market demand.
With regard to the slow trend of
presenting stocks since the beginning of the year and the reason for not
offering stocks at a certain juncture during which many people called for more
speedy presentation of stocks, Mir-Motahari said, "If we had presented stocks
at that juncture, the price would have continued to soar and now the
government would have been held responsible for presenting low-output stocks
at a high price."
Elaborating on the reason for lack of
enthusiasm to purchase some governmental stocks, he said, "Unwillingness was a
result of wide fluctuation of prices and cannot be attributed to international
tensions. Therefore, supply was carried out in proportion to market demand.
Anyway, if people were not enthusiastic about a certain stock, we could review
conditions, change stock price or change installments or the volume of
Nov. 2003 / No. 26