Mahmoud Hashemi Shahroudi, Head of the judiciary

Viewpoints of politicians about economic affairs, especially with regard to economic corruption, and subsequent debates about investment and job creation have currently turned into an unrealistic dichotomy. Some political players constantly stress the necessity to fight corruption and have focused on disclosure of names of people whose cases have been taken up by Judiciary officials.

On the contrary, another group of officials who are concerned about preventing capital flight, investment security and job creation, have called on the first group to pave the way for infrastructural reforms in order to provide better conditions for investment. Of course, the first group believes its method to be fundamental and maintains that fighting economic corruption has nothing to do with capital flight.

The second group, which includes high-ranking authorities, has noted during recent months that a big chunk of Iranian capital has been taken to other countries and has been used to create jobs in those countries.

Regardless of falsity or truth of the said viewpoints, they represent a dichotomy, which shows that there is no consolidated conceptual atmosphere in the society. Some think that you cannot fight corruption and, at the same time, attract foreign investments. East Asian countries, especially China, have considered the harshest punishments for economically corrupt officials and, on the other hand, have managed to attract foreign capital through adopting wise policies at international and domestic levels.

Analyzing factors which have shaped this dichotomy needs more information than is usually presented in mass media. But the evidence supports speculation that the two groups have different meanings for the said concepts in their minds.

If somebody supports investment, he is charged with being a supporter of capitalists and affluent people and believes that earning money through any means, even dirty money, is of no objection and spreading justice is not among his priorities. On the other hand, he who speaks about fighting corruption is charged with inattention to job creation and wealth generation.

Naturally, such atmosphere will affect judicial and economic decisions. Some cases should be cleared in the course of time before it becomes clear who is right and who is wrong. Of course, people may come to harm in the meantime.

We must note that sometimes, factors affecting economic phenomena are not solely political or economic. Sometimes, psychological atmosphere governing the society plays a major role in forming market and economic relationships. The best proof is fluctuations in stock exchange market where even a rumor can send waves into the market and change its index. Interestingly, the political and economic elite who are aware of the role of psychological factors are effective in establishing the said psychological atmosphere. This is also true about social security. Establishing security for citizens through known factors is one thing, and feeling secure by citizens is another thing whose realization needs different methods.

This is very important when it comes to economic activities. Sometimes, even when all factors for prosperous economic activities are prepared, even an unbalanced statement by an official can change everything. The situation becomes more sensitive when foreign investors are involved. This is also true about capital other than cash. Obviously, in addition to capital, development needs efficient manpower in executive and managerial fields and apparently, some concerns show that the risk of capital flight is serious for all types of capital. During the past few years, there have been heated discussions about brain drain as well as capital flight, but changing tone of high-ranking officials shows that this time, the situation is more alarming. Chairman of the expediency council said, “If we were not serious about development, we would be brought to our knees. An annual growth rate of 8 percent will help us realize goals of the 20-year perspective plan and that growth could only be realized through attracting national as well as foreign investments. If we thought that we can run the country by relying on existing facilities, we would have committed a deadly mistake…. True economic prosperity is when capital is circulating and is not plagued by land usurpation and usury…. Instead of allowing tens of billions of dollars to escape the country, we can attract tens of billions of dollars into the country.”

In another part of his remarks, former-president Hashemi Rafasanjani, referred to critical figures on brain drain, saying, “The scary statistics on brain drain are regrettable. We expected Iran to be a center for attracting educated persons and we even wanted to attract the world’s elite to Iran. However, brain drain proves otherwise.”

Mahmoud Hashemi Shahroudi, head of the judiciary, who should be more concerned about fighting corruption than other authorities, is obviously worried about unhealthy atmosphere which gives rise to capital flight. In a meeting with Majlis deputies, he talked about issues which widely reverberated in political circles and were reflected by print media. He said bluntly, “Islamic principles are more compatible with free economy.” A day later, Saeed Aboutaleb, a Tehran MP noted that viewpoints of judicial officials about fighting economic corruption are different from that of the MPs.

In another part of his remarks, Shahroudi said, “Few investors, who venture to take their money here despite inefficient regulations and competition from state-run sector, are scared away by hearing news about possible crackdown by the government and prefer to give up benefits of investment in Iran. This is quite like giving part of the country to a foreign state. Presence of about 10,000 Iranian companies which have been launched through capital, ideas and science of Iranians in Persian Gulf littoral countries is no less important than giving part of the country to those states.”

He added, “Countries which are considered insecure for investors will be facing capital flight. Investors then go to other countries and take their money, experiences and innovations there and destination countries reap subsequent profits.”

Answering a question posed by the Islamic Republic of Iran Broadcasting’s news program, Shahroudi brought an example to shed more light on the issue and mentioned Rani Fruit Juice Company as an instance. During that interview, Shahroudi claimed that investor who established Rani Company first planned to base it in Iran. However, due to what Shahroudi called, insecure economic atmosphere, the investors later changed his mind and took his money to Saudi Arabia.

During the same meeting with MPs, he enumerated some legal and structural hurdles to investment in Iran and noted, “Our banking, customs, taxation and similar systems are so complicated that most investors prefer to avoid of entangling into it or go rapidly through legal formalities through illegal means such as bribery or collusion to get at what they need.”

Later, 152 MPs wrote a letter to him claiming that publicizing names of economically corrupt persons will have punitive effects and hiding their identities will reduce public trust in the system. He wrote in response: “Majlis deputies are expected to change many laws which lead to economic corruption in line with fighting economic vice and healing the currently ailing economy. They are expected to turn inefficient laws and regulations which are the root cause of capital flight and replace them with clear laws.”

The judiciary has not yet publicized names of those incriminated with economic corruption, but regardless of publicizing the names or not, it will be facing major challenges in the field. Does announcing names solve the problem? Have such procedures not been exercised before? How many controversial cases have thus far been bought up only to be forgotten before long?

What was the end result of all the efforts made to fight windfall wealth under Shahroudi’s predecessor, Mohammad Yazdi? Didn’t they disclose names at that time and even aired trial session through the state television? What was the effect of issuing heavy verdicts against such culprits as Fazel Khodadad on reducing economic crimes? Is it possible that the current insistence on disclosing names and handing heavy verdicts to criminals is just a political game to use the resultant atmosphere to pursue other goals?