Mohsen Safaei Farahani, Former Deputy of Ministry of Economic Affairs and Finance

After amendments were made to Article 44 of the Constitution which were subsequently held up by concerned authorities, new hopes were raised about a major transformation in Iran’s economic system. Yet, legal problems are not the only impediments to economic transformation. The passage of the privatization law, which was not previously implemented even at low levels, has not brought about a robust private sector activity. The main reason for recent protests by Majlis deputies and members of the Expediency Council results from the reality that in a country where 85,000 billion tomans is allocated to the development of state-run companies, there is no way to implement any form of privatization policy and downsize the government. Therefore, the executive branch is invariably involved in the non-realization of privatization policy.

Are correct methods taken into account in order to attain the goals of privatization in our country? The 20-Year Perspective Plan has delineated the status of the private sector while the Fourth Five-Year Economic Development Plan has clearly indicated the ideal share of the private sector and the amount of investment needed in the sector. Two years since the onset of the Fourth Economic Development Plan, it remains to be seen whether or not the necessary assurances have been provided for investors in the private sector. Naturally, investors will not look at high risk rates and market instability as major factors. Iran has been repeatedly ranked as a high-risk investment environment by leading international standards. Therefore, not only foreign investors are not willing to bring their money to Iran, but also domestic investors are not interested in investing in productive economic sectors. In fact, economic activities in the private sector have not grown suitably and the private sector’s activities have been carried out on a small scale.

Since the government is the biggest employer within the economy and runs the biggest contractor establishment with regard to such key economic sectors as oil, gas, petrochemicals, telecommunications, post, water, power and steel industry, it prevents economic activities in the private sector to take root. Thus, owners of capital have focused their attention on the commercial fields and small to medium industries. The private banking sector is one example. After seven years since their establishment, private banks still account for less than 8 percent of banking activities in the country and this imbalance can be witnessed in other economic sectors.

It seems that even the most preliminary problems have remained unsolved in Iran. For example, each year hajj pilgrims are transferred through inefficient state-run system at a very high cost while a more organized manner can clarify the process and decrease the overall cost. It seems that powerful currents inside the government are not willing to loosen their grip on various economic sectors and only chant slogans about the necessity of privatization, while in practice; they act as a major impediment to privatization drive.