Privatization is 94% Behind Schedule

Hamid Ahadi, Rooz Online:

Two months into the recent decree of the ‘supreme leader’ of the Islamic Republic regarding privatizing of government business entities through relinquishing company stocks, official statistics indicate that contrary to the government’s concurrence with this program, it does not seem to be genuinely interested in implementing it. During the past five months only 6% of the government’s budgetary goals regarding the transfer of company shares to the private sector have been met. In other words, 94% of the budget has not been met in this regard.

It should be noted that last year, before the decree of the ‘supreme leader’ about five times (in terms of value) as many shares were transferred to the private sector worth about 970 billion Rials (a US Dollar is worth about 800 Rials in the open market in Iran). READ MORE

This disregard by the government is expected to make profound changes on the economy of the country. Majlis representatives have complained about the government’s performance and say that there are no accurate figures on government held companies in the country. Because of this government companies that have provisions in their charters may embark on changing their status and compete with the private sector, thus changing the monopoly nature of the enterprises.

It is important to note that these developments took place during months when the government spent an unprecedented amount of its oil income in addition to drawing about $7.5 billion from the special Foreign Exchange Reserve fund without allocating any of this money to development, as is required by the regulations that set up the Reserve fund.

Observers have said that last week’s efforts in preparing draft regulations to protect foreign investment in Iran could possibly open a window for managers in the private sector to increase their domestic investment which they have not been doing because of insecure investment climate in the country when compared to other countries.

While cabinet members of President Mahmoud Ahmadinejad have criticized the private sector for not investing enough in the country, they have also not given the entrepreneurs the opportunity to inform him directly of their problems and needs. For example, at the meetings organized by Tehran’s Chamber of Commerce and Industries in which private sector entrepreneurs and government officials met to discuss their problems, the sessions usually turned into contests and accusations. A similar meeting last month where the Minister of the Interior was present turned into hot exchanges between the participants and ended in threats by the minister. In one particular meeting, deputies from two different ministries made accusations and counteraccusations and one side said that the private sector had to come out of belonging to the ‘opposition”.

These events take place at a time when the balance in the Foreign Exchange Reserve fund stands at $2 million in the red, after the deduction of its commitments. Last year the government withdrew about $3.2 billion from this fund.