Privatization in Iran

According to the Fourth Five-Year Economic Development Plan (2005–2010), the Privatization Organization of Iran affiliated with the Ministry of Economic Affairs and Finance is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange. The privatization effort is primarily backed by reformist members of the Iranian government and society who hope that privatization can bring about economic and social change.

In 2007, Supreme Leader Ayatollah Khamenei requested that government officials speed up implementation of the policies outlined in the amendment of Article 44, and move towards economic privatization. Khamenei also suggested that ownership rights should be protected in courts set up by the Justice Ministry; the hope was that this new protection would give an additional measure of security and encourage private investment.^[1][2] Despite these statements, true official backing for privatization remains very slow due to political reasons.

Some 80 percent of the companies subject to Article 44 of the Constitution would be transferred to public ownership, 40 percent of which will be conducted through the "Justice Shares" Scheme and the rest through the Tehran Stock Exchange. The government will keep the title of the remaining 20 percent.^[3]

It is widely believed that if current governmental organizations are privatized they will need to become more efficient. At present many are not profitable due to large numbers of unnecessary employees hired by the government to reduce unemployment. Furthermore, many of these companies are subsidized by oil revenues. True privatization will inevitably lead to many unpopular job cuts and large scale lay offs.

The writer Kaveh Ehsani of an article on privatization in Iran says: "the absence of transparency and accountability, in all likelihood, “privatization” of public assets will replace state monopolies with equally unaccountable private monopolies and multi-national capital, without necessarily benefiting “the public” in a discernible way." ^[4]

The current privatization effort calls for an initial public offering (IPO) of five percent of the firms being privatized. Once the five percent is public, it will establish a base market price for future offerings. According to a study conducted by the IMF in 18 countries, privatization adds 2 percent to the government's GDP per annum.^[5]