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Privatization in Iran

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Privatization in Iran

Iran's disinvestment has brought the government's ownership in the GDP from 80% in 2005 down to 40% by the end of 2009.[1]

According to the Fourth 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.[2][3] 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

  • Private sector in Iran - PressTV (2011)
Videos
  • Privatization of Public Goods in the Islamic Republic by Kaveh Ehsani
  • Law in Force - Iran Daily
  • Pros and Cons of Privatization - Iran Daily
  • Privatization and Structure of Iran's Transportation System (2000)
  • Privatization of State-Owned Enterprises in Iran: Panacea or Prescription for Disaster By Dr. Ali Mostashari
  • Iran: Inflation, privatization lead intensify working class struggles
Press articles
  • Economy and Business in Iran at DMOZ
  • Privatization Organization of Iran (Persian) (English) - affiliated to the Ministry of Economy and Finance (With latest info on the companies being privatized, including regulations)
    • List of Companies that have already been approved for privatization (early 2007)
  • Federation of Euro-Asian Stock Exchanges - Tehran Stock Exchange statistics, listing requirement, regulations, operations, comparisons and latest news (including IPOs)
  • Iran Industrial Management Company (Persian) - Top 100 Iranian companies list

External links

  1. ^ a b "No Operation". Presstv.com. Retrieved 2012-02-05. 
  2. ^ "Iran: Supreme Leader calls for acceleration of privatization program". Payvand.com. Retrieved 2012-02-05. 
  3. ^ [19]
  4. ^ a b [20]
  5. ^ a b Author. "About the Middle East Report | Middle East Research and Information Project". Merip.org. Retrieved 2012-02-05. 
  6. ^ Iran Daily - Economic Focus - 03/14/07
  7. ^ "BBCPersian.com". Bbc.co.uk. Retrieved 2012-02-05. 
  8. ^ a b John Pike. "Mostazafan and Janbazan (Oppressed and Disabled Veterans) Foundation (MJF)". Globalsecurity.org. Retrieved 2012-02-05. 
  9. ^ Business Day - News Worth Knowing
  10. ^ a b c d Roshanzamir, Negar (2006-07-03). "/ In depth - Iran to privatise but cling to big oil companies". Ft.com. Retrieved 2012-02-05. 
  11. ^ [21]
  12. ^ "Iran to launch investment banks". Payvand.com. Retrieved 2012-02-05. 
  13. ^ a b [22]
  14. ^ http://www.iran-daily.com/1388/3482/html/economy.htm#s400458
  15. ^ "Iran Financial Services Forecast", Economist Intelligence Unit, The Economist, 18 August 2008 
  16. ^ a b c "No Operation". Presstv.com. Retrieved 2012-02-05. 
  17. ^ http://www.tehrantimes.com/economy-and-business/115671-iran-to-privatize-186-state-run-companies-official
  18. ^ http://www.payvand.com/news/14/nov/1066.html
  19. ^ Iran Daily - National - 12/21/05
  20. ^ a b http://financialtribunedaily.com/articles/2014/09/16/economy-domestic-economy/701/govt-make-%E2%80%98justice-shares-tradable
  21. ^ [23]
  22. ^ Iran Daily - Domestic Economy - 11/28/06
  23. ^ "10m justice shares to be ceded by March". .irna.ir. Retrieved 2012-02-05. 
  24. ^ [24]
  25. ^ a b c http://presstv.com/detail.aspx?id=106538
  26. ^ [25]
  27. ^ Marshall Goldman, The Privatization of Russia (London: Routledge, 2003); and Stephen Kotkin and A. Sajo, eds., Political Corruption in Transition (Budapest: Central European University Press, 2002).
  28. ^ "20m Shares for Workers". Iran Daily. 18 November 2008. Retrieved 14 July 2012.  via Wayback Machine
  29. ^ Iran Daily - Domestic Economy - 02/14/07
  30. ^ Iran Daily - Domestic Economy - 04/04/06
  31. ^ Iran Daily - Domestic Economy - 09/02/06
  32. ^ "Migration Information Source - Iran: A Vast Diaspora Abroad and Millions of Refugees at Home". Migrationinformation.org. Retrieved 2012-02-05. 
  33. ^ "Iran", Investment regulations,  
  34. ^ [26]
  35. ^ "No Operation". Presstv.com. Retrieved 2012-02-05. 
  36. ^ "No Operation". Presstv.com. Retrieved 2012-02-05. 
  37. ^ "Financial Times: Iran fund opens bourse to foreign investors". Ft.com. 2007-06-21. Retrieved 2012-02-05. 
  38. ^ Top 100 Corporations Named
  39. ^ Iran Daily - Domestic Economy - 11/11/07
  40. ^ "Iran: Top Firms Relegated In Bourse Rankings". Zawya.com. 2007-10-07. Retrieved 2012-02-05. 
  41. ^ Iran Daily - Domestic Economy - 02/27/07
  42. ^ "No Operation". Presstv.com. Retrieved 2012-02-05. 
  43. ^ Iran to privatize 240 companies by March ’08
  44. ^ http://iran-daily.com/newspaper/page/4835/4/14035/0
  45. ^ "Iran to privatize 5 banks". Payvand.com. Retrieved 2012-02-05. 
  46. ^ "No Operation". Presstv.com. Retrieved 2012-02-05. 
  47. ^ [27]
  48. ^ Iran-Daily:IDRO to Privatize 102 Companies
  49. ^ Iran Daily - Domestic Economy - 09/11/07
  50. ^ [28]
  51. ^ Sheikholeslami, Ali (2010-07-21). "Iran Sells 18% of Saipa Automaker for $1.6 Billion, Tehran Exchange Says". Bloomberg. Retrieved 2012-02-05. 
  52. ^ "Iran Tractor Manufacturing Company to go public". tehran times. Retrieved 2012-02-05. 
  53. ^ Iran Daily - Domestic Economy - 01/28/07
  54. ^ [29]
  55. ^ [30]
  56. ^ "Iran to privatize 20 power plants". Payvand.com. 2010-03-20. Retrieved 2012-02-05. 
  57. ^ "No. 3731 | Domestic Economy | Page 4". Irandaily. Retrieved 2012-02-05. 
  58. ^ a b Iran Daily - Domestic Economy - 05/07/07
  59. ^ a b Turquoise Partners: Iran Investment Monthly (February 2011) Retrieved April 30, 2011
  60. ^ Iran to privatize 2 companies by June 21
  61. ^ [31]
  62. ^ [32]
  63. ^ "No Operation". Presstv.com. Retrieved 2012-02-05. 
  64. ^ Iran-Daily: Privatization of Telecom Companies
  65. ^ "Iran to privatize 51% of telecommunication sector by March ’08". tehran times. Retrieved 2012-02-05. 
  66. ^ [33]
  67. ^ a b "Iran plans to privatize 95% of oil ministry’s subsidiaries". Tehran Times. Retrieved 2012-02-05. 
  68. ^ "Iran lists 21 oil companies for privatization". Payvand.com. Retrieved 2012-02-05. 
  69. ^ [34]
  70. ^ [35]
  71. ^ "Iran's oil terminals move to private hands". UPI.com. 2009-09-21. Retrieved 2012-02-05. 
  72. ^ Iran Daily - Domestic Economy - 02/10/08
  73. ^ "Iranian North Drilling Company to go public - 100225 - 2009-06". Steelguru.com. Retrieved 2012-02-05. 
  74. ^ Iran to privatize 17 petrochemical companies by March 20
  75. ^ """40% of Iran's petrochemical industry to be privatized as "justice shares. Payvand.com. Retrieved 2012-02-05. 
  76. ^ a b [36]
  77. ^ "Petrochemical industry to be fully privatized". tehran times. Retrieved 2012-02-05. 
  78. ^ "Iran plans privatizing oil refineries". tehran times. Retrieved 2012-02-05. 
  79. ^ http://www.turquoisepartners.com/iraninvestment/IIM-Dec10.pdf

References

See also

  • Iran also projects to privatize some of its oil refineries (2009).[59][76][78][79] Isfahan, Bandar Abbas, Tabriz, Shiraz, Kermanshah, Lavan, and Tehran (Shahid Tondgouyan) oil refineries will be transferred to the private sector but the ownership of Abadan and Arak (Imam Khomeini) oil refineries will remain in government control.[67]
  • Iran’s National Petrochemical Company (NPC) plans to privatize 17 companies by the end of 2007.[74] Forty percent of those shares will go to "Justice Shares" for underprivileged citizens in Iran. 20% will be allocated to NPC. 35% will be put on sale on the Tehran Stock Exchange and the remaining 5% will go the Petrochemical Industry personnel. The 20 percent allocated to the NPC is meant to support petrochemical industry projects but may be offered to the private sector in the future.[75] 89.6 percent of Shiraz Petrochemical Complex, and 27.76 percent of Petrochemical Investment Company will be sold to the public in June 2009.[76] All shares of domestic petrochemical firms will be offered to the public in the frame of a holding company by the end of Iranian year (ending March 21, 2010).[77] As part of the 2010 Iranian Economic Reform Plan, petrochemical companies, which use natural gas as their feedstock (rather than fuel), will pay no more than 65% of the average export price (rather than 75% for the general population) for a period of 10 years.
  • Iran is to target foreign investment in its energy sector by creating an umbrella group of nearly 50 state-run firms and listing its shares on four international stock exchanges. Under the privatization plan, 47 oil and gas companies (including PetroIran and North Drilling Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange by 2014.[72][73]
  • According to the Supreme Leader of Iran the downstream oil and gas sectors will be privatized, excluding the upstream oil and gas industry, the National Iranian Oil Company, the state companies involved in exploration and the production of crude oil and gas. Iran’s Oil Ministry plans to cede shares of 95 percent of its affiliated companies to the private sector.[67] Just 7 out of 142 subsidiaries of the Ministry of Petroleum have been excluded from the privatization process.
Shazand Petrochemical complex.

Oil, gas and petrochemicals

In 2009, 51% of TCI was sold to Mobin Trust Consortium, a consortium belonging to the Iranian Revolutionary Guard Corps for the sum of $7.8 billion.[66]

  • Group Four: The subsidiary telecom network named Subsidiary Telecommunications Company is another basic telecom network. They are completely owned by the state and not targeted for privatization.
  • Group Three: There is only one public network in the data network sector, namely Data and Telecommunications Company of Iran, which is considered a basic telecom network in terms of mobile networks and Shomal IT Company. In the non-governmental sector, there are over 100 companies with a shared data network.
  • Group Two: The second group concerns mobile telephone networks. In the public sector, they include the Telecommunication Company of Iran (TCI) to be privatized by March 2008.[65] In the non-governmental sector, they include telecommunications companies such as Omran Kish, Isfahan, Rafsanjan Complex and Irancell.
  • Group One: Among the 30 provincial telecom networks, the fixed telecom networks pertain to those of Tehran, Isfahan, Fars, Hamedan, Ahvaz, Khorasan Razavi, Khuzestan and East Azarbaijan. The first group concerns fixed line telecom networks, including those in the public sector with 30 subsidiary telecom networks in provinces. The non-governmental sector includes companies such as Iraphone, Novin, Zahi Kish, Kouh-e Nour, Montazeran Adlgostar and Pouya Ertebat with each having hundreds of thousands of subscribers.

Under the general policies of Article 44, telecom companies are categorized in four groups as follows:

In 2006, the Ministry of Communications and Information Technology announced that it will float the shares of affiliated companies such as Mobile Telecommunications Company in the stock market.[64]

Telecommunication

As planned, all airline companies except for Civil Aviation Organisation as well as Iran Air and its affiliate Iran Aseman Airlines. The fast-growing Islamic Republic of Iran Shipping Lines has also been lobbying for more independence.[10] The government has agreed to offer the shares of Iran Post Company in the bourse (2008).[61] The National Iranian Tanker Company's shares have been offered to the private sector in 2009.[62] In 2009 Iran announced that Imam Khomeini port, its biggest port in the Persian Gulf, will be privatized.[63] Bandar Abbas has also been listed for privatization.[16]

Transport

The steel, cement and iron ore prices are currently being liberalized in Iran. [60] National Iranian Copper Industries Co.(NICICO),

Mines & metals

Mapna Company. Sahand, Bistoun, Shazand, Shahid Montazeri, Tous, Shahid Rajaei and Neishabour power stations are among the profit-making plants, work on privatizing them will be finalized by late March 2007.[53] Jahrom, Khalij-e Fars (Persian Gulf) and Sahand power plants will be ceded to the private sector in 2009.[13][54] All domestic power plants will be privatized gradually, except those the government feels it should run to ensure security of the national electricity grid. Power plants of Damavand, Mashhad, Shirvan, Kerman, Khalij-e Fars, Abadan, Bisotoon, Sanandaj, Manjil and Binalood, which have been turned into public limited firms, are ready for privatization.[55] As of 2010, 20 power plants were ready for privatization in Iran.[56] Upon ceding the 20 power plants to IPO, some 40 percent of the capacity of power plants nationwide will be assigned to the private and cooperative sectors.[57]

Shazand power plant

Utilities

102 companies out of the total 130, affiliated to IDRO, will be privatized by next March (2009)[48] Leading automakers Iran Khodro and Saipa are also due to be privatized in March 2008.[49] In July 2010, the government sold a further 18% stake in both Iran Khodro and Saipa for about $2 billion in total, bringing down its participation in both companies to about 20%.[50][51] Shares of Iran Tractor Manufacturing Company have also been offered on the Tehran Stock Exchange as part of an IPO.[52]

Industry

Insurance companies Asia, Dana and Alborz will be listed on the stock exchange in 2009 after review and improvement in their financial accounts, internal regulations, organizational structure and dispersion nationwide.[46][47] In 2008, the total insurance premiums generated in Iran were $4.3 billion. This is less than 0.1% of the world’s total, while Iran has approximately 1% of the world’s population. The insurance penetration rate is approximately 1.4%, significantly below the global average of 7.5%. This underdevelopment is also evident in product diversity. Approximately 60% of all insurance premiums are generated from car insurance. Also, 95% of all premiums come from general insurance contracts and only 5% relate to life products. Payout ratios have shown consistent growth over the years. Last year, the industry average payout ratio was 86%.

Most smaller state banks will be open to flotation, but excluded key banks including the Central Bank of Iran, Bank Melli Iran, Sepah Bank of Iran, Bank of Industry and Mines, Bank of Agriculture, Housing Bank (Bank Maskan) and the Export Development Bank of Iran. The privatization-bound banks are Tejarat, Mellat, Refah, Saderat, and Post Bank (ceding 100 percent of stakes of all 5 banks).[45]

Banking and insurance

Of 1,000 companies awaiting the cabinet’s approval, 240 companies had the green light already to be privatized by March 2008.[43] As of 2014, Iran had also 930 industrial parks and zones, of which 731 are ready to be ceded to the private sector.[44]

Major companies listed for privatization

The assets of the top 100 Iranian Microsoft.[41] But this does not account for goodwill that likely increases the real assets value of those same companies to more than one trillion US dollars.[42]

Valuation

Latest statistics show that the number of companies worth over one billion dollars on Retirement Investment Firm, Metal and Mine Investment Companies, Gol-Gohar Iron Ore Company ($2.1 billion), and Chadormalu Mining and Industrial Company.[39][40]

Meanwhile, the Persian daily SAIPA car factory with 40,528 billion rials and National Iranian Petrochemical Company with 32,024 billion rials. They were followed by SAPCO, Bank Melli Iran, Bank Saderat Iran, Mobarakeh Steel Co. and Bank Mellat taking the sixth to tenth positions.

According to the same survey, while 67 percent of the firms have experienced a decline in profit margin, car manufacturers, cement factories, investment institutions and banks have had an increase in the same index. The Iranian year March 2005-06 was a good year for these industries.

The ranking has been assessed by Iran Industrial Management Company for the past 10 years.[38] Based on financial statements for March 2005-06, the ’100 top Iranian corporations’ were ranked and announced in a conference in early 2007. According to the economic expert in charge of the rankings, the main index considered was the sales of companies because “Sales figure indicates the growth of a corporation“.

Top 100 Iranian companies

A subsidiary of Iran's largest bank, Melli Investment Bank with branches in Dubai (UAE) and London, plans to launch a fund of up to $300 million to invest in the Tehran Stock Exchange, providing an alternative venue for foreigners to invest in the Iranian economy. The market, with a capitalisation of $37 billion, is trading at a fraction of the earnings multiples enjoyed by Iran's neighbours, while average earnings continue to grow at about 25 per cent a year. The fund will be composed of blue chip companies like Iran Khodro and will be based in the Cayman Island and managed from Iran.[37]

Offshore fund

Foreign investors can bid in Iranian privatisation tenders, but need permission from the Economy Ministry on a case-by-case basis.[10] Iran has announced it will begin to allow foreign firms to purchase Iranian state-run companies, with the possibility of obtaining full ownership.[36]

Foreign investment

The government has proposed setting up a joint investment fund with $5 billion in basic capital and an economic union to serve Iranians living abroad. The stated goal is to attract investment from Iranian expatriates and using their experience in stimulating foreign investments.[34] Later, in 2010, it was announced that Iran will start the process by creating a national fund with a basic capital of eight million euros. This fund will later transform into a bank.[35]

Expatriate fund

In 2000, the Iran Press Service reported that Iranian expatriates had invested between $200 and $400 billion in the United States, Europe, and China, but almost nothing in Iran. The Iranian government's efforts to encourage foreign investment from Iranians in the United States were thwarted in 1997 when President Bill Clinton issued an executive order prohibiting investments in Iran (ILSA).[32] Nevertheless, FIPPA provisions apply to all foreign investors, and many Iranian expatriates based in the US continue to make substantial investments in Iran.[33]

Investments

Privatization drive will gain momentum once Iranian expatriates begin to invest in their motherland. Iranian nationals residing abroad are holding significant assets. Many have invested their capital in other countries, following the 1979 Islamic Revolution and the 1980-1988 war. Statistics at hand suggest that close to $10 billion (of goods) were re-exported into Iran last year. Multinational companies, particularly Iranian firms mostly owned and controlled by Army of the Guardians of the Islamic Revolution, are involved in export of goods into the country from Dubai. There are differing estimates of the expatriates’ total capital (1.3 trillion dollars[29]), but what is clear is that it is so huge that it will be enough to buy shares of all state companies. In Dubai alone, Iranian expatriates are estimated to have invested up to $200 billion.[30] If 10 percent of this capital arrives, things will change drastically in Iran.[31]

Iranian expatriates role

[28] As part of a policy of transferring shares of state firms to employees (5% of privatization proceeds), 20 million shares valued at 18.5 billion

Shares for workers

The waves of privatizations in Iran have been criticized by both labor and business leaders, albeit for different reasons.[25] Some observers have argued that this "privatization" is modeled on the voucher distribution programs of Russia and Czechoslovakia in the 1990s, which, at least in the case of Russia, led to the rise of the oligarchs.[27] The Ministry of Economic Affairs and Finance (Iran) has announced that it was forming a special committee to facilitate the process of making Justice Shares tradable in the stock exchange.[20]

Criticism

In February 2008 the Iranian Economic Ministry announced that some 15 million rural people out of 23 million are entitled to justice shares by the next Iranian year (to start March 20, 2008).[23] In November 2008 Iran announced that some 22.5 million people have received justice shares.[24] However, in 2009 labor leaders complained that workers have received hardly any.[25] More than seven million people have been categorized in the lowest-income bracket.[4] By mid-June 2009, it was reported that almost 40 million people had received justice shares.[26]

Directives on identifying those eligible to receive justice shares (in the second phase) have been issued and the shares will be distributed (among the rural residents and the tribesmen) after receiving their national code number. Up to 6.5 million rural residents who qualify for the shares have been identified and that 1.2 million more people are yet to complete their documents. The Government is promoting the shareholding culture in Iran. The total number of shareholders has reached 700,000 people and this figure is expected to reach 24-25 million. In December 2006, the Government informed that some 4.6 million low-income Iranians had received Justice shares worth $2.5 billion as part of the privatization scheme. Each person received around $550 in shares with a maximum of 5 payments for each family.[22]

Distribution

The poorest strata of society shall receive justice shares at a 50 percent discount and will pay the said amount in 10-year installments. Villagers and nomads shall have priority in this respect.[21] The holding period for those shares is a minimum of 2 years [afterwards]. Those covered by charity services rendered by the Imam Khomeini Relief Committee and the State Welfare Organizations as well as the jobless war veterans are prioritized in the first phase of the justice shares initiative. In the second phase, rural population and tribesmen will receive the shares.

Implementation

The government has approved a plan to offer shares to low-income families, starting with the poorest. Under the “Justice Shares“ plan, millions of Iranian families will receive shares in state-owned firms, the value of which will be reimbursed in 20 years from the dividends generated by those shares. The project is in line with President Mahmoud Ahmadinejad’s election promise to improve the condition of Iran’s poor. Ahmadinejad in July 2005 promised to distribute shares to Iranian families, adding that these shares would be from state-run companies that must be privatized.[19] Justice shares are valued at $36 billion as of 2014.[20]






Privatization shares distribution

  "Justice shares" (40%)
  Workers (5%)
  Government (20%)

"Justice shares" plan

Iran's government will privatize 27 huge companies, 76 large companies, 31 medium companies, and 31 companies of other sizes in 2014. Huge companies are those companies with the shares value of over 10 trillion rials (about $403 million) and large companies are those with the shares value of over one trillion rials (about $40 million).[17] As of November 2014, the value of shares transferred over the mentioned 1.5 years (about $9.2 billion) is tantamount to the value of shares transferred since the establishment of the organization 12.5 years ago.[18]

Rouhani government (2013-)

The Iranian Government announced in 2010 that it aims to raise some $12.5 billion by privatizing more than 500 state-owned firms.[16] The money raised through privatization of the firms will be spent on paying the state's debts.

As of 2009, Iran has privatized $63 billion worth of government equity in state-owned firms since 2005 (out of $120 billion). Subsequently, the disinvestment has brought the government's direct ownership in the GDP from 80% down to 40%.[1] However, privatization through the bourse has tended to involve the sale of state-owned enterprises to other state actors such as pension funds.[15]

In 2009 it was reported that 30 percent of the revenues obtained from ceding the ownership of state entities within the framework of Article 44 of the Constitution are allocated to the nationwide cooperatives.[14]

Close to 370 trillion rials worth of shares of firms covered by Article 44 of the Constitution have been sold to the private sector from 2006 to 2009. The value of government assets are between 1,000 to 1,100 trillion rials ($110 billion), one third of which have been ceded to the private sector (December 2008).[13]

In February 2008, Iran announced that 3 newly formed stock exchange, helping Iran divest state-owned enterprises.[12]

In July 2006, Supreme Leader Ayatollah Khamenei decreed a renewed effort to privatise the economy and said in his order that “ceding 80 per cent of the shares of large companies will serve to bring about economic development, social justice and the elimination of poverty”. The decree is also an effort to revive Iran’s stalled privatization programme and kick-start the country’s many uncompetitive industries, which are heavily protected by subsidies.[10]

Ahmadinejad government (2005-2013)

Despite plans to sell billions worth of state assets to the private sector, uptake was very slow. A common criticism of the [5]

In 2004, under the presidency of reformist Mohammad Khatami a number of efforts were made to eliminate the role of the government: The Tehran Stock Exchange was re-launched, which allowed a mechanism for trading shares of government companies. Elements of the constitution (article 44) that decreed that core-infrastructure should remain state run were eliminated,[9] and private banks were launched.

Khatami government (1997-2005)

After the Iran-Iraq war in 1988, the Iranian government declared its intention to privatize most state industries in an effort to stimulate the ailing economy. The sale of state-owned factories and companies proceeded slowly, however (mostly because of the opposition in Majlis), and most industries remained state-owned in the early 21st century (70% of the economy as of 2006). The majority of heavy industry —including steel, petrochemicals, copper, automobiles, and machine tools— was in the public sector, while most light industry was privately owned.

Rafsanjani government (1989-97)

Immediately following the outbreak of the Iran-Iraq war over 80% of Iran's economy came under the control of the government. This created numerous problems for Iran as previously internationally competitive companies, such as Iran Air or Iran Khodro, degraded into basic domestic companies that could barely function without massive government subsidies - primarily derived from oil revenues.

In July 1979, six months after the victory of the Revolution, 28 private banks that held 43.9 percent of the total assets of all the [8]

Iranian Revolution and Iran-Iraq war (1979-88)

Background

A strict interpretation of the above has never been enforced in the Islamic Republic and the private sector has been able to play a much larger role than is outlined in the Constitution. In recent years, the role of the private sector has been further on the increase. Furthermore, an amendment of the article in 2004 has allowed 80 percent of state assets to be privatized (ref: Note C, article 44 of Constitution).[7]

  • The private sector consists of those activities concerned with construction, agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.
  • The cooperative sector is to include cooperative companies (Bonyad) and enterprises concerned with production and distribution, in urban and rural areas, in accordance with Islamic criteria.
  • The state sector is to include all large-scale industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like; all these will be publicly owned and administered by the State.

According to the Article 44 of the Iranian Constitution, the economy of Iran is to consist of three sectors: state, cooperative, and private; and is to be based on systematic and sound planning.

The Iranian constitution

Contents

  • The Iranian constitution 1
  • Background 2
    • Iranian Revolution and Iran-Iraq war (1979-88) 2.1
    • Rafsanjani government (1989-97) 2.2
    • Khatami government (1997-2005) 2.3
    • Ahmadinejad government (2005-2013) 2.4
    • Rouhani government (2013-) 2.5
  • "Justice shares" plan 3
    • Implementation 3.1
    • Distribution 3.2
    • Criticism 3.3
  • Shares for workers 4
  • Iranian expatriates role 5
    • Investments 5.1
    • Expatriate fund 5.2
  • Foreign investment 6
    • Offshore fund 6.1
  • Top 100 Iranian companies 7
    • Valuation 7.1
  • Major companies listed for privatization 8
    • Banking and insurance 8.1
    • Industry 8.2
    • Utilities 8.3
    • Mines & metals 8.4
    • Transport 8.5
    • Telecommunication 8.6
    • Oil, gas and petrochemicals 8.7
  • See also 9
  • References 10
  • External links 11

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 market price that further offerings can be based on. According to a study conducted by the IMF in 18 countries, privatization adds 2 percent to the government’s GDP per annum.[6]

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.[5]

[4]

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