Privatization in Iran, a tool for plundering the country’s capital

Analysis by PMOI/MEK

Iran, November 4, 2021—The privatization of state-owned industries and economic enterprises in Iran has been one of the levers through which government-linked institutions, such as the Revolutionary Guards(IRGC), the Headquarters for Executing the Order of the Imam (SETAD), Bonyad Mostazafan (Foundation of the Oppressed), Shahid Foundation (Martyr Foundation), and so on, have taken over state-owned economic institutions for a small price.

The SETAD’s influence and domination over the Iranian economy surpasses even that of the IRGC. It is the most assertive of the so-called “non-government public sector” companies when it comes to the confiscation of assets.

Economists acknowledge the fact that this kind of privatization is in fact “Khosoolati” (government-owned companies sold to private owners linked to regime officials) and contrary to the usual methods of privatization in other parts of the world.

Under the Iranian regime’s rule, “privatization” aims to increase the capital of government institutions, linked with the supreme leader Ali Khamenei, at the cost of destroying a large part of the country’s economy, and ultimately to the detriment of the people.

Khamenei, by invoking Article 44 of the mullahs’ constitution, has taken over a large part of the country’s economy through privatization, with some economists estimating at 60 to 80 percent.

“The implementation of Article 44 proceeded in such a way that 80 percent of the economy was practically transferred from the public sector or the private sector (Khosoolati),” according to an October 30 report by the ILNA news agency, quoting Mohammad Reza Bahonar, a member of the regime’s Expediency Discernment Council.

“Factories were handed over to unskilled people with massive loans from banks and government funds, and inefficiently stopped the production cycle and created problems for the workers,” said the regime’s president Ebrahim Raisi, according to a May 1st, 2020, by the state-run Shahrvand daily.

This corrupt structure, in addition to seizing industries and economic institutions and “80 percent of the economy”, has also stolen much of the people’s capital while allocating the preferential exchange rate of 42,000 rials per U.S. dollars for the import of basic goods.

In this process, the government gave the preferential exchange rate (each dollar for 42,000 rials despite the price of each dollar in free market being around 280,000 rials) to people who enjoy ties with the government. And instead of importing the basic goods needed by the people, they imported luxury goods and are selling them at market value or basically not returning the export currency.

“An important part of the currency that did not return to the country is related to petrochemicals and private companies (Khosoolati) active in various sectors of the Iranian economy. Unfortunately, no one holds them accountable,” said Ali Shariati, a member of the regime’s Chamber of Commerce, according to an October 24 report posted on the state-run Eghtesad online website.

Petrochemicals are primarily affiliated with the IRGC and serve to provide the regime with the currency needed to spread terrorism and support regime-linked militias in the region.

“35 percent of all exports are conducted by the real private sector, and the other 65 percent by government, quasi-government and Khosoolati units. In 90 percent of these cases, they are exporting raw or semi-raw materials. The problem is that instead of using currency resources in the national economy and increasing the supply of foreign exchanges in favor of domestic productive sectors, our governments have only followed the price control policy in this section,” said Gholam Hossein Shafeei, head of regime’s Chamber of Commerce, according to an October 17 report publisehd by the state-run Mardomsalari daily.

Tax exemption or tax evasion and receiving large subsidies is another advantage of the “Khosoolati sectors.”

“In 2020, only 20 private companies had a profit of 2.5 quadrillion rials (about $9 billion), mainly due to an increase in currency prices and support from large energy subsidies to these sectors. Furthermore, taxes collected by the government are extremely small,” said Hossein Raghfar, an economist, according to an October 13 report by the state-run Mostaghel daily.

In an interview with the state-run Setareh Sobh newspaper, Raghfar, while referring to the tax evasion of government institutions, especially the Khosoolaties, amounting to 500 trillion rials (about $1.8 billion), talked about giving the country’s resources to “comrades” and the “people.”

“The resources of the country’s mines have been given to friends and comrades, and the share of the government and the people should be taken from these people. However, there is no will to do so… Today, the country’s large mines are in the possession of those who do not pay taxes, and none of these companies and individuals are producers, but they extract the country’s natural resources, which belong to all people. All the while, they try not to let these things be seen by the people and the society, and they continue this secrecy in order to fill their pockets,” said Raghfar according to a September 26 report in the Setareh Sobh newspaper.

“Ninety percent of the country’s liquidity is in bank deposits, and 90 percent of these bank deposits are in the hands of two percent of the depositors,” said Mohammad Noei, a Parliamentary Research Center economist, according to an October 5 report posted by the state-run Bazar website.

These “friends and comrades” are regime officials and/or institutions that control “65 percent of the country’s exports” and “90 percent of the export of raw and semi-raw materials” through the privatization policy. The end result is increasing corruption and driving many workers and employees of production companies below the poverty line.

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