The Forum for Partners in Iran's Marketplace
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     

June 2020, No. 94


Special Report

Bold Decisions


If we want to maintain our national and regional authority we must make bold political, social and economic decisions.


 

By Dr. Mehdi Karbasian

 

In 1969 I was admitted into the university and it was decided that I should come to Tehran from Isfahan. At that time, my grandfather, the late Afzal, a well-known businessman in Isfahan Bazaar gave me some pieces of advice. One of these advices became an asset in my life. He told me if you go to college and get highly literate and even become a professor, it still would not take the place of experience, because experience in life is as significant and as valuable as knowledge.

When I was in college and later during work life, I always accepted the topic of experience a major factor for myself. In the 1980s, after the victory of the 1979 Revolution, an anti-capitalist and anti-private sector mood was created by leftist forces, including the Communists, the Tudeh Party and the Peopleís Mujahedin Organization (MKO), as well as young Muslim revolutionaries under the influence of Dr. Ali Shariati. Part of this situation was because some of the capitalists were dependent on the monarchy, before the revolution.

This trend was escalated after the outset of the imposed Iraqi war (1980), and in fact the state and centralized economy were shaped due to the war, which at that time was inevitable. The couponing system, the government controls, and the nationalizations made by the Revolutionary Council created an atmosphere that was not so much in line with the private sector. I remember that in the 1980s, the Chamber of Commerce, Industries, Mines and Agriculture did not play a major role in the economy and they were not even invited to attend decision-making meetings. This was largely due to the Iraqi war.

After that, during the reconstruction and reform eras, this line of thinking was mainly prevalent among government managers, and there was no discussion at all about supporting and developing open economy and the private sector. At the same time, large units were in the hands of government agencies. Since the early 1990s, a group of retirees of institutions more or less entered the economy and they had become stronger. The Mostazafan (Underprivileged) Foundation, the Martyr Foundation, the Executive Headquarters of Imam Khomeiniís Orders and Astan Qods Razavi (Razavi Holy Shrine) gradually grew and played a role in the countryís economy, but the private sector was not able to operate with that strength.


We need to know that a strong, healthy private sector can support the country and let the government gradually return to its policy making and monitoring job and let the cycle of the peopleís economy to turn.


Quick decisions were made due to foreign exchange shortages in 1372-73 (1993-94) and in 1374-76 (1995-97), instructions were issued that were more for controlling the economy and this trend was further strengthened. Of course, the late Akbar Hashemi Rafsanjani did not believe in the state control of the economy during his first term as president, but in the second term, that is, from 1374 (1995) onwards, the state economy gained more power and government intervention increased and the private sector could not recover.

This trend continued until 2001 and between 1380 and 1384 (2001-05) was the best period for the economy which also set the private sector in motion. During this time till 1383 (2004), some hard currencies were transferred to Iran by Iranians residing abroad. Both the stock market and housing sector were boosted. This left a big impact and caused the prices to change and the stock market to boom. The private sector was gradually standing on its feet but its status was weakened in the Ninth and Tenth Governments. Of course, some grew up in these two governments, part of which were the private rentier sector, namely those who were able to take advantage of concessions by the government and institutions.

Clear that the government supported military institutions and funds by donating property and bringing banks into grand investment, which weakened the newly revived private sector. During this period, the economy was largely out of the government hand and fell into the hands of government linked corporations (GLCs), and some government units that were transferred in the name of transfer and by granting 5 or 10 percent in the stock market came out of the umbrella of regulatory agencies such as the National Inspection Agency, Audit Court and the government itself and were governed by commercial laws. It was said the stock exchange will oversee them but the stock exchange was never able to deal with them nor had it the power to dismiss managers, referring a case to the court, and so on, because it did not have the power.

The GLCs were involved in the contracts and took over the affairs in the contracting sector, entered the realm of large corporations, and the situation of the private sector and the economy became unfavorable, as corruption went high in some GLCs. Naturally, when it is a state-owned company, the regulatory system can control and monitor, but this is not possible in GLCs, while the stock exchange too did not follow the rules. It is not doing it even today because it canít intervene, and Iím skeptical that the stock market can be transparent.

Then we come to the Eleventh Government, which focused on the private sector as a pivotal policy. During this period, changes took place and the Chamber of Commerce, Industries, Mines and Agriculture, especially the Tehran Chamber of Commerce, entered the scene as a government consultant. Of course, in some cases the government would naturally follow the advice of the private sector and in some cases it would not, but in any case, a policy starts in 1392 (2013) and continues until 1396 (2017), and the private sector is strengthened and the Iran Nuclear Agreement (known as the Joint Comprehensive Plan of Action) also helps the economy get tranquil. In the next stage ties with Europe are resumed and exports get a boost. On the other hand, although banks are not very active, it gets easier to move money, the price of money gets better, the exchange rate and the commission rate ranges from 10-15% to 2.5-3%, the country attains some calm and Investment gets moving.

Unfortunately, after failure of the JCPOA economic problems occur and as of almost middle of 2018 when the US president withdrew from the JCPOA and imposed new sanctions, the government too in an unprofessional decision, sets the US dollarís rate at 42,000 rials and thus foreign exchange becomes a security matter. This led to qualified and unqualified applicants both register orders and this led to widespread corruption. In this case, those who were involved in corruption are not the only ones to blame, but those who decided to register the order, because there was no control at that time. It is because of these directives that the real private sector is less inclined to invest, since it is worried that they will wake up in the morning and see that a new directive has been issued. Such directives are consistent with the Ninth and Tenth Governments. The Eleventh Government strongly criticized the actions of the Tenth Government, but some of the work done in the Eleventh Government upset the balance in the economy.

This trend has intensified since 1398 (2019), and now with the outbreak of the coronavirus the economic situation has worsened. The first point is that the budget the government has sent to the Parliament for 1399 (2020/21) was unprofessional and the income figures were not close to reality. At the same time, the European Union has treated Iran unfairly for the third time. Once under Mr. Hashemi Rafsanjani, once under George W. Bush, who called Iran the axis of evil, and once after the United States withdrew from the JCPOA, Europe followed the US sanctions. All of this has caused problems for the private sector, which had just started to move on.

But in the case of coronavirus, the virus has caused some of the domestic consumer production, such as food to receive support but many other products have had problems, especially those areas where production does not match consumption.

Export prices are now more or less faced with costs such as the cost of moving foreign currency and transportation. Here the government must intervene and help exporters turn the wheel of production. This is an important point that the government must accept. Unfortunately, the government has failed to give the export awards it had promised.

The Islamic Republic of Iran, which is currently facing the problem of coronavirus, liquidity and foreign currency supply, must provide basic assistance to exporters because it helps domestic production when it helps exporters, and this is in the interest of the consumer, as the finished cost is reduced and the drop in foreign exchange revenues of oil is compensated.

Unfortunately, we have eliminated the factor of experience from our calculations and actions. We have experienced some cases several times and we continue to make the same mistake: Wrong experience!

Another issue is that we did not use the experience of countries like Malaysia and Turkey, which are also Muslim states. During the Ninth and Tenth Governments, it was decided to implement the Chinese experience. That is, while companies are not state-owned, they are controlled by the government. It is true that Chinese companies have been created in the form of GLC but their behavior and management have a special formula, but in this case we did some work and abandoned some other part.

In fact, the GLC is now a competitor to the private sector, and they are not being monitored by the public sector. I believe that some of their decisions would lead to corruption and they do not serve the national interest. Now that the country is faced with coronavirus, apart from the human toll and the economic crisis that we hope will be resolved as soon as possible, given the decree the Supreme Leader has issued to the heads of the three powers they are expected to be more sympathetic and put aside their differences. Based on 40 years of experience, they are expected to make bold decisions and know that in the current juncture, the executive branch alone cannot solve the problems, and some of our problems cannot be solved until our international interactions are resolved.

If we want to maintain our national and regional authority we must make bold political, social and economic decisions. We need to know that a strong, healthy private sector can support the country and let the government gradually return to its policy making and monitoring job and let the cycle of the peopleís economy to turn. At the same time, the shadow of politics on the economy should be diminished, and politics should return to its place. Meantime, the private sector, in the form of the chamber of commerce, should reduce criticism, speech, and statements, and offer bold practical solutions. The government, the heads of the three powers and the ruling establishment must accept the private sector as an honest advisor and give it responsibility.

 

Subscribe to
IRAN INTERNATIONAL

CURRENT ISSUE
   
  June 2020
No. 94