Iran’s state-owned firms suffocate private sector activity
Roughly 80 percent of Iran’s economy is controlled by the state, effectively paralyzing its private sector.
According to the recent publication of “Gomrok” by Iran’s Customs Administration, economic figures published by state-run corporations are rather vague, which makes it virtually impossible to gauge the actual incomes of these institutions. The report added that trade conducted by state-affiliated organizations actually hinders economic plans and poses significant problems to the government’s fiscal agenda.
Iran Daily provides more specifics, whereby state-controlled institutions, which enjoy special privileges, import large volumes of farm products such as tea, rice and sugar during the harvest season, thereby causing a recession in the market for domestic products. Despite the abundance of sugar in the country last year, a large quantity of the product was imported without any government plans or studies. As a result, the market was over-saturated and domestic factories, which could not sell their produce, went bankrupt.
Article 4 of the Third Plan Bill and Note 29 of the 2000-2001 Budget Bill ban and trade activity that is not specified in the articles of association of state-owned corporations. Thus, Gomrok argues that private enterprises will not prosper as long as government firms continue to dominate the market.
According to Mohammad-Reza Khabbaz, a member of Iran’s Budget Commission, over 80 percent of the national economy is presently under state control, implying that the government and its subsidiaries play an active role in the economy, which has resulted in a loss of private sector competitiveness. Mr. Khabbaz then went on the criticize state monopolies, arguing that although the government has been obliged in the Third Plan (2000-2005) to eliminate monopolies, none of them have been eliminated despite the fact that the law was passed five years ago. He added that state organizations evade taxes and duties by establishing subsidiaries and changing their articles of association. In this manner, they become involved in lucrative business activities and create monopolies that harm the government’s economic plans.
Dr. Arman, an economics professor, argues that in order to eliminate monopolies, the Ministry of Finance and Economy should devise a bill that would incorporate the following three items: Fixed taxes on commercial profits and customs duties on consumer products, which are based on real hard currency rates; Taxes on imports and commercial activities should be double those on productive activities; And the issuance of permits for economic activities by government and semi-government organs should be prohibited. –(Albawaba-MEBG)