Accessibility links

Breaking News

Iran Says Revising Privatization Regulations In Bid To End Murky Deals

Haft Tapeh Sugar Factory workers protesting for unpaid wages and mismanagement by new owners who bought the complex with a very low price from the government. November 2018

The Rouhani administration's spokesman Ali Rabiei says the administration has revised the regulations for the privatization of government companies, official news agency IRNA reported on Tuesday October 22.

Problematic privatization has led to frequent cases of labor unrest in Iran in recent years, some of which are still going on here and there and are often suppressed by the police.

Critics say murky privatization deals have transferred once profitable industrial conglomerates in Iran to corrupt individuals who have used the acquired assets to borrow money from state banks and then fail to pay the workers.

Rabiei did not elaborate on the details of the revised regulations but said that they would be announced "soon."

He said in future privatizations the "competence" of those who purchase government factories and their guarantee to keep the workforce in employment will be the key criteria for privatization.

Haft Tapeh Sugar Factory on strike and protesting in November 2018.
Haft Tapeh Sugar Factory on strike and protesting in November 2018.

Workers in Haft Tappeh Sugar Mill and several companies in Arak including Hepco and Azar Ab, complained that those who took over as owners of major factories were laymen who did not know how to run a business.

Meanwhile, both workers and economists have complained that privatizations in the Islamic Republic were made based on family ties and political affiliations rather than transparent competition and proven competence.

In most cases of labor unrest from 2017-2019 including the ones at the Khuzestan Steel Mill, Haft Tappeh Sugar Mill and several companies in Arak including Hepco and Azar Ab, workers have demanded that the factories should be returned to the government to ensure regular payment and continued employment.

As Iran’s economy fast deteriorated under U.S. sanctions, an anti-corruption drive was launched by the orders of Supreme Leader Ali Khamenei in 2018, probably to stave off public anger. The issue of selling government property in non-transparent deals was publicized by workers, the authorities now try to react to criticism and show they are fixing the problem.

Rabiei said that the new regulations require two public tender bids for privatization, and in case there are no prospective buyers, then the government will try to sell the companies to private sector entities through negotiations.

Some reports say most privatized companies were sustaining losses, but Rabiei said some of them had high profit margins before being privatized.

Meanwhile, he said privatization is not the only solution for companies that do not make a profit. These companies may be dissolved just as well, Rabiei said. He named the Iranian Drilling Company as an example.

The Iranian Privatization Organization has defended the way the companies have been handed over to private sector, however, complaints about mishandling and corruption in privatization landed the organization's chairman Abdollah Pouri Hosseini in jail in the summer of 2019.

Iran’s powerful Judiciary controlled by the Supreme Leader defends privatization in principle but has acknowledged that it has often been combined with misappropriation and legal violations. The government generally defends privatization as a way of improving the economy and making the organizations and the industry agile.

Previously, Vice-President Es'haq Jahangiri had called for preventing problems by furthering a "pathology of privatization" to sort out possible pitfalls.

Following the 1975 revolution, the Islamic government confiscated many factories and businesses and handed them over to government organizations or newly established economically non-transparent entities such as the Mostazafan Foundation.

A policy of privatization started under President Akbar Hashemi Rafsanjani (1988-1997) and an official privatization scheme started in 2005 based on Article 44 of the Iranian Constitutional Law, however, the plans were adversely affected by discrimination, corruption and mismanagement.

As an example, once considered as the largest industrial machinery complex in the Middle East, HEPCO was a lucrative company established in 1972 during the reign of Iran's last monarch, Shah Mohammad Reza Pahlavi.

However, HEPCO was first nationalized after the revolution and later privatized in a highly suspicious deal. Labor rights activists say immediately following the privatization problems emerged for workers. The new owners started to delay payment of wages and mismanage the complex.

Judiciary Chief Ebrahim Raeesi has accused Rouhani's government of privatizing public companies disregarding regulations. "In many privatized companies, the workers have lost their jobs---nobody has listened to the labor protests---the factories are suffering from stagnation---and the judiciary has been forced to step in," Raeesi asserted.