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Rouhani Criticizes Poor Privatization, Calls for Accountability

President Hassan Rouhani in meeting dealing with the economy, July 10, 2016. File photo
President Hassan Rouhani in meeting dealing with the economy, July 10, 2016. File photo

President Hassan Rouhani has criticized lack of supervision on the performance and accountability of poorly-privatized companies.

Rouhani has been sarcastically warned previously by many, including Supreme Leader Ali Khamenei, that Rouhani should ask himself why such problems exist.

The poorly-privatized companies, known as "khosoulati" [a combination of the Persian words Khosousi meaning private, and Dolati meaning government-owned], are the companies the government has often partly sold or transferred to state-affiliated institutions, banks and well-connected individuals.

Addressing Labor Ministry officials on Monday February 25, Rouhani said "No one dares to supervise and audit these companies." He also called the partly state-owned businesses as part of the worst kind of economy, mindless of the fact that he is in charge of the country's economy.

Ironically, the Labor Ministry owns several of these companies including major airlines and shipping companies that should be supervised by the administration.

Iranian Labor News Agency (ILNA) quoted Rouhani as saying that "these are independent companies, neither the government, nor the people know anything about them."

The Islamic Republic confiscated or took over hundreds of private firms and factories early after the 1979 revolution. This created an economic system, which was only partly based on private ownership. But the bulging public sector became increasingly inefficient forcing the government to sell many enterprises in the last two decades.

But this was not genuine privatization as often state-connected entities or powerful insiders bought the privatized companies.

In August 2018, some 38 Iranian economists wrote a letter to Rouhani, calling on him to pay attention to the critical situation of these companies and to bring about reforms in the way they are being run.

Some of these companies are backed or partly or wholly owned by powerful institutions such as the holy shrine in Mashad, several foundations under the umbrella of Khamenei's office, as well as military forces.

The institutions and the military, are said to get concessions from the government for these companies without giving a share of the benefits back to the government. As if that is not enough, they also get hefty budgets from the government to run their finances.

Rouhani has been frequently speaking against the military's role in the economy, yet last week, one of his own cabinet ministers invited the Islamic Revolution Guard Corps (IRGC) to take control of profitable mobile phone companies.

Also recently, the Iranian army was criticized for being involved in importing meat.

In September, a reform leader under house arrest, Mehdi Karroubi, called on the government to seek Khamenei's views about these companies as well as about military involvement of organizations in economic activities including oil sales. He also called for auditing the accounts of the companies and foundations operating under the aegis of Khamenei's office.

During the past two years Rouhani has been going back and forth between criticizing and supporting the economic activities of Iran's military forces. His criticism of IRGC's economic activities elicited harsh reactions by revolutionary guards commanders including Aerospace Force Commander Amir Ali Hajizadeh who criticized Rouhani and his top managers for "preventing the country's progress" and accused them of being under Western influence.

At various points during the Presidency of Presidents Mahmoud Ahmadinejad and Hassan Rouhani they complained about errors in privatization, while economists warned that these companies either make a profit and do not return the government's share and refuse to pay taxes, or they incur losses creating more problems for the government by leaving workers without a job, or unpaid for several months.