The Economic ‘Black Hole’ That Threatens Iran's Future
Behrouz Turani
Iran International
Iran’s government-controlled economy closely intertwined with a closed political system represents a “black hole” according to a prominent journalist in Tehran.
Iran International
Iran’s government-controlled economy closely intertwined with a closed political system represents a “black hole” according to a prominent journalist in Tehran.
Foroozan Asef Nakhaei says the Iranian Constitutional Law recognizes three forms for the economy, namely the government sector, private sector and cooperatives. But four decades after the 1979 Islamic Revolution, the economy is plagued by what many have dubbed as “Khosulati” [a combination of the words private and public in Persian] that could be vaguely translated as Private-Government sector.
These are enterprises nominally “privatized” by the government but owned or managed by political insiders. The sector devours the three legitimate forms of the economy like a “black hole.”
"This horrendous black hole can prevent even trusted elements of the regime, men such as Majles Speaker Mohammad Bagher Ghalibaf and President Ebrahim Raisi from advancing their economic plans," Asef Nakhaei said in an article on the moderate conservative Khabar Online website , adding that "the black hole can challenge and paralyze the entire system."
According to the journalist, this is an outcome of lack of transparency in the Iranian political system which confuses Iranian and foreign observers who try to understand the decision-making process in Iran.
A recent example of the ‘Khosulati’ economic black hole is a $3 billion corruption case at a major steel plant that appears as a publicly traded company but in fact is controlled by government entities and run by their appointees.
Meanwhile, the existence of rival power centers and the prominence of unofficial networks in the political system make the situation even more ambiguous. There is no political power center that would be able to criticize the regime, without dangerously challenging it from a safe distance.
Political powers who identified themselves as "reformists" and usually aligned themselves with the "moderates" within the system could never come up with a rhetoric that would build confidence within the core of the system, which is headed by Supreme Leader Ali Khamenei for the past 33 years.
Although the so called ‘Reformist’ faction tried to embark on some changes in the system of governance, the conservatives gradually pushed them aside.
The two groups differed on the idea of development, as Reformists had slightly a more liberal approach, the conservatives continued to fatten the state-controlled economy and specially the quasi-private sector.
These and the fact that the hardliner advocates of "Islamic Government" as opposed to the "Islamic Republic" created parallel, but otherwise similar institutions, did not allow economic development to take center stage. As a result, economic plans in Iran live in a world different from real needs. Power centers exercise their own policies rather than answering to public demands in domestic and even foreign policy. Asef Nakhaei said that the continuation of this paradoxical duality is destructive and dangerous for the country's survival.
If Iran's hardline conservatives and their currently consolidated government can lend some sort of legal safeguards to everyone before the law, they will in fact be implementing the ideas of the country's reformists and moderates and pushing an immature government to behave maturely. This will lead to a government based on national interests, the journalist opined.
He added that the future of Iran depends on democratic reforms regardless of who runs the system and getting rid of the parallel institutions that give way to black holes such as the quasi-government-private economy which is devouring the other sectors and precious resources.
Since 1940s Iran has launched 11 plans to build infrastructure, establish key industries, expand public services and education. Five plans were launched under the monarchy until 1979, and six during the Islamic Republic. Nevertheless, Iran is still considered a developing country.
There are a few reasons for this. The revolutionary chaos of the early 1980s, immediately followed by the 8-year Iran-Iraq war that caused hundreds of thousands of casualties derailed Iran from its modernization trajectory.
Also, the Islamic government, built on an anti-Western ideology engaged in hostage taking and supporting militant groups from its very inception. This kept Iran isolated from advanced economies. Inefficiency of successive clerical governments during the past four decades, and many years of international sanctions that have crippled the country's economy, were added to the adverse factors.
For longer than a decade, governments have not been able to carry out any meaningful development plans as sanctions and growing corruption kept the economic growth rate at around zero.
Economic development until the 1979 revolution
In an interview, Fathollah Aghasizadeh, the author of the book Seventy Years of Planning for Development in Iran, told Khabar Online website in Tehran on Saturday offered his expert views about the failures of developmental plans.
Interestingly, he had words of praise for the pre-revolution plan during the reign of Mohammad Reza Shah Pahlavi.
Aghasizadeh said in the interview that Iran's initial development plans which started in 1949 were successful partly because the country's -then- newly established Planning Organization was genuinely interested in furthering development plans.The powerful organization operated independent of the prime ministerial bureaucracy and was directly accountable to the Shah.
With focused governance and rising oil prices in the 1970s Iran was perhaps the best placed country in the region to take the next leap, just as South Korea did in the following two decades. Economic development was taking place and per capita income was rising until the 1979 revolution.
Success with development plans
The outcome of the first two development plans included major projects such as several dams, fertilizer production companies, the construction of some 11,000 kilometers of railways, the Mehrabad Airport as well as several garment factories, sugar mills and cement production companies. At that time, Iran was not a rich oil exporter. It was still a poor country, getting a small share of the oil income from the British who controlled the industry.
Another reason for the success, according to Aghasizadeh, was the authority and independence of the organization and its chairmen, particularly Abolhassan Ebtehaj who was chairman after 1954. Ebtehaj left the post in 1958 when his powers were curtailed by the Prime Minister's Office. Later Ebtehaj wrote in his memoires that he got his mandate from the Shah and his mission was to make sure that no one other than himself would have access to the oil income set aside of infrastructural development.
Aghasizadeh says that evidence supports the fact that Ebtehaj was directly backed by the Shah. Even the Islamic Majles acknowledged in a 2010 report that "The Shah personally backed the development efforts."
The expert said that as the organization lost its authority, its success began to diminish, and development plans were changed into comprehensive plans that lacked focus. However, Aghasizadeh said he is not sure whether the current development plans could be effective. "They have very little if any achievement and the country can do without them," he added.
Post-revolution developmental plans
He agreed with Khabar Online that post-revolution development plans reflect Iranian politicians wishful thinking rather than the country's needs. "Plans are no longer written to be executed," he said, adding that institution such as the parliament and the Expediency Council also try to reflect the country's general [ideological] orientation in the new development plans. Meanwhile, he added that governments in the Islamic Republic are more interested in long-term plans that cannot be effective in Iran.
He did not say why, but it appears that politicians' short-sightedness, and the transitional nature of presidential governments, each representing a different faction in the Islamic system, derail their own long-term plans. On the other hand, it appears that the plans with ill-defined objectives provide a better situation for corrupt politicians who block inspections and spend the money for unrelated projects where their allies can enrich themselves.
Aghasizadeh said that Iranians cannot expect much from the 7th development plan for similar reasons as the government is barely taking care of the nation's day to day business amid sanctions and a perpetual economic crisis.
Like India, Iran should turn to one-year developmental plans, Aghasizadeh believes, or plans for a maximum of four years. This gives officials a better chance to follow up on the successful parts of their plans. At the same time, their expectations from each plan is well defined and objective.