First Study Reveals Bigger Role for Iran Private Sector in Economy

EghtesadOnline: A study conducted by the Statistical Center of Iran has for the first time measured the share of the private sector in the national economy.

News ID: ۷۴۶۷۱۸

18 February 2019

The findings indicate a bigger role for the private sector, placing it at 44.74% in 2013-14 and 47.33% in 2014-15.

It was commissioned by the Iran Chamber of Commerce, Industries, Mines and Agriculture as the body representing the private sector and was undertaken by Statistical Research and Training Center affiliated to the SCI which is the main authority in Iran responsible for providing financial data.

The study tracked data for the two calendar years 1392 (March 2013-14) and 1393 (March 2014-15) and as the organizers of the research say, it aims to cover future years too, according to Financial Tribune.

Outcome of the study was announced at a meeting of the ICCIMA representative board members on Sunday.

Pedram Soltani, ICCIMA vice president and the main organizer of the study, told the Financial Tribune that the reason for the study's belated stats is the "cumbersome process of producing data in the country" with the result being that the country is normally three years late in numbers.

According to Soltani, statistical data belonging to 2015-2016 has been released in making it easier to gauge private sector share in that data in 3-4 month.

The study reviewed the private sector share in the national economy based on two criteria: ownership ( recommended by international standards and SCI) and management (the preferred metric by ICCIMA.)

The ownership category considers sectors as private in which at least 50% stake is owned by the private sector plus one share and the management basis regards an entity as private if the company managers and executives are appointed by private enterprise.

For example, in Iran Khodro, the country's biggest car maker, government is the minority shareholder, but its managers are customarily appointed by the state or government. Thus, Iran Khodro is not and cannot be considered as a private company from the viewpoint of ICCIMA.

To find out private sector share in GDP, the study has figured out the contribution of the government, municipalities, the Social Security Organization and semi-state organizations (owned by public entities other than the government) and then subtracted their share from the economy in its entirety to be able to determine the share of the real private sector in the economy.

Findings

The study reveals that by taking the "management" approach, private sector share in the economy was 43.03% in 2013-14 and 45.76% in 2014-15.

When considering the "ownership" method, the size of the private sector was 44.74% in 2013-14 and 47.33% in 2014-15 in the national economy.

As such, the study reveals a bigger share of the private sector compared to commonly-held view that the share of private companies is a poor 20%.

Explaining this increase in fiscal 2014-15 compared to the previous year, Soltani said that was due largely to the decline in oil prices.

He noted that the private sector share had shrunk in 2016-17, and especially in 2017-18, due to the fact that Iran's oil exports jumped after signing the historic nuclear deal with the six world powers that eased the economic sanctions in exchange for curbs on the disputed nuclear program.

The private sector often complains that the government pleads for private sector help in the economy only when the going gets tough and “oil revenues plunge.”

Soltani, however, states that the private sector share will fall to 20% if the role of "livelihood" sectors like agriculture and small businesses are taken out of the equation.

"The reality is that the private sector should have 80% share in the economy," he says without indulging in niceties or tired clichés.