Corruption Cleanup: Tough Road Ahead

EghtesadOnline: The government of President Hassan Rouhani has delivered a convincing performance in the fight against corruption, yet it will take years to stamp out corruption from Iranian society and economy, an eminent economist said.

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14 June 2017

Hossein Raghfar also told KhabarOnline that Iran’s economy has to pay dearly in the coming years to root out corruption.

“If we try to withhold such payments, bigger challenges will arise. This fight necessitates a political determination; a revolution from within,” he said.

Despite the significant economic growth recorded in the last fiscal year (March 2016-17), Iran has to clear many hurdles to make further economic advancement. One such hurdle is the systemic corruption at different levels, which escalated during the fiscal 2005-6 and 2013-14, according to Financial Tribune.

Substantial banking capital and lending facilities were devoured by unproductive sectors instead of being injected into production effectively, throwing the country into recession.

Raghfar viewed channeling of resources to productive economic activities as one of the manifestations of fixing previous faults.

“Most problems facing the country today, including capital flight and marginalization of productive sectors, are rooted in corruption,” he said.

Noting that corruption begets corruption, Raghfar called for resistance against the graft-generating systems to abolish it completely.

“Undoubtedly, those who took advantage of corruption will try to claim their old turf and the 12th government seems to have its work cut out in this respect. The government will win the trust of foreign and domestic investor if it emerges victorious in the fight against corruption,” he concluded.

Advantages

Iran emerged from years of sanctions in mid-January when a deal clinched six months earlier with major powers came into force. In return for sanctions relief, Tehran implemented curbs on its nuclear program.

Economic studies show there is a negative correlation between economic growth and allocation of bank lending to government-run projects due to the cumbersome, inefficient nature of public projects.

Most government projects that have received loans lost productivity and imposed heavy financial burden on the economy.

Experts believe that besides the lingering non-nuclear US sanctions, widespread domestic corruption and lack of transparency also contribute to the reluctance of foreign firms and banks in cooperating with Iranians.

Incidentally, fighting corruption and money laundering is among the 14 priority projects First Vice President Es’haq Jahangiri has tasked the Ministry of Economic Affairs and Finance with in the current Iranian year (started March 21).

The intergovernmental Financial Action Task Force, that designs and promotes policies and standards to combat money laundering, decided last June to keep Iran on its blacklist of high-risk countries, but welcomed Iranian promises to improve and “suspend counter-measures for 12 months in order to monitor Iran’s progress in implementing the Action Plan”.

Jahangiri’s edict is the latest indication of Iran’s determination to quit the blacklist of high-risk countries maintained by FATF.

According to the vice president, rampant corruption has struck major blows to national interests and highlighted the need for promoting transparency across all sectors.

“Corruption is one of the major problems of the country and has hampered the development of national economy,” he said.

“Corruption deters investors. When they observe that some have amassed huge wealth overnight by pulling strings while others have not achieved even a fraction of that fortune after years of toiling, they lose motivation.”

Jahangiri noted that for eliminating corruption, all bodies should be subjected to strict supervision to ensure complete transparency.