Iran Private Sector Takes Initiative to Fight Corruption

EghtesadOnline: Business leaders and private stakeholders on Sunday convened at the fourth anti-corruption conference as part of their effort to promote transparency and their long-time desire for a level playing field.

News ID: ۷۸۴۳۸۶

10 December 2018

The event, organized by Iran Chamber of Commerce Industries Mines and Agriculture and hosted by Tehran Chamber of Commerce, came as the private sector finds itself in the vise of economic upheaval and the unwanted and unhelpful government interference in trade.

Massoud Khansari, president of the Tehran chamber, told the conferees "one of the conditions that give rise to corruption is the profusion of rules, regulations and government directives."

Elaborating the point Khansasri recalled, "For instance during the recent volatility in the currency market a large number of directives were issued [by the government and the central bank]…many of which contradicted each other," and the chaos that emerged created a breeding ground for greedy opportunists and  middlemen fishing in troubled waters, Financial Tribune reported.

If the government had taken a gradual approach and allowed for a step by step increase in forex rates during the past years the nation would have been “spared of the  currency shock” that saw foreign exchange prices go through the roof, the senior business official told the meeting.

Other sources of corruption, he said, include political factors epitomized in pressure groups, lobbies, big government and the unprecedented liquidity in the banking system.

Khansari referred to the phenomenon of shadow banks and lending institutions and their subsequent bankruptcy as a recent example of chronic corruption in the key financial sector. Shadow banks, which reported (some say doctored) exponential growth in the past decade by offering sky-high deposit rates, attracted huge deposits – some figures suggested 20% of the country's total liquidity – in the amazing absence of strong supervisory bodies.

The demise of some big ones resulted in capital loss for many investors nationwide and gave rise to people’s protests demanding back their money.

"The fact that the government bailed out these entities by paying about 400 trillion rials to them ($3.50 billion) of public money is just one example of this," Khansari rued.

The United States has reimposed "the toughest sanctions ever" against Iran's economy after President Donald Trump in May abandoned Iran’s historic nuclear deal with the six world powers, including the US.

The new sanctions, the first round of which took effect in August and the second in November, led to a steep depreciation of the national currency and consumer prices shot up as never before. Although the rial has pared some of its losses in recent weeks, the normalizing effect is all but absent when it comes to consumer prices and the lives of wage-earners.

Khansari said in addition to sanctions and the structure of the national economy, corruption is indeed a major hurdle in the way of economic development and growth.

The participants pointed to Iran's weak position in global corruption rankings which is 130 out of 180 countries. Iran’s score based on the Corruption Perception  Index improved by a notch in 2017 with 30 out of 100, a report by global graft monitor Transparency International showed. The CPI scale indicates zero as highly corrupt while 100 is perceived to be very clean.

Noting that monopoly is another aspect of corruption, the chamber official said the existence of semi-state organizations, which came into being as part of the apparently failed privatization initiative, had made the playing field more uneven for private enterprise.

Other speakers of the seminar included Alexander Fedulov, the UN Office on Drugs and Crime representative in Iran and Yujing Yue, assoc. crime prevention and criminal justice officer at the UN  Office on Drugs and Crime.

Yujing referred to Iran being a signatory of United Nations Convention Against Corruption and the ratification of its membership by parliament in 2009 and said anti-corruption guidelines by UNODC has been made available in Farsi through a partnership with TCCIMA.

Also at the event, an anti-corruption model for private companies, developed by a team from Iran University of Science and Technology based on domestic and international norms, was unveiled.

Government Partnership

La'ya Jonaidi, vice president of Iran for legal affairs, as a keynote speaker, thanked the private sector for its pursuit of transparency through four years of anti-corruption conferences and said the “fight against  corruption must start with the government through public sector transparency.”

Jonaidi referred to several pieces of legislation that have been introduced by the government aimed at promoting transparency, such as the amendments to the anti-money laundering law and the financing of terrorism law.

While the latter has formally become law, the former is held up at the Expediency Council  after the Majlis and the powerful constitutional watchdog the Guardian Council could not resolve differences over some articles.

Jonaidi said these laws as well as others that link Iran to international conventions for combating terror finance –passed by the Majlis but rejected by the Guardian Council – are not only crucial for Iran's ties to global banking but also for the transparency of the banking sector for domestic purposes.

She said two other bills are being drafted by the government. One is the Transparency Bill, which seeks transparency over all aspects of the government – even the non-confidential financial activities of the armed forces – and the other being the Public Conflict of Interest bill, which suggests that no personal conflict of interest for public sector officials should damage the interest of the public.