IPO Says Stock Market to Handle Divestiture of State-Owned Firms

EghtesadOnline: The newly appointed head of Iranian Privatization Organization- the state-run body overseeing the sale of state-owned companies, has pledged to use the stock market’s capacity in divesting the stakes of government-owned companies.

News ID: ۷۸۵۰۷۷

30 November 2019

This is in line with government policy to advance divestiture processes in an open and transparent environment, Alireza Saleh said.

“We have decided to allow all divestitures to be handled via the via stock market with the goal of increasing transparency, ” the IPO website quoted him as saying.

On other measures to improve transparency in selling state-run companies to private buyers, he pointed to the need to make public activities of the IPO, Financial Tribune reported.

For example, all the data about companies on the divestiture list has been published on the IPO website.

“IPO is among the organizations whose performance should be fully shared with the people,” he said.

In the next step, Saleh added, the IPO will create a supervisory system to increase oversight over the divested companies.

For now, details about some controversial divested companies, such as Iran Airtour, Heavy Equipment Production Company (HEPCO) and Almahdi Aluminum Company are available on the IPO website.

Since inception in March 2001-02, the IPO has handled divestiture of state-owned companies worth 1,500 trillion rials, according to Saleh.

Gaining Momentum

The much-awaited privatization process gathered momentum in the mid-2000s when the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei issued a decree, expounding the Constitution Article 44 and recognizing the private sector as an integral part of the national economy.

Provisions of Article 44 of the Constitution offer opportunities to private firms, promote downsizing and curb the bloated bureaucracy.

According to existing privatization laws, state-owned enterprises fall into three main groups. The government is barred from ownership, investment and managerial posts in Group One.

Likewise, the government is obliged to transfer 80% of the total firms in Group Two to private, cooperative, public and nongovernmental organizations. Ownership, investment and managerial positions in Group Three is the exclusive premise of the government.

Saleh took office in September after his predecessor, Aliashraf Pouri Hosseini resigned, and was detained over corruption charges.

One of the main hurdles in the way of privatization in Iran is the emergence of semi-private companies during the flawed privatization process in the recent past.

The private sector has always criticized the activities of quasi-state companies and the public sector has failed to clarify ambiguities associated with their activities despite multiple promises.

The quasi-state sector consists of businesses registered as private entities under the Commerce Code but in reality are either wholly or partially owned by military organizations, foundations or pension funds.

Rampant corruption, unfavorable business environment, economic instability and inefficient ownership rights are the four main reasons behind the failure of meaningful privatization in the country.