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Privatization in Iran

Privatization in Iran

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According to the Fourth Five-Year Economic Development Plan (2005-2010), the Privatization Organization of Iran affiliated to the Ministry of Economic Affairs and Finance
Ministry of Economic Affairs and Finance (Iran)
The Ministry of Economic Affairs and Finances function are:*acting as the state treasury,*public finance,*economic and financial policy making,*implementing tax policies,*in charge of foreign direct investment,...

 is in charge of setting prices and ceding shares to the general public and on the Tehran Stock Exchange
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

. The privatization effort is primarily backed by reformist members of the Iranian government and society who hope that privatization can bring about economic and social change. Iranian president Mahmoud Ahmadinejad, a staunch conservative, has on several occasions lambasted the privatization policies and tried to counteract them.

In 2007, Supreme Leader
Supreme leader
A supreme leader typically refers to a figure in the highest leadership position of an entity, group, organization, or state, who exercises strong or all-powerful authority over it. In religion, the supreme leader or supreme leaders is God or Gods...

 Ayatollah Khamenei requested that government officials speed up implementation of the policies outlined in the amendment of Article 44, and move towards economic privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

. Khamenei also suggested that ownership rights should be protected in courts set up by the Justice Ministry
Ministry of Justice (Iran)
Minister of Justice of the Islamic Republic of Iran is responsible for prosecuting the government cases. In other words, the justice minister is the attorney-general of the country. However, he has nothing to do with policing which is the responsibility of the Interior minister of the Islamic...

; the hope was that this new protection would give an additional measure of security and encourage private investment. Despite these statements, true official backing for privatization remains very slow due to political reasons.

It is widely believed that if current governmental organizations are privatized they will need to become more efficient. At present many are not profitable due to large numbers of unnecessary employees hired by the government to reduce unemployment. Furthermore, many of these companies are subsidized by oil revenues. True privatization will inevitably lead to many unpopular job cuts and large scale lay offs.

The current privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

 effort calls for an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...

 (IPO) of five percent of the firms being privatized. Once the five percent is public, it will establish a market price that further offerings can be based on. According to a study conducted by the IMF
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

 in 18 countries, privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

 adds 2 percent to the government’s GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 per annum.

The Iranian Constitution



According to the Article 44 of the Iranian Constitution, the economy of Iran
Economy of Iran
The economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...

 is to consist of three sectors: state, cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...

, and private; and is to be based on systematic and sound planning
Planned economy
A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...

.
  • The state sector is to include all large-scale industries, foreign trade, major minerals, banking, insurance, power generation, dams and large-scale irrigation networks, radio and television, post, telegraph and telephone services, aviation, shipping, roads, railroads and the like; all these will be publicly owned and administered by the State.

  • The cooperative sector is to include cooperative companies (Bonyad
    Bonyad
    Bonyads are charitable trusts in Iran that play a significant role in Iran's non-petroleum economy, controlling an estimated 20% of Iran's GDP. Exempt from taxes, they have been called "bloated", and "a major weakness of Iran’s economy", and criticized for reaping "huge subsidies from government",...

    ) and enterprises concerned with production and distribution, in urban and rural areas, in accordance with Islamic criteria.

  • The private sector consists of those activities concerned with construction
    Construction in Iran
    In recent years, the construction industry of Iran has been thriving due to an increase in national and international investment to the extent that it is now the largest in the Middle East region...

    , agriculture, animal husbandry, industry, trade, and services that supplement the economic activities of the state and cooperative sectors.


A strict interpretation of the above has never been enforced in the Islamic Republic and the private sector has been able to play a much larger role than is outlined in the Constitution. In recent years, the role of the private sector has been further on the increase. Furthermore, an amendment of the article in 2004 has allowed 80 percent of state assets to be privatized (ref: Note C, article 44 of Constitution).

Iranian Revolution and Iran-Iraq war (1979-88)


In July 1979, six months after the victory of the Revolution, 28 private banks that held 43.9 percent of the total assets of all the Iranian banks in their possession, were declared nationalized by the government. At the same time, all the carmaking, copper, steel and aluminum industries, as well as the assets of 51 capitalists and major industrialists and their next of kin were declared nationalized by the government. In 1982, Mostazafen Foundation of Islamic Revolution alone came to possess 203 manufacturing and industrial factories, 472 big agricultural fields, 101 major construction firms, 238 trade and services companies and 2,786 big plots of real estates.

Immediately following the outbreak of the Iran-Iraq war
Iran-Iraq War
The Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...

 over 80% of Iran's economy came under the control of the government. This created numerous problems for Iran as previously internationally competitive companies, such as Iran Air
Iran Air
Iran Air , formally Airline of the Islamic Republic of Iran is the flag carrier airline of Iran, operating services to 60 destinations, 35 international and 25 domestic. The cargo fleet operates services to 20 scheduled and 5 charter destinations...

 or Iran Khodro
Iran Khodro
Iran Khodro Company, also known as IKCO, is the leading Iranian automaker with headquarters in Tehran. The company's original name was Iran National. IKCO was founded in 1962 and it produced 688,000 passenger cars in 2009...

, degraded into basic domestic companies that could barely function without massive government subsidies - primarily derived from oil revenues.

Rafsanjani government (1989-97)


After the Iran-Iraq war
Iran-Iraq War
The Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...

 in 1988, the Iranian government declared its intention to privatize most state industries in an effort to stimulate the ailing economy. The sale of state-owned factories and companies proceeded slowly, however (mostly because of the opposition in Majlis
Majlis of Iran
The National Consultative Assembly of Iran , also called The Iranian Parliament or People's House, is the national legislative body of Iran...

), and most industries remained state-owned in the early 21st century (70% of the economy as of 2006). The majority of heavy industry —including steel, petrochemicals, copper, automobiles, and machine tools— was in the public sector, while most light industry was privately owned.

Khatami government (1997-2005)


In 2004, under the presidency of reformist Mohammad Khatami
Mohammad Khatami
Sayyid Mohammad Khātamī is an Iranian scholar, philosopher, Shiite theologian and Reformist politician. He served as the fifth President of Iran from August 2, 1997 to August 3, 2005. He also served as Iran's Minister of Culture in both the 1980s and 1990s...

 a number of efforts were made to eliminate the role of the government: The Tehran Stock Exchange
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

 was re-launched, which allowed a mechanism for trading shares of government companies. Elements of the constitution (article 44) that decreed that core-infrastructure should remain state run were eliminated, and private banks were launched.

Despite plans to sell billions worth of state assets to the private sector, uptake was very slow. A common criticism of the privatisation effort by investors was the only local Iranian organisations that are capable of buying the large share blocks are themselves government owned. Also analysts have blamed international fears about the Iranian nuclear programme and an absence of transparency and information reporting for the lack of enthusiasm for state assets. In 2005, Iran tried to sell $2.5bn of government assets but only managed to offload less than 30 per cent. At present, at least 20 percent of the companies slated for selloff are officially loss-making. While the rest have earned an average profit of 5.5 percent in recent years, that figure does not take into account the extensive political and economic incentives and monopoly protections that they enjoy.

Ahmadinejad government (2005-Present)


In July 2006, Supreme Leader
Supreme leader
A supreme leader typically refers to a figure in the highest leadership position of an entity, group, organization, or state, who exercises strong or all-powerful authority over it. In religion, the supreme leader or supreme leaders is God or Gods...

 Ayatollah Khamenei decreed a renewed effort to privatise the economy and said in his order that “ceding 80 per cent of the shares of large companies will serve to bring about economic development
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...

, social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...

 and the elimination of poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...

”. The decree is also an effort to revive Iran’s stalled privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

 programme and kick-start the country’s many uncompetitive industries, which are heavily protected by subsidies.

Some 80 percent of the companies subject to Article 44 of the Constitution would be transferred to public ownership, 40 percent of which will be conducted through the "Justice Shares" Scheme and the rest through the Bourse Organization
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

. The government will keep the title of the remaining 20 percent.

In February 2008, Iran announced that 3 newly formed Investment Banks (AminIB
AminIB
AminIB, also known as Amin Investment Bank, is a major Iranian banking establishment offering commercial and investment banking services. The company was established in 2007 as part of the government's economic reform of the banking system....

, Novin
EN Bank
EN Bank, also known as Eghtesad Novin Bank, is a major banking establishment offering retail, commercial and investment banking services in Iran...

 and Pasargad Bank
Pasargad Bank
Pasargad Bank, also known as BPI, is a major Iranian banking establishment offering retail, commercial and investment banking services. The company was established in 2005 as a part of the government's privatization of the banking system....

) will take share subscriptions and act as an intermediary between the Privatization Organization and the stock exchange
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

, helping Iran divest state-owned enterprises.

The Central Bank of Iran indicate that 70 percent of the Iranians own homes., with huge amounts of idle money entering the housing market. However, if the stock market grows stronger, it will undoubtedly attract idle capital.

"Justice shares" plan


The government has approved a plan to offer shares to low-income families, starting with the poorest. Under the “Justice Shares“ plan, millions of Iranian families will receive shares in state-owned firms, the value of which will be reimbursed in 20 years from the dividends generated by those shares. The project is in line with President Mahmoud Ahmadinejad’s election promise to improve the condition of Iran’s poor. Ahmadinejad in July 2005 promised to distribute shares to Iranian families, adding that these shares would be from state-run companies that must be privatized.

Implementation


The poorest strata of society shall receive justice shares at a 50 percent discount and will pay the said amount in 10-year installments. Villagers and nomads shall have priority in this respect. The holding period
Restricted stock
Restricted stock, also known as letter stock or restricted securities, refers to stock of a company that is not fully transferable until certain conditions have been met. Upon satisfaction of those conditions, the stock becomes transferable by the person holding the award.One type of restricted...

 for those shares
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 is a minimum of 2 years [afterwards]. Those covered by charity services rendered by the Imam Khomeini Relief Committee
Imam Khomeini Relief Committee
Imam Khomeini's Relief Committee was founded in March 1979 as a charity organization to provide support for poor families. The aim is to help such families regain financial stability.-Sources of Funding:...

 and the State Welfare Organizations as well as the jobless war veterans are prioritized in the first phase of the justice shares initiative. In the second phase, rural population and tribesmen will receive the shares.

Distribution


Directives on identifying those eligible to receive justice shares (in the second phase) have been issued and the shares will be distributed (among the rural residents and the tribesmen) after receiving their national code number. Up to 6.5 million rural residents who qualify for the shares have been identified and that 1.2 million more people are yet to complete their documents. The Government is promoting the shareholding culture in Iran. The total number of shareholders has reached 700,000 people and this figure is expected to reach 24-25 million. In December 2006, the Government informed that some 4.6 million low-income Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...

ians had received Justice shares worth $2.5 billion as part of the privatization
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

 scheme. Each person received around $550 in shares with a maximum of 5 payments for each family.

In February 2008 the Iranian Economic Ministry announced that some 15 million rural people out of 23 million are entitled to justice shares by the next Iranian year (to start March 20, 2008). In November 2008 Iran announced that some 22.5 million people have received justice shares. However, in 2009 labor leaders complained that workers have received hardly any. More than seven million people have been categorized in the lowest-income bracket. By mid-June 2009, it was reported that almost 40 million people had received justice shares.

Criticism


The waves of privatizations in Iran have been criticized by both labor and business leaders, albeit for different reasons. Some observers have argued that this "privatization" is modeled on the voucher distribution programs of Russia
Privatization in Russia
Russian privatization was the reform consisting in privatization of state-owned industrial assets that took place in Russia in the 1990s, during the presidency of Boris Yeltsin, immediately after the dissolution of the Soviet Union, where private ownership of enterprises had been illegal for a long...

 and Czechoslovakia
Czechoslovakia
Czechoslovakia or Czecho-Slovakia was a sovereign state in Central Europe which existed from October 1918, when it declared its independence from the Austro-Hungarian Empire, until 1992...

 in the 1990s, which, at least in the case of Russia, led to the rise of the oligarchs
Business oligarch
Business oligarch is a near-synonym of the term "business magnate", borrowed by the English speaking and western media from post-Soviet parlance to describe the huge, fast-acquired wealth of some businessmen of the former Soviet republics during the privatization in Russia and other post-Soviet...

.

Shares for workers



In line with transferring the shares of state firms to their own staff, Privatization Organization has ceded more than 20 million shares of production units worth 18.5 billion rials
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....

 during Sept-Oct 2008, ISNA
ISNA
ISNA can refer to:Abbreviations/acronyms* Iranian Students' News Agency* Intersex Society of North America* Islamic Society of North America* Indigenous Sovereign Nation Assembly, an assembly of indigenous nations in New Zealand and vicinityPlaces...

 reported.

Iranian expatriates role


Privatization drive will gain momentum once Iranian expatriates begin to invest in their motherland. Iranian nationals residing abroad are holding significant assets. Many have invested their capital in other countries, following the 1979 Islamic Revolution and the 1980-1988 war
Iran-Iraq War
The Iran–Iraq War was an armed conflict between the armed forces of Iraq and Iran, lasting from September 1980 to August 1988, making it the longest conventional war of the twentieth century...

. Statistics at hand suggest that close to $10 billion (of goods) were re-exported into Iran last year. Multinational companies, particularly Iranian firms mostly owned and controlled by Army of the Guardians of the Islamic Revolution, are involved in export of goods into the country from Dubai
Dubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...

. There are differing estimates of the expatriates’ total capital (1.3 trillion dollars), but what is clear is that it is so huge that it will be enough to buy shares of all state companies. In Dubai alone, Iranian expatriates
Iranian citizens abroad
The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...

 are estimated to have invested up to $200 billion.
If 10 percent of this capital arrives, things will change drastically in Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...

.

Investments


In 2000, the Iran Press Service reported that Iranian expatriates
Iranian citizens abroad
The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...

 had invested about $200 to $400 billion in the United States, Europe, and China, but almost nothing in Iran. The Iranian government's efforts to encourage foreign investment from Iranians in the United States were thwarted in 1997 when President Bill Clinton issued an executive order prohibiting investments in Iran (ILSA). Nevertheless, FIPPA provisions apply to all foreign investors, and many Iranian expatriates based in the US continue to make substantial investments in Iran.

Expatriate fund


The government has proposed setting up a joint investment fund with $5 billion in basic capital and an economic union to serve Iranians living abroad. The stated goal is to attract investment from Iranian expatriates
Iranian citizens abroad
The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...

 and using their experience in stimulating foreign investments. Later, in 2010, it was announced that Iran will start the process by creating a national fund with a basic capital of eight million euros. This fund will later transform into a bank.

Foreign investment



Foreign investors can bid in Iranian privatisation tenders, but need permission from the Economy Ministry on a case-by-case basis. Iran has announced it will begin to allow foreign firms to purchase Iranian state-run companies, with the possibility of obtaining full ownership.

Offshore fund


A subsidiary of Iran's largest bank, Melli Investment Bank
Bank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...

 with branches in Dubai
Dubai
Dubai is a city and emirate in the United Arab Emirates . The emirate is located south of the Persian Gulf on the Arabian Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi...

 (UAE) and London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...

, plans to launch a fund of up to $300 million to invest in the Tehran Stock Exchange
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

, providing an alternative venue for foreigners to invest in the Iranian economy. The market, with a capitalisation of $37 billion, is trading at a fraction of the earnings multiples
P/E ratio
The P/E ratio of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share...

 enjoyed by Iran's neighbours, while average earnings continue to grow at about 25 per cent a year. The fund will be composed of blue chip companies like Iran Khodro
Iran Khodro
Iran Khodro Company, also known as IKCO, is the leading Iranian automaker with headquarters in Tehran. The company's original name was Iran National. IKCO was founded in 1962 and it produced 688,000 passenger cars in 2009...

 and will be based in the Cayman Island and managed from Iran
Iran
Iran , officially the Islamic Republic of Iran , is a country in Southern and Western Asia. The name "Iran" has been in use natively since the Sassanian era and came into use internationally in 1935, before which the country was known to the Western world as Persia...

.

Top 100 Iranian companies



The ranking has been assessed by Iran Industrial Management Company for the past 10 years. Based on financial statements for March 2005-06, the ’100 top Iranian corporations’ were ranked and announced in a conference in early 2007. According to the economic expert in charge of the rankings, the main index considered was the sales of companies because “Sales figure indicates the growth of a corporation“.

According to the same survey, while 67 percent of the firms have experienced a decline in profit margin, car manufacturers, cement factories, investment institutions and banks have had an increase in the same index. The Iranian year March 2005-06 was a good year for these industries.

Meanwhile, the Persian daily Ettelaat named the top five corporations as follows: Industrial Development and Renovation Organization
IDRO
Industrial Development and Renovation Organization of Iran was established in 1967 in Iran. IDRO Group is one of the largest companies in Iran, it's also on of the largest conglomerates in Asia. IDRO's objective is to develop Iran's industry sector and to accelerate the industrialization process...

 (IDRO) ranking first with an asset of 112,658 billion rials
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....

 followed by Iran Khodro Industrial Group
Iran Khodro
Iran Khodro Company, also known as IKCO, is the leading Iranian automaker with headquarters in Tehran. The company's original name was Iran National. IKCO was founded in 1962 and it produced 688,000 passenger cars in 2009...

with an asset of 65,971 billion rials, Mining Industries Development and Renovation Organization (IMIDRO)
IMIDRO
Iranian Mines and Mining Industries Development and Renovation Organization is a major holding company active in the mining sector in Iran...

with 52,184 billion rials, Saipa car factory with 40,528 billion rials and National Iranian Petrochemical Company
National Iranian Petrochemical Company
The National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...

with 32,024 billion rials. They were followed by SAPCO, Bank Melli Iran
Bank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...

, Bank Saderat Iran
Bank Saderat Iran
Bank Saderat Iran is an Iranian Bank. Its name means "the Export Bank of Iran". Bank Saderat Iran was founded by the prominent Mofarrah and Bolurfrushan families, commenced operation on 13 November 1952 with a board of three directors and 20 employees...

, Mobarakeh Steel Co. and Bank Mellat
Bank Mellat
Bank Mellat is a Private Iranian bank. Its name means "Bank of the Nation". Bank Mellat was established in 1980, with a paid of capital of Rials 33.5bn as a merger of ten pre-revolution private banks comprising: Tehran, Dariush, Pars, Etebarat Taavoni & Tozie, Iran & Arab, Bein-al-melalie-Iran,...

taking the sixth to tenth positions.

Latest statistics show that the number of companies worth over one billion dollars on Tehran Stock Exchange
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

 (listed companies only) has reached 12. Among them are National Iranian Copper Industries Company (NICIC shares are worth $5.2 billion), Kharg Petrochemical Company, Ghadir petrochemical companies
Ghadir Investment Company
Ghadir Investment Company was established in 1991 in Iran. Its activities range from managing or restructuring Iranian companies on behalf of its parent company, Saderat Bank of Iran. GHADIR is one of the largest listed companies on the Tehran Stock Exchange with a market capitalization in excess...

, Khuzestan Steel Company, Power Plant Projects Management Company (MAPNA)
MAPNA
MAPNA Group is a group of Iranian companies involved in construction and installation of energy production machinery, including boilers, gas and steam turbines, electrical generators, as well as industrial scale petroleum processing installations, railway locomotives and wind power...

, Retirement Investment Firm, Metal and Mine Investment Companies, Gol-Gohar Iron Ore Company ($2.1 billion), and Chadormalu Mining and Industrial Company
Chadormalu Mining and Industrial Company
Chadormalu Mining and Industrial Company was established in June 1992 in Tehran, Iran.CMIC is the main iron ore concentrate producer by direct reduction in the Middle East with 7 million  ton/year and produces up to 1,000,000 ton/year of crushed iron ore for blast furnaces and...

.

Valuation


The assets of the top 100 Iranian publicly traded
Public company
This is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...

 corporations -- not including the National Iranian Oil Company
National Iranian Oil Company
The National Iranian Oil Company , a government-owned corporation under the direction of the Ministry of Petroleum of Iran, is an oil and natural gas producer and distributor headquartered in Tehran. It was established in 1948...

 and affiliated companies, various IDRO affiliated companies, the Defense Industries Organization
Defense Industries Organization
The Defense Industries Organization The Defense Industries Organization The Defense Industries Organization (DIO; Persian: Sasadjah (Sazemane Sanaye Defa) is a conglomerate of companies run by the Islamic Republic of Iran whose function is to provide the military of Iran with the necessary...

, Iran Air
Iran Air
Iran Air , formally Airline of the Islamic Republic of Iran is the flag carrier airline of Iran, operating services to 60 destinations, 35 international and 25 domestic. The cargo fleet operates services to 20 scheduled and 5 charter destinations...

 and the Iran Aviation Industries Organization
Iran Aviation Industries Organization
The Iran Aviation Industries Organization was established in 1966 for the purpose of planning, controlling, and managing the military aviation industry of Iran....

 -- add up to $86 billion, which is less than that of a corporation such as Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

. But this does not account for goodwill
Goodwill (accounting)
Goodwill is an accounting concept meaning the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps because the reputation the firm...

 that likely increases the real assets value
Valuation (finance)
In finance, valuation is the process of estimating what something is worth. Items that are usually valued are a financial asset or liability. Valuations can be done on assets or on liabilities...

 of those same companies to more than one trillion US dollars.

Major Companies listed for privatization



Of 1,000 companies awaiting the cabinet’s approval, 240 companies had the green light already to be privatized by March 2008.

Banking and insurance



Most smaller state banks will be open to flotation, but excluded key banks including the Central Bank of Iran, Bank Melli Iran
Bank Melli Iran
Bank Melli Iran , also called the National Bank of Iran, is the first national Iranian bank. The bank was established in 1927 by the order of the Majlis and since then has consistently been one of the most influential Iranian banks.In 1931 the Iranian Majlis authorized the bank to print and...

, Sepah Bank of Iran, Bank of Industry and Mines, Bank of Agriculture, Housing Bank (Bank Maskan
Bank Maskan
Bank Maskan , also known as the Housing Bank, is a bank in Iran. In 2008, the Central Bank banned all banks and other financial institutions, except for Maskan Bank, from providing residential mortgages.-Structure:Their subsidiaries include:...

) and the Export Development Bank of Iran. The privatization-bound banks are Tejarat
Tejarat Bank
Tejarat Bank is an Iranian Bank. Its name means Trade Bank.-History:Tejarat Bank was founded in 1979 by the integration of Bank Bazargani, five domestic commercial banks, and six previous multi-nationality banks which were active in international and domestic fields.-See also:*Banking and...

, Mellat
Bank Mellat
Bank Mellat is a Private Iranian bank. Its name means "Bank of the Nation". Bank Mellat was established in 1980, with a paid of capital of Rials 33.5bn as a merger of ten pre-revolution private banks comprising: Tehran, Dariush, Pars, Etebarat Taavoni & Tozie, Iran & Arab, Bein-al-melalie-Iran,...

, Refah, Saderat
Bank Saderat Iran
Bank Saderat Iran is an Iranian Bank. Its name means "the Export Bank of Iran". Bank Saderat Iran was founded by the prominent Mofarrah and Bolurfrushan families, commenced operation on 13 November 1952 with a board of three directors and 20 employees...

, and Post Bank
Post Bank of Iran
Post Bank of Iran is an Iranian Bank.-History:Post Bank of Iran was formally established in 2006. It is the eleventh state owned bank in Iran.-International issues:...

 (ceding 100 percent of stakes of all 5 banks).

Insurance companies Asia, Dana and Alborz will be listed on the stock exchange in 2009 after review and improvement in their financial accounts, internal regulations, organizational structure and dispersion nationwide.
In 2008, the total insurance premiums generated in Iran were $4.3 billion. This is less than 0.1% of the world’s total, while Iran has approximately 1% of the world’s population. The insurance penetration rate is approximately 1.4%, significantly below the global average of 7.5%. This underdevelopment is also evident in product diversity. Approximately 60% of all insurance premiums
are generated from car insurance. Also, 95% of all premiums come from general insurance
General insurance
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and...

 contracts and only 5% relate to life products
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...

. Payout ratios have shown consistent growth over the years. Last year, the industry average payout ratio was 86%.

Industry




102 companies out of the total 130, affiliated to Industrial Development and Renovation Organization
IDRO
Industrial Development and Renovation Organization of Iran was established in 1967 in Iran. IDRO Group is one of the largest companies in Iran, it's also on of the largest conglomerates in Asia. IDRO's objective is to develop Iran's industry sector and to accelerate the industrialization process...

 (IDRO), will be privatized by next March (2009) Leading automakers Iran Khodro
Iran Khodro
Iran Khodro Company, also known as IKCO, is the leading Iranian automaker with headquarters in Tehran. The company's original name was Iran National. IKCO was founded in 1962 and it produced 688,000 passenger cars in 2009...

 and Saipa are also due to be privatized in March 2008. In July 2010, the government sold a further 18% stake in both Iran Khodro and Saipa for about $2 billion in total, bringing down its participation in both companies to about 20%. Shares of Iran Tractor Manufacturing Company
Iran Tractor Manufacturing Company
Iran Tractor Manufacturing Company is a tractor manufacturing company with headquarters in Tabriz.-History and development:Based on an agreement that was reached in 1966 between Iran and Romania to establish a tractor manufacturing company in Iran, the company was created in Tabriz in 1968...

have also been offered on the Tehran Stock Exchange as part of an IPO.

Utilities



Mapna
MAPNA
MAPNA Group is a group of Iranian companies involved in construction and installation of energy production machinery, including boilers, gas and steam turbines, electrical generators, as well as industrial scale petroleum processing installations, railway locomotives and wind power...

 Company. Sahand, Bistoun, Shazand, Shahid Montazeri, Tous, Shahid Rajaei and Neishabour power stations are among the profit-making plants, work on privatizing them will be finalized by late March 2007. Jahrom, Khalij-e Fars (Persian Gulf) and Sahand power plants will be ceded to the private sector in 2009. All domestic power plants will be privatized gradually, except those the government feels it should run to ensure security of the national electricity grid. Power plants of Damavand, Mashhad, Shirvan, Kerman, Khalij-e Fars, Abadan, Bisotoon, Sanandaj, Manjil and Binalood, which have been turned into public limited firms, are ready for privatization. As of 2010, 20 power plants were ready for privatization in Iran. Upon ceding the 20 power plants to IPO, some 40 percent of the capacity of power plants nationwide will be assigned to the private and cooperative sectors.

Mines & Metals



National Iranian Copper Industries Co.(NICICO), Mobarakeh Steel Co., Khuzestan Steel Company, Isfahan Steel Mills, Iranian Aluminium Company (IRALCO), Ehdas Sanat Company
IMIDRO
Iranian Mines and Mining Industries Development and Renovation Organization is a major holding company active in the mining sector in Iran...

 (ESC) and Iran Alloy Stell Co. are all candidates for privatization. The Privatization Organization of Iran has announced that Iranian Aluminium Co. and Bushehr Cement Co. will be privatized in June 2007. The steel, cement and iron ore prices are currently being liberalized in Iran.

Transport


As planned, all airline companies except for Civil Aviation Organisation as well as Ports and Shipping Organisation should be ceded to the people. This covers flag carrier Iran Air
Iran Air
Iran Air , formally Airline of the Islamic Republic of Iran is the flag carrier airline of Iran, operating services to 60 destinations, 35 international and 25 domestic. The cargo fleet operates services to 20 scheduled and 5 charter destinations...

 and its affiliate Iran Aseman Airlines
Iran Aseman Airlines
Iran Aseman Airlines is an airline based in Tehran, Iran, operating scheduled domestic and regional flights within the Persian Gulf area, as well as charter and air taxi services...

. The fast-growing Islamic Republic of Iran Shipping Lines
Iran Shipping Lines
The maritime fleet of the Islamic Republic of Iran Shipping Lines comprises 115 ocean-going vessels with the total capacity of . The ownership structure of the fleet comprises 87 ocean-going vessels in IRISL and 28 different types of ships under the flag of subsidiaries, including Khazar Shipping,...

 has also been lobbying for more independence. The government has agreed to offer the shares of Iran Post Company in the bourse (2008). The National Iranian Tanker Company
National Iranian Tanker Company
National Iranian Tanker Company is a subsidiary of the National Iranian Oil Company which was privatized in 2009. As at 2011, NITC was owned by funds managing pensions for 5 million Iranians. It is the biggest tanker company in the Middle East and 4th in the world...

's shares have been offered to the private sector in 2009. In 2009 Iran announced that Imam Khomeini port, its biggest port in the Persian Gulf
Persian Gulf
The Persian Gulf, in Southwest Asia, is an extension of the Indian Ocean located between Iran and the Arabian Peninsula.The Persian Gulf was the focus of the 1980–1988 Iran-Iraq War, in which each side attacked the other's oil tankers...

, will be privatized. Bandar Abbas
Bandar Abbas
Bandar-Abbas or Bandar-e ‘Abbās , also Romanized as Bandar ‘Abbās, Bandar ‘Abbāsī, and Bandar-e ‘Abbās; formerly known as Cambarão and Port Comorão to Portuguese traders, as Gombroon to English traders and as Gamrun or Gumrun to Dutch merchants) is a port city and capital of Hormozgān Province on...

 has also been listed for privatization.

Telecommunication


In 2006, the Ministry of Communications and Information Technology announced that it will float the shares of affiliated companies such as Mobile Telecommunications Company in the stock market.

Under the general policies of Article 44, telecom companies are categorized in four groups as follows:
  • Group One: Among the 30 provincial telecom networks, the fixed telecom networks pertain to those of Tehran, Isfahan, Fars, Hamedan, Ahvaz, Khorasan Razavi, Khuzestan and East Azarbaijan. The first group concerns fixed line telecom networks, including those in the public sector with 30 subsidiary telecom networks in provinces. The non-governmental sector includes companies such as Iraphone, Novin, Zahi Kish, Kouh-e Nour, Montazeran Adlgostar and Pouya Ertebat with each having hundreds of thousands of subscribers.

  • Group Two: The second group concerns mobile telephone networks. In the public sector, they include the Telecommunication Company of Iran
    Telecommunication Company of Iran
    Telecommunication Company of Iran was established in 1971 with a new organizational structure as the main responsible administration for the entire telecommunication affairs, and Iran Telecommunication Industries was also founded in the same year to manufacture the required equipment for the...

     (TCI) to be privatized by March 2008. In the non-governmental sector, they include telecommunications companies such as Omran Kish, Isfahan, Rafsanjan Complex and Irancell
    MTN Irancell
    Irancell is the second mobile phone network operator of Iran. It is 49% owned by the South Africa-based MTN Group.MTN Irancell operates on GSM 900/1800 and is the first network operator of Iran which provides GPRS and MMS service and will let subscribers choose their desired number from between...

    .

  • Group Three: There is only one public network in the data network sector, namely Data and Telecommunications Company of Iran, which is considered a basic telecom network in terms of mobile networks and Shomal IT Company. In the non-governmental sector, there are over 100 companies with a shared data network.

  • Group Four: The subsidiary telecom network named Subsidiary Telecommunications Company is another basic telecom network. They are completely owned by the state and not targeted for privatization.


In 2009, 51% of TCI was sold to Mobin Trust Consortium
Mobin trust consortium
The Mobin Trust Consortium is a company affiliated with the Iran Revolutionary Guards Corps.. As such, it is an economic engine of the Revolutionary Guards that has been used to acquire state monopolies, or other commercial and business interests important to conservative Iranian political...

, a consortium belonging to the Iranian Revolutionary Guard Corps for the sum of $7.8 billion.

Oil, gas and petrochemicals



  • The Supreme Leader said the downstream oil and gas sectors would be privatized but excluded the upstream oil and gas industry, the National Iranian Oil Company
    National Iranian Oil Company
    The National Iranian Oil Company , a government-owned corporation under the direction of the Ministry of Petroleum of Iran, is an oil and natural gas producer and distributor headquartered in Tehran. It was established in 1948...

    , the state companies involved in exploration and the production of crude oil and gas. Some shares will be dual-listed on regional foreign stock exchange
    Stock exchange
    A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

    s to attract expatriate investors
    Iranian citizens abroad
    The term Iranians abroad or Iranian diaspora refers to the Iranian people born in Iran but living outside of Iran with their children.As of 2010, there are an estimated four to five million Iranians living abroad, mostly in North America, Europe, Persian Gulf States, Turkey, Australia and the...

    . A list of 21 companies to be privatized will be released by mid-2007. Of these companies, five belong to National Iranian Oil Company (NIOC), nine to National Iranian Petrochemical Company
    National Iranian Petrochemical Company
    The National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...

     (NPC), five are affiliates of National Iranian Gas Company
    National Iranian Gas Company
    The National Iranian Gas Company was established in 1965 as one of the four principal companies affiliated to the Ministry of Petroleum of the Islamic Republic of Iran with 25,000 million Rials initial capital....

     (NIGC), and two of National Iranian Oil Refining and Distribution Company
    National Iranian Oil Refining and Distribution Company
    National Iranian Oil Refining and Distribution Company is part of the Ministry of Petroleum of Iran. NIORDC was established on March 8, 1992 and undertook to perform all operations relating to refining and distribution of oil products....

     (NIORDC), including the Abadan Refinery
    Abadan Refinery
    The Abadan refinery was located in Abadan near the coast of the Persian Gulf. It was completed in 1912 and was one of world's largest oil refineries when it was destroyed in 1980 by Iraq in the Iraq-Iran war. Its nationalisation in 1951 prompted the Abadan Crisis and ultimately the toppling of the...

    . National Iranian Gas Company
    National Iranian Gas Company
    The National Iranian Gas Company was established in 1965 as one of the four principal companies affiliated to the Ministry of Petroleum of the Islamic Republic of Iran with 25,000 million Rials initial capital....

    , the Iranian Oil Terminals Company and the National Iranian Oil Products Distribution Company are also on the list. The ownership of the jetties, metering facilities and storage tanks will still remain in government hands. Iranian Oil Terminals Co., a division of the National Iranian Oil Co., has four transport hubs that load more than 2,000 oil tankers per year.

  • Iran is to target foreign investment
    Foreign Direct Investment in Iran
    Foreign direct investment in Iran has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the Iranian government liberalized investment regulations. Iran ranks 62nd in the World Economic Forum's 2011 analysis of the global...

     in its energy sector
    Energy in Iran
    Energy resources in Iran consist of the third largest oil reserves and the second largest natural gas reserves in the world. Iran is in a constant battle to use its energy resources more effectively in the face of subsidization and the need for technological advances in energy exploration and...

     by creating an umbrella group of nearly 50 state-run firms and listing its shares on four international stock exchanges. Under the privatization plan, 47 oil and gas companies (including PetroIran and North Drilling
    North Drilling
    North Drilling Company is an Iranian company specialized in the contracting, design, construction, management and leasing of oil and gas platforms in the Caspian Sea, to global customers. The company was privatized in June 2009...

     Company) worth an estimated $90 billion are to be privatized on the Tehran Stock Exchange
    Tehran Stock Exchange
    The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

     by 2014.

  • Iran’s National Petrochemical Company
    National Iranian Petrochemical Company
    The National Iranian Petrochemical Company , a subsidiary to the Iranian Petroleum Ministry, is owned by the government of the Islamic Republic of Iran. It is responsible for the development and operation of the country's petrochemical sector. Founded in 1964, NIPC began its activities by operating...

     (NPC) plans to privatize 17 companies by the end of 2007. Forty percent of those shares will go to "Justice Shares" for underprivileged citizens in Iran. 20% will be allocated to NPC. 35% will be put on sale on the Tehran Stock Exchange
    Tehran Stock Exchange
    The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

     and the remaining 5% will go the Petrochemical Industry personnel. The 20 percent allocated to the NPC is meant to support petrochemical industry projects but may be offered to the private sector in the future. 89.6 percent of Shiraz Petrochemical Complex, and 27.76 percent of Petrochemical Investment Company will be sold to the public in June 2009. All shares of domestic petrochemical firms will be offered to the public in the frame of a holding company by the end of Iranian year (ending March 21, 2010). As part of the 2010 Iranian Economic Reform Plan
    Iranian Economic Reform Plan
    The Iranian targeted subsidy plan also known as the subsidy reform plan was passed by the Iranian Parliament on January 5, 2010. The government has described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's...

    , petrochemical companies, which use natural gas as their feedstock (rather than fuel), will pay no more than 65% of the average export price (rather than 75% for the general population) for a period of 10 years.

  • Iran also projects to privatize some of its oil refineries
    National Iranian Oil Refining and Distribution Company
    National Iranian Oil Refining and Distribution Company is part of the Ministry of Petroleum of Iran. NIORDC was established on March 8, 1992 and undertook to perform all operations relating to refining and distribution of oil products....

     (2009). Isfahan, Bandar Abbas, Tabriz, Shiraz, Kermanshah, Lavan, and Tehran (Shahid Tondgouyan) oil refineries will be transferred to the private sector but the ownership of Abadan and Arak (Imam Khomeini) oil refineries will remain in government control.

Progress



Close to 370 trillion rials worth of shares of firms covered by Article 44 of the Constitution have been sold to the private sector in the past three years. The value of government assets are between 1,000 to 1,100 trillion rials
Iranian rial
The rial is the currency of Iran. It is subdivided into 100 dinar but, because of the very low current value of the rial, no fraction of the rial is used in accounting....

 ($110 billion), one third of which have been ceded to the private sector (December 2008).

In 2009 it was reported that 30 percent of the revenues obtained from ceding the ownership of state entities within the framework of Article 44 of the Constitution are allocated to the nationwide cooperatives.

As of 2009, Iran has privatized $63 billion worth of government equity in state-owned firms since 2005 (out of $120 billion). Subsequently, the disinvestment has brought the government's ownership in the GDP from 80% down to 40%. Privatization through the bourse
Tehran Stock Exchange
The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

 has tended to involve the sale of state-owned enterprises to other state actors such as pension fund
Pension fund
A pension fund is any plan, fund, or scheme which provides retirement income.Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors dominate. The largest 300 pension funds collectively hold...

s.

The Iranian Government announced in 2010 that it aims to raise some $12.5 billion by privatizing more than 500 state-owned firms. The money raised through privatization of the firms will be spent on paying the state's debts.

See also


  • International Rankings of Iran in Economy
  • List of Major Iranian Companies
  • Tehran Stock Exchange
    Tehran Stock Exchange
    The Tehran Stock Exchange is Iran's largest stock exchange, which first opened in 1967. The TSE is based in Tehran. As of July 2010, 337 companies with a market capitalization of US$72 billion were listed on TSE...

  • Labour and tax laws in Iran
    Labour and tax laws in Iran
    Taxation in Iran generates particular unease among foreign firms because they appear to be arbitrarily enforced – tax bills are initially based on 'assumed earnings' calculated by the Finance and Economy Ministry according to the size of the company and the sector in which it operates...

  • Next Eleven
    Next Eleven
    The Next Eleven are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam — identified by Goldman Sachs investment bank and Jim O'Neill as having a high potential of becoming, along with the BRICS, the world's largest...

  • Economy of Iran
    Economy of Iran
    The economy of Iran is the eighteenth largest in the world by purchasing power parity and according to Iranian officials' claims is going to become the 12th largest by 2015. The economy of Iran is a mixed and transition economy with a large public sector and some 50% of the economy centrally planned...

  • Iranian Economic Reform Plan
    Iranian Economic Reform Plan
    The Iranian targeted subsidy plan also known as the subsidy reform plan was passed by the Iranian Parliament on January 5, 2010. The government has described the subsidy plan as the "biggest surgery" to the nation's economy in half a century and "one of the most important undertakings in Iran's...

  • Transition economy
    Transition economy
    A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a free market. Transition economies undergo economic liberalization, where market forces set prices rather than a central planning organization and trade barriers are removed,...


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