Iran’s Economy a ‘Masterpiece of Structural Ambiguity’

The quasi-state sector emerged following the end of the Iran-Iraq War (1980-88), when public institutions began to establish companies, and military organizations set up businesses. For instance, Khatam al-Anbia, the Islamic Revolutionary Guard Corps’ (IRGC) business conglomerate, was founded as a military headquarters for reconstruction in 1989. These quasi-state entities — some of them public or part of the political system — established businesses of their own and registered them as private firms.

For instance, the Kish Free Trade Zone Organization (KFTZO) set up the Kish Free Trade Zone in the late 1980s and serves as its administrator. KFTZO then founded Kish Airlines, assumed ownership of property on Kish Island and became a major player in the tourism industry.

When the Iranian government initiated privatizations in 1989, as part of President Akbar Hashemi Rafsanjani’s policies to jump-start the economy, the quasi-state entities bid for shares in state firms. In effect, privatization became a process of transferring public property to companies defined as private businesses but belonging to public organizations. The story of Iran Aseman Airlines is a case in point. Created in 1980 through the merger of four formerly private airlines, the Iranian government transferred its 100% stake in the company to the Civil Servants Pension Organization (CSPO) in 2002.

Researchers consider Iran’s Social Security Organization (SSO) and CSPO to be among the chief beneficiaries of the privatizations. In 2013, Iranian legislators estimated that more than 1,500 trillion rials ($46 billion) in shares had been transferred to quasi-state entities as part of the privatization process, which intensified in 2005 following a decree by the supreme leader, Ayatollah Ali Khamenei. In several cases, there was no bidding. Rather, the government transferred its shares in state-owned enterprises to CSPO or SSO or banks upon Cabinet decrees or to satisfy budget obligations.

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