Privatisation in Iran

Revision of Article 44 of the Constitution

An executive order for privatization envisaged by Article 44 of the Constitution of the Islamic Republic of Iran was issued by the Supreme Leader in July 2006.

According to the action plan, the government is assigned to cede 80 percent of the shares of major state-owned enterprises to the people in order to support the targets envisioned by the 20-Year Strategy for Economic, Social and Cultural Development The executive order indicates that ceding 80 percent of the shares of large companies will serve to bring about economic development, social justice and elimination of poverty.

By putting into practice the action plan, the government's role will undergo a shift from direct involvement in ownership and running the large companies to supervisory and guidance of different sectors of the economy to meet the regulations of the World Trade Organization (WTO) gradually.

Pricing of the outputs of the large companies should be made in line with the world trade regulations and a special team will be formed to monitor full implementation of the action plan on privatization.

Sectors subject to modification:

  • All governmental companies and enterprises in the field of mining.
  • Major industries in the down stream sectors of the oil and gas industry (refineries and petrochemical plants and complexes, as well as the distribution of refined products and gas at the domestic level) with the exception of the National Iranian Oil Company and those companies involved in the up-stream activities in oil and gas sectors.
  • Some of the major banks.
  • All insurance companies except Central Insurance Company and Iran Insurance Company; this includes 35% of the whole national market.
  • All air lines and shipping companies, and port's management.
  • All power Plants, electricity producing and distribution companies except the main national electricity grids and transmission lines.
  • Almost all activities in the area of Post and telecommunication except major national grids and some of the monitoring area and fields.

Main objectives of the initiative:

  • 80% shares and stocks of major public companies and enterprises which worth totally US$130bn. will be sold to the private and cooperative sectors.
  • 10% of this amount, US$13bn. is allocated to the foreign investment.
  • The role of the government will change from ownership and direct management to the macro policy making and monitoring.
  • The government should contribute to the enhancement of private and cooperative sectors in the economy and wil1 create a supportive environment for their competition at the international markets.
  • Preparing the domestic enterprises to be able to conduct their activities in accordance with the prudential rules and regulations of international trading system in a targeted and a sequential process.
  • Developing human resources and capacities as well as necessary knowledge for best implementation and follow-up of these policies.
  • Development and promotion of national standards and making the quality assessment systems compatible with the international standards in all necessary areas and fields.
  • The promoting privatization with the objective of promotion of efficiency, competitiveness and expansion of private ownership

Privatisation to Date

According to official figures from the Iranian Privatisation Organization, since 2006 some US $82,770 has been received by the Iranian government through its program of privatisation, representing over 60% shares in large companies. Plans are currently underway to divest another 20% by 2015.

So far the program has led to sale of refineries, banks, petrochemical industries, steel, aluminium, shipping, telecommunication and insurance companies.

By far the largest privatisation of the Iranian public sector to date has been the sale of a majority stake in Iran's only state-owned telecommunications firm September 27 2009. In this sale three Iranian firms part of a consortium called Etemad Mobin Development bought 50% plus one share of the Telecommunications Company of Iran for 7.8 billion dollars.

Most recently on the 17 of July 2012, the state divested 50.5% of its shares in Khuzistan Steel Company on the Tehran Stock Exchange. Plans are also being drawn up to divest total shares of Sefidroud Agricultural and Animal Husbandry Company in the near future.