Iran’s quasi-government companies, neither truly public nor private, are proliferating annually, posing an unprecedented challenge to the country’s economy. While initially created as a means to evade sanctions, these entities have gradually evolved into a problem for Iran’s economic stability.
Ahmadreza Dastgheib, the head of the country’s audit bureau, recently disclosed the latest status of these quasi-government companies, stating, “To date, we’ve identified approximately two thousand quasi-government companies, and measures to address them have commenced.”
It’s worth noting that this figure doesn’t encompass the total number of such companies, as many have been established more recently.
Emergence of Quasi-Government Companies
The phenomenon of quasi-government companies emerged in Iran in the mid-2000s amid international sanctions and Security Council resolutions aimed at Iran’s nuclear activities. These companies were primarily created to circumvent sanctions, often establishing overseas branches for activities such as oil sales, banking transactions, and commodity trading.
Characteristics and Transparency
Quasi-government companies, often referred to as parastatals, are managed by the government but operate with a private sector approach. Their management structure closely resembles that of state-owned companies privatized in the past. However, the key difference lies in their clandestine origins, with the composition of their management and their specific activities shrouded in secrecy.
Interestingly, while the Public Accounting Law defines ministries, government entities, and non-governmental public institutions, it lacks a definition for quasi-government companies in Iranian legislation. Experts argue that as the number of these companies, sarcastically referred to as ‘Khosulati,’ grows, transparency within Iran’s economy declines.
Impact and Controversies
The history of quasi-government companies dates back to the mid-1980s, but their extensive presence and role in tax evasion within Iran’s economy became public knowledge in July 2015. What sparked public outrage was the exorbitant salaries of quasi-government company managers, suggesting that government officials had established a ‘private enclave’ under the guise of evading sanctions.
In the same year, Hamshahri newspaper reported approximately 19,000 such companies, although details about their financial performance remained murky. At that time, Ali Tayebnia, the Minister of Economy, characterized them as having an inefficient and complex economic structure compared to the public sector.
Despite claims of these companies enjoying tax exemptions worth at least $20 billion annually, no financial turnover data has been made available. Such information could shed light on their significance in the shadow economy.
Key Players
Six categories have notably expanded quasi-government companies within Iran’s economy:
1. Non-governmental and public institutions
2. Military and law enforcement organizations
3. Endowment organizations
4. Pension funds
5. Islamic revolution institutions
6. Charitable institutions
These entities, including those affiliated with the office of the supreme leader of the regime, have established quasi-governmental companies.
Current Status and Transparency Concerns
For the past seven years, there has been no official report on the fate or financial performance of these companies, despite an expectation of disclosure on Iran Stock Exchange-related platforms.
Iran’s Transparency International ranking has plummeted in recent years, currently standing at 147th out of 180 countries in terms of financial corruption. This decline coincides with the suspension of the JCPOA agreement and the reimposition of U.S. sanctions. International and domestic economic analysts argue that Iran is sinking deeper into the morass of financial corruption.
Quasi-Government Companies and Oil Sales
The Iranian regime passed a law allowing the sale of oil through individuals and institutions as a means to evade oil sanctions. This law enables quasi-government companies to sell oil at any price, often with significant discounts, further increasing their numbers.
Eco Iran, an affiliated website of Donya-e Eghtesad newspaper, reported that, according to budget statistics and statements from Davoud Manzoor, Head of the regime’s Planning and Budget Organization, the 13th government has prioritized oil export volume over selling prices. This strategy means that Iran is often selling oil at a 30 percent discount in global markets.
Conclusion
Quasi-government companies in Iran, with substantial resources and extensive political and economic connections, have emerged as major players in the nation’s economy. Their influence spans from large contracting projects to oil trading. They now rival private enterprises, and in some instances, even official regulatory bodies struggle to oversee their activities, raising concerns about transparency and accountability within Iran’s economic landscape.
