February 28, 2020
The Majlis Research Center says a new government plan for privatizing its remaining assets is not “privatization in the true sense.”
An analysis by the research center says the new plan, just like previous ones, will leave control over the “privatized” assets effectively in state hands.
The Rohani Administration plan is to turn over the ownership of the stock in many state-owned firms to an “exchange-trade fund” (ETF), whose shares would then be bought and sold on the stock exchange just like any ordinary stock.
“Given the nature of ETFs, it seems state-controlled enterprises on the divesture list will still be managed by the government, at least in the short term,” the Majlis think tank said in its study of the proposal, which is made in this year’s draft budget.
An ETF can own hundreds or thousands of stocks across various industries, or be isolated to one particular industry or sector. They are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.
The government is pursuing two goals via this initiative: generating income by divesting ownership of its properties without losing control over them, the research center said, adding that this is at odds with the principles of Article 44 of the Islamic Republic Constitution calling for true privatization.
As per provisions of Article 44, the economy should downsize to be able to offer opportunities to private firms and curb the bloated bureaucracy.
The government assets to be divested are worth 200 trillion rials ($1.5 billion), according to the head of the Securities and Exchange Organization, Shapur Mohammadi.
If the assets were sold via a single ETF, the figure would be higher than the value of a total of the 42 active ETFs currently trading on the Tehran stock market.