Iranian Parliament puts reforms on hold

Posted in Iran | 18-Aug-04 | Source: The Daily Star (Lebanon Edition)

Newly-elected conservative body agrees to partially privatize Iran Air

Iran's conservative-dominated Parliament has agreed to privatize 49 percent of the country's national carrier Iran Air, Tehran newspapers reported Tuesday, but many other planned economic reforms are to be dropped completely.

The government will retain a 51 percent stake in the airline to "prevent the private sector from taking over the majority," the reports added.

Parliament also approved the flotation in its entirety of Iran Air Tours (IAT), an Iran Air subsidiary that handles around 30 percent of domestic flights.

The MPs' decision has yet to be approved by the Council of Guardians, an unelected conservative-controlled watchdog with powers to vet all legislation.

Shares in Iran Air will not be easy to sell, as the company is thought to have suffered losses of some $122 million from 2002 to 2003 and private investors are reluctant to invest in a company while the government retains majority control.

Iran Air is also known to have a dilapidated fleet, as the airline has been hit by US-imposed sanctions that bar Iran from buying aircraft with more than 10 percent US components. Iran Air uses US-made Boeings purchased before the 1979 Islamic revolution, while about half of its 90 aircraft are rented Russian Tupolevs.

Iranian Transport Minister Ahmad Khoram has admitted that several Boeing and European-made Airbus airplanes are currently grounded due to a lack of spare parts.

Economic liberalization measures taken by reformist MPs, especially in the oil and banking sectors, have recently come under attack from the new conservative Majlis (Parliament) which began its mandate in May. Reformists say that Iran's state-run economy is in dire need of foreign investment.

MPs Sunday endorsed the rejection by the Council of Guardians of the last parliament's moves to stimulate the lumbering state economy through a combination of foreign investment and privatization as part of the 2005-10 five-year plan.

According to Hamid Reza Hajibabaie, a conservative MP, the development plan "was not based on social justice but on excessive capitalism and privatization." Several foreign banks had reportedly expressed interest in setting up branches in Iran.

Britain's Standard Chartered bank planned to open a branch in one of the country's free trade zones in October - the first such venture since the Islamic revolution 25 years ago.

Abdollah Ramezanzadeh, spokesman for the government of pro-reform President Mohammad Khatami, said that the aim of the rejected plan had been to achieve eight percent growth and decrease the gap in per-capita earnings with other developing countries.

And he added that with the changes "the government will not accept any responsibility for any future shortcomings in peoples' livelihood." Deputy oil minister Mahmoud Astaneh added that MPs had also effectively cut state revenues by more than $80 billion, thus making it impossible to develop Iran's oil and gas sectors.

Iran wants to double its oil production to 8 million barrels a day within the next 15 years, and the move will "undoubtedly create enormous problems in the future," he said.

Financial analyst Saeed Leylaz told AFP that "the Majlis's move is more political than economic, and goes against all three previous development plans (1990-2005), which advocated economic liberalization ... basically it is a strategic retreat.

"This move is also in line with anti-detente policies currently being followed" by the conservative camp, he said, adding, "the conservatives are not looking for economic transparency, so a state-run economy is in their favor."

The Iranian economy is around 85 percent state-run and its infrastructure has suffered greatly because of the eight-year Iran-Iraq war as well as US-imposed economic sanctions.

The Majlis' decision virtually puts paid to Khatami's efforts to revive the economy through legislation, which he had seen regularly blocked by the Guardians Council, and leaves him a lame duck president until elections next year. - Agencies