Private Sector and Domestic Investment

Following the sweep of privatization fever around the world, Iran's First Development Plan encouraged private sector participation in rebuilding the country's war-damaged economy in the hope of creating new industries, increasing employment, and expanding non-oil export. However, when the five-year plan came to a close in March 1994, none of these objectives was obtained, and the country became ever more dependent on imports of consumer and processed goods. The question is why has domestic private investment been a laggard?

The answers may be found in a number of deep-rooted impediments to productive private ventures such as the oppressive nature of the countries political order; the great profitability of trade and brokerage activities compared to long-term investments; bureaucratic tangles and administrative corruption; ever-changing and unstable rules and regulations; ambiguities regarding private ownership and enterprise; extra-legal actions by certain governmental or parastatal organizations; paucity of statistics and information concerning new opportunities and economic trends; timid and inappropriate research; and, finally, the deficiencies of the Tehran Stock Exchange as an intended vehicle for privatization and the spread of private industrial ownership.

What is certain is that Iran's current economic problems cannot be alleviated without the active, sustained, and dynamic participation of the private sector. This participation, however, would hinge on such factors as bureaucratic reforms, private ownership guarantees, access to impartial courts of law, supportive monetary and fiscal policies, and availability of pertinent information.

Amir Baqer Madani
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