Private Entrepreneurs and Iran’s Statist Economy

Highly restrictive and at times contradictory regulations, an ideologically oriented judicial system, and a bureaucratized public banking structure are among the major barriers facing industrial entrepreneurs. Graduated tax on industrial enterprises that can reach as high as 54%, in addition to myriad of other levies and taxes, constitutes another serious obstacle for the growth of a class of industrial entrepreneurs in Iran. Furthermore, the conservatives who control the major centers of political power and whose economic and financial interests are intertwined with the powerful distributive sector of the economy, have little incentive to espouse an industrialization program.

Thus, despite important changes in the regime’s economic policies, political and legal impediments towards the realization of president Khatami's initial economic program, particularly in the area of privatization, persist. The insistence of the Council of Guardians to systematically veto measures taken by the Majles, including the legislation to authorize and promote foreign investment in Iran, must be considered as one of the most serious of these obstacles. Many private industrial entrepreneurs believe that since the election of president Khatami, his administration and the 6th Majles have tried, albeit not successfully, to facilitate private investment in industry. They have been supporting reformist candidates since 1997 presidential election and do not seem to have lost hope in the reformists’ agenda. They also appear determined to play an increasing role in effecting economic, social and political reforms.

Nonetheless, reforming a rentier economy will entail substantial loss, in both financial and political terms, for traditional bazaar merchants and the major beneficiaries of oil revenues. It was the bazaar traders who first underwrote the cost of the revolution and in its aftermath succeeded in promoting a distribution-oriented economy. Reforming the economy is thus a political act which necessitates active support of major social and economic actors, especially salaried middle classes, liberal professionals, private industrial entrepreneurs and workers who have so far been thrust aside. Gaining their support and constructing new social alliances require radical changes in objectives and policies which the Islamic regime does not seem ready to undertake.

Azadeh Kian Thiebaut
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