Iran's economic reform plans stalled

Plans to reform Iran's largely state-run economy have suffered a major setback after parliament blocked measures aimed at opening up the economy to much-needed foreign investment.

    Conservative MPs dominate Iran parliament

    The parliament, or Majlis, on Sunday voted down plans put forward by its reformist-controlled predecessor allowing the privatisation of Iranian banks and the presence of foreign banks in the Islamic republic. 

    To "prevent foreign dominance of Iran's economy", MPs also voted against a proposal that would have allowed oil prospectors to exploit their own finds. Instead, successful prospectors must bid against competitors in a state-run tender. 

    The conservative-run Majlis took office in May after the Guardians' Council, an unelected political watchdog, barred most reformists from contesting elections last February. 

    MPs on Sunday endorsed the rejection by the Council, which also vets legislation, of the last parliament's moves to stimulate the lumbering state economy through a combination of foreign investment and privatisation as part of the 2005-10 five-year plan. 

    'Excessive capitalism'

    According to Hamid Reza Hajibabaie, a conservative MP, the development plan "was not based on social justice but on excessive capitalism and privatisation". 

    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. 

    "The conservatives are not looking for economic transparency, so a state-run economy is in their favour" 

    Saeed Leylaz,
    Financial analyst

    Abd Allah Ramezanzadeh, spokesman for the government of pro-reform President Muhammad Khatami said that the aim of the rejected plan had been to achieve 8% 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 Mahmud Astanih 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 eight million barrels a day within the next 15 years, and the move will "undoubtedly create enormous problems in future", he said. 

    'Political move'

    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 liberalisation... 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 favour." 

    The Iranian economy is around 85% 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.

    SOURCE: AFP


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