Review of the Advantages and Disadvantages of Privatization and the Existing Harms in Article 44 of the Constitution
Abstract
Privatization, in line with the general policies of Article 44 of the Constitution, was announced in June 2005 by the Supreme Leader. This initiative, referred to as an economic revolution, was intended to create a new framework for the country’s economy. However, years after its implementation, it has faced numerous challenges. Misguided privatizations in the 2010s, such as the transfer of the HEPCO company in Arak, the Haft Tappeh Sugarcane Industry, and the Mughan Industry Company, led to the collapse of factories and the unemployment of a significant portion of their workers. To prevent such outcomes from recurring, a thorough assessment of the privatization process in the country is of great importance.
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The Concept of Privatization and Its Methods
Privatization involves transferring state-owned assets or activities to the private sector. In a narrow sense, it means selling public companies; in a broader sense, it includes shifting government-run services to private control to boost market-driven economics. Common methods include:
- Public share offerings to spread ownership, requiring profitable companies and a strong capital market.
- Private sales to specific groups, which carry risks of misuse.
- Breaking up large companies into smaller units, used when share offerings aren’t feasible and the government needs funds.
Advantages and Disadvantages of Privatization
Privatization can improve efficiency, boost competition, and generate revenue for governments by selling public assets. However, it may also risk public interests in essential services like healthcare and education, cause the government to lose future profits from successful state-owned companies, and lead to private monopolies in sectors with high infrastructure costs, potentially raising prices for consumers.
Article 44 of the Constitution regarding privatization and its harms
Article 44 of Iran’s Constitution divides the economy into three sectors: public, private, and cooperative. The public sector includes major industries and vital services owned by the government. The private sector complements the public and cooperative sectors. Ownership in all three sectors is supported by law as long as it aligns with Islamic principles and benefits society. Privatization must be carefully planned and should not harm public interests or economic development.
This study was conducted at Economic Corruption Confrontation Think Tank in collaboration with Alireza Rahimi Aghdam and Armin Saeidi in 2022.
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