Not Private, but Government Companies

"Private" is a constructed term used to refer to one of the characteristics of the rentier economy of the clerical system, meaning companies that are not directly dependent on the government and do not receive a share of the state budget, so they must be private, but they also receive significant privileges from the government, thus having a partnership with the state. The combination of 'private' and 'government' creates the term 'private-government' which is both misleading and incorrect. 'Private-government' is misleading because the combination of this term implies that the corrupting rent of such enterprises arises from the proximity and cooperation of the private and public sectors. However, this is not the case, and cooperation between state and private companies, as long as it does not harm the essence of the market-based economy, does not always have negative consequences. For instance, in France, private and public sector companies cooperate to implement special projects. Although the legal framework for private companies is private law and for state companies is public law, when these two partner, the legal reference for the implementation of contracts and the organization of relations between them is administrative law. In cooperation between private and public companies in France, the state company can change its administrative contract with the private company and even terminate it without the private sector necessarily having failed in its work. Therefore, within the legal framework of a market-based economy, cooperation between private and public companies is neither illegal nor does it provoke rent-seeking. The term 'private-government' is not only misleading but also incorrect, because in the clerical system, these companies are never born from the cooperation of the free public and private sectors (civil society), but rather emerge from government circles that operate independently and compel the government to grant privileges without formally receiving a share of the state budget. In a system based on insiders and outsiders, where civil society's freedom has disappeared, how can non-insider companies of civil society, even with the cooperation of state companies, emerge and become dominant in the closed economy of the clerical system? The backbone of these enterprises is the pillars of the Islamic Republic system, such as religious institutions (Astan Quds Razavi and Imamzadehs), revolutionary foundations (Mustazafan and Shahid), and especially military forces that can leverage power to obtain various names and convoluted networks of resources at low prices and monopolize sales markets, thus driving the private sector out of the field. The so-called 'private-government' companies, according to common and governmental belief, hold the largest construction, financial, and oil activities in the country. The activities of these government companies are not transparent, and the related data must be gathered piecemeal from here and there to achieve a clearer view. To better understand this phenomenon, we refer to the banking activities of government companies affiliated with the armed forces, such as the Basij Foundation, the NAJA Foundation, and the Army Foundation. In the 1380s, the IRGC established over 500 branches of the Ansar al-Mujahideen Fund with its Cooperative Foundation, and then sought to create a bank and obtained a license from the Central Bank. Both the Thamen Financial and Credit Institution and the Ansar al-Mujahideen Bank are affiliated with the IRGC Cooperative Foundation. However, the IRGC Cooperative Foundation also owns other companies, such as Rasa Trade Mobin and especially Yas Holding, which reportedly owes 4,500 billion tomans to the Tehran municipality for obtaining construction and operation licenses, but the IRGC denies this today. Furthermore, the IRGC-affiliated government companies have also obtained significant privileges from Hassan Rouhani's government, such as the privilege of jihadist camps for poverty alleviation in deprived areas and border cooperatives for controlling trade at border crossings. The Basij Organization invested the 10 million rial gift from Ayatollah Khamenei, the leader of the clerical system, and in 1372 launched the Basij Fund, which expanded into the Mehr Economy Bank in 1381 with a license from the Central Bank. The brokerage of Mehr Economy Iranians (stock market), Tajalli Mehr Iranians (construction), Farasouye Sharq (affiliated with Tajalli Mehr Iranians for design, calculation, execution, and supervision), and the Atieh Sazandeh Mehr Economy Company (satisfaction and assistance to personnel and investors working and retired from the bank) are subsidiaries of Mehr Economy Bank. Alongside this well-known financial institution, the non-profit Basij Cooperative Foundation encompasses other non-banking companies such as Javan Sir Etesar (land transport), the Basijans' Treatment Supply Institute (health services), Rail Tarabar Saba (rail transport), the Basijans' Housing Supply Institute (housing provision), the Cultural and Artistic Institute of Islamic Warriors, the Scientific Institute of Warriors (scientific and educational services for Islamic warriors), and the Kosar Auditing Company and the Basijans' Consumer Goods Supply Institute. The Islamic Republic's Law Enforcement Force initially established the Law Enforcement Qarz al-Hassaneh Fund and in 1379, during the first presidency of Mohammad Khatami, transformed it into the 'Law Enforcement Savings and Qarz al-Hassaneh Institute'. After two years, in Esfand 1381, it obtained a license from the Central Bank and converted this institute into Qavamin Bank. The Army Cooperative Foundation established the Hikmat Iranians Bank in 1389, creating its branches mostly around army barracks. Saba Insurance and the Etka store chain are also affiliated with the Army Cooperative Foundation. The Ministry of Defense and Armed Forces Logistics (Wadja) also established the Kosar Credit Institution in 1389. In addition to the armed institutions, other powerful institutions of the Islamic Republic system have entered financial and banking activities, such as the Martyrs Foundation and Day Bank, the Mustazafan Foundation and Sina Bank, Tehran Municipality and Shahr Bank, and the Cultural Workers' Reserve Fund and Sarmayeh Bank. The military institutions' invasion into banking occurs while even the Research Center of the Islamic Consultative Assembly has assessed the Iranian banking industry on the verge of bankruptcy, unable to continue operations without borrowing from the Central Bank. This means that these government banks incur losses and compel the government to finance their losses. The bankruptcy of banks is primarily due to two interdependent reasons: one is the granting of loans unrelated to deposits, and the other is the inability to collect debts. The unpaid debts of banks exceed 300 trillion tomans. The government's debt is 230 trillion tomans, and the debts of the real and legal private sector amount to 90 trillion tomans. 80% of the unpaid debts of the non-governmental sector belong to 500 individuals, of whom 61 have overdue debts of over 100 billion tomans. The relationship between these two reasons is clear. Government institutions establish banks to gain access to abundant funds and grant large loans to many influential insiders. Many of these insiders do not repay their debts, complicating the banks' operations. To escape the crisis, banks do two things. On one hand, they promise high profits to attract more deposits and revive their operations, without which they have no solution to the endless collapse of 'new deposits for repaying old debts'. On the other hand, banks pressure the government to obtain facilities. How can the government stand against the powerful foundations of the clerical regime and not provide the desired facilities? Therefore, the author always insists that these enterprises should not be called private, but rather governmental. Enterprises that do not officially have a share of the state budget but influence the government through governmental mechanisms. These governmental enterprises use the government as their rent-seeking agent. It should be noted that a rent-seeker is someone who gains access to money-making economic privileges, free from any competition and without considering the equal rights of others. Just like the armed forces in the clerical system that have taken control of the banking system and its privileges. At another opportunity, we will turn to other governmental companies such as Khatam al-Anbiya Construction Headquarters and Astan Quds Razavi. The views expressed in this note do not necessarily reflect the views of Radio Farda.