President Hassan Rouhani and his economic team have stated unambiguously that they will revive the Management and Planning Organization (MPO) — an entity that was dissolved by former president Mahmoud Ahmadinejad in 2006. While the new administration is deliberating on how to structure the new MPO, it is worthwhile assessing what kind of a state organization would best respond to the needs of the country’s economy and business environment.

The MPO was created through the merger of two old state organizations in 1997: the Planning and Budget Organization (PBO: in charge of drafting and supervising annual budgets and five-year development plans) and the Organization for Administration and State Recruitment (in charge of all human resource issues within the state sector). It should be noted that the PBO was originally established in 1948 based on the advice of US advisers who were helping Iran build a modern state in post-WWII era. After the merger in 1997, the MPO played a significant role in the allocation of provincial, organizational and project budgets and as such was an important stakeholder in the financial processes within the government. It was so significant within the state structure that the head of the MPO had the rank of a vice president and was also a member of the Supreme National Security Council. Before Ahmadinejad’s arrival on the scene, the main criticism at the MPO was that its experts were out of touch with local and provincial realities and that budgets were allocated without a clear understanding of local issues and most times based on political bargaining processes.

Ahmadinejad’s decision to dissolve the MPO and to transfer its key responsibilities to the president’s office under a vice presidency was based on a number of reasons: First, Ahmadinejad was principally anti-establishment and for him the MPO was a symbol of a state bureaucracy that was driving decisions in Iran. Second, his experience as the former provincial governor of Ardabil had underlined how Tehran could impede provincial projects through the budget leverage. Third, as his later decisions indicate, he wanted a free hand in passing and implementing “rapid projects” and wished to control the resources — incidentally, the desire to control matters directly was also evident in the new name for the new vice presidency, “vice president for planning and strategic control.” 

In justifying the move (which was criticized heavily by experts at the time), Ahmadinejad said: “This step will inject a new spirit into the management and planning systems of the country.” In reality, the decision to dissolve the MPO paved the way for a “trial and error” mentality in budgetary decisions and fund allocations and the gradual move away from expert cost-benefit analyses on state expenditure. It is also no coincidence that the government is faced with enormous budget deficits and also a large number of unfinished projects.