How Iran’s 'justice shares' impede state divestment from the economy
The Iranian government’s "justice share" scheme has impeded divestment of state involvement in the economy, further complicating efforts to institute genuine privatization.
In the 40 years since Iran’s Islamic Revolution, consecutive Iranian governments have pursued social justice as a key policy principle. The distribution of so-called justice shares, beginning almost 12 years ago, is one such example of a populist policy that had been promised to underprivileged Iranians under mass privatization programs. The aim of the justice share program was to distribute stocks of state-owned enterprises that could yield dividends to millions of poverty-stricken families. Although some meager dividends have been paid to justice share owners, those who subscribed to the scheme are not yet the direct shareholders, as initially intended. This is chiefly due to the program’s multiple inherent complexities, including legal, technical and operational impediments.
According to data posted on the Justice Shares Information Center website, more than 47 million Iranians own justice shares. The number of state-owned enterprises that were supposed to be privatized under the justice share program is now 49, down from 60.
These enterprises are valued at almost 918 trillion rials ($21.8 billion). However, most of them are not currently profit-making and consequently do not pay dividends. Had the justice share scheme not been ill-devised from its early stages, such shares could have been utilized as a security in the Tehran Stock Exchange for trading and investment. But since non-economic incentives were behind the implementation of the program, justice shares are not yet tradable.
Interestingly, the head of the Securities and Exchange Organization recently announced that exchange-traded funds (ETFs) will eventually enable the trading of justice shares on the Tehran Stock Exchange. But this raises questions about who will assume ownership of the preferred units of the ETFs; e.g., will government-affiliated agencies continue to manage the ETFs and exert their influence in order to retain their majority voting rights in the ETFs’ underlying assets?
