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2005/04/13
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Fighting Corruption
Economic corruption is rife in the world with high-profile embezzlement cases, the worsening dilemma of smuggling of goods as well as widespread graft, bribery and hoarding.
In Iran too, cases of economic corruption have been on the rise in recent years.
The Seventh Parliament has resorted to certain measures to bring financial corruption under strict control. These measures include the lawmakers’ decision to prevent the implementation of two major foreign investment projects with Turkey’s telecom giant TurkCell and France’s Renault, a leading automaker in Europe.
However, it remains to be seen whether the measures could contribute effectively to the campaign against economic corruption.
A member of Parliament’s Economic Commission told the Persian daily Qods that the campaign against economic corruption needs a strong national will, stressing that all the state organizations must supervise the performance of their employees and affiliates.
Mohammad Shahi-Arablou noted that the existing laws have to become more transparent, if economic corruption were to be brought under greater control.
“The government has to come up with a new system of managing the state companies and fighting corruption through legal means,“ he said, adding that parliament could only play the overseeing role in this regard.
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Government and parliament have so far failed to target subsidies to the benefit of the poorer strata.
Subsidies
The lawmaker is of the opinion that the continuation of the subsidy system has worsened economic corruption in Iran.
“The Third Development Plan (2000-2005) had stipulated that subsidies must become targeted,“ he said, adding that the government and parliament have so far failed to target subsidies, meaning that they are given only to the low-paid social strata.
The Management and Planning Organization is against plans to dole out cash equivalent of subsidies directly to the people, stressing that the funds must be used to implement educational and health schemes.
Proponents of the initiative believe that the wealthy sections of the society are taking five times more subsidies than those given to the large underpaid population.
The government announced recently it would pay additional subsidies to the vulnerable strata which numbers 15 million, stressing that some five million people are already covered by official charity services.
Many experts believe subsidies have encouraged smuggling and economic corruption in the country. Fuel smuggling is rife in Iran with many people in border areas taking subsidized fuel out to neighboring countries, most notably Pakistan.
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The Third Economic Development Plan (2000-2005) stipulated that subsidies must become targeted.
New Bill
The new bill on dealing with smuggling of goods has been drawn up and would be presented to parliament soon, according to the Islamic Republic of Iran Police Department for Combating Economic Corruption.
The new bill envisages measures to deal with smuggling of cultural and historical items as well as medicines.
Medicines, mostly tranquilizers, are smuggled into the country via waterways in the southern, western and eastern regions.
Experts say it is possible to exert greater control over the smuggling of goods via free trade zones.
Goods are smuggled into the country directly via 11 border provinces.
Spokesman of Headquarters for Combating Smuggling of Goods and Foreign Exchange said recently some five billion dollars worth of goods are smuggled into the country each year depriving Iran of 500,000 job opportunities per annum.
Unconfirmed reports, Mohsen Bahrami said, suggest that 10-14 billion dollars worth of goods are smuggled to and from Iran each year.
Secretary of the headquarters, Brigadier General Mohammad Baqer Qalibaf said earlier all channels of illegal entry of commodities into the country have been identified and will be named soon.
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Chain of Corruption
Shahi-Arablou believes that the main reason why the anti-smuggling drive has not yet got anywhere is because the corruption networks have strong links with influential authorities.
“When inspection organizations start to inspect the performance of certain powerful economic bodies, they face serious problems.“
He said those involved in corruption have managed to prevent thorough inspections in some organizations.
Some experts say there are sufficient laws on fighting corruption, but they do not come into practice due to strong resistance by certain economic bodies.
While Shahi-Arablou believes parliament is not in charge of fighting economic corruption, Shamseddin Niknam, a prominent economic expert, says this is one of the main tasks delegated by law to the legislative body.
He is of the opinion that parliament must get to the bottom of the corruption dilemma.
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Medicines, mostly tranquilizers, are smuggled into the country via the southern, western and eastern regions.
“In a government where the bureaucratic system is so extensive, it would not be possible to control each and every economic section properly,“ he said, adding that statistics released by official sources on economic corruption are hard to believe.
He said the worsening economic woes of government employees and the two-digit inflation rate speak for the serious economic challenges facing the country.
“Poor living conditions prepare the ground for economic corruption,“ he said in reference to the widespread dilemma of bribery in state organizations.
Niknam further noted that misuse of power is forbidden by Islamic laws, whereas the problem is quite extensive in Iran, where the economy is heavily monopolized by the state.
He says the only way out of the current predicament caused by economic corruption is to downsize the government and cut its budget and consequently expenses.
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Forex Rates
By Samaneh Ekvan
The Seventh Legislature ratified the plan to keep prices on fuel products unchanged and reduce bank profit rates for the new Iranian year. However, several MPs are silent on the issue of raising foreign exchange rates, which in practice could severely affect other plans. The Majlis Presiding Board also boycotted proposals raised by several MPs with regard to reducing foreign exchange rates.
Gholamreza Mesbahi, who represented MPs opposing the plan to raise foreign exchange rates, presented his proposition to reduce forex rates in the early days of reviewing the notes for income in the budget plan. Head of Majlis Presiding Board, Abu-Torabi rejected the proposal arguing that it was costly. In another session, the proposal was once again rejected by some of the MPs on the same grounds. Later, for the same reason, the MPs who had submitted the proposal, in a statement criticized the performance of the Majlis Presiding Board.
Apart from these reasons, the inattention of the board, particularly members of the Joint Commission in charge of reviewing the 2005 fiscal year budget plan, to the MPs’ proposal will raise inflation rates in the current year. It is important to explain why certain concerned MPs wanted to discuss the proposal in parliament and why the Joint Commission reviewed this year’s budget plan without considering their proposal.
The Joint Commission members argued that the new year budget plan is designed to save on costs by better organizing the financial matters of the government. The increase in income costs by 36,000 billion rials and the unlikely receipt of unidentified incomes and question marks over several other sources of income such as car imports is likely to create budget deficit for the government. The Joint Commission is aware of the situation but does not want to reduce foreign exchange rates. This way, it does not want to take away another source of income from the government and face it with budget deficit. The only explanation for this is that the government cannot be pushed further beyond its limits anymore. Since savings, unidentified sources of income, loss-making state-run companies and other factors, would as it is, create budget deficit and financial crisis for the government.
But by raising foreign exchange rates is it the only solution to tackle budget deficit?
Those in favor of the plan and government representatives argue that foreign exchange rates are controlled by market forces and not by obligatory factors.
Certain MPs and government officials must realize that such a plan could have negative impacts on the market and raise inflation rates. If foreign exchange rate for the US dollar is set at 9,095 rials for this year, the value of dollar in the market will rise even higher than intended in the first place. This will ultimately lead to failure of the plans to keep prices unchanged or reduce bank profit rates.
If that is the case, then the government will have to deal with budget deficit, unwanted conditions and financial crises at the same time.
The mostly conservative Majlis by brushing aside the proposal of MPs who oppose the plan to raise foreign exchange rates, or ignoring constructive proposals, seems to find it the best way to create trouble for the government. It is about time for the Majlis Presiding Board and the government to come together and confront such unconstructive measures.

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