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Iran to privatise $350b public assets

DUBAI — Iran's financial market is opening up to the world and the private sector is expected to play a greater role with the privatisation of $350 billion of public assets, according to a former governor of the Central Bank of Iran.

Countering US Administration claims that Iran is heading towards isolation and economic hardship as a result of the nuclear stand-off, Dr Seyed Mohammad Hossein Adeli downplays the impact of sanctions on Iran and is upbeat about the country's financial future.

Iran is one of the few countries in the world to have converted its entire financial sector to an Islamic system and as a Governor of the Central Bank of Iran, Dr Adeli is credited with spearheading major reforms in the country's financial sector. Dr Adeli is currently Chairman and CEO of the Ravand Institute for Economic and International Studies in Teheran.

On Iran's financial sector and its relationship to the rest of the world, Dr Adeli says: "The financial sector in Iran is gradually opening up to the world. Permitting private banks to be established and operated; allowing foreign banks to operate in Iran; introducing privatisation of some public banks; and, allowing foreign investors to invest in the Teheran Stock Exchange, are all measures indicating that the financial sector is determined to open up to the world." "Given the size of Iran's foreign exchange reserves on the one side with foreign reserves exceeding $30 billion, and foreign trade reaching $150 billion and foreign trade transactions of Iran worldwide, there is a fairly strong connection between international financial institutions and Iran's financial sector."

On the role of the private sector, Dr Adeli said: "The entrepreneurial spirit and tradition is very strong in Iran, although private sector activities were circumscribed due to the Iran-Iraq War. Nevertheless the thrust for privatisation and the intention of providing a meaningful role to the private sector has increased.

"A bill is being currently debated in the parliament with a view to privatising some $350 billion of public assets. It is estimated that the process will take seven years to complete as a result of which the role of private sector will increase significantly in all sectors of the economy."

Dr Adeli dismisses the impact of sanctions on financial operations. "With the vast network of financial ties Iran has developed over the past decades, companies are busy working out the easiest and most practical alternatives for their financial transactions," he said. "Banks in Dubai have traditionally been one alternative but it is by no means the only option."

"These days, some countries — mostly in the East and to a lesser extent a few in the West — are still willing to cooperate with Iran given the fact that Iranian transactions are huge and profitable."

Dr Adeli sees Islamic finance as complementary to the conventional finance system but sees room for further improvement. "So far the improvement has originated from the side of experts initiating and developing various kinds of financial instruments compatible with Shariah laws," he added.

"I am confident that when the ulama make their own initiatives, Islamic banking will thrive at a much higher level. Moreover, it will give much more leeway for the experts to innovate the Islamic financial sector. "

The International Islamic Finance Forum Europe at the World Trade Center, Zurich, Switzerland, from October 29-November 1, will be exploring the expansion of Islamic finance in Europe.

Also on the agenda are the pressing issues of Islamic finance and rating agencies; new strategies in wealth management and private banking; and sustainability in Islamic financial products.