Iran could sell off leading banks, and major entities such as the National Petrochemicals Company (NPC), in an expanded privatisation programme, senior officials have told Emerging Markets.
Despite heightened geopolitical tensions, the Islamic Republic also envisages corporate bond issues on the capital markets, Mohamed Mojarrad, deputy governor of Bank Markazi (Iran’s central bank) told Emerging Markets in an interview.
NPC and the giant National Iranian Oil Company (NIOC) – both already well-known to international financiers – could be among the first generation of issuers. While Iran’s standoff with the US and other UN Security Council members over nuclear enrichment continues, economic reformers in Tehran are fighting a rearguard action.
Mojarrad said the Islamic Republic’s senior leadership is now concluding revisions to Article 44 of the constitution to allow privatisation. Holdings in leading state commercial banks (except Bank Melli Iran), major industrial holdings and insurance companies.
As details of the programme have emerged, reformists have grown more confident that the privatisation programme announced by Iran’s Rahbar (Supreme Leader) Ayatollah Ali Khamenei will be more wide-ranging than many opponents – including members of President Mahmoud Ahmadinejad’s government and the Majlis (parliament) – had wanted.
Mojarrad said stakes would be available to foreign, as well as local, investors. Much previous discussion has focused on the sale of state assets through so-called Justice Share companies, whose equity is owned by the public. The Islamic Republic has previously issued two successful sovereign bonds, which despite the US boycott drew on a big European, Asian and Middle East investor base.
Another sovereign isn’t necessary, central bank governor Ebrahim Sheibany told Emerging Markets. “Right now we don’t feel we need to issue any new bonds, because we are depending on reserves. But the market is quite good. ... Even now there are some regional banks who are looking towards those bonds, because the rate is very good and they are 100% sure they will get their money.” He said around 60% of these issues were held by Gulf banks.
Mojarrad concurred that a sovereign issue wasn’t needed, “because we’ve accumulated huge reserves as a result of our oil revenues”. However, “Iranian corporates like NIOC, NPC, Iran Khodro and private banks are very interested to raise money in the market, so we might see corporate Iranian issuances in future.”
The opening to private investment is critical to reforming the economy. With a bigger private sector, issues such as burdensome state subsidies – which now weigh heavy on the budget – will be overcome, Mojarrad concluded. Disputes over Iran’s economic policy – and Ahmadinejad’s enthusiasm for replacing reformist officials with his allies – have fuelled speculation that the widely respected governor Sheibani was to leave the central bank. But he reiterated to Emerging Markets: “I have not resigned.”