Iran's new finance minister sent a strong signal this weekend that his country would welcome international and private-sector investors despite the perception that new president Mahmoud Ahmadinejad is a hard-liner who may not be keen on opening up the economy.
To achieve its goal of 8% growth, Iran will need a more 'empowered' private sector, Minister of Economic Affairs and Finance Davoud Danesh-Jafari said in an exclusive interview with Emerging Markets.
'We are at a very bad position [in which] the public sector is too huge,' Danesh-Jafari said. 'In vast areas, it is similar to a monopoly. The private sector, which was previously not so active, should be empowered.'
Article 44 of Iran's constitution will now allow private investors to enter many of the areas from which they were previously banned, according to Danesh-Jafari. 'We are now in a situation that almost everywhere, the private sector can enter,' he said. 'There is now very good scope for economic cooperation. Foreign investors will have some new projects declared within the next few months.'
Critics have been sceptical about the new government's willingness to allow private and foreign investment into the Iranian economy, however. President Ahmadinejad is widely seen as a conservative who, like many previous governments, is not particularly interested in forming stronger ties with the West.
But Ahmadinejad may prove more pragmatic than many expect. As mayor of Tehran, he took steps to improve public services and infrastructure, and may not be averse to measures that will help improve Iran's economic position.
Danesh-Jafari sounded confident that Iran's new government would allow foreign and private-sector investors to take a bigger piece of the economy, and pointed to specific measures it has already supported.
'The new government is interested in Iran's wealth distribution position,' Danesh-Jafari said. 'Iran's position on the Gini index [used to measure income inequality] is not so favourable. We have to do something in order to distribute the wealth.
Reducing corruption 'is another field of interest for the new government,' Danesh-Jafari said. 'Transparency and anti-corruption activities will be promoted so that we can have better investment and a better position for private investors.'
Danesh-Jafari also reaffirmed Iran's intention to implement a new value-added tax system. Iran's latest economic plan calls for current expenditures to be funded from non-oil revenues. A new VAT system and measures to reduce the size of government and public expenditures should help to accomplish this, he added.
Liberalizing Iran's stock market will be a slower process, Danesh-Jafari said, because the country is wary of repeating south-east Asia's experience of the late 1990s.