Iranian government corruption in the next year’s proposed budget


by Cyrus Yaqubi

Small number of government officials plunder billions of dollars in a short period of time.

Next year’s budget bill for Iran was submitted to parliament by Hassan Rouhani on December 2, 2020, to undergo a review process by the parliament’s Budgetary Committee.

The proposed budget for next year with the current exchange rate (about 25,000 tomans per dollar) is 2435 thousand billion tomans (97.4 billion dollars). Of this amount, 929.8 thousand billion Tomans (36.2 billion dollars) is allocated to the country’s general budget, and 1562 thousand billion Tomans (61.2 billion dollars) is allocated to state-owned companies, non-profit organizations affiliated with the government and banks.

Of the two sections that make up the overall budget structure in Iran, only the general budget section, which accounts for about 1/3 of the total amount, is reviewed by parliament and specialized committees. The other 66% of the budget, mostly devoted to state-owned companies, is exempt from initial review and subsequent audit by the parliament and the same figure that the government allocates in the bill is usually approved.

This section of the budget is $ 61.2 billion, where most corruption, briberies and private contracts take place and materialize.

Mohsen Zanganeh, the current member of parliament and a member of the budget commission, says that this form of budgeting and non-transparency of more than two-thirds of the country’s budget serves the interests of all political parties in the Islamic Republic, and nobody is willing to challenge it.

Because of that, “All our disputes between the parliament and the government are about one-third of the budget,” he said. Two-thirds of the budget is allocated to state-owned companies, over which we have no control. We only have the oversight that the 10th parliament has approved for these companies and corporations to present their financial balances. The government loaded a van and gave 70,000 pieces of paper to the delegates, saying that everything was clear to us. “These representatives also looked at these 70,000 leaflets and said, ‘What can be done?’

What does the budget of state-owned companies mean?

The Program and Budget Organization says that the reason for dividing the budget into two parts is due to the difference in their functional nature. The budget allocated to state-owned companies, government-affiliated non-profits, and banks depend on their own financial operations. In other words, these companies and institutions themselves produce or supply goods and services that are credited to their revenue account and determine the operating and corporate costs of earning that revenue based on their own needs, and these costs form their annual budget.

In the general budget sector, expenditures are generally dependent on revenues from various sources such as oil sales, taxes, borrowing, etc.
The budget description of state-owned companies is generally allocated to 371 state-owned companies, nine state-owned banks and two non-profit institutions affiliated with the government, which allocate 1562 thousand billion Tomans (61.2 billion dollars) to themselves.

But not all of these 371 companies are important, and only five of them make up 85% of that amount.

For example, the National Iranian Oil Company alone has a budget of 900,000 billion tomans ($ 36 billion). It should be noted that the National Iranian Oil Company’s financial statements are also confidential, and even if members of parliament and other regulatory bodies want to review it, they cannot receive the relevant documents.

According to Mohsen Zanganeh, head of the budget structure reform committee, only two or three people in the country know about the company’s accounts and books. When we asked the Minister of Oil, he said that these are classified documents and we only report it to two or three officials in the country!

What about state-owned companies?

The non-transparency that overshadows two-thirds of the annual budget and the exclusion of state-owned companies from disclosure is where government leaders’ main looting and thefts occur.

In March 2017, Ali Taybonia, the former Minister of Economy, talked about the nature of state-owned companies: “Instead of one thousand people in a state-owned company, five thousand people are hired, and these hires are done through friendship and family contacts.”

Accounting and auditing operations in state-owned companies, except for those provisions specified by law, are subject to the Commercial Code and the Financial and Transaction Regulations approved by the Board of Directors of these companies. This is while the audit of the country’s general budget is subject to the law of public accounting of the whole country.

Salaries, benefits, bonuses, and profit-sharing in these companies are based on the board of directors’ approvals. Sitting on the board of directors of these companies is a privilege given to those in power.

A survey of the top 15 state-owned companies shows that the majority of board members are either former senior executives and their relatives or people with a background in security and the military.

It should be noted that the announced budget allocated to these companies is also far from what is implemented in practice. Last year, the budget of state-owned companies deviated by 48%, which means that even the figures in these companies’ budget lines do not create a requirement to limit their annual expenses.

The benefits of sitting on the board of directors of these companies are not limited to the huge salaries and benefits and relatives’ employment. The significant advantage is in the downstream contracts that these companies enter as the country’s largest contractors. Holding tenders and auctions, abandoning formalities, determining qualifications, and finally handing over large contracts to other companies has an opaque process that makes sitting on the board of directors and CEOs of state-owned companies the most profitable business in the structure of the Islamic Republic. Thus, a small number of government officials plunder billions of dollars in a short period of time.

While they and their relatives live an aristocratic life, both in Iran and abroad, more than 60% of Iranians live below the absolute poverty line. But history has shown that this situation can not last long. It is as if in November 2019, the majority of people, overwhelmed by high prices and other poverty, took to the streets and set fire to government manifestations like banks. Undoubtedly, the next uprising of the people will be more severe than the 2019 uprising, and it may lead to the overthrow of the regime.

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