Re: What the Empire Learned from the Lesson of Iran

[Louis Proyect <lnp3@xxxxxxxxx>]

Yoshie wrote:

> ****  Compare Iran and Venezuela:
>
> Iran: "The World Bank reports that the government consumed 14 percent
> of GDP in 2003. In the same year, according to the International
> Monetary Fund's Government Financial Statistics CD­ROM, Iran received
> 53.83 percent of its total revenues from state-owned enterprises and
> government ownership of property.

Actually, state ownership prevails throughout much of the Middle East, 
including Saudi Arabia. You really need to conduct a more class-based 
analysis in order to make judgements as to the "progressive" character of a 
state.

Financial Times, March 26, 1998

Without a lead from those who control the oil wealth and political power of 
the region, it is unlikely that any political decisions will be made which 
will shake-up investment patterns. Private sector investment is therefore 
unlikely to take off unless state ownership is reduced through privatisation.

The downside of state control has slowly dawned on the region's 
decision-makers. When the lossmaking state-owned Saudi Arabian Airlines 
failed to find $ 4.5bn for new aircraft it had to approach international 
capital markets, which demanded a sovereign guarantee. This from a country 
whose stock market capitalisation stands at $ 58bn.

Privatisation of utilities would require a widespread overhaul of pricing, 
billing and service provision before foreign investors would consider 
seeking a share.

Scale is everything. Saudi Arabia is reckoned by its senior officials to 
need $ 116.8bn over 23 years to build new power stations. It will find such 
ambitions hard to realise without adopting private sector 
build-operate-transfer (BOT) schemes, which will chip away at state control.

It has been left to the smaller states to spearhead moves towards 
attracting a real private sector role through privatisation. Even so, this 
process has been extremely limited.

Qatar has now awarded 60 per cent of the contract to build an aluminium 
smelter to Norsk Hydro. This ground-breaking deal marks the first time any 
Gulf state has allowed a foreign joint-venture partner, in this case with 
the state-owned Qatar General Petroleum Corporation, to hold a majority stake.

Despite acceptance elsewhere - notably in Oman and Bahrain - of foreign 
majority stakeholding, theory has yet to become reality. Oman has secured 
substantial project finance for state-led investments and infrastructure 
projects, as well as being home to the region's sole private sector power 
plant, the 90MW al-Manah power station. But the government withdrew the 
privatisation of the Salalah Water and Sewage Company because of 
difficulties over agreeing an accurate sale price - the value of the 
company being skewed by subsidies and widespread non-payment of bills.

Bahrain has changed its law to allow 100 per cent foreign ownership of 
companies. It has also drawn-up a favourable tax regime and currency 
regulations to attract investors. But privatisation has yet to follow, with 
the future sale of Bahrain Telecommunications Company (Batelco) a long way off.

Abu Dhabi stands out for having instituted a series of initial public 
offerings, despite not having a stock exchange on which to trade them. This 
year eight IPOs are planned in sectors ranging from banking, gas 
distribution and satellite television.

However, the absence of a stock exchange - the only Gulf Co-operation 
Council state without such a facility - has deterred private sector share 
issues within the UAE states, and led to unauthorised trading in shares in 
markets renowned for insider dealing and price manipulation.

Kuwait's commitment to the privatisation of state utilities has emerged 
from the process of disposing of state assets acquired during the early 
1980s. The government is expected to establish a new authority to launch 
moves towards privatisation in the telecommunications sector following the 
expected ratification of a new investment law next month.

The Kuwait government has so far sold shares in 16 companies and now has 
plans to offer 50 per cent of Kuwait Airlines to the public. It will sell 
its shares in a total seven companies during 1998, ranging from a 
cattle-rearing operation to banking and cement manufacture.