In Iranian constitution, the economic system of the country is divided into three categories: State owned, cooperative and private sector.
According to the Act No. 44, all big industries, foreign trade, banks, major mines, insurances, TV and Radio, post, telecommunication, dykes, Energy suppliers, airliners, navigation and rail-ways should be state-owned.
Cooperative companies in cities and countries should work on production and distribution and private sector should work as a complementary for state and cooperative companies.
In June 2006, Ayatollah Khamenei gave a new interpretation of this act which could suit the modern economic era in order to empower private sector.
In this interpretation, Ayatollah Khamenei said the government has to pass 80% of its properties to the private sector by the end of the fourth 5-year-plan (i.e. 20 March 2010).
Some entities, however, were excepted and will remain state-owned. These are: Iran National Oil Company, Extracting Oil and Gas companies, Central Bank of Iran, Bank Sepah, Sanaat and Madan Bank, Bank Melli of Iran, Agricultural Bank, Bank Maskan and Bank Tosee Saderat, Central Insurance and Iran Insurance Company, Air Line of Islamic Republic of Iran, Navigation of I.R. Iran, Ports and Maritime Organisation, and exception among defence organisation.
Privatization is done through an organisation, called “Iranian Privatization Organization”, which was established to manage the process of selling the state owned companies to the private sector. Although now in 2016, the process is still not finished.
The procedure is done through different channels; sometimes partial shares of the state-owned companies are sold in Tehran Stock Exchange or in Iran Fara Bourse, an over-the-counter market. Some of the shares were sold among the lower-income society in several calls, etc.
Iranian law defines state owned company as a company, which at least 51% of its shares belong to the Government and a private company is defined to be a company, which at least 51% of its shares belong to private or non-state-owned entities.
Using this definition, a new generation of companies were born in Iran: the so called “quasi-state-owned” companies. These companies are former state-owned companies, where some of their share were sold to other companies or private sector. Therefore, they count as private companies now, however, since the Government owns the majority share (although less than 50%), has the right to choose the managerial board of them.
The quasi-state-owned companies, despite being private, apply the Governmental policies and decisions. This applies to their pricing policies as well, where the Government sets the prices for many products and services.
The result of this “privatization” has been that many entities such as Tejarat Bank, Saderat Bank, Mellat Bank, Iran Khodro Co, SAIPA, all petrochemical companies except NPC, and many other big companies in Iran turned to be private, although their governance is controlled directly by the Government.