Interview with Mohammadreza Saeedi, CEO of Shasta, on Privatization and Transition from Business Ownership to Shareholding
*Shargh* newspaper interviewed Mohammadreza Saeedi, CEO of Shasta (Social Security Investment Company), to discuss the privatization of subsidiaries under the Ministry of Labor and pension funds as mandated by the Seventh Development Plan. Concerns have been raised about the process, given past unsuccessful privatization experiences in Iran, which have fueled doubts about how Shasta will shift from business ownership to shareholding, who can afford to buy such large entities, and whether influential figures or transparent market mechanisms will dominate the process.
**Challenges Facing Shasta**
Saeedi outlined Shasta’s role as a major conglomerate managing 163 trillion tomans in investments across nine specialized holding companies in 21 industries, employing 65,000 people and producing 1,641 products. He identified two main categories of challenges:
– **External Challenges**: These include frequent managerial changes driven by Iran’s political environment, political interventions, sanctions increasing transaction costs, and the migration of skilled managers to the private sector due to uncompetitive compensation. Additionally, Shasta has been burdened with companies transferred by the government to settle its 78 trillion toman debt to the Social Security Organization, many of which do not align with Shasta’s strategic goals.
– **Internal Challenges**: These involve corporate governance issues due to frequent leadership changes, excess staffing in some companies (e.g., a company needing 8,500 employees but having 18,000), and a lack of focus on technological innovation, reflected in low R&D spending relative to revenue. Despite these challenges, Shasta manages 400 trillion tomans in production and sales, making it a critical economic player.
**Transition from Business Ownership to Shareholding**
Saeedi emphasized that Shasta’s move from managing businesses to holding shares is driven by both global best practices and legal mandates. After studying global pension fund investment models, Shasta found that unlike its counterparts, it has been heavily involved in direct business management rather than diversified shareholding. The transition involves:
– Reducing involvement from 21 industries to a maximum of five.
– Shifting from non-listed to listed companies on the stock exchange.
– Moving from local to international markets, from small to large-scale operations, and from low-tech to high-tech and digital transformation.
This complex process requires patience and careful planning to avoid past mistakes, such as “ownerless privatization” that disregards value chains. Saeedi stressed “committed privatization,” ensuring buyers have the expertise to maintain and enhance the companies’ contributions to GDP and productivity. For example, Shasta’s pharmaceutical arm, TIPICO, must be privatized in a way that preserves its integrated value chain, from raw materials to distribution across 16,200 pharmacies.
**Ensuring Transparency and Addressing Oversight**
Saeedi acknowledged public concerns about transparency, given past privatization failures. He noted that Shasta is subject to extensive oversight, which sometimes hinders progress due to conflicting supervisory perspectives. For listed companies, market mechanisms ensure fair pricing, while non-listed companies undergo regulated auctions to ensure competitive and fair sales. Saeedi’s main concern is not political pressure but the multiplicity of regulatory bodies, which can deter managers from pursuing privatization due to fear of post-sale scrutiny. He suggested streamlined oversight mechanisms to balance transparency with efficiency.
**Internationalization Amid Sanctions**
Saeedi, whose expertise lies in international business, stressed the importance of internationalization for Shasta’s growth and innovation. Despite sanctions increasing transaction costs, he views global market engagement as essential for learning, competitiveness, and accessing foreign currency for reinvestment. Internationalization goes beyond exports—it involves integrating into global value networks, adopting international standards, and staying competitive. Saeedi believes that even in tough conditions, Shasta must pursue this path to avoid falling behind.
**Addressing Financial Misconceptions**
Responding to reports of rising internal costs and declining profits, Saeedi clarified that Shasta’s financial challenges stem from external factors, particularly the government’s 78 trillion toman debt for products supplied (e.g., 12 trillion tomans for pharmaceuticals and 4.2 trillion tomans for agricultural products). Delayed payments force Shasta to take high-interest loans, increasing costs by about 30%. He refuted claims of excessive managerial compensation, stating that Shasta’s salaries are too low to attract top talent compared to private-sector competitors. Saeedi expressed pride in his team’s dedication despite these constraints and emphasized that Shasta’s profits have increased, with plans for further growth.
**Managerial Stability and Long-Term Vision**
Saeedi highlighted frequent managerial changes as a major challenge, causing “organizational Alzheimer’s” by disrupting institutional memory and coordination. He urged for stable leadership to allow strategic plans, like privatization, to succeed. While acknowledging the risk of plans being derailed by future changes, Saeedi emphasized that Shasta’s roadmap is designed to be sustainable, with a dedicated holding company overseeing privatization to ensure continuity.
**Conclusion**
Saeedi remains committed to transforming Shasta into an innovative, internationally competitive entity through strategic privatization and global engagement. He believes that with reduced external interventions and stable leadership, Shasta could significantly boost Iran’s GDP, leveraging its robust ecosystem to drive economic growth.
