In search of funds
The mission of the private sector is to present solutions to the Central Bank concerning the distribution of resources in a way that the monetary base would not grow. According to common views of the private sector a win - win situation for banks and production sector is possible if appropriate distributional policies are made, regulatory mechanisms reforms take place and the banks perform their roles as banks rather than acting as “rivals for the private sector”.
The mission of the private sector is to present solutions to the Central Bank concerning the distribution of resources in a way that the monetary base would not grow. According to common views of the private sector a win-win situation for banks and production sector is possible if appropriate distributional policies are made, regulatory mechanisms reforms take place and the banks perform their roles as banks rather than acting as "rivals for the private sector".
Negotiations to attract money for production
The meeting of the private sector and the Central Bank was held with the aim of fostering the production and preventing the loss of resources.
From the perspective of a monetary policy maker, the disequilibrium in Iran's economy is the main reason for all the current economic problems. The problems in the production sector might not have occurred if the former administration had achieved equilibrium. The views of the private sector are to some extend close to those of monetary policy makers; however, the private sector believes that achieving a win-win situation is possible when: first, the distributional policies of resources are chosen properly and second, the reforms of regulatory mechanisms are undertaken. The banks must be recognized as a credit provider rather than a "rival for the private sector". In this way, the banks can perform their real task which is banking. In accordance with the private sector, Valiollah Seif, the current governor of the Central Bank of Iran, emphasizes that the duty of banks -either private or public- is to protect the production sector. The head of the Chamber of Commerce of Tehran, as the representative of the private sector, discusses about the pathology of the banking system in the last three decades and assigns a great role to the Central Bank. He believes that if the Central Bank maintains its independence, all economic sectors will receive the benefits and a great deal of the banking problems will be overcome.
Disequilibrium; the core of all problems
The meeting of the private sector and the Central Bank was held with the cooperation of the Chamber of Commerce of Tehran, the Chamber of Commerce of Iran and attended by some economic activists. The aim of such meetings is to investigate solutions of the private sector for the distribution of liquidity without monetary base growth. The approaches of the private sector and monetary policy makers have shown interesting outcomes. Pointing to the current stagflation in Iran's economy, the governor of the Central Bank, Valiollah Seif, states: "From one side, the banking system in Iran is dealing with inflation and controlling the liquidity, from the other side the issue of protecting production and economic growth is of crucial importance. Both require the cooperation of all economic activists and agents". According to Valiollah Seif, in order to prevent the waste of resources, they must be directed to those productive sectors which accelerate growth and prosperity. He continues: "Such meetings will enable us to achieve our goals." Seif, believes that the lack of balance in the market is the base of all problems. The governor of the Central Bank continues that if the economic indices of a country are balanced then the problems are resolvable. The head of the money and credit council states: "The government attempts to protect the private sector and all of the constructive economic activities. Thus the banking system must distribute the resources fairly among the depositors, shareholders and credit receivers; therefore, the Central Bank must provide the ground for this condition."
Reviewing the structure of the Central Bank
In an interview with Donya-e-eqtesad Yahya Ale Eshaq, the head of the Chamber of Commerce of Tehran talks about the details of the meeting between the private sector and the governor of the Central Bank: "The problems of the banking system have been investigated in various dimensions. What must be done at the moment is revising the identified problems in the field of banking system and banking relationships. Now is the right time to have an overall review about the structure of the Central Bank, as well as the relations between the banking system and monetary policies."
According to Ale Eshaq, there is an abnormal demand for bank resources. The Central Bank and the bank network can provide 240 thousand billion Tomans as resources, the demand for these resources being twice this amount. He believes that shifting bank credits to the production sector is a better solution as it will increase the productivity.
Regarding the proposed solutions in this meeting, the head of the Chamber of Commerce of Tehran believes that the banks are better off if they provide credit for the small and medium size financial agents and the bigger agents are directed to the capital market. In addition, the banks must not be the competitors of the private sector in provision of credits. He also maintains that rules and regulations need to be revised in a way that normalization of opening LCs would pave the grounds for credit foreign investments.
According to the head of the Chamber of Commerce of Tehran 'following the non-performing loans' and 'transparency in the bureaucracy' are other important issues which he emphasized on. He also stressed on transforming the structure of the Central Bank to gradually resume its independence. "The Central Bank is of crucial importance for an economy; a weak and dependent Central Bank may harm many economic agents dependent upon it", he adds.
Masud Gol Shirazi, the head of the investment and finance commission of the Chamber of Commerce of Iran states that the meetings of the Central Bank and the private sector aim at creating a balance for the supply-demand conditions. He continues: "The important point for the private sector is that the obligations on the banking system must take place correctly and that the banks' role must change." Gol Shirazi explained that distribution of the resources in the last years has not been according to the codified policies and the production sector has not benefited from those resources. He emphasized that the solutions must move the mechanisms and resources towards a productive economy where the agents work based on their full capacities. It has been repeatedly highlighted that if banks enter the agent sphere, they will be transformed into competitors of the production sector. "This situation will be harmful in the long-run and this is against the monetary law of Iran. The first step in changing the current situation is that the government must reform its defined policies and the second step is a reform of the regulatory mechanism. The central Bank must take steps in this direction as well. This is what the two sides have emphasized upon in this meeting. I believe if the issue of regulation does not lead to a solution, it is better to employ similar models of regulations as those of other countries to create a monetary inspection organization", continued Mr. Gol Shirazi
The win-win situation
Mohammad Mahdi Raeeszadeh, the head of the investment and finance commission of the Chamber of Commerce of Tehran agrees with the opinion of the governor of the Central Bank in the recent meeting of the private sector and the Central Bank. "The main topic in the recent meeting between private sector activists and the Central Bank was the lack of balance in policies of the ninth and tenth administrations. The overall conclusion was that the two sides must provide practical solutions in order to return to equilibrium conditions", he said. Considering the inappropriate monetary distribution in the last years, Raeeszadeh added; "The emphasis is on a win-win situation for both sides -the private and production sectors- in a way that financial resources are adequate and the interest rate of the credit does not create rents. The head of the investment and finance commission of the Chamber of Commerce of Tehran said that such meetings between the private sector and the Central Bank will be held more often. "My suggestion is to gather the results of the meetings of ministries and governmental organizations with the private sector in order to make a better use out of these meetings and the time and costs invested so that higher levels of effectiveness are achieved", he continued.