Iran finds bonyads standing in the way of restructuring the economy

Book a nice hotel room, eat a meal or buy a soft drink - chances are the money flows to one of Iran's "foundations" and on to the country's powerful, hard-line clerics. The impressive holdings of the foundations, or "bonyads," cover nearly every aspect of life from soybean farms to luxury hotels. Outside Iran, the bonyads' wealth include cargo ships and a New York office building once owned by the monarchy deposed by the 1979 Islamic revolution.
Now, with Iran showing signs of easing back from rigid state economic controls, the bonyad network stands as a major test for the reformist bloc led by President Mohammed Khatami. No serious restructuring of the anaemic economy is possible without breaking the bonyads' stranglehold.
But that means confronting an ultra-powerful establishment, which some experts say includes confidants and key allies of supreme leader Ayatollah Ali Khamenei. A growing number of critics accuse the bonyads of acting as autonomous conglomerates outside any normal controls or scrutiny.
"They are out of the economic order," said Fariborz Raisdana, a sociologist who has urged greater openness about bonyad operations. "At least they could try to get them to pay taxes. They are one of the biggest economic complexes in the Middle East." Conservative estimates say at least a quarter of Iran's economy is controlled by the dozen or so main bonyads.

The bonyad concept was begun for charity purposes under the former shah, then expanded into diversified business powerhouses by Islamic leaders. Some of the bonyads' funds still go to social programs like clinics or to families who lost relatives in the 1980-88 war with Iraq. But the groups increasingly look more like hard-edged businesses with strategic plans and rich portfolios.
The full extent of the bonyad wealth is difficult to ascertain, since they are neither audited nor obliged to fully disclose their ventures. But the bonyads' own material gives a hint of their reach. About 70 different farm-related companies areoperated by bonyad groups, including vast soybean, wheat and cotton fields in Iran's breadbasket near the Caspian Sea. Tourism holdings include more than 24 hotels led by two five-star accommodations in Tehran: the Azadi (the former Hyatt) and the Esteghlal (the former Hilton).
The bonyads run global shipping lines from offices in London and Athens, Greece, and there is the Bonyad Eastern Railway at home. A bonyad consortium is seeking to open an airline. Iran's best-selling soft drink, Zam Zam, is a bonyad brand.
The bonyad boards are rooted in Iran's political culture. Many directors were leaders of the revolution and enjoyed close ties with its leader, Ayatollah Ruhollah Khomeini. A former bonyad head, Mohsen Rafiqdoust, drove Khomeini in from the airport when he returned to Iran after the shah's downfall.
"There is no real dialogue about economic reforms unless there is discussion about making the bonyad more accountable and bringing them into the system," said Mehrdad Baghery, a former central bank executive who is seeking to open one of Iran's first private credit institutions.

Iran's new five-year economic plan is lacquered with a thick sheen of optimism for a nation that has watched its fortunes grow tarnished. Key goals of the program include a nearly threefold boost in growth to at least 6 % a year, trimming inflation to 10 % from the current unofficial estimate of 30 % and capitalising on higher oil prices to bring in a flood of new revenue for OPEC's second-largest producer. But no mention was made of trying to squeeze state revenues from the bonyads. "This shows the reformers still do not have the strength they need," Baghery said.