With the recent bankruptcy and collapse of banks, financial institutions and the social security system in Iran, millions of domestic deposit holders and investors have lost their money. This brings to mind the story of moneymaking companies that emerged during 1980s and 1990s, especially in Egypt after religious parties established financial institutions to invest money.
These institutions, however, quickly fizzled out and vanished along with the hundreds of millions of funds collected, along with their sponsors. The difference this time is that such a game or swindle, whatever it was, has become official and legalised through Iranian state institutions, and which has led to public anger about the deteriorating economic conditions and increasing poverty, unemployment levels and inflation spikes.
As a result, the suffering of tens of millions of Iranians has intensified, leading half of the population, around 40 million people, to live below the poverty line, according to reports. There is now knowing how Iran will handle such an issue that is expected to exacerbate in the coming months.
Yet, the strangest outcome is that Gulf investors will also lose their deposits — estimated at hundreds of millions of dollars — and especially for Kuwaiti investors. This reveals the folly of investment decisions taken for non-professional reasons.
Nevertheless, here arises a question: What has prompted investors to leave prosperous and economically stable Gulf countries — and which provide good returns on their investments as evidenced in their attracting billions of foreign capital — and head to a country of chaos, corruption and poverty despite the enormous wealth it enjoys?
There are certainly reasons for the naive to do so, the first and the most important being the sectarianism. They believe that they provide support for a collapsed economy that spreads chaos and funds wars and foreign terrorist organisations at the expense of living standards of its own people. They forget that the financial and economic system in the country suffers from corruption and mismanagement as well as an international boycott.
However, regret will not help in this cases, as investors’ money has evaporated and becoming an example for those of their peers who were thinking to invest along the same lines.
The second reason seems to be cupidity. The Iranian financial institutions and banks that announced bankruptcy have been offering 30 per cent interest rates compared to less than 1 per cent on international currencies in the rest of the world. Although this alone is a direct reason to move away from this market, cupidity has led some to send their money to Iran and which subsequently got burnt by the fires of corruption.
In addition, there is another reason, which is the inflation rate in Iran is almost equal to the interest rates on offer, meaning that an investor does not get any returns. Then again, did not those investors question why bazaar traders and other owners of capital in Iran are looking for ways to smuggle their money outside Iran?
When you go to buy valuables, such as fine Iranian carpets, the merchant asks you to pay the money abroad as a means to protect his assets and invest them in safe areas.
It is indeed a contradiction that expresses a state of lost equilibrium. Intolerance in all its forms, including sectarianism, places a black cloud on the eyes, hide the flaws, lead to a dark tunnel and a tragic end.
Unfortunately, such cases will not be the last tragedies of fraud, as it will be repeated more than one time and in one place. Religious parties, especially the “brotherhoods” in Egypt and Saudi Arabia, are trying to convince investors to transfer their money abroad and attempting to hit vital economic sectors such as tourism through carrying out terrorist operations to sabotage ambitious development programmes.
However, the experience of the failed investors in Iran will help undermine the attempts of religious parties in the Arab countries, and ultimately tilt the scales in favour of more stable, secure and prosperous economies.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.
