Iran’s Rouhani faces test on excessive overstaffing

When Mohammad-Ali Najafi resigned in January just six months after taking over as head of Iran’s Cultural Heritage and Tourism Organisation, the official reason was ill health.

Others gave a different explanation: that he quit after realising he could not get to grips with the overstaffed bureaucracy of the bloated organisation he presided over.

“Mr Najafi was frustrated that he could not push for any reforms,” said one political analyst. “It was not easy to change a director, for instance, as many employees were opposing new policies.”

Analysts say among the biggest challenges facing the seven-month-old government of Hassan Rouhani, Iran’s centrist president, is dealing with the dramatic rise in the number of employees at state-run organisations over the past few years.

Iran’s government is sometimes described as a giant with a small head due to its massive bureaucratic structure and inefficiencies. When reformists were in power from the late 1990s until 2005, they sought to address the issue by pushing through rules to limit hiring by the government. However, this was reversed under the populist presidency of Mahmoud Ahmadi-Nejad, Mr Rouhani’s predecessor, who hired thousands to attract votes and secure the loyalty of state institutions.

The headcount at the tourism body run by Mr Najafi, for instance, doubled to more than 2,000 in the eight years Mr Ahmadi-Nejad was in power. Yet this is small-fry compared with the country’s oil ministry, which is reported to now employ 260,000 people, compared with about 100,000 in 2005.

Mr Rouhani’s department for human resources has refused to comment on how many excessive hires there were under the previous government.

But Mahmoud Askari-Azad, acting vice-president for human resources, admitted to Iranian media this month that a large number of “irregular and illegal employments” were hired under the previous government and “not registered anywhere”.

“Officials were fully authorised to do anything, anywhere they wished. One ministry in the last months of the previous government hired 76,000 people,” he added.

Hassan Ghazizadeh, Iran’s minister of health, also revealed in domestic media that the number of staff at his ministry had jumped from 230,000 to 400,000 over the same period. He also complained that the employment status of most of them was not legally clear.

The former government explained its hiring policy by arguing that the 800,000 people who had retired or left office during recent years needed to be replaced. Authorities now doubt seriously the accuracy of this figure.

As recently as May, just a few months before Mr Ahmadi-Nejad’s government left office, officials even ratified a so-called “compassion-creator plan” which allowed for a further 500,000 state employees to be hired. It is not clear how many people were given jobs under the plan, which was later annulled by Mr Rouhani.

The overstaffing has even extended to the state-owned newspaper, where the editorial headcount has ballooned from 320 in 2005 to 890 today – one reason the previously profitmaking publication is struggling with debts of about 200bn rials ($8m).

“There are many people in the newspaper who call themselves columnists but the only thing they do is drink tea,” said one journalist who works there. “What you see in such a small organisation can be extended to bigger bodies – and then you realise the magnitude of the disaster.”

The overstaffing problem is a major obstacle for Mr Rouhani’s cash-strapped administration, which is struggling with a number of challenges, including empty coffers and debts of at least $80bn. The Iranian economy shrank by 5.8 per cent last year, while the inflation rate is running at about 40 per cent.

To compound the problem, the new hires are often low skilled and without a university education. Many also do not have defined posts within the organisations they are supposed to work for.

“Almost all organisations face the same problem of dealing with an army of uneducated people who hold high school diplomas or not even that,” said one government official. “Everyone is the cousin of someone else.”

It was not meant to be this way. An ambitious privatisation programme put in place eight years ago and worth more than $120bn was supposed to reduce the size of the government headcount.

However, handing over companies from one state-run organisation to another had no effect in shrinking the size of Iran’s bureaucracy.

The problem now is that the government is obliged to pay salaries each month to hundreds of thousands of employees who not only are considered inefficient but who also often sabotage efforts to roll back populist policies.

“Ahmadi-Nejad has laid lots of minefields, one of which are these employees,” said one regime insider. “Can the government expel them all? No.”

The Financial Times