Iranian Oral History Project | Harvard University Center for Middle Eastern Studies
Khodadad Farmanfarmaian
Plan Organization Director
Transcript 7 of 16
Narrator: Dr. Khodadad Farmanfarmaian
Date: December 14, 1982
Place: Cambridge, Massachusetts
Interviewer: Habib Ladjevardi
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Q. Dr. Farmanfarmaian, if you agree, I suggest that we begin today's discussion with the events that led to your resignation from the Plan Organization and then we can continue from that. This was what, during Dr. Amini's cabinet?
A. After Ebtehaj was gone and Khosrow Hedayat became the managing director; but in his case he was also given the title of Minister of State in Charge of Plan Organization, which was a new practice since by law now the prime minister was in charge of the Plan Organization. Under Hedayat, the Plan Organization continued to operate a good two years in a calm and serene atmosphere and the third plan was prepared with a whole new concept. The third plan was totally different in nature than the second plan. I did talk about this earlier, but let me quickly review for you the differences.
The third plan was not to be just a partial list of projects as was the case of the first and second plan. The third plan was to be a comprehensive plan which would take into consideration, on the one side, all the resources of the country, and on the other side all the current government expenditures, to determine the size of the national saving or surplus available for the purposes of investment. And if that national saving was not sufficient to achieve the rate of growth we wished to achieve, then measures for mobilization of new savings, such as new taxes, or more borrowing from domestic and foreign sources would be recommended to supplement the required financial resources. If the financial resources still fell short of the required levels, then the growth goals were revised downward.
As it were, we did find out that the plan, in order to achieve a six percent rate of GNP growth, had a major deficit. And we began our efforts to borrow from abroad by attempting to create a consortium of international agencies and international leaders which would have included the World Bank <IBRD>, U.S. AID, and European countries, to provide us with the resources to fill in the plan's gap. And we went on a mission trying to sell the plan, and to explain the plan and its content to the European governments, to the United States government, and the international financial institutions.
We knew that some of the figures in the plan were underestimated, such as the oil revenue, and over that I had all kinds of difficulties convincing the minister of finance that the expected oil revenues were larger than the Plan estimates.
Q. Who was the minister at the time?
A. Now I'm talking about the time that Behnia had already come in. This is now the beginning of Amini.
But another point in the third plan, which really is extremely important, is that for the first time we began to say that the ministries should have the responsibilities to carry out the projects under the plan, they would never learn how to do these things and their organizations would never develop the necessary capabilities unless they were given an opportunity. Therefore, we recommended in the third plan that execution of projects should be gradually transferred to the line ministries.
Q. Was this solely initiated from within the Plan Organization or was there pressure from the outside?
A. Solely initiated. Well, obviously there was tremendous pressure from outside. Obviously, ministers and members of the parliament were pressing for getting a share in the plan in terms of having responsibility within it. Obviously, the ministers didn't like it when Ebtehaj would turn around and say that, "You are not capable." They didn't like it and they considered themselves a minister of government, "responsible" to the parliament and as such, they wanted to have responsibility for their particular sectors. That is, the minister of roads wanted to do the transportation plan, to carry out the transportation projects relating to his sector. The minister of agriculture wanted to do his own job, etc. That was understood, their political ambitions in this sense were reasonable ambitions.
It was unreasonable because their departments were not adequately equipped for the job. Nobody had bothered to develop and to streamline, to bring new blood into the ministries and to develop the technical and economic know-how within them, thus
to enable them to supervise or to implement these projects.
So we actually said that we ought to have a frontal approach to development and give all the line ministries responsibilities in the execution of the projects. Knowing that we were doing this, the big problem that came up was all right, if we have made the plan a comprehensive plan, that is there is no more a fixed amount of oil revenue assigned to Plan Organization by law and the revenues are therefore principally in the hand of ministry of finance, and if the projects' execution are going to the ministries, then the plan would be an empty shell. It would have no power whatsoever left to assure its integrity. And nobody in our country is interested in what is written in the document of the plan. The words of the document of the plan were useless, meaningless unless they could be enforced.
Then I began, and this was principally...
Q. Was this going to be a packaged deal or was this going to be in different parts? ...all going to be as one piece?
A. No, no, no, no. This whole thing came up when we were writing the law governing the third plan of Iran, the enabling act for a third plan of Iran.
Q. Everything was to be in there...
A. For the implementation we suggested the establishment of the high administrative council. And I remember recommending Mr. Goudarzi (as I said earlier) who was trained and was very good in administration, to Amini to become his deputy in charge of that organization, outside of the Plan. That was done, that was done very early in the game.
Next, I began to think in terms of the budget. I said to myself, budget has no meaning in terms of a philosophy and goals, the way it's being done. The heart of the budget must be the investment program of the country and not the current budget. Although the current budget is an important component of the national budget, its aim should be to serve the development of the country.
I had the notion that if the whole of the national budget was in the hands of the planners, they will be able to administer, to prepare and administer the national budget in a way to assure themselves that the third plan would be properly implemented. That, in fact, the planners would squeeze out sufficiently out of total national revenue, by being stringent in the allocations to current and defense expenditures and save enough funds for the investment expenditures required under the plan.
Later, afterwards when I resigned, I wrote articles in the newspapers. These newspapers are available. And I wrote papers within the Plan. I established a committee and chaired it myself with Dr. Cyrous Samii in it, who had had a great deal of experience with budget analysis and preparation. We started to work on a law enabling the government to bring the budget from the ministry of finance into the Plan Organization.
Q. My question was, were these separate laws or was there one law which covered all these questions together, so that they could either be ...
A. That was our early hope and intent but actually, the third plan law does not refer to the budget. Later on a separate law provided for the transfer of the budget function to the Plan Organization.
Q. So you sort of gave it something that ?? something.
A. But we had had the prime minister's commitment, agreement. Well, when the law was ready to transfer the budget function, it was about three months before the fall of Dr. Amini. By then, Dr. Amini's political position had deteriorated and his government had become rather weak; and there were all kinds of speculation. The town was rife with rumors that the government is going to go. The Shah, who had presumably supported Dr. Amini earlier, had now withdrawn his support completely and there was a great deal of opposition in town against Dr. Amini. But we stood firm on his side.
And I took the penultimate draft of the budget law to Dr. Amini, to his office; and as I have already explained, he felt he could not take the law to the cabinet and consequently I resigned.
Just to add a few words to my earlier statement, on this occasion I told Dr. Amini, "Sir, I will have, therefore, to resign my post. It isn't that it has anything to do with you, because I love you," I remember this, saying it to him, "because you are a decent man, you are a good prime minister; but I cannot face my colleagues anymore, I cannot go back to that organization because I have staked my reputation on this matter." As excited as I was at the time about the subject, if he had only cautioned me about his difficulties to transfer the budget earlier, it probably would not have led to such a crisis. But now it was too late and I resigned.
Dr. Amini stood up looking extremely unhappy. Now, I saw this with my own eyes, tears had come to his eyes. I don't know, I don't know, maybe I had become such a problem to him by then, that he didn't actually mind my resigning. This, even now I am not sure of. As it were, the situation unnecessarily became such a drama. And of course much noise was made by many about my resignation.
After he stood up he said, "All right. All right. Let's have another meeting on this matter and decide finally." In this meeting, Mr. Asfia was present; Mr. Pourhomayoun, the governor of the Central Bank was present. Samii had come to represent the ministry of finance, and not the new minister, Samii was the new undersecretary of the ministry of finance.
Q. Which Samii?
A. Dr. Cyrous Samii. If I'm not mistaken, already appointed -- yes, appointed, I think -- appointed, or anyway picked up for, or designated undersecretary of finance, attended the meeting. Goudarzi was in the meeting; and Dr. Amini chaired the meeting. And he said, "Would you explain to us why you want to resign?" As if he needed some kind of witnesses, or as if it was my trial or something. I did explain my thoughts and the efforts on the unification of plan and budget functions and concluded that if the plan doesn't have the budget, the plan cannot keep its integrity and is a useless exercise.
I said the ministry people cannot do the budget, they're tax collectors and disbursement experts and do not understand the budget function in a developing economy. In fact, only planners can allocate, this is an allocating job. Now whether they are allocating for current expenditure or for investment expenditure, the job still can be done by the Plan Organization.
Nobody really gave me full support, except one man -- the new undersecretary of the ministry of finance -- supported me fully and that was Dr. Cyrous Samii. And that was very strange, because after all I knew the minister of finance did not support me; but Samii had the courage of his conviction in spite of his new responsibilities. Nobody else supported me and the meeting was adjourned.
So my resignation was final and I left the Plan Organization. Asfia came to my house, asked me to reconsider. Jamshid Amouzegar also came and asked me to return to the Plan Organization.
Q. Why Jamshid Amouzegar?
A. Jamshid was sent because of the problem of Jahangir, I suppose. And Jahangir didn't want to be singled out as the main cause for my resignation. I remained adamant and did not return.
Mr. Ala, however, insisted that I should go to the Shah, at that time, to explain to him why I had resigned. I absolutely refused. And Mr. Ala, who was like my own father to me always, was extremely disappointed that I wouldn't. I said, "As long as Dr. Amini is in office, I will not go to the Shah, because it will then take the form of my going behind the back of the prime minister to complain to the Shah about what the prime minister has done to me." I said I will not do that. However, shortly after, Dr. Amini resigned and left office, which wasn't long after my departure, it was about three months, two and a half months; I went to the Shah.
I also told the Shah, "Your Majesty, if I didn't come to see you, it was because I didn't want people to feel that I had a complaint against Dr. Amini, that I was complaining to Your Majesty against your prime minister." I felt it was a very improper thing to do. I figured the prime minister <was> perfectly capable of telling the Shah what happened. And after all, I was working for the prime minister, I wasn't working, as such, for the Shah. I was a secondary officer, I was at the time just the undersecretary or the second in command in the Plan Organization. I wasn't a minister, I wasn't at the top level to go to the Shah to air my differences with the prime minister.
Q. What did the Shah say? Did he understand the principle upon which you were...
A. I remember... Well, I don't think the Shah was all that excited about the whole concept of budget going to the Plan Organization. I did explain all of these things to the Shah and told him my reasons.
Q. What was his reaction?
A. He just... I remember he turned, he was walking, he said, "Well, I've always thought you were a man of principle and I admire people of principle." These are his words. In the light of later things, I never believed this. But this was his statement at the time, whether this came from his heart or they were just empty words, I'm not certain. I wish I could judge that. My own inclination is to say that he was just being nice to me, that's all. He just said that. I don't think he was about to bring about such reforms because I was suggesting them, not unless he felt there was a strong backing for the proposal within the government.
Q. Had you come to know him fairly well by this time?
A. Oh yes, oh yes. By that time I had known the Shah, had been to him many times, had reported to him many times, I'd argued with him many times, so...
Q. So, this may not be a bad place to draw a sketch of him as you saw him in 1962.
A. I will because there's another instance which relates to this sketching, which I'll go back.
Well, let me end this story. I went out into the street. I wrote the booklet that I've given you, called "Formation...", what is it called? "The Formation... (I can't read), "The Formation and..."
Q. "Report on the Formation and Development of the Economic Bureau, 1336-1342," submitted to the Ford Foundation by Khodadad Farmanfarmaian.
A. The Ford Foundation hired me as a consultant to write my own experiences in the Economic Bureau. They had invested a great deal of money in the Economic Bureau, nearly, over a million dollars to provide economic expertise and advice to the Plan Organization of Iran; and they wanted to know what happened to the money, was it useful, what was my view of this effort. And I agreed to do it -- after all, I was unemployed and had nothing better to do. I don't need to go into it.
I did that. I also wrote several articles at that time, especially in CKayhan InternationalD, whole pages of articles regarding these reforms that I'm referring to. It was a very interesting article. But what is interesting is how free the press was, because I was attacking the whole of the government. You know, we talk about repression of the press. My God, things were being published in those days.
Going back to a little earlier period, referring to the consortium that I said we wanted to set up to finance the third plan; this took us abroad many times. Also, negotiation of loans took us abroad many times, because the Plan Organization, the Economic Bureau were in charge of this.
But I went on a very special trip to convince the American government to provide budgetary aid to Dr. Amini, at the time of Kennedy. And budgetary aid was not anymore the policy of Kennedy and they were trying to wipe out this budgetary aid business for simply helping the developing countries. They wanted to give only money for projects.
A. Under Public Law 480, for other sorts of help, such as supporting schools, but directly and individually, on the merits of each case. However, Dr. Amini's biggest problem was a general budget deficit. And we wanted to see what we can do by way of getting aid. Of course, I was arguing that money is fundable, that is, money's not stamped as money which is being used for development or military or current purposes -- it doesn't matter how you allocate it. It's money. We can shift around our own money to be used for current expenses and the money we got from the United States for the purposes of development. The only difference was money for budget support did not carry the terms and conditions of a loan and it could have been a grant-in-aid and as such would not require parliamentary approval.
The guarantee to ask, or the basic question was whether or not the Plan projects were carried out. And that was what I was after. That is what I was pressing for. It wasn't a question of whether the money was called budget aid or not.
Anyway, I went strongly briefed. I had one of the best negotiation briefs prepared by Dr. Abadian, who came with me also to Washington. And I remember in the office of Secretary of State Rusk, this meeting took place where I defended the government position. There must have been about thirty-three, thirty-four people in the office of Rusk, around the table. Rusk came in, said hello to me. He didn't stay for the length of the meeting, but all of his undersecretaries: people from the treasury, people from the Pentagon, people from the World Bank, people from I.M.F.; this whole room was filled. And I made my presentation to them. Made my arguments as strongly as possible.
Oh, people from the budget bureau also who knew me, because they used to be working with me; the head of the budget bureau of Kennedy and his deputy were close friends of mine. Anyway, they're asking many questions, not only relating to economics, but relating to Dr. Amini's government, relating to the politics in Iran, relating to the National Front -- which at that time was beginning to have a sort of younger group, you may remember, Hossein Mahdavi, Fereidoun Mahdavi, and Cyrous Ghani had something to do with it. These were all my own friends, I knew them so well.
They asked me about the National Front, what I thought about the National Front. And honestly, I told them exactly what I thought. I said to them, "The National Front, as such, does not exist as a party. The National Front is fragmented groups or just individuals, who if they have time and a chance to develop, they may one day become a significant political party in my country. And I also answered questions regarding trade policy, ?, development policy, regarding the third plan, went into detail about the third plan. The whole meeting took some two hours. This was really a very significant meeting on Iran.
After that, we were given considerable amount of aid, by the way, budget support. Told that this is the end, there will be no more given <?>. So I came back quite happily to Dr. Amini saying that we have all of this. And Asfia, who was...
Q. Was the ambassador at this meeting?
A. Ardeshir Zahedi? No, no.
Q. Anybody from the embassy at this meeting?
A. No. No, nobody. I was the only Iranian. I think Ardeshir purposefully left Washington when I came in with independent instructions from the prime minister.
Q. But normally someone...
A. He told me later on, I asked him, he said some business to go to San Francisco. He wouldn't, of course, tell me that. I don't know, maybe he didn't want to make my mission sound big. It was, anyway, a very important mission.
Q. But normally someone from the embassy always attended these meetings.
A. Nobody followed me, nobody asked me and nobody came. That's the interesting part.
Q. Am I right that normally someone from the embassy should have come?
A. Always, always. But you're right, in this meeting there was nobody. What was funny though, now that you raised this, I must... When I returned, Asfia and I went to the Shah and Amini had apparently urged this...
Q. Encouraged this.
A. Maybe Amini for one reason wanted me to go and report, and that was the fact that we were successful in getting aid, wanted the Shah to know, feel better about the situation. And I so did and he did feel better. But while I was talking to the Shah, he said, what other questions did they ask you? And I, as always, being the straight-shooter, I simply said, "Sir, they asked me about the National Front." He suddenly turned and was very tense. He said, "What did they ask you about the National Front?" I said, "Sir, they asked me whether or not they were strong enough." He said "What did you say?" I said, "Sir, no they are not strong enough. They do not exist as a party. These are fragments and individuals. However (and this is the part he didn't like to hear at all), if they are given a chance to develop, they can become a strong party." I had never seen the Shah like this; he turned white, completely white. And of course, Asfia was sitting with his head down, not saying one word throughout the whole meeting; but this was his usual way in such meetings. So now, when we go back to think...
Q. Did you realize what you were doing, I mean when you said that?
A. I swear I didn't. I was just so straight. Only later on I realized what I had done. Much later on I realized what I had done. But still it shows the atmosphere. Still it shows that an officer of the government could have honestly told the Shah what he thought of. He didn't kick me out. I don't know what he told Dr. Amini afterwards, regarding this conversation. Maybe he thought I was just a naive, young officer who didn't know beans about Iranian politics and said this type of thing to Americans, you know, to whom he was deeply sensitive. I wasn't. I didn't care. I mean I just told them what I felt about my country, and I told the Shah exactly the same thing. There was nothing hidden in between and I spoke my feelings.
Now that I look back, it may have been this incident that made him later say, "you are a man of principles." Maybe he had this in mind. Also, I would suspect that certainly the desk people at the state department must have given the story to the ambassador, to Ardeshir Zahedi, without a doubt. And that Ardeshir would have cabled it. Now, I think about these things only now.
Q. So the Shah already knew what he was asking.
A. Whether they had stressed this particular aspect, I don't know. I haven't seen these reports. They are in the archives. I can go and check the archives. One day, one ought to go and get this information, and find out what the hell was going on during this period. I will. If I ever write about this period, as I plan to, I'm going to go and get all this business. Because, someplace it has to be shown... I want to find out what the Americans thought of me. Because from those archives, it will be quite known and clear. They used to call us the "American chickens" or the "American boys" or this type of thing.
I can speak until I'm blue in the face to defend myself that I was never an "American boy," I was always a Persian boy in the full sense of the word. Young I was, boy I may have been, but American I never was. You see, I WILL pull out, one day, all of these archives and I have a right to them. But I want to wait. I'll do that in good time as I organize myself, so I can use them properly.
By the way, the day I resigned, I remember an officer of the embassy telephoning me in a big hurry. Said, "Please, may I come and see you." I'll give you the name, his name was John Walsh, who later became ambassador to Kuwait, as a matter of fact. I said of course. He said, "May I bring someone?" I said who? He said Morrie Williams. Morrie Williams was the head of the Point Four <program> (by then had become AID, I think), who is now a very important man who heads what is called Food and Agriculture Committee, or something of this sort in Rome, to which Americans give considerable support for hunger, to support nutrition programs throughout the world.
These two came and sat across from me, started questioning me about why I had resigned. I said to them, "What's your business." They said, "Sir, it's very important for us, because you've been presenting the case of Iran in Washington on these matters and you have said so many things. We want to know whether or not your resignation relates to those matters and the question is if those things that you have committed yourself to as the representative of the prime minister (and I was the bona fide representative, accredited representative of the prime minister of Iran when I was talking about these things in Washington), we want to know whether or not these matters are going well, and so on." Well, I talked about the budget again, you know. I talked about my fears about the plan and left it at that.
Q. Did you feel that they could influence the Shah to accept this idea of budgetary control by the Plan Organization?
A. The Americans? I never even used the Americans. Don't forget, I had to convince the American advisors, who were against it -- this is interesting, again, what I want to tell you. I never felt that, for example, Ed Mason at Harvard, who had come at this time and talked to me, I never felt Ed Mason supported the idea. I argued with Ed, I sat down for hours trying to convince Ed. And nobody could argue with me, because I was so well prepared, you know. I made it a business to be prepared on the argument of why the budget should come to the Plan Organization.
As it were, you know, it was a successful effort because the next government following Alam, that is after Amini, Hassan Ali Mansour's government used my very concept as a reform concept and actually transferred the budget from ministry of finance to the Plan Organization. And so it happened. And the force of an idea is so important, you know, the idea remained alive. They couldn't kill the idea. And finally it happened. It then became the Plan and Budget Organization of Iran, as you are fully aware.
Anyway, I walked the streets for nearly a year. Samii, I remember, at that time was co-managing director of the Industrial Mining Development Bank of Iran...
Q. This is Mehdi Samii?
A. Yes, Mehdi Samii, and asked me if I would help him with a conference that had to do with economics and projects and banking. And I accepted to be sort of chief of staff for him on that. And I had no work in those days and that helped me, kept my mind busy on these matters. We used to prepare... I remember I used to sit down there, write articles for people, or speeches for people to give before the conference. It was all in English, mind you. And after a short while, Alam asked Samii to become the governor of the Central Bank of Iran.
Q. Before we get to that part of your career, could we not go back and ask you to sketch your impressions of the Shah as a monarch, as a ruler, as a manager, as a person?
A. You want it done to this point, or would you not...
Q. I think it would be interesting to compare what you felt at this point, the way you saw it. And then we can again ask you to do this when we get to 1974 <?>, and then perhaps compare. Now at this point, your impressions...
A. By this time, at this time I always felt -- and I'm being very honest, maybe I'm glad you asked me this question -- at this moment of time in history, I felt the Shah was the greatest refuge I had. I felt the Shah was the ultimate hope. I felt the Shah capable of understanding what we young reformists were saying. Far more than anybody else. Even at times I felt, although I could have been wrong, that he understood even better than Dr. Amini what we were talking about.
The only major point that, in my heart, separated me from the Shah during this period, the only thing in my heart -- now I'm talking about my heart -- was this whole preoccupation with military. We hated militarism. We did, this is the truth. And when I say we, it is this group of reformers. We didn't believe Iran should be spending so much money on military. And we made it our position clear on this. Cyrous Samii, Moghaddam, and I signed an open letter to the Shah. We went that far, representing this group, so to speak, presuming to represent this group. Signed a letter to the Shah saying that, "Your Majesty, what is important is a sound economy, an army cannot be built on the basis of a crisis-ridden, underdeveloped economy."
Q. Was this published anywhere?
A. It was an open letter. Now, obviously it couldn't get published in newspapers. We just sent it directly to the minister of court. We had a copy of this. I don't know whether a copy exists in these archives. That's what I am trying to search for. So far, all the archives I've looked in, I haven't found it. What happened.
But it wasn't important. It was another letter to us. What is significant, we didn't do this in those times as a matter of keeping our historical records straight, or showing our political position, no. We did it because we believed in it and thought we could convince the Shah.
Copyright © 2003 by the President and Fellows of Harvard College (Harvard University)
Dr. Habib Ladjevardi
Iranian Oral History Project
Center for Middle Eastern Studies
Harvard University
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ladjevar@fas.harvard.edu
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