Nationalization and Efficient Management of Water Resources in Iran

Abstract

In Iran the government under the Shah's regime nationalized the water resources of the country and legislated a detailed statute concerning the development, allocation, and use of this limited resource. This paper critically examines the Nationalization of Water Resources Act (NWRA) from the standpoint of promoting economic efficiency. A historical study of past water laws reveals a strong philosophical link with the concept of nationalization. The NWRA denounces the market mechanism and centralizes all aspects of development, allocation, and use of this resource. The analysis in this paper reveals that efficiency and optimality in the allocation and use of water cannot be attained through these laws. A review of the performance of a number of water agencies that were established prior to the NWRA shows that they are successful in gaining the advantage of economies of scale, internalization of external effects, and reduction of waste. Under these systems, the farmers have the ultimate discretion with regards to allocation, use, and transfer of water. Recommendations in this paper could be valuable to the current legislators who are engaged in the development of a new body of water laws.