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EghtesadOnline: The head of Iran Chamber of Commerce, Industries, Mines and Agriculture called on the government and the Central Bank of Iran to improve oversight of the cumbersome banking system and move it toward the "productive" sectors of the economy.

At the ICCIMA's board of representatives' gathering on Sunday, Gholamhossein Shafei said in a bank-based economy like Iran, lenders act as the blood veins of the economy and hence the need for much more  attention to the beleaguered sector. 

"A deepening gulf between the scale of the financial sector and [size] of the real economy has led to the ballooning of non-productive sectors of the economy which by extension have given rise to rent-seeking and ingrained corruption," Shafei said. 

CBI Governor Abdolansser Hemmati was scheduled to attend the meeting that coincided with the National Export Day, but dropped out at the last minute from what could have been a challenging tête-à-tête with irate private sector envoys who insist the CBI’s  currency policies are undermining exports, Financial Tribune reported.

Overdependence on oil revenues has created such conditions that while economic decline is the norm “the government's directive-producing factory continues to flourish”

Shafei criticized the bloated banking system for trying  to "acquire resources" instead of allocating them to businesses and called on lenders to prioritize credit allocations given the scarcity of resources.

Shefei referred to the decision to establish non-government banks as part of the Third Five-Year Economic Development Plan (2000-2005) on grounds that it would help promote  competition and the free market economy and questioned whether those goals had been realized. 

"Why doesn't the banking system embrace mergers? Does our economy really have the capacity for this huge number of bank branches?" he asked.   

Iran’s banking industry is struggling with acute problems such as the piling up of non-performing loans. Banking regulations are not in line with international norms guiding risk management, capital requirement and stringent auditing. 

The unusually high number of bank branches compared with global the average and weak supervision over the past decade have also taken their toll. 

A twin bill to overhaul both the banking system and the central bank, currently in the final phase in parliament, is expected to usher long-awaited reforms to the teetering banking system. 

Shafei expressed regret at the banking system's lending practices  that indicate the agriculture, water and export sectors have been shortchanged. 

Dysfunctional Government  

Reflecting the prevailing mood of businesses present at the meeting, Shafei cited some unpleasant facts to show the dire conditions of the Iranian economy. To say the least, he noted, “The economy does not have much to say" without oil export revenues. 

The business leader censured the governments’ development policies in the past that has led to the monstrous growth of cities without taking into account the accompanying deleterious byproducts, namely air pollution and congestion. 

He called on the central bank to tap monetary policy in order to at least instill monetary stability in the middle term, saying that overdependence on oil revenues has created conditions that while economic decline is the norm the "government's directive-issuing factory flourishes."

He asked the government to "at least listen" to the private sectors' demands before issuing directives even if it does not agree with everything they have to say.  

Shafei has in the past weeks sent several letters to First Vice President Es'haq Jahangiri, asking  him to do away with the allocation of subsidized currency for certain imports and end the three-month deadline for exporters to return their export earnings to the "country's economic cycle." 

Other members of ICCIMA's board echoed those demands, saying that a hodgepodge of directives issued by the government has confused the business community. 

Tehran Chamber of Commerce head Massoud Khansari had earlier announced that from April 10 until August 13, the CBI had issued more than 33 directives and according to the Islamic Republic of Iran's Customs Administration chief, it had to notify more than 150 ordinances in accordance with the constantly changing forex injunctions.   

Businesses assert that most of government directives meant to control currency allocation and prices are counterproductive and that the only way to weather the current economic storm is more liberalization.  

The government in April fixed the US dollar's exchange rate at 42,000 rials but after that policy failed, leading to a deluge of demand for currency, it had to ditch currency unification plan. 


Iran Central Bank of Iran banking system Banking Sector Chamber of Commerce