EghtesadOnline: The Export Guarantee Fund of Iran is stepping up efforts to promote non-oil exports to Iraq by offering lower premium rates and cheaper guarantee cover.
On the sidelines of a monthly meeting of the Iran-Iraq Chamber of Commerce, the EGFI chief Afrouz Bahrami said the fund’s fees for export to Iraq is currently 1% which competes with rates quoted by foreign insurers.
“This encourages Iranian traders to expand their presence in Iraq,” IRIB News quoted her as saying.
In the past ten years the fund has provided close to $3.5 billion in export guarantees for trade with Iraq and has paid $113 million in compensation for losses during the period, Financial Tribune reported.
More recently it issued export guarantees worth $630 million for companies exporting to Iraq, which accounts for almost 40% of the fund’s total commitments, she said.
Bahrami pointed to issues like the credibility of Iraqi companies, adding that the fund plans to open an office in Iraq to facilitate the credibility assessment process.
Risk Cover Capacity
EGFI is capable of providing cover for export risk to the tune of $2.3 billion which accounts for 5% of Iran’s $40 billion non-oil export market.
The figure is almost half the cover provided by many developed countries and about a quarter of export guarantees in East Asian countries.
EGFI said earlier that it wants to expand risk cover for export insurance by $2.5 billion in the current fiscal (started March 21) and increase the penetration rate of export guarantees.
The CEO recalled the fund’s mandate to help shield non-oil exporters from US sanctions, noting that an effective strategy to follow in the tough economic conditions is to help mitigate the detrimental effects of sanctions by promoting trade with neighbors.
Iran’s export accounts for hardly 2.5% of the total imports of the 15 neighboring countries, she recalled.
Bahrami said the insurance cover EGFI provides is the best substitute for letters of credit at a time when the economy is saddled with mounting economic and banking restrictions imposed by the United States.
The fund offers guarantees to foreign trading partners that their money will be paid on time.
Iran’s Minister of Industries, Mining and Trade Reza Rahmani earlier said Iran and Iraq want to increase annual bilateral trade to $20 billion within two years.
According to Iran's commercial attaché in Baghdad, Nasser Behzad, Iran exported $8.3 billion worth of non-oil goods to Iraq during the first 11 months of the previous fiscal year (March 2018-Feb2019) up 54% and 45% in volume and value respectively compared to last year.
The EGFI was established in 1973, as the first export credit agency in Middle East and North Africa region. The state-owned body affiliated to Ministry of Industries, Mining and Trade promotes Iran’s non-oil export by providing Iranian companies export guarantees and insurance to cover risks in and emanating from export trade.