EghtesadOnline: October 21 is traditionally marked as the National Day of Export in Iran by economic players from both public and private sectors.
This year’s event, owing to its concurrence with the Arbaeen mourning ceremony, was put off to a later date by Minister of Industries, Mining and Trade Reza Rahmani. However, this has not prevented policymakers and economic players from reviewing the current state of exports in Iran and its future.
Speaking at the meeting of High Council of Free Zones on Monday, First Vice President Es’haq Jahangiri called on governmental institutions active in the field of exports to lend their support to exporters of non-oil products, ILNA reported.
“As we speak, exporters are at the forefront of the economic war waged against our country. Despite all [external] coercive measures, Iran’s exports in the first half of the current [fiscal] year [March 21-Sept. 22] increased by more than 22% [in terms of volume], which is indicative of redoubled efforts made by both the private and public sectors. Directors of free trade zones need to draw up a special plan for improving exports via these regions to create a satisfactory balance between imports and exports,” Financial Tribune quoted him as saying.
Latest data released by the Islamic Republic of Iran Customs Administration show Iran's overall non-oil foreign trade (except crude oil, mazut, kerosene and exports via suitcase trade) during the first half of the current Iranian year (March 21-Sept. 22) stood at $2.16 billion, indicating an 8.07% decline compared with same period of last year, the Islamic Republic of Iran Customs Administration reported.
Non-oil exports stood at 70 million tons worth $20.94 billion to register a 22.5% growth in weight but a 10.55% year-on-year decrease in value compared with the same period of last year.
Imports reached 16.56 million tons worth $21.22 billion, indicating an increase of 0.41% in weight and a decline of 5.51% in value year-on-year.
This led to a trade deficit of around $280 million in H1.
China, Iraq, Turkey, the UAE and Afghanistan were Iran’s main export destinations over the period.
Exports to China stood at $5.1 billion, accounting for 24.37% of total exports.
Iraq imported $4.66 billion worth of non-oil goods from Iran, accounting for 22.26% of Iran’s overall exports.
Exports to Turkey stood at $2.55 billion to account for 12.18% of Iran’s total exports.
Non-oil goods sold to the UAE were worth $2.35 billion, constituting 11.25% of Iran’s overall exports.
Exports to Afghanistan reached $1.07 billion, which accounted for 5.13% of Iran’s total exports during the period.
Major exporters to Iran were China with $5.3 billion and a share of 25%, the UAE with $3.78 billion and a share of 17.81%, Turkey with $2.61 billion and a share of 12.34%, India with $2.12 billion and a share of 10.02% and Germany with $1.01 billion and a share of 4.77% from Iran’s total imports.
By “non-oil”, IRICA refers to all commodities, except crude oil. Therefore, oil-driven products and byproducts as well as petrochemical products are still categorized as non-oil.
IRICA categorizes non-oil exports into the three categories of “petrochemicals”, “gas condensates” and “other products”.
Need for Roadmap, Centralized Command
A centralized command should be responsible for setting priorities and making decisions about the country’s foreign trade, particularly at present when Iran is under economic siege [due to the US sanctions] and suffers from lack of an export-oriented economic structure, says Hamid Zadboum, the head of Trade Promotion Organization of Iran.
“Iran’s exports apparatus needs a roadmap in line with market regulation policies and domestic commerce. A thoughtful balance should be struck between the two,” he added.
TPO plans to energize exports by organizing and attending trade exhibitions at home and abroad, holding commercial training courses, dispatching trade delegations and commercial attachés and establishing trade offices in 15 neighboring countries, as well as China, India and later in Indonesia, Vietnam and Thailand, he told the Persian-language daily Iran.
Zadboum noted that TPO’s top priority for the current Iranian year (ending March 19, 2020) is to improve exports of products with higher added value, including those being manufactured by knowledge-based companies, exports of services, pharmaceuticals and medical equipment, tiles and ceramics, sweets and chocolate, rugs and saffron.
Trade Agreement With EEU
Since the start of the Third Five-year Development Plan (2001-06), TPO has been setting annual objectives to shore up exports. Of objectives that have been clearly spelled out and achieved, I can refer to two-year-long negotiations that led to Iran joining the Eurasian Economic Union, he said.
Iran and EEU are looking to substantially increase trade after they signed the aforementioned provisional agreement in Astana on May 17, 2018, for the bloc to welcome Iran into EEU.
The arrangement is the first step in implementing free trade between Iran and the union’s five members. It lowers or abolishes customs duties, setting off a three-year process for a permanent trade agreement.
The provisional three-year agreement is set to come into effect on Oct. 27.
The average tariff set by the union on Iranian goods as part of the agreement stands at 3.1%, while the figure is 12.9% for EEU goods exported to Iran.
Iran and EEU have listed 862 types of commodities in their provisional trade agreement. As per the deal, Iran will enjoy easier export terms and lower customs duties on 502 items and the same goes for 360 items from the EEU member states.
“Out of the total 862 items in the agreement, 639 are industrial products and the remaining 223 items are agricultural goods,” the deputy head of Iran Chamber of Commerce, Industries, Mines and Agricultures, Mohammad Reza Karbasi, was quoted as saying by ICCIMA’s news portal.
Mehrdad Ebad, a member of Iran Chamber of Commerce, Industries, Mines and Trade, believes that Iran’s best option is to boost its exports by tapping into the potential of its diplomatic machine and redefine the country’s engagement with the world in general and neighboring countries in particular.
“One of the high hopes of exporters is the Iran-EEU trade agreement and the use of local currency in conducting trade with states located in central and northern Asia and Eastern Europe. This is, I dare say, the best piece of news reported this year. I recommend setting preferential tariffs on strategic goods,” he said.
Moving Away From Oil
According to Mohammad Lahouti, the chairman of Iran Export Confederation, following the Iran-Iraq war of 1980-88, petrodollars made the exploitation of other sources of revenue, including non-oil exports, dispensable.
The reimposition of US sanctions against Iran’s energy sector has opened up an opportunity for the country and the government to support non-oil exports.
“Under the current circumstances, expansion of Iran’s export markets is not easy, but we can at least terminate the so-called self-imposed sanctions by avoiding ad-hoc, disruptive rules and regulations as well as imposing bans or restrictions on exports,” Lahouti said.
“The biggest challenges exporters face today is the high transportation costs. The government needs to back non-oil exports through committing resources from the Export Guarantee Fund of Iran and Export Development Bank of Iran.”
“Last year’s devaluation of Iran’s rial could help reduce the cost of exports and render them more competitive in the global market, but the government’s misguided policymaking, including the introduction of subsidized foreign currency at the rate 42,000 rials per dollar did not allow this to happen,” Bahram Shakouri, the deputy head of Iranian Iron Ore Producers and Exporters Association said.
“What we need to do is to get on an equal footing with our rivals and prepare infrastructures such as rail and sea transportation and offer low interest rate loans to exporters. The imposition of customs duties on exports is costing us export markets,” he concluded.