EghtesadOnline: Iran’s non-oil exports increased from $4.2 billion to $46.8 billion over 17 years between the fiscal 2001-02 and fiscal 2018-19, registering an average annual growth of 16.23% or a 10.6-fold increase.
According to a report by the research arm of the Iranian Parliament, Majlis Research Center, exports increased 13.9% in terms of weight annually over the years under review, registering a 7.28-fold increase.
The country exported to 170 countries in the fiscal 2008-09, which is the highest number of export markets the country had over the period, while it exported non-oil goods to 140 countries in the fiscal 2014-15—the fewest over these years.
The already skewed pattern of Iran’s export markets has only become more disproportionate over these years; in other words, the country has very few trading partners with whom it conducts a large volume of trade.
Eight out of 163 trading partners Iran in fiscal 2001-02 (or 4.9% of all its trading partners) accounted for more than half of Iran’s export revenues. Less than half of the country’s export revenues came from the remaining 155 countries.
The share of four countries, namely the UAE, China, Iraq and South Korea, was collectively more than the value of exports to 145 countries in the year ending March 2019.
The UAE, Iraq and China have almost always grabbed the biggest shares of Iran’s export markets.
Over the 17 years under review, the UAE accounted for 14.45% of the total export revenues Iran gained. The smallest share of the neighboring country pertains to fiscal 2014-15 with 11.12% and the biggest share was registered in the fiscal 2012-13 with 17.3%.
Annual exports to the UAE grew 17.45% on average over these years from $641.15 million to $5.99 billion.
Being Iran’s eighth export market in the fiscal 2001-02, Iraq swiftly became one of its top three export destinations in the following years. Its share from Iran’s total exports varied from 3.45% in the year that ended in March 2002 to 20.83% in the year leading to March 2009.
The average share of the neighboring country from Iran’s exports over these years has been 13.56%. Annual exports to Iraq grew 38.46% on average over these years from $144.99 million to $8.99 billion.
China accounted for 13.74% of Iran’s exports over the 17-year period. In the fiscal 2001-02 and 2002-03, the Asian country ranked seventh and eighth among Iran’s top export destinations, becoming Iran’s fifth biggest export market in the year ending March 2006 and second in the year ending March 2010.
From the fiscal 2010-11 to 2018-19, China has been the top destination of Iranian exports. Annual exports to China grew 30.23% on average over these years from $177.09 million to $9.28 billion.
Apart from lack of market diversification, Iran’s economy also suffers from the high concentration of exports on a handful of products.
For example, more than one-third of revenues gained by the country from non-oil exports in the year ending March 2019 came from mineral products, in spite of the fact that out of 3,826 export codes or HS codes, only 152 codes belonged to minerals that year. In other words, less than 4% of items classified as non-oil products constituted more than 36% of the country’s export income.
The report suggests that despite efforts by the government to improve the share of industrial goods from total exports, foreign trade data show that a large part of Iran’s non-oil exports actually come from oil, as gas condensates and petrochemicals topped non-oil exports.
Pistachio, saffron and carpet are still the most popular Iranian products in global markets.
Over the 17-year period under review, 17-33% of non-oil exports revenues came from the export of five items. On average, 24.66% or around a quarter of non-oil exports revenues are generated via exports of five items.
The annual share of top 10 exported goods from foreign exchange income averaged 35.57%. And the share of top 15 export products from overall export revenues has been 42.77% on average.
On top of that, the report says, the overall direction of exports over the years under review hovered around exports with low and medium degree of sophistication.
The Harmonized System or HS code is a six-digit global standard used to classify globally traded products. This standard is used by customs authorities around the world to identify the duty and tax rates for specific product types. HS codes are used in most international export documentation and commercial invoices.
Iran’s export basket included 2,426 HS codes in the year ending March 2002 and 3,826 HS codes in the year ending March 2019. The country had the highest number of HS codes in the fiscal 2017-18 over the 17-year period.
Since 2011-12, an upward trend can be observed in the number of HS codes (except for the year ending March 2016), suggesting that the country is seeking to diversify its exports. Overall, an annual 3% growth has been posted in the number of export items, marking a 1.61-fold increase over these years.
The Hirschmann index tells us the degree to which a country’s exports are dispersed across different destinations and products. High concentration levels are sometimes interpreted as an indication of vulnerability to economic changes in a small number of export markets and products. Over time, the decline in the index may be used to indicate broadening of exports.
The index is the sum of squared shares of each product in total export. A country with a perfectly diversified export portfolio will have an index close to zero, whereas a country which exports only one product will have a value of 1 (least diversified).
The average Hirschman index between the fiscal 2001-2 and 2011-12 has been on the decline from 0.179 to 0.136. However, in the fiscal 2016-17, the index surged to 0.200, indicating that the country’s exports only accounted for a small number of commodities. The average Hirschman index was 0.145 over the 17-year period.
In conclusion, MRC has urged the government and private sector to identify new export markets while retaining the current ones.
There is mounting evidence that countries grow when they export a wider variety of goods to different destinations. Market and product diversifications protect countries from export collapse due to changes in demand or competition in one particular market.