EghtesadOnline: The prevailing restrictions or total ban on imports of 2,500 types of commodities will remain in place even if sanctions against Iran are lifted, says Minister of Industries, Mining and Trade Alireza Razm-Hosseini.
“These measures are aimed at boosting domestic production,” he was quoted as saying by IRNA.
“The production of parts in many industries has been indigenized such that domestic manufacturers account for 75% of home appliance and 80% of car production,” he said.
Noting that domestic apparel production is gaining traction, the minister said, “As apparel imports are no longer profitable [due to restrictions put in place], local manufacturers are thriving.”
Demand for Domestic Apparel Up 20%
Iran’s spinning factories are operating at full capacity as cotton mills’ capacity increased by 47,000-48,000 tons last year (March 2019-20), Afsaneh Mehrabi, director general of the Ministry of Industries, Mining and Trade’s Textile and Clothing Department, has been quoted as saying by Mehr News Agency.
Stressing that demand for locally-made clothing has increased by 20%, the officials said, “As of last year, the country needed 120,000 tons of cotton. Last year’s imports of cotton stood at 98,000 tons while 60,000 tons of locally-made cotton were consumed.”
She continued, “Prices of imported cotton have increased due to the depreciation of local currency. Hence, efforts of Agriculture Ministry to increase import tariffs seem unjustifiable. Furthermore, sanctions have made imports even more challenging.”
“Many years ago, Iran used to export 270,000 tons of cotton but in recent years, cotton production has declined to 50,000-60,000 tons per year, Alimardan Sheibani, a board member of the Association of Iran Textile Industries, said.
“Given the machinery installed at factories, the country needs to import 120,000 tons of cotton annually. Textile industries consume locally-produced cotton in its entirety. In fact, they are facing a shortage of cotton,” he was quoted as saying by IRIB News.
The 5% tariff on imports of cotton in Iran comes, as producers have to import cotton at currency rates set in accordance with the exchange rates of the so-called secondary FX market, known by its Persian name Nima.
Setting tariffs on imports will encourage farmers to speed up cotton production, Ebrahim Hezarjaribi, an Agriculture Ministry official, said. “Cheap dollars and removal of import tariffs led to a declinse in cotton cultivation from 300,000 hectares to 70,000 hectares in the early 2010s. The removal of tariffs resulted in the closure of 150 cotton mills. Today, only 70 factories are operating at a fraction of their capacity,” he said.
“The country has achieved 40% self-sufficiency in cotton production. Iran’s cotton production is estimated to reach 80,000 tons in the current fiscal year [March 2020-21] and land under cotton cultivation will increase to 120,000 hectares next year.”
According to Morteza Mirmohammadi, an official with the Ministry of Industries, Mining, and Trade, the share of foreign products has dramatically declined in the Iranian apparel market due to a ban on imports and rise in foreign currency rates and domestic producers have gained more motivation to utilize this opportunity and improve the quality of their products.
Foreign brands, mainly Turkish ones, are being replaced with quality Iranian products, he added.
Mirmohammadi said this achievement (growth in output and production of quality apparel) has been realized with the import of up-to-date machinery and technology, adding that despite sanctions, noteworthy investments have been made in the apparel industry.
Hassan Nilforoushzadeh, secretary-general of Iran’s Textile Industry Association, has told Fars News Agency that 98% of Iran’s textile industry are owned by the private sector, and if it wasn’t so, it would have been banished altogether.
“Our main plight is the huge amount of contraband items that enter the country. It seems that even the police can’t stop the smuggling. Other handicaps we deal with are money transactions, foreign exchange and transportation problems caused by reimposed US sanctions,” he said.
Saeed Jalali Qadiri, the head of Textile and Apparel Production and Exports Union, recently told Mizan Online that at present, close to $1.8 billion worth of contraband apparel enter Iran every year.
Nilforoushzadeh added that the textile industry has created close to 600,000 direct jobs.
The purchasing power of Iranians has declines in recent years, leading to lower consumption of apparel, among other commodities. The increase in production of domestic producers could reverse this trend, provided that manufacturers boost the quality and diversity of their products.
More than $40 million worth of apparel were exported from Iran during the first seven months of the current Iranian year (March 20-Oct. 21, 2020), according to the deputy head of Textile and Apparel Production and Exports Union.
“This is while over the past few years, our total annual apparel exports hovered between $50 million and $60 million. We estimate that by the end of the current [fiscal] year [on March 20], our exports will see a 30% rise compared with last year,” Majid Nami was quoted as saying by IRNA.
Based on data released by the Islamic Republic of Iran Customs Administration, Iraq, Kuwait, Australia, Armenia, Azerbaijan, Uzbekistan, Russia, Afghanistan, Pakistan, Turkmenistan, Kyrgyzstan, Germany, South Korea, Japan, the UAE, the UK, Venezuela, the Ivory Coast, Italy, Turkey, Canada, Qatar, Oman, Nigeria, Switzerland, Yemen, Georgia, Spain and Denmark were Iran’s main export destinations for these products.
The official noted that the export figure pertains to official and legal exports only and the figures for suitcase trade of apparel, which is estimated to be considerable, is not included.
Moreover, said Nami, merchants from neighboring countries like Iraq and Afghanistan as well as Central Asian countries have based themselves in different cities of Iran, pay Iranian producers of clothing items in rials and then take the consignments out of the country in either legal or illegal ways, adding that this kind of exports has little profit for Iranian businesses.
Meanwhile, Iran exported €15 million worth of synthetic fibers over the eight months to Nov. 20, according to the director general of Industries Ministry.
“Exports of Iran’s synthetic fibers stand at 240,000 tons worth €20 million per year,” Mehrabi was quoted as saying by IRNA.
According to parliamentarian Javad Hosseini-Kia, a total of 600,000 tons of raw materials for production of synthetic fibers are produced domestically every year, of which 550,000 are used inside the country.