EghtesadOnline: Atotal of $113 million worth of clothes were exported from Iran in the fiscal 2020-21, registering a 91.5% growth compared with $59 million in the previous year, according to the director general of Textile and Clothing Department of the Ministry of Industries, Mining and Trade.
Iraq, Afghanistan, Central Asian countries and Persian Gulf littoral states were the main export destinations.
“In the fiscal 2019-20, we saw a 20% increase in production compared with the fiscal 2018-19 and a 25% increase in the fiscal 2020-21 year-on-year,” Afsaneh Mehrabi was also quoted as saying by IRNA.
“In order to improve and manage the clothing market in the fiscal 2018-19, we banned clothing imports,” she added.
According to the vice chairman of Iran's Textile and Apparel Production and Export Union, Iran’s domestic demand for apparel stands at 510,000 tons, while annual production is around 385,000 tons per year.
“The industry’s turnover cannot be accurately calculated due to fluctuations in foreign exchange rates as well as changes in the Iranian household expenditure basket. Yet, we estimate it to hover between $6 billion and $8 billion annually,” Majid Nami was also quoted as saying by Mehr News Agency.
Smuggling: Biggest Challenge
The official said smuggling is the biggest challenge facing the industry and huge amounts of effort and determination are needed to combat it.
“The Headquarters to Combat Smuggling of Goods and Foreign Exchange currently puts the amount of contraband apparel entering the country at $600 million per year. But how they have come up with this figure is a big question since tracking and detecting smuggled goods in the market is impossible,” Nami said.
Putting the value of apparel smuggling at $600 million per annum, Ali Moayedi Khorramabadi, the head of Iran’s Headquarters to Combat Smuggling of Goods and Foreign Exchange, recently said, “In the past, smuggled apparel accounted for as much as 90% of all clothing available in the country. Now, 80% of demand for clothes are met through local production, thanks to the efforts made by 26 agencies of Iran's Headquarters to Combat Smuggling of Goods and Foreign Exchange.”
Saeed Jalali Qadiri, the head of Textile and Apparel Production and Exports Union, told Mizan Online last year that close to $1.8 billion worth of contraband apparel enter Iran every year.
One reason, says Nami, Iranian customers show more willingness to buy contraband clothing is their relatively cheaper prices.
According to Bahram Havali Shahriari, the deputy head of Iran’s Apparel and Textile Producers and Exporters Association, a rise in the prices of domestic products, depreciation of Iranian rial against the dollar and the reopening of some international borders after the partial success in controlling the spread of Covid-19 pandemic, which resulted in more foreign travels, has given rise to contraband apparel entering the country after years of waging an effective battle against the illegal activity.
“Around three years ago, a ban was imposed on apparel imports, yet the measure was not effective since the lion’s share of these products were smuggled into the county in the first place. At the time, an average of $2.5 billion worth of apparel was estimated to have been smuggled into the country annually, while official and legal imports during the same period stood at $60 million,” he was quoted as saying by the news portal of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
Upsurge in Raw Material Prices
Nami stressed that due to the faulty economic structure, raw material prices have surged over the past few years.
“For instance, in Turkey, the industry’s required raw material can be bought at prices 20-30% cheaper than that in Iran. This alone has considerable effects on making end prices more affordable and smuggling of these goods more profitable.”
The official said that at present, the annual domestic demand for cotton is around 180,000 tons.
“Of this, only 60,000 tons to 70,000 tons are locally produced and the rest has to be imported. The problem is that domestically-produced cotton is not of high quality, therefore it does not appeal to customers,” he added.
A total of 200,000 tons of cotton bolls are estimated to be produced in Iran during the current Iranian year that started on March 21. Due to drought and low precipitation levels, the estimate is lower compared with last year’s output, according to the manager of Cotton Project implemented by the Agriculture Ministry.
Last fiscal year (March 2020-21), some 270,000 tons were harvested. As a result, production is estimated to experience a 26% decline this year.
“Cotton cultivation season started in late April and we estimated up to 115,000 hectares to go under cultivation this year, but given the unexpected and unfavorable weather conditions, only 80% of this goal can materialize,” Ebrahim Hezarjaribi was also quoted as saying by Mehr News Agency.
The official added that about 90,000 hectares have gone under cotton cultivation this year, down from last year’s 98,000 hectares.
According to Nami, Iran imports 100% and 20% of its demand for viscose and tricot respectively but produces all its required polyester locally. He said that sufficient capacity for the production of raw materials in the industry has not been created and even most apparel accessories, such as zips and buttons, are also imported.
“After the import of apparel into the country was banned, many sites and Instagram pages started selling contraband items and since they don’t have to pay import duties or taxes, their businesses have thrived,” he added.
The official complained that the banking system, by refusing to extend facilities, has forsaken the apparel industry that is totally run by the private sector.
Nami noted that due to banking problems and issues concerning the opening of letters of credit, all of which are rooted in economic sanctions imposed on the country, most foreign traders purchase their goods in Iran, pay in rials and take them to their intended destinations.
“These purchases are naturally not included in the country’s export data,” he said.