Tehran Chamber of Commerce, Industries, Mines and Agriculture as the country's main private sector assembly has made known its demands from the government, hoping to win the public sector's trust in its quest for a more business-friendly climate and less red tape.
TCCIM, in its monthly board meeting on Tuesday, voiced renewed concern about the lingering recession hurting the economy, warning that the only way out is to reform the labor and trade laws, cut red tape and effectively tackle venality and corruption.
Data released by TCCIM shows that in the 12 months to March 2016 the Industrial Production Index (IPI) declined by 9.8% compared with the same period last year with sales dropping by 10.9%. Cement, plaster, lime and auto industries were the worst performers. Imports in the two months ending May 21 were $5.6 billion down 13.5% year-on-year with exports at $6.8 billion posting a 15% decrease.
The meeting culminated in a statement passed unanimously by the chamber’s representative board of directors, which urged the government and the Central Bank of Iran to unify exchange rates and put an end to the controversial system of allocating subsidized hard currency to a selected group of imports.
Business Gripes
Noting that the biggest pressure to businesses in time of recession is being imposed from “taxes,” Masoud Khansarai, TCCIM head, suggested that since the previous fiscal year ending in March saw zero growth in manufacturing, businesses be taxed on the basis of the 12 months to March 2015 adjusting for the Producer Price Index (PPI) in the past fiscal year.
“With regard to easing the recession in 2015-16 and the slow and low growth of production units, our suggestion is that taxes for production sectors be the same as in the previous year adjusting for PPI,’’ he said. A request to this end has been presented to Vice President Eshaq Jahangiri who presides over the Central Headquarters for the Resistance Economy.
Jahanagiri has been tasked by President Hassan Rouhani to insure the government policies are in tandem with the Resistance Economy–a set of guidelines recommended by the Leader Ayatollah Seyyed Ali Khamenei which envisions an economy that is “self-reliant” and “forward-looking” while at the same time less dependent on crude oil exports.
“It’s been three months since the start of the year and we have heard many experts talk about the Resistance Economy but have not seen any tangible results,” Khansari said.
The second irritant voiced by the TCCIM chief was taxes levied on the foreign currency exporters receive from the government on grounds that the market exchange rate is higher than the official rate. Businesses claim these taxes harm exports and have no legal base because as per law exports are tax free.
The business leaders aired similar concerns about value-added tax –saying it is unfair for sold goods to immediately become taxable when most transactions are on credit – and cumbersome social security laws that allow probes into the companies’ insurance payment records going back to a decade.
Plea for Help
The meeting devoted a special time for struggling enterprises, the cement industry in particular, which is facing serious challenges after exports were suspended to neighboring Iraq.
Khansari warned that if immediate help is not available, half the cement plants will face bankruptcy and closure.
Elaborating on the issue of improving the business climate, Khansari urged all ministries and entities to solicit TCCIM’s view before passing new regulations. “All the ministries are busy drafting new plans and rules. However, it would much better if we take a step back and see what we have achieved with the previous schemes.”
Khansari added his voice to the growing number of pundits and businesspeople calling for reforming the banking sector which is lagging behind international standards due to years of sanctions and neglect by policy and decision makers.
“The number one priority for the economy is the overhaul of the banking system by promoting transparency, raising commercial and specialized lenders’ capital and upgrading banking system’s standards and codes of conduct,” he said.
Exchange Rate Unification
It was apparent from Tuesday’s meeting that top on the mind of the private sector, is the issue of forex rates, which, except for some intervals, have been ruled by a dual or multiple exchange rate system for most of the past three decades.
TCCIM issued a special statement, recited by Fatmemeh Moghimi a member of the presiding board, outlining a litany of woes brought on by government intervention in the forex market and the dual exchange regime, which facilitates the allocation of subsidized foreign exchange to a selected few importers.
“The previous government, by controlling foreign exchange rates in years before 2011 with disregard for economic realities, set the stage for wild forex swings in 2012-13,” the statement said.
Itemphasized the inefficacy and impracticality of keeping the national currency artificially strong, saying that that was, and is, a recipe for disaster and contributed to corruption and rent-seeking.
“Resorting to official decrees in setting forex rates is tantamount to paying subsidies, which strengthens imports at the cost of exports. This not only hurts domestic growth, but also creates a hotbed for rampant smuggling,” the statement rued.
TCCIM demanded that a return to floating exchange rates–a promise often made by the central bank – be implemented sooner rather than later, noting that foreign exchange rates should rise annually in line with domestic and global inflation.
