The recent forex fluctuation, disrupting foreign deals and seeing prices going through the roof, has left the ICT businesses in disarray, according to several business owners active in the sector.
It has been more than two weeks since the government of President Hassan Rouhani unified the US dollar exchange rate at 42,000 rials, in response to the rate hitting record levels as high as 63,000 rials.
While the administration has promised to distribute the "42,000-rial dollars", many firms are yet to get their hands on the greenback at the official rate with many calling it nonexistent. This has perplexed the ICT market to the point where most of businesses refuse to sell products and many are unwilling to buy.
The newsroom for Iran Chamber of Commerce, Industries, Mines and Agriculture has conducted several interviews with big-time firms to better capture the status of the market.
>Bottlenecked Imports
The chamber's head of the Commission for Information Technology, Communications and Economics Mohammad Reza Tala'ei says the impact of the government's decision will be most felt by those doing business with foreign firms.
According to Tala'ei, since a major part of hardware needed across the country is imported, the disruption in the market, lack of allocation of the 42,000-rial dollar and the ambiguity surrounding it has hampered business and bottlenecked imports.
According to Tala’ei, the recently announced government regulations in regard to the forex rate and its distribution are ambiguous. He is of the opinion that the current uncertainty has paralyzed many firms. To Tala'ei, absence of transparency is the chief culprit, which has disrupted the ICT sector above all.
>A Tale of Bankruptcy
Vida Sina, director of Research Center of Informatics Industries, says that last year, at the behest of the government, the firm launched a joint project in collaboration with an unnamed foreign company.
For conducting business with the firm, the research center was provided with subsidized currency at the rate of 37,000 rials to the US dollar. So as to launch the project the Iranian firm received a deposit of $10 million from its foreign partner.
Sina says, "After the recent fluctuations of the forex market, the foreign company asked for its deposit back based on the current rate. Even if we consider the dollar exchange rate at 42,000 rials, considering the difference between today's rate and the subsidized currency [5,000 rials], we will incur 50 billion rials [$1.1 million] in losses.”
She did not elaborate on the reason why the foreign business has asked the deposit to be returned or whether the project has fallen through.
The figures are an early sign of bankruptcy for the Iranian research center. While Sina is devastated on how to repay the debt, she says she supports the unified rate as long as it remains consistent.
>Divorced From Reality
Kambiz Rashidi, a member of Farassoo Company's board of directors, is of the opinion that the country's infrastructures are not ready for a unified exchange rate, but he supports the decision if Rouhani and his officials stick to their guns and retain the unified rate. Farassoo is one of the major Iranian computer hardware suppliers.
Rashidi was hesitant to accept a rate set by the government and not by the market. He maintains that "the rate is out of touch with reality"; a point already raised by many observers saying that the US-rial exchange rate is actually way higher than the state declared 42,000.
Furthermore, according to him, currency reserves will fall short of the market's demand and since the banking system cannot meet the needs, the administration's recent strategy will give rise to a black and inevitably corrupt currency market.
He says, "The government's policy will certainly affect tech firms and the impact will be most pronounced in the production sector."
>Consumers Bewildered
In the few weeks that have passed since the forex upheaval, the price of mobile handsets has experienced a 10-15% rise. The same hike has been reported in the computer hardware market.
Observers believe ICT costs will soar even further in the coming months, especially if the promised dollar exchange rate fails to hold.
The sky-rocketing prices have outraged consumers with many taking to social media platforms criticizing the government and its monetary policies.
In a time and age when technology plays a huge role in the people's daily lives like never before, and when the advancement of the knowledge-based economy is directly affected by the cost of electronics, the government is well-advised to be cognizant of how efficiently it prioritizes the allocation of currency.
