The National Day of Exports was marked in Iran on Sunday in a ceremony attended by top government officials and major economic players and traders.
According to Mojtaba Khosrotaj, the official at the helm of Trade Promotion Organization of Iran, 500 companies account for 82% of Iran's exports, IRNA reported.
“Exports by two main sectors of steel and petrochemicals are twice the country’s traditional exports. Therefore, to improve the structure and diversify exports of the country, we need to increase the share of knowledge-based commodities and exports of technical, engineering and information technology services,” he said.
"The current fiscal year (March 2018-19) has witnessed a significant decrease in exports to the European countries, largely due to US sanctions," said the head of Iran Export Confederation, Mohammad Lahouti.
"Even private sector's exports as well as those of small- and medium-sized enterprises to Afghanistan and Iraq have been undermined."
He added that the difference in the foreign currency rates, including those set by the Forex Deals Integrated System (known by its local acronym Nima) and open market, has made imports more enticing.
"Thus far, orders for imports worth €56.6 billion have been registered, twofold more than in the same period of last year," he said.
President of Iran Chamber of Commerce, Industries, Mines and Agriculture Gholamhossein Shafei said the government’s new instructions and bylaws surprise economic actors on a daily basis.
"What is highly conspicuous today is that the government is trapped in making rash decisions that won’t have positive consequences when implemented. I urge the government to consult the private sector in the policymaking process. The time is right for the government and the private sector to form a complementary relationship and improve mutual trust," he said.
> A Timeline of Recent Challenges
In the face of a currency crisis that has seen the rial lose about two-thirds of its value since the beginning of 2018, the government has scrambled to cope with the predicament at hand–blamed as much on the structural deficiencies of the Iranian economy as on the May abandonment of the nuclear deal Tehran signed with world powers in 2015 by the United States. The consequent reimposition of US sanction against Iran has only exacerbated the situation.
In a bid to economize on foreign currency reserves amid lack of hard currency at home due to toughening restrictions on trading with the Islamic Republic, the government has taken a series of controversial measures.
First, it banned the import of over a thousand categories of goods the government considered "non-essential", which resulted in the inevitable rise in their prices. Exports of a wide range of goods were also banned to meet growing domestic forex demand triggered by psychological implications of sanctions' comeback.
The government started allocating cheap foreign currency to the import of essential goods, only to give rise to corruption on the part of certain traders.
Yet another controversial move was mandating all exporters to repatriate their foreign currency yields into the economic cycle of the country, which expectedly draw the ire of private sector businesses.
Government regulations obligate exporters to return 95% of their currency yields–by accepting imported goods, reimbursing currency debts, selling foreign currencies to banks and exchanges, or making deposits in banks– within three months of receiving their customs export permit. The repatriation period was initially set at six months, but was later reduced.
The government has said any exporter who receives foreign currency yields and does not repatriate them will have their official trade IDs issued by the chambers of commerce nullified.
"The emphasis of the central bank to implement the currency repatriation bylaw will lead to professional exporters being kicked out of the field," Gholamhossein Shafei, the president of Iran Chamber of Commerce, Industries, Mines and Agriculture, said.
"With every talk about currency repatriation, exporters are accused of not bringing their currency yields into the country, but these yields have already been returned in recent years because where would exporters provide their capital for next shipments if they don't repatriate their currency?"
> Need to Diversify Exports
Iran's economy has long been plagued by the so-called Dutch Disease, referring to abundant oil reserves causing over-reliance on oil exports.
Measures have been taken to diversify exports, as oil remains a major source of revenue in the government budget.
The United States has targeted exactly that by urging other countries to stop buying oil from Iran as part of its new set of sanctions.
Latest data by the Islamic Republic of Iran Customs Administration show exports, excluding crude oil, mazut, kerosene and suitcase trade, hit 56.64 million tons worth $23.12 billion during the first half of the current fiscal year (March 21-Sept. 22).
By “non-oil”, IRICA refers to all commodities except crude oil. So oil-driven products and byproducts as well as petrochemical products are still categorized as non-oil.
IRICA categorizes non-oil exports into three groups of petrochemicals, gas condensates and “other items”.
A total of 13.68 million tons of petrochemicals worth $7.02 billion were exported during the period, registering a decline of more than 3% in weight and 17% in value compared with the same period of last year. In fact, petrochemicals accounted for more than 30% of Iran’s overall non-oil exports.
Exports of gas condensates stood at $2.41 billion, accounting for over 10% of total exports to post a year-on-year decline of more than 46% in weight and 28.5% in value.
Exports of liquefied propane stood at $1.07 billion, accounting for 4.64% of total exports, light oils, except gasoline, at $861 million accounting for 3.72% of total exports, and methanol at $693 million accounting for 3% of total exports.
Exports of non-petroleum-based products that are classified within the “others” group fell in the neighborhood of 38.31 million tons worth $13.67 billion in the first half of the year, indicating a rise of around 7% rise in weight and more than 23% in value YOY.
Products in “others” group are exported by the private sector, accounting for more than 59% of the country’s total value of non-oil exports in H1.
China, Iraq, the UAE, Afghanistan and India were the main customers of Iranian products during the six-month period.
The UAE, which was Iran’s second top export destination for years, has now given up its position to Iraq. Exports to the UAE stood at $4.06 billion, registering more than a 33% increase. Exports to Afghanistan and India hovered around $1.66 billion and $1.25 billion, respectively.
Exports to China, Iran's biggest trade partner both in exports and imports, which constituted more than 20% of the total value of Iran’s exports, saw close to a 12% rise to hit $4.63 billion.
Iraq imported $4.56 billion worth of non-oil goods from Iran during the first half of the current fiscal year, 44.5% more than the same period of the last year.
H1 exports to Afghanistan have increased by 31% while those to India decreased by nearly 4% YOY.
The average price of each ton of exported commodities hovered around $408, up close to 17% compared to last year’s same period.
