Business And Markets

Banks to Exchange at Market Rates

Banks to Exchange  at Market Rates
Banks to Exchange  at Market Rates

The government has allowed exporters to sell their revenue in foreign currency to Iranian commercial banks at free market (street) prices, first vice president Es'haq Jahangiri said Sunday.

In addition, the Central Bank of Iran has been tasked with supporting production and export through reducing the interest rate for export finance facilities and applying a 10-percent cut in the rate of reserve ratio that banks hold at the CBI, with regard to the inflation rate, Jahangiri said as he addressed the participants at a ceremony in Tehran on Sunday marking the National Export Day. The rate of the banks' reserve ratios at the central banks currently stands at 17 percent.

The new decisions are expected to increase the banks' potential for providing various types of loans to the businesses and traders, he said in the annual event attended by top officials and key non-oil exporters.

Outlining the government's latest decisions on foreign exchange, the former industry minister said the CBI is also authorized to grant special facilities to the importers of high quality goods in the form of buyer's credit -- short term credit availed to an importer from lenders such as banks and other financial institutions for goods they are importing.

Since President Rouhani took office last summer, his government has tried to attach great importance to export as an engine of growth and development. In its plan of action to exit recession, the government has included proposals aimed at increasing support for the country’s businessmen, especially non-oil exporters, as an effective way to pull the economy out of recession and also to introduce Iranian brands at the global markets.

Ahead of this year's National Export Day, non-oil exporters, in a meeting with top business officials, made it clear that they want the government to consider certain initiatives such as granting low-interest loans to exporters, including a comprehensive export package in the 6th Five-Year Economic Development Plan (2015-2020). Exporters seek the government help to facilitate their presence in international exhibitions, establish export-friendly funds and financial institutions, provide a new framework for the timely refunding of VAT on export goods, revise the current trade regulations -- in particular for the technical and engineering services -- and remove anti-export bias, render legal and administrative support to exporters and increase export incentives.

Stressing the government's determination to support Iranian exporters, Jahangiri said during the event that a special credit line at the customs administration will be used to refund exporters for duties and VAT imposed on their commodities.

Jahangiri announced that he will soon meet with a group of leading exporters, CBI governor and top officials from other banks to discuss the government's plans for boosting exports.    

*** Budget Envisaged for Export Prizes

Minister of Industry Mohammad Reza Nematzadeh also attended the ceremony unveiling a set of initiatives passed by the Supreme Council of Export (SCE).

He said the initiatives are aimed at improving non-oil exports. “SEC has approved several initiatives. It has allocated part of the budget for export awards as well as developing export infrastructures, expediting the issuance of banking guarantee letters, increasing the capital of Export Development Bank andExport Guarantee Fund of Iran, and providing financial aids for shipping of exports.

The minister added that the decisions would be enforced "as soon as possible so that exports are further developed."

In the past one year, the government has made efforts to remove restrictive bureaucratic regulations, develop anti-recession rescue package, exempt compulsory standards for those product bearing national standard emblem and remove border limitations in order to facilitate exports, according to Nematzadeh.

Although non-oil exports have witnessed a gradual growth despite national and international obstacles, further policymaking, goal setting and prompt action is needed to achieve better position in international market, he added.

In the first half of the current Iranian year (March 21 – September 22), Iran exported $33 billion worth of goods, showing a 20 percent growth compared to the similar period last year. In the meantime, technical and engineering services have grown by 13 percent accounting for more than $5 billion in the same period, Nematzadeh noted.

During his speech, the minister also praised President Rouhani’s efforts to improve international relations and considered it a fundamental requirement to develop exports. He invited exporters and businesses to further assist the ministry of industry, mine and trade in its effort to increase export. “Export rebound requires novel ideas, and to this end, those industries and production with comparative advantage should be given more attention. In the meantime, efforts should be targeted at investment, human resource training and marketing.”

Comparative Advantage

In this respect, “auto industry”, according to the minister, is one of those sectors with comparative advantage, which can generate $10 billion to $15 billion income if one million cars are exported by 2020.

"In addition, the steel industry can generate $6 to $7 billion in export revenue, while other industries like copper can generate $2.5 billion, textile and garment about $ 5 billion, mines and, minerals around $5 billion and construction products approximately $5 billion," Nematzadeh estimated.

He wrapped up his remarks by saying that through proper planning and goal setting, an export rebound is easily attainable and the government is making every effort to embark on such moves in the country.

Future Relies on Export

In the same ceremony, Gholam Hossein Shafei, chairman of the Chamber of Industry, Mines And Agriculture of Iran, delivered a speech saying, “Export can play a significant role in helping the country out of recession and the future of the economy relies now on exports more than any time."

“Exports have been hit harder than any other sector in the past few years, and if it is to play a key role to drag the country out of recession, officials should pay more serious attention to it,” Shafei asserted.

He considered that strong production is the key to success in global competition and added that “unfortunately, neglecting the development of production capacity and incurring unwanted extra costs on this sector has resulted in weak competitiveness of Iranian products in global markets."

Shafei regretted that non-oil exports has not yet found its true standing in the economy as it gains attentions only when oil revenues plunge. Moreover, in the absence of a “strategic plan for export,” sustainable development cannot be achieved, he noted, while underlining that exports’ fundamental issues should be classified and addressed through such a comprehensive plan.