Domestic Economy

Plans to Give Exporters a Shot in the Arm

Plans to Give Exporters a Shot in the ArmPlans to Give Exporters a Shot in the Arm

Increasing exports is one of the highest priorities of any government wishing to stimulate economic growth. There is, however, strong disagreement on how governments should achieve this.

It has often been argued that the best governments can do is to remove obstacles to exports and provide information to exporting firms about destination markets and foreign competitors. Of course, not all policymakers share the same view.

In Iran, economic decision-makers have recently offered strategies to boost exports in the second half of the current Iranian year (September 23, 2015-March 19, 2016).

One of the measures employed by the government is to increase the Central Bank of Iran’s foreign currency deposit with Export Development Bank of Iran’s support for non-oil exports.

Also, the government has proposed both cash and non-cash incentives to promote competitiveness of Iranian goods, such as easing transport and clearing a fraction of banking commission exporters have to pay.  

The government is also planning to grant loans to the tune of $200 million to support exports of technical and engineering services to Iraq, the Financial Tribune’s sister newspaper Donya-e-Eqtesad reported.

“Our policies will be directed toward helping traders offer their goods to world-be markets with the lowest costs and the quality on par with international standards. Exporters will be provided with cash and non-cash incentives if need be,” said deputy minister of industries, mining and trade, and head of Trade Promotion Organization of Iran, Valiollah Afkhamirad.

He went on to say that the key export incentive by TPOI will be easing transportation, including establishment of regular air and shipping lines to the target countries.

“We will also pay a fraction of exporter’s bank commission from resources the Management and Planning Organization would put at our disposal,” he said.

Afkhamirad also referred to the $200-million loan the government has allocated for exporters of technical and engineering services to Iraq and said the government has not set a fixed interest rate for these loans. “The two ministers of economy and industry will make the final decision in this regard, but the government intends to set a preferential interest rate to these loans,” he concluded.

Currently, exports of technical and engineering services to Iraq constitute 80% of Iran’s total exports, said the head of International Consultants and Contractors Association of Iran, Mohammad Reza Ansari, adding that the $200 million loans will provide the much needed boost to spur exports.

Meanwhile, experts believe expansion of export markets also necessitates boosting domestic production and that strategies to boost exports would not produce intended results if the current challenges facing the manufacturing sector persist.

One interesting point in the policies employed by Malaysia, Indonesia, India, Brazil and Turkey is the multiple incentives given to small- and medium-sized enterprises, according to studies by the Institute for Trade Studies and Research of the Ministry of Industries, Mining and Trade. Typically, the SMEs are more vulnerable to the risks of the international markets due to their limited resources and credit constraints. Therefore, it is of utmost importance to implement plans to support such enterprises. Moreover, all these countries, except Brazil, have backed advertising and marketing plans.

In another research, the institute has weighed the effects of the Iranian government’s interventionist policies on food exports. The research proved these strategies helped boost exports during 2001-11. The most effective plans were provision of financial and credit facilities, as well as rewards to exporters, facilitating transport of exports and conducting educational and information dissemination projects.