Domestic Economy

Officials Spotlight Need to Boost Exports

Officials Spotlight  Need to Boost ExportsOfficials Spotlight  Need to Boost Exports

Export is a global necessity and not an option, said the minister of industries, mining and trade.

Addressing a ceremony marking the Ninth National Export Day in Tehran on Tuesday, Mohammad Reza Nematzadeh also said, “To reach an 8% economic growth within the next five years [as per the sixth five-year development plan (2016-21)], we need to spur exports."  

Referring to the 20% growth in non-oil exports last Iranian year (ended March 20, 2015), the minister said Iran’s exports in 2014 accounted for 0.34% of global exports.

"To boost exports, provision of working capital and financial resources through the National Development Fund of Iran and financing the credit lines are vital," he said.

The National Development Fund of Iran is Iran's sovereign wealth fund. It was founded in 2011 to transform oil and gas revenues to productive investment for future generation.

Accordingly, 20% of oil income are to be transferred to the NDF and this increases 3% annually until the end of the Fifth Five-Year Development Plan (2011-16). The fund is to extend 50% of its financial facilities to private, cooperative and non-governmental sectors, and 20% to promote foreign investment. The remaining 30% is invested in capital markets abroad.

Nematzadeh had earlier said production of quality goods and increasing exports will speedily put the country back on the road to recovery and that Iran’s export potential is way above the current $50 billion a year.

Foreign Minister Mohammad Javad Zarif, who also attended the event, said: “The anti-Iran atmosphere prior to the July 14 nuclear deal denied Iranians the execution of the policies of Resistance Economy on the international front and advancing the objectives of national development. It is our hope to enter into negotiations with major world powers and cement ties with their economies. The repeat of sanctions regime would be a remote possibility in this climate, since other countries’ economies would intertwine with our economy.”

Resistance Economy is a concept declared originally by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei in his August 2012 speech to promote economic self-reliance. In February 2014, the Leader notified the general policies of Resistance Economy in 24 clauses to the heads of three governmental branches.

Also in attendance at the Tuesday event, First Vice President Es’haq Jahangiri said: "The only way to achieve development is by aiming for an outward-looking economy, which is within reach through boosting exports."

To honor the Iranian negotiating team's diplomatic efforts for defending Iran's nuclear rights in the talks with P5+1, a bust of Zarif was unveiled at the ceremony.

> CBI Deposits $200m With EGFI

In the run-up to the event, the Central Bank of Iran deposited $200 million to the Export Guarantee Fund of Iran on Sunday, announced the managing director of the fund, Seyyed Kamal Seyyed-Ali.

“Bolstering the organizations in charge of export is of utmost importance for the future of the country since export is the economy's driving force. By providing financial support and insurance for exporters, they can minimize the risks of entering regional target markets, which are mostly high-risk markets,” he said.

Following the devaluation of the US dollar and the consequent shortage of oil revenues in the early 70s, EGFI was established, in cooperation with the United Nations Conference, Trade and Development, as the only Iranian state-owned export credit insurance entity affiliated to the Ministry of Commerce in 1973 with the aim of covering Iranian exports against major political and commercial risks.

The operation of the newly established organization could not last long since oil prices increased as a result of political developments in the Middle East in the mid-70s, which brought about increased oil revenues and consequently led to the complete disruption of EGFI’s activities.

Following 10 years of inactivity, EGFI was revived as an independent entity affiliated to Iran’s Ministry of Commerce in 1994 to help Iranian exporters reestablish their trading positions following the disruption caused by Iraq-Iran eight-year war and to increase the country’s non-oil export revenues.

Head of Iran Chamber of Commerce, Industries, Mines and Agriculture Mohsen Jalalpour, who was also present at the event, viewed the allocation of $200 million to the export sector as a significant move and called for a plan that boosts exports in the post-sanctions era.

Earlier, Financial Tribune's sister newspaper Donya-e-Eqtesad quoted Jalalpour as saying that high import and export duties are sticking points that only keep the country from having free economic interactions with the world.

“Iran has long been planning to join the World Trade Organization. To this end, drafting comprehensive, long-term plans for reducing tariffs is inevitable,” he said.

> Top Exporters Awarded

As part of the ceremony, 45 Iranian exporters and five companies that excelled in exports were commended and honored.

Prior to the event, Valiollah Afkhamirad, head of Trade Promotion Organization of Iran, told Donya-e-Eqtesad that a set of criteria has been considered for selecting top exporters, including type, volume and variety of exported products, quality of products and packaging, membership in national and provincial export unions, brand building and strategies employed in the target markets such as having offices there.

“The added value of exported products is one of the new indices considered when selecting top exporters, given the significance of exporting industrial and knowledge-based commodities,” he said.

On how to clear the hurdles in the way of production and expansion of non-oil exports, Afkhamirad said he sees eye-to-eye with the industries minister and thinks securing foreign investment, granting export incentives and awards, lending support to large-scale export entities, tapping into international cyber advertising networks and financing exports as well as brand building and creation of marketing networks overseas will help promote exports.

> Export Incentives

Earlier, Afkhamirad announced government plans to grant loans to the tune of $200 million to support exports of technical and engineering services to Iraq.

"Currently, exports of such 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.

The TPO head also unveiled plans to provide exporters with access to regular air and shipping lines to target countries and pay a fraction of their bank commission from the Management and Planning Organization's resources.

Meanwhile, the Industries, Mining and Trade Ministry recently announced that entities that create jobs using foreign brands are entitled to 50% exemption from income tax, if they manage to export 20% of their products.

Afkhamirad believes that exports in the current Iranian year will experience a declining trend due to lack of liquidity, falling commodity prices, diminished demand in global markets, especially in the region, tariff disputes and low competitiveness of Iranian goods.

IRICA’s figures for the sixth month of the Iranian year suggest that the value of imports outstripped the value of exports. This is while in the five-month period ending August 22, the value of exports was more than that of imports.

Furthermore, a 17% drop in trade volume was recorded for the first six months of the year compared to the corresponding period of last year. Reasons behind this declining trend could be the inaction of traders and producers while waiting for the complete removal of sanctions and stability of foreign currency rate.

Iran’s trade in the first half of the year was $41.346 billion wherein exports and imports stood at $20.494 billion and $20.852 billion respectively. It seems that 54% of the $77 billion non-oil export goal set for this year have been materialized. It is worth noting that a trade volume of $50 billion was registered for the same period of last year. In terms of value, exports and imports experienced a decrease of more than 14% and 20.5% respectively.