Domestic Economy

Japan Vies for Automotive Cooperation

Japan Vies for  Automotive CooperationJapan Vies for  Automotive Cooperation

A Japanese trade delegation met with Masoud Khansari, the head of Tehran Chamber of Commerce, Industries, Mining and Agriculture, for talks aimed at boosting bilateral ties in the automotive sector and exploring avenues of cooperation.

The delegation, comprising representatives of 17 auto and auto part manufacturing firms and headed by the country's ambassador to Iran, Hiroyasu Kobayashi, in addition to the Executive Director of Japan External Trade Organization Kimihiko Inaba, visited Tehran on Wednesday.

"Non-oil trade value between Iran and Japan stood at $3 billion in 2010, a figure which declined to nearly $210 million in 2014 due to western sanctions [imposed on Iran over its nuclear program]," said Khansari, emphasizing that one of Tehran's main areas of interest for cooperation with Tokyo in the post-sanctions era is the auto industry, TCCIMA's website reported.

According to the Iranian official, more than 1.5 million autos are annually produced and sold in Iran.

"Now is a great opportunity for investing in Iran's auto industry. By doing so, Japan can also gain access to the 300 million-strong market in the region," he said.

The Japanese envoy welcomed the prospect of closer ties with Iran and said a growing number of Japanese firms have been vying to enter the Iranian market since the July 14 nuclear deal. He added that bilateral trade can reach the pre-sanctions levels in two years' time.

Kobayashi described the prospects of Tehran-Tokyo cooperation in the auto industry as "promising".

"With the lifting of sanctions, we expect to witness a revolution in Iran's auto industry," he said.

The 30-strong trade delegation's main objective in their Iran visit, according to the JETRO representative, was to gain firsthand experience and obtain a better understanding of Iran's auto industry and economy.

"The Japanese firms also seek to find reliable trade partners during their visit," he added.

According to a member of the board of directors of Iran Auto Parts Manufacturers Association, Mohammad Reza Najafi-Manesh, who was also present at the meeting, Iran's auto parts industry requires $8 billion in investment during the next 10 years.

> Tehran-Tokyo Trade Ties

Despite lacking sources of raw material for its industry, Japan is Asia's most developed country and the second biggest economic power after China. In fact, most southeastern Asian countries rely on Japan as it is a leader in terms of industrial prowess and technological breakthroughs.

Iran, too, has had its fair share of Japanese goods and technology. In 2010, Iran's imports from Japan stood at $2.1 billion, with capital goods accounting for 28% of this figure, autos and auto parts 25%, intermediate industrial goods 24% and other transportation vehicles 20%, according to TCCIMA.

Although Japan has been a major trade partner of Iran with imports from the country accounting for 3.3% of Iran's total imports in 2010, Japan's exports to Iran made up a meager 0.27% of the industrial giant's total exports in that year. In fact, Iran was ranked 34th among importers of Japanese goods in 2010, after Turkey, with an import bill of $2.6 billion.

Furthermore, imports witnessed a declining trend following the imposition of oil and banking sanctions against Iran and reduced to $650 million in 2012 and $250 million in 2014.

As a major importer of fuel, Japan has also been an important export destination for Iranian oil, as $18 billion worth of crude oil were exported to Japan in 2008, accounting for 21% of Iran's total crude oil exports in that year.

Japan's share of Iran's oil exports has swung between 27% in 2003 and 11% in 2012 and 2013–14% on average. Trade balance has been mostly positive and favored Iran, standing at nearly $100 billion for 2004-14.

According to TCCIMAsince a large part of Japan's exports consists of technologically advanced and quality capital and intermediate goods and only 3% are consumer goods, increasing imports from the country does not pose a threat to Iran's production sector.

The chamber says the best way to improve Tehran-Tokyo trade ties and at the same time develop Iran's industries in the long run is to have Japanese firms enter joint venture production with their Iranian counterparts in the production of industrial and consumer goods to both meet domestic demand and also undertake exports.

Direct import of Japanese goods, without the intervention of middlemen such as those in the UAE, can prove effective in enhancing trade ties.