Domestic Economy

Gov’t Targets 20% Rise in Non-Oil Exports

Gov’t Targets 20% Rise in Non-Oil Exports
Gov’t Targets 20% Rise in Non-Oil Exports

Non-oil exports will rise by 20% to reach $50 billion by the end of the current Iranian year (March 20, 2017), Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh predicted in a meeting with a group of exporters.

“Our projections show exports pertaining to the industrial and mining sectors will hit $38 billion, those of agriculture sector will reach $5 billion and gas condensates’ exports will hover around $7 billion,” IRNA quoted the minister as saying.

Figures by the Islamic Republic of Iran Customs Administration show a total of $42.41 billion worth of goods were exported in the last Iranian year (March 2015-16).

“Thirty-two countries are on the list of Iran’s export destinations for the current year,” he said.

“President Hassan Rouhani’s administration raised the number of commercial attachés from four to 25 last year to boost marketing in foreign countries.”

Nematzadeh underlined the necessity of stabilizing legal decision-making and said countries, at times, do not change their laws for as long as 30 years, “but in our country, governments and parliaments easily introduce changes to rules and regulations”.

“Macro industries enjoy valuable export knowhow and expertise whereas small- and medium-sized industries account for 90% of the country’s production. That’s all the more reason for further collaboration between them to promote exports,” he said.

Seyyed Hamid Pourmohammadi, the deputy head of Management and Planning Organization, who was also present in the Saturday meeting, said to reach an annual growth of 8%, the government needs to lend support both to production and export because production is doomed in the absence of export markets.

He referred to the non-oil exports stimulus package unveiled by First Vice President Es’haq Jahangiri last week and said, “SMEs will be offered financial backing in the form of bank facilities.”

  Stimulus Package

The stimulus package is aimed at reducing dependence on crude oil sales for earning forex revenues.

The new stimulus package will be financed by the National Development Fund of Iran, the government’s budget and state-owned banks.

The NDFI will deposit $1 billion in foreign exchange accounts with designated banks for two years. The sum can be increased to $2 billion, if necessary.

The money will be used to lend to foreign buyers of Iranian goods and services at a maximum interest rate of 3.5% per annum.

The government hopes the loans would give Iranian goods and services an edge over their foreign rivals in export markets.

Furthermore, the NDFI will set aside 20 trillion rials ($577 million at market exchange rate) for a year to support lending by Export Development Bank of Iran, Bank Sepah, Bank Saderat Iran, Keshavarzi Bank and Bank of Industry and Mine.

The banks will lend to agricultural sector and knowledge-based industries at 14%. The lending rate to industrial plants will be higher at 16%. With current lending rates hovering near 25%, these loans will be considerably subsidized by the government.

The NDFI will also deposit foreign exchange with banks to increase lending to exporters of goods and services. Foreign exchange loans will be provided on condition they are not converted to rials.

To keep track of the lending and ensure the funds end up where they are supposed to, the NDFI will review each bank’s operations every two months. The fund will then decide how much more will go to each bank based on their performance in those two months.

The Central Bank of Iran will also help these banks. Some may get their reserve requirements—money banks are mandated to deposit at the central bank—cut, unlocking more money for them to lend.

The government will also use 9 trillion rials ($259 million) of its budget for lending to exporters. The plan, however, goes further than providing cheap money.

Exporters who expand their trade will get cash awards as well.

Trade Promotion Organization of Iran will also create a group to counter fraud and misuse of government funds.