Domestic Economy

Transit Industry Yearning for Reform, Modernization

Given its geostrategic location, Iran’s transit routes have three advantages over those of its neighbors. They are short, safe and cheap
During the first three months of the current Iranian year (March 20-June 20) more than 7,600 trucks  exited Iran, only 48,200 of which were Iranian.During the first three months of the current Iranian year (March 20-June 20) more than 7,600 trucks  exited Iran, only 48,200 of which were Iranian.
The road transport fleet is dilapidated and the renovation projects in the past have not produced the desired results due largely to the fact that trucks in Iran cost four times as much as in the global market

Declining oil export earnings, dire economic conditions and the government’s declared aim to join the World Trade Organization make a powerful case for those in charge to make concerted efforts to exploit the country’s untapped potential.

One area of economic activity that has perhaps received less attention is the goods transit sector, which can help increase non-oil receipts by $10 billion annually, Financial Tribune’s sister publication the Persian-language  Donya-e-Eqtesad quoted deputy head of the Transportation Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture, Mojtaba Baharvand as saying.

“Given its geo-strategic location, Iran’s transit routes have three advantages over those of its neighbors: they are short, safe and cheap,” he said.

Iran has access to landlocked countries in Central Asia and the Caucasus to its north, over land borders and the Caspian Sea. To its south, the country is connected to the strategic Persian Gulf and the Sea of Oman.

Iran’s unique location makes it “an ideal transit hub—both in terms of cost and time efficiency,” wrote Al-Monitor, a website on news and commentary from the Middle East.

The country is also located on several international corridors including the ancient Silk Road – now a key to China’s transportation links to the Middle East and Europe – in addition to the International North-South Transport Corridor, which connects South and East Asia to Eurasia and Europe.

Since 2013, the number of international flights flying over Iranian air space and the volume of goods transit via Iran’s railroads has doubled. Now Tehran is concentrating on ways to diversify and expand its transit routes, especially to Europe.

  Persian Gulf-Black Sea Corridor

Iran has recently revived a plan to connect to Europe with a new multimodal route. The Persian Gulf-Black Sea corridor involves road, rail and sea transport. It begins from the Persian Gulf in the south stretches to the country’s northern borders and then transits Armenia and Azerbaijan before it reaches the Georgian ports of Poti and Batumi on the Black Sea. Bulgarian ports also play a role, handling roll-on/roll-off ships used to get trucks to Greece.

Iran, Armenia, Azerbaijan, Georgia, Bulgaria, and Greece recently agreed on a draft plan to press ahead with the project, which is expected to be finalized by the end of 2016.

For the Europeans, the route will provide access to the Persian Gulf and shorter routes to the Indian and Pacific oceans.

Romania has requested to join the corridor while other European, Persian Gulf, and Indian Ocean countries are also expected to join. The corridor is not meant to replace the trans-Turkish route to Europe.

Moreover, Iran believes that the new corridor will increase Iran’s transit footprint and pave the way for foreign investment in the country’s transportation infrastructure.

  Impediments to Growth

However, the road to the ideal transit roadmap is not easy, says Baharvand. “Our transportation fleet is dilapidated and renovation projects in the past have  failed for the simple reason that trucks in Iran cost four times as much as in the global market. Add to this the lack of banking facilities.

“Some trucks are more than 40 years old while as per global transportation standards trucks need to be renovated every 5 years. This decreases the efficiency of the transport industry, increases costs as well as the probability of road accidents. Moreover, these (old) vehicles are not permitted on European roads.”

Baharvand said at present more than 10,000 foreign trucks handle export and transit to and from Iran costing an annual $1 billion.

“During the first three months of the current fiscal year (March 20-June 20) more than 70,600 trucks exited the country, only 48,200 of which were Iranian.”

He believes another problem to be the large bureaucracy responsible for monitoring the domestic transport network. “These organizations lack coordination while their functions overlap causing problems for businesses and transporters.”

The private sector official says, “All over the world, there is no tax on transit of goods. Yet the Iranian government has imposed different tariffs on cargo transit.” He concurs that the key transport sector also suffered over the past several years due to the international sanctions.

Without indulging in tired clichés, he said Iran’s transit and customs regulations are outdated and in dire need of reform.

“Also, creating logistics centers and inland ports as well as expanding and equipping the free trade and economic zones can help in reviving the dormant  transit industry.”

  Turkmen Dispute

In a recent transit-related dispute, Turkmenistan unilaterally decided to increase tariffs on Iranian transit trucks as of August 8 without prior notice.

“The measure, which only targets Iranian vehicles, goes against the transport agreements signed by the two sides and will certainly impact Tehran-Ashgabat commerce and economic relations,” director general of the Transit and Border Terminals Bureau of Iran’s Road Maintenance and Transportation Organization, Mohammad Javad Atrchian was quoted by IRNA as saying.

“Our diplomats have expressed objection to this decision and the same measure will be taken against Turkmen trucks passing from Iran,” he added.

Every year about 75,000 Iranian trucks head to Turkmenistan and 8,000 use the neighboring country to get to other destinations in the region. Some 20,000 Turkmen trucks enter Iran every year and about 3,000 use Iran as a transit route.