October 20 in Iran is marked as the National Export Day by high-ranking officials, economic players and exporters from the public and private sectors who come together to review the country’s export performance in the past year and survey the prospects of improving their performance.
This year, President Hassan Rouhani, together with the Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh, Minister of Agriculture Mahmoud Hojjati, the head of Trade Promotion Organization of Iran, Mojtaba Khosrotaj, the head of Iran Chamber of Commerce, Industries, Mines and Agriculture, Gholamhossein Shafeie, and his deputy Pedram Soltani, and the head of Iran Chamber of Guilds, Ali Fazeli, attended the annual ceremony.
Need to Improve Standards
Speaking in the ceremony on Thursday, President Rouhani said the first step toward having profitable exports is to raise the quality of Iranian products and services, enhance production standards and lower the prices of domestically-made goods, IRNA reported.
“Substandard products and services have no place in the modern international market and are unfit for the domestic market as well,” he said.
“The government is making a great deal of effort in combating smuggling and has managed to reduce the rate of smuggling from $25 billion [before Rouhani took office] to $15 billion. Yet, a more effective way to tackle the issue is by producing goods on par with national and international standards at competitive prices.”
The president also noted that boosting exports necessitates improvement of international ties and that this has been a priority since the beginning of his tenure three years ago.
“The export of services and non-oil products amounted to $28.5 billion during the first half of the current Iranian year (started March 20). The figure indicates a 6% increase compared with the corresponding period of last year,” he said.
Khosrotaj noted that a major hurdle facing Iran’s foreign trade is the fact that most export companies are small and need to form consortiums and work toward unified goals to be successful in trade with the international community.
Lack of Diversity in Exports, Destinations
At present, Iran exports to 150 countries, Saman Panahi, an economic researcher, wrote in the Perswian weekly, Tetarat-e-Farda.
According to the latest figures, 93% of all Iranian exports go to 20 countries, namely China, the UAE, Iraq, Turkey, South Korea, India, Afghanistan, Japan, Pakistan, Oman, Azerbaijan, Italy, Turkmenistan, Taiwan, Spain, Armenia, Germany, Thailand, Syria and Egypt, and the remaining 130 countries are the destinations for only 7% of Iranian goods.
Moreover, only 20 products account for over 58% of all non-oil exports, with 6,000 commodities constituting the rest.
According to Saeed Gholami Baghi with the Majlis Research Center, these figures show lack of diversity in Iran’s exports and export destinations, which puts the country’s foreign trade at risk.
Forgoing Value Added by Raw Exports
“Over the first half of the current Iranian year, the value of each kilogram of exported goods amounted to only about 36 cents while each kilogram of imported goods was valued at $1.28. This brings us to the sad fact that our goods are sold in the ‘raw’ form and that we have not yet been able to produce value added products,” Gholami said.
Razi Haji-Aqamiri, a member of ICCIMA and an exporter, said economic sanctions imposed on Iran by the West over its nuclear program interfered with the country’s foreign trade and some markets were lost.
“After the lifting of sanctions in mid-January, it was expected that foreign trade will be restored to the pre-sanctions level and thrive, yet this has not been the case. Although the lifting of sanctions opens up new paths for our economy, to arrive at a burgeoning foreign trade and regain the lost ground, we need to define proper and serious marketing plans,” he said.
Exports of gas condensates and petrochemical products, which are actually derived from oil, are categorized under non-oil export. When the export of these two types of products is subtracted from the total export of non-oil products, such as industrial and mineral products as well as traditional items such as hand-woven carpets and handicrafts, the remaining amount is meager.
“Unfortunately, we have not been successful in increasing non-oil exports and the lion’s share of our exports still consist of oil and petroleum-derived products,” Haji-Aqamiri said.
The ICCIMA member believes that the policy of dictating foreign currency rates causes big obstacles to exports.
“Furthermore, high interest rates on banking facilities, inflation, customs duties and tax regulations are all impediments to boosting exports … All these factors ultimately bring about high production costs that increase the prices of Iranian products. Therefore, we cannot compete in the international market,” he said.
Need for Strategic Planning
Governments in recent years, Haji-Aqamiri said, have always insisted on increasing non-oil exports, yet in practice, their policies and plans have been almost entirely focused on oil exports.
“What we need at this point is strategic planning for increasing our non-oil exports. In such a plan, revenues derived from oil exports need to be allocated to expanding infrastructures, improving foreign exchange reserves and invigorating the industry so that non-oil exports can thrive. Once that has been attained, revenues derived from non-oil exports can be used to fund the government budget,” he said.
“The government has to do away with contradictory policies regarding foreign trade. Limitations must be eliminated and free trade has to replace the current system. There are, for instance, limitations placed on imports. How can we expect our trade partners to buy our products when we cannot buy anything from them in return due to obstructive regulations?”
Haji-Aqamiri called for the realization of the influence of private sector in bringing about economic prosperity.
“The government has to facilitate foreign investments and prove that it has a sustainable diplomacy. It has to increase tax incentives and exemptions, and support producers in marketing, advertising and creating brands, without which no successful trade can take place in the modern global market,” he said.
