Techno-Engineering Services to Help Lift Non-Oil Exports

Exports of technical and engineering services would play a large role in attaining a 10% rise in non-oil exports, as mandated by the Headquarters of Resistance Economy, the head of Iran Export Confederation said.

Mohammad Lahouti's statement came after last week's report that said the headquarters had assigned the Ministry of Industries, Mining and Trade with the task of boosting non-oil exports by $2 billion in the current Iranian year (March 2017-18) by empowering small- and medium-sized enterprises.

Resistance Economy refers to a set of principles outlined by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei aimed at bolstering domestic production, curbing dependence on oil exports, improving productivity and encouraging Iranians to buy domestically-manufactured products.

“The unlocked potential of the field would help exports boom if subsidies are paid and credit guarantees are issued speedily,” he was quoted as saying by Tehran Chamber of Commerce, Industries, Mines and Agriculture.

According to the chairman of International Consultants and Contractors Association of Iran, Mohammad Reza Ansari, about $2 billion worth of technical and engineering services were exported from Iran since the implementation of the nuclear deal (formally known as the Joint Comprehensive Plan of Action) in January 2016 up until the beginning of the current fiscal year (March 21).

"There is room for Iran to increase the export of technical and engineering services to at least $25 billion per year," Ansari has been quoted as saying.

JCPOA's implementation marked the removal of sanctions against Iran over its nuclear program as part of the deal signed between Iran and world powers in July 2015.

The water and power sectors have made a significant contribution to the export of technical and engineering services in the past few years.

“Water and electricity services made up almost 98% of Iran's total exports of technical and engineering services in the fiscal 2015-16,” Alireza Daemi, deputy energy minister for international affairs, was quoted as saying by IRNA last month.

In the fiscal 2013-14, water and power services made up 47.4% of engineering exports, but the volume increased to 62.1% and 98.7% in the next two fiscals.

Over the years, Iraq has been a major destination for the services of Iranian technicians and engineers.

> Prohibitive Costs

Industrial exports registered negative growth last year (March 2016-17), which is mostly blamed on the high end-price of production, Lahouti said.

"The unreal foreign currency rate that does not increase in accordance with the annual inflation and the government’s failure to compensate the difference between domestic and global inflation is the main reason rendering many Iranian exports uncompetitive," he said.

According to the official, there is unfair competition between Iranian exporters and their foreign counterparts. Foreigners enjoy banking facilities with low interest rates of 2-3%, whereas Iranians have to pay interests of up to 11% if they are lucky enough to receive the loan in the first place, since 90% of exporters cannot even take out such loans.  

Transportation costs are yet another factor contributing to high end-price of products, accounting for up to 30% of the total end price of Iranian exports. In many other countries, transportation comprises up to 12% of export costs.

According to the Islamic Republic of Iran Customs Administration, Iran exported 129.648 million tons of non-oil commodities worth $43.93 billion over the past year, registering a 3.58% growth in the value of exports compared to the preceding year.