Domestic Economy

Iran to Improve LPI Ranking

Iran ranked 78th in the World Bank’s LPI ranking in 2007, but dropped to 112th in 2012, as a result of tightening sanctions, which ranking has been improving ever since
Maritime transportation accounts for 85% of Iran’s trade.Maritime transportation accounts for 85% of Iran’s trade.
Iran’s improved transport performance is mostly attributed to the lifting of sanctions that allowed international shipping lines to resume services to Iran

By focusing on transportation development, Iran is planning to further improve its Logistics Performance Index ranking and continue the progress registered in 2016 when the World Bank listed the country at 96th place among 160 nations.

“Our target is to reach 75th position by the end of the sixth five-year development plan [2017-22],” deputy minister of roads and urban development, Amir Amini, was quoted as saying by the ministry’s news portal.

He said Iran has a long-term plan “to regain its stature in international transportation”, referring to policies Iran adopted in this regard, including expansion of logistic parks and dry ports, development of harbors and inviting international airfreight forwarders to work inside the country.

LPI is an interactive benchmarking tool to help countries identify the challenges and opportunities they face in undertaking trade logistics and what they can do to improve their performance.

The index is based on a worldwide survey of operators on the ground (global freight forwarders and express carriers), providing feedback on the logistics “friendliness” of the countries in which they operate and those with which they trade.

It measures performance along the logistics supply chain within a country and offers two perspectives: international and domestic.

International LPI ranking provides qualitative evaluations of a country in six areas by its trading partners—logistics professionals working outside the country.

“To improve our LPI ranking, we should prepare the ground for inbound transportation of valuable goods and shipments via air. We will grant the opportunity to foreign cargo airlines to come and operate in Iran’s cargo sector,” Amini said.

"Iran’s potential in the aviation sector is unexploited. We can offer some of our airports to regional countries to use them as cargo transport hubs.”

According to the official, Iran is now operating five international airports as part of TRACECA economic corridor, to which Iran is a member.

TRACECA is an internationally recognized program aimed at strengthening economic relations, trade and transport communication in the regions of the Black Sea basin, South Caucasus and Central Asia owing to active work based on political will and common aspirations of all member-states.

It is endorsed by the European Union. Other members include Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Ukraine and Uzbekistan.

“Container transport capacity is of utmost importance in LPI listing, besides the presence of equipped rail facilities to load and discharge containers,” Amini said.

According to the CEO of Islamic Republic of Iran Shipping Lines Mohammad Saeedi, maritime transportation accounts for about 87% of global trade. For Iran, the figure currently stands at 85%.

The government has been cooperating with investors inside the country and abroad to develop the strategic Chabahar Port in the southeastern Sistan-Baluchestan Province alongside the Sea of Oman. It is a major project to create a massive container port connecting the whole region to India and China.

India, Afghanistan and Iran signed a trilateral agreement last year to expand the port, with India agreeing to invest $500 million, and an Indian company signing a deal to build hundreds of kilometers of railroads from the harbor into Iran.

Other ports, including those alongside the Persian Gulf and the Caspian Sea, have also seen a boost in construction activity to increase capacity, as new opportunities emerged following the lifting of the nuclear sanctions against Iran in January 2016, following the signing of a landmark deal between Tehran and world powers a year earlier.

Close to 145 million tons of oil and non-oil goods were loaded and unloaded in Iranian ports in the last Iranian year (ended March 20, 2017), registering a 4.3% rise compared to March 2013-14 when President Hassan Rouhani first came to power.

The ports handled 58.2 million TEU of containers last year, indicating a 162% hike over March 2013-14 after a sharp fall to 1.2 million TEU registered in March 2014-15.

The World Bank revises the LPI ranking biennially. Iran ranked 78th in the LPI ranking in 2007, but dropped to 112 in 2012 as a result of tightening sanctions, which ranking has been improving ever since.

Amini said Iran started a comprehensive program in 2014 to study the reasons why it fell in the LPI listing and to figure out ways to improve its logistics performance.

However, transport performance improved mainly because of the lifting of sanctions that allowed international shipping lines to resume services to Iran.

Mediterranean Shipping Company, the world’s second-largest shipping line in terms of container vessel capacity, and Evergreen Line are among the top shipping lines that have resumed cooperation with Iranian ports.

France’s CMA CGM, the world’s third largest container shipping group, also called at Shahid Rajaee, Iran’s biggest container port at the mouth of the Strait of Hormuz, early August 2016.

And most recently, Maersk Line expanded its footprint in Iran by adding a second port of call less than three months after it resumed services to the country following the lifting of sanctions.

Iran’s reengagement with the international community will also help the country expand its transport sector.

It has enabled the country to form economic alliances with other states, both in the region and beyond, including boosting its activity in the TRACECA bloc and joining international pathways such as the International North-South Transport Corridor.

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