Why can’t Iran turn into an exporting superpower in the Middle East? Mohammad Reza Modoudi, the caretaker of Trade Promotion Organization of Iran, believes Iran’s export performance is hobbled by the absence of strong exporting companies, insufficient production and lack of transparency and information on exported goods that enjoy comparative advantage.
Referring to the need to diversify exports, the official was quoted as saying by the Persian daily Iran that “investment in improving Iran's export competitiveness has been poor and the same inattention has limited the number of the country’s exported goods”.
According to IRNA, more than half of Iran’s non-oil exports actually consist of gas condensates, petroleum-driven products and petrochemicals that are either directly or indirectly linked to the oil industry.
Oil is still Iran’s so-called “export identity card” despite efforts made over the past many years to wean the country’s economy off petrodollars and shift it toward non-oil exports. With its relatively higher added value, non-oil exports are of greater importance.
However, it is a matter of debate how the Islamic Republic of Iran Customs Administration has classified non-oil exports. By non-oil, IRICA actually refers to all commodities, except crude oil.
Gas condensates undergo the least change before export. Even liquefied natural gas and petrochemicals, the backbone of Iran's exports, have been classified as "non-oil".
Low Technology
Modoudi noted that Iranian products also suffer from low penetration rate of technology.
"The level of the country’s high-tech exports in 2018 was lower than the world’s average technology of exports 20 years ago i.e. in 1998," he said.
Noting that had it not been for petrochemical and steel exports, the level of exports’ technology would have been far lower, the official said, “Petrochemical and steel products are not counted as high-tech industries. They are medium-technology industries. However, you do not see sophisticated technology in other exported items.”
Referring to the basic technology employed in the production of macaroni and tomato paste, Modoudi said, “If the current trend persists, we might even lose the neighboring countries’ markets. We need to increase the use of high technology in our products to maintain our export markets such as Iraq.”
“Iran’s exports to neighboring country Iraq have been on the decline since the last Iranian month [ended July 22],” said Secretary-General of Iran-Iraq Chamber of Commerce, Hamid Hosseini.
“The downward trend is rooted in several factors, including the appreciation of Iran's national currency, summertime heat and the government’s pressure on exporters to repatriate their earnings.”
Need to Increase Major Exporters
Modoudi noted that there are 80 companies with exports worth over $50 million each.
Their exports, which are mainly petrochemicals and steel, generate $30 billion altogether, accounting for 65% of Iran's overall exports. There are also 450 companies with exports worth $10 million. These numbers suggest that Iran’s 10,000 exporters have failed to play a significant role in improving the country’s exports whereas the neighboring Turkey is home to 1,700 companies with over $10 million worth of exports.
On how to secure a place in the export markets, Modoudi said the country needs to focus on the export of 100 commodities and double the amount of exports.
“The government is planning to boost exports of several commodities, including home appliances, and tap into the capacities of special economic and free trade zones. TPO plans to organize exhibitions in target markets and invite traders of neighboring countries with the help of the private sector in the near future. All trade unions, associations and commerce chambers are invited to help the government identify new markets and enhance Iran’s presence there,” he concluded.
Latest Trade Data
Latest non-oil trade data show Iran recorded a surplus of $1.3 billion in the first three months of the current Iranian year (started March 21).
According to a report by the Persian daily Iran based on data provided by the Trade Promotion Organization of Iran, the country’s overall non-oil foreign trade during the period under review stood at $21.7 billion.
Overall, Iran’s exports stood at $11.5 billion to register a 1.2% decline year-on-year.
Imports hit $10.2 billion in Q1, registering a decline of 8.7% compared with the similar period of last year.
Liquefied natural gas ($2.8 billion), liquefied propane ($609 million), light oil ($470 million), gas condensates ($412 million) and methanol ($328 million) were Iran’s main exported commodities.
Top export destinations during the three-month period under TPO review were China accounting for 23% of Iran’s total exports, Iraq (21%), Turkey (19%), the UAE (8%) and Afghanistan (5%).
Exports to China stood at $2.64 billion in Q1 to register an 18% growth YOY.
Iraq bought $2.38 billion worth of non-oil goods from Iran, indicating a 35% increase compared with the same period of last year.
Exports to Turkey jumped by 430% to reach $2.23 billion in the three-month period.
Iran’s exports to the UAE and Afghanistan declined by 56% and 31% to hit $925 million and $535 million, respectively.
China, the UAE, Turkey, India and Germany were main exporters to Iran in the three months ending June 21.
Imports from China and the UAE were down 19% and 8% in Q1 to reach $2.34 billion and $1.54 billion, respectively.
Turkey and India’s three-month exports to Iran climbed 129% and 131% to hit $1.26 billion and $1.24 billion, respectively. Iran’s imports from Germany dropped by 10% to reach $514 million.
Iran’s imports mainly included rice ($704 million), field corn ($583 million), soybean oilcake ($335 million), green beans ($303 million) and butter ($262 million).
