Economy, Business And Markets

Contraband Killing Domestic Textile Industry

Contraband Killing Domestic Textile Industry Contraband Killing Domestic Textile Industry

Iran’s textile and apparel industry is worth $7.3 billion, with the apparel industry’s market value amounting to $5 billion and the textile and rug industry comprising the rest, announced the secretary general of Iran Textile Exporters & Manufacturers Association (ITEMA), Mehdi Yekta.

Contraband clothes dominate the Iranian markets with smuggled foreign products comprising nearly 70 percent of the domestic markets. It’s been estimated that contraband clothing items worth $4.5 billion enter the country each year, while the value of legally imported clothes stands at only $3 billion. “This is while many official brand agencies resort to legal imports only to obtain the official transaction documents required to avoid penalties at the time of inspection by official authorities and would otherwise opt for unofficial imports,” ISNA quoted the official as saying. So Iranian marketers favor illegal imports as they lead to considerable cost cutting.

Iran imposes 100% tariffs on import of clothing as they are considered as luxury commodities (as opposed to basic goods). This increases the value of legally imported clothes by twofold, he added.  The Iranian clothing industry has also undergone a sharp decline in export rates, with the current rate of export standing at $40 million per year, down from $120 million in 2011. This is while Turkey is exporting clothes at an annual rate of $20 billion and plans to increase the figure four times by 2020, Yekta noted. Lack of efficient manpower in the clothes manufacturing industry is another issue, as the younger generation is not motivated to enter the field, leading to decline in the number of skilled workforce.

 Brand Agencies & Domestic Production

Several activities including issuance of permits for trade units are carried out illegally in Tehran, Yekta pointed out, adding: “While foreign brands, supposedly licensed and supervised by offices abroad, are easily operating up to 100 branches in Tehran, domestic manufacturers must deal with lengthy procedures and restrictions for obtaining work permit.”

“In Tehran alone, close to 12,000 official clothing trade units are in touch with smuggling portals but the Clothing Association of Iran has so far neglected the issue,” said the official, adding: “Fortunately, a committee headed by the deputy minister of industry, mine, and trade has recently been established in Iran Goods and Currency Smuggling Control Headquarters to address such problems.”

He called for supporting domestic manufacturers and enabling them to deliver their products to target consumers in a more convenient and cost-efficient manner.

“The government should support domestic manufacturers and encourage them to expand their small workshops to large clothing factories to prevent the outflow of hard currency and help create employment,” Yekta added. The official finally noted that Iranian manufacturers often prefer working in small units instead of establishing their own brands to avoid paying high insurance premiums and taxes mandated by organizations such as the Social Security Organization (SSO) and the Iranian National Tax Administration (INTA) on recognized brands.