Economy, Business And Markets

Private Sector Opposed to Protectionism

Finance Desk
Private Sector Opposed to Protectionism
Private Sector Opposed to Protectionism

Head of Iran Chamber of Commerce, Industries, Mines, Agriculture voiced opposition to protectionism in all of its forms, demanding free-market economics be upheld by the incoming parliament.

Mohsen Jalalpor said the new legislature should be an “economic Majlis” rather than a political body. He asked the MPs to foster healthy competition and promote free-market norms.

“In my meetings with the newly-elected MPs, several of them talked of protectionist policies to support the private sector. However, my position is that we need competition and not protectionism,” he said at a monthly meeting of the ICCIMA on Sunday.

“Protectionism is a tranquilizer and will not contribute to sustainable development,” Jalalpour said. “The protectionism path will lead to what we are now seeing in Venezuela.”

While warning against the risks and dangers of protectionist policies, both independent and pro-reform economists and politicians usually draw parallels with the full-fledged crisis visiting Venezuela whose late populist president Hugo Chavez was a close ally of Iran’s former president Mahmoud Ahmadinejad.

ICCIMA, aka as the ‘private sector’s parliament’ has been demonstrating added clout since President Hassan Rouhani took office in the summer of 2013. Jalalpour and other business leaders have accompanied the president and his senior aides on most, if not all, foreign visits.

Jalalpour asked the new Majlis -- which will be 10th of its kind after the Islamic Revolution in 1979 -- to help ease cumbersome laws and regulations and the crippling bureaucracy inhibiting businesses.

“I urge the lawmakers to first get rid of two pages of existing regulations before adding one page of new legislations, as is the norm in some countries,” he said.

He pleaded for diligence when it comes to preparing plans and policies. “The Third Fifth-Year Economic Development Plan which was the best of its kind, barely delivered 30% of what was intended. This shows us that we have too many ‘plans’ but not enough plans to execute them!”

The prominent trader asked the new Majlis to prioritize the revision of basic laws such as the labor law, trade law and the social security law and focus on the Resistance Economy -- a set of principles recommended by the Leader Ayatollah Seyyed Ali Khamenei to boost domestic production, reduce reliance on oil revenues and enhance productivity.

Similar to many private sector figures in recent days, Jalalpor was critical of the controversial ‘Banking Reform Bill’ pending in the Majlis, expressing grave concern that the bill could further erode the CBI’s role and influence.

 Recession Worries

Jalalpour warned that the economic downturn is still not showing signs of easing. He singled out “weak demand” and the “credit crunch” as the main two reasons stoking the recession.  Referring to recent comments made by Masoud Nili, President Rouhani’s senior economic advisor, in which he outlined four main culprits for the economic ills, Jalalpour offered his own suggestions for economic recovery.

Nili had said that the sanctions were only one of four main hurdles to economic growth. He listed three other challenges, namely the ineffectiveness of long-term policies combined with lack of institutions that can guarantee sustainable growth, controversial policies adopted when international oil prices were high and the historic decline in crude prices over the past two years.

“Of these four, only the issue of sanctions has been resolved while the other three persist,” Jalalpor said, adding that to surmount lackluster demand and bring it to the level in 2012, ‘’we need average annual growth of 7.7% between 2016-19.”

“It is apparent that domestic demand is not enough to bring about such a growth rate and we need to expand our export markets.”

Jalalpor, however, regretted that due to the rise in production costs, the prospects for higher exports remain dim.

“Although the government has curbed inflation to some extent, the foreign exchange rate has not increased in line with the inflation and is even lower than when the current administration took office,” he said, adding that low foreign exchange rates hurt domestic manufacturers and exporters who are losing ground to foreign rivals.

Asking the government and the central bank to pay attention to forex rates in the context of exports, Jalalpour said the reforms to be taken to turn the economy around should not be the function of decrees, but with the “adoption of effective policies.”

 Financial Woes

Jalalpour also took aim at the banking sector, saying that banks tend to ignore instructions of the CBI that call on them to ease lending practices for struggling production units already indebted to the banks.

“To resolve the credit crunch there are only two ways. First and foremost we need to overhaul the banking sector and that should commence with the government repaying its debts to banks and after that raising the capital of banks.”

The other solution to ease the credit crunch and provide credit to businesses, Jalalpor said,” is for the government to launch a debt market and attract foreign capital and FDI.” The ICCIMA has so far been unsuccessful, he concurred, in convincing the government that private enterprise is in dire need of foreign investment similar to the public sector.