Iran’s National Export Day: Trade Deficits Scrutinized

Iran’s National Export Day was marked in a ceremony held in Tehran on Saturday.

The event was attended by First Vice President Es’haq Jahangiri, Industries Minister Mohammad Shariatmadari, Chairman of Iran Chamber of Commerce, Industries, Mines and Agriculture, Gholamhossein Shafei, the head of Trade Promotion Organization of Iran Mojtaba Khosrotaj as well as other governmental officials and representatives from Iran’s private sector.

“Given the country’s capacities and capabilities, including educated young people, engineers, technicians, skilled labor force, abundant mineral reserves, unique geopolitical situation, vast sea borders and access to free waters, it is not far off the mark to say Iran’s share of world trade should stand at 1% per year at least. As such, the government plans to increase exports to reach $180 billion by 2025,” Shariatmadari was quoted as saying by Mehr News Agency.

At present, Iran accounts for 0.34% (oil included) and 0.24% (exclusive of oil) of the world annual trade.

According to Shariatmadari, the value of 10 goods topping the list of Iran’s exports last year amounted to $23.8 billion and exports to our top 10 customers stand at $35.8 billion.

Over the last three decades, he said, there have been no significant change in the variety of Iran's exported products, nor in the number of export destinations.

“Despite everything that has been done, our foreign trade amounted to around $45 billion in the first six months of the current Iranian year (March 21-Sept. 22). This shows that our economic share is still small. This renders us incapable of expanding the size of our market or increasing our production," he said.

"The problem with our trade today is the lack of a belief in and a national determination in both business owners and laymen for embarking on exports as a solution to our economic problems. Then comes the fact that 95% of our production units are not export-oriented. Finally, there’s the problem of the National Development Fund whose board members do not prioritize expansion of businesses’ working capitals or new investments in export-oriented production.”

Shariatmadari said granting export incentives, improving the business environment, doing away with obstructive and contradictory regulations and expanding the related infrastructure are among measures that need to be taken.

 Need to Add Value to Exports

Shafei, the ICCIMA chief, also said the lion’s share of Iran’s exports consists of agricultural products and raw material.

“We should know that in the years ahead, we might not have much success in the global market of these products due to the water crisis in our country and the high competitiveness in the raw material market. Therefore, we must change our outlook toward the production sector and opt for exports of industrial products,” he said.

Shafei noted that according to figures released by the Central Bank of Iran, the average value of goods exported from and imported to Iran stands at $341 and $1,308 respectively, which show the low value-added of Iranian products in comparison.

The seasoned businessman spoke of high final prices of products, dilapidated machinery, high energy consumption and the fact that Iranian products lag behind in technology compared with foreign ones as the main handicaps facing exporters.

“There is a need to sign free or preferential trade agreements with other countries. Since we are not a member of World Trade Organization, we are made to pay up to 20% tariffs. FTAs and PTAs can help us get past this barrier,” he said.

Iran became an observer member to the world organization in 2005, but WTO failed to assign a group chairman to discuss Iran’s foreign trade regime, due to the opposition of the US that has been hostile toward Iran ever since the 1979 Islamic Revolution.

Mojtaba Khosrotaj, the head of Trade Promotion Organization of Iran, said in August that joining World Trade Organization is no longer a priority for the country amid America’s aggressive Iran policy under US President Donald Trump.

“Our priority is now to increase cooperation with neighboring countries and those in the region, which offer the most benefits to us,” he was quoted as saying.

Not being a WTO member, Iran has been banking on free or preferential trade agreements with the countries it has strong economic trade ties with. A PTA with Turkey was implemented early 2015 and similar deals are expected to be signed with Eurasian Economic Union states, among others.

Shafei added that trade is a two-way street and products cannot be exported without importing anything in return.

“All countries are after their own benefits and we have no other choice but to accept this principle of trade,” he said.

Numbers Speak for Themselves

According to the Islamic Republic of Iran Customs Administration, Iran’s non-oil foreign trade during the first half of the current Iranian year (started March 21) stood at $44.13 billion, indicating a 6% rise compared with last year's corresponding period.

Non-oil exports during the period hit 58.63 million tons worth $20.54 billion, indicating a 3.2% decline year-on-year.

Non-oil imports amounted to 17.19 million tons worth $23.59 billion, up 15.37% YOY.

Petrochemicals ($7 billion), followed by gas condensates ($3.52 billion), polyethylene ($750 million), liquefied propane ($686 million), light crude oil, excluding gasoline ($638 million), and methanol ($593 million) were the main exported commodities.

Imports mainly included rice ($996 million), field corn ($799 million), vehicles of engine displacement between 1500 cc and 2000 cc ($582 million), auto parts ($551 million) and soybean ($456 million).

China was the main customer of Iranian products during the six-month period, as Iran exported $4.31 billion worth of goods to the Asian country, 7% more than the corresponding period of last year.  

Other major export destinations included Iraq with $3.18 billion, the UAE ($2.95 billion), South Korea ($2.06 billion) and India ($1.33 billion). Exports to Iraq and South Korea rose by 5.47% and 12.86 respectively compared to last year, but the UAE and India imported 17.1% and 6.52% less goods from Iran in H1 over last year’s same period.

Major exporters to Iran included China ($5.69 billion), the UAE ($4 billion), Turkey ($1.67 billion), South Korea ($1.51 billion) and India ($1.35 billion).

Iran's 15 neighboring countries accounted for $9.9 billion of Iran's $20.54 billion non-oil exports in H1.

Iraq topped the list of neighboring countries’ imports from Iran during the period, with $3.2 billion. The UAE and Afghanistan followed with $3 billion and $1.26 billion worth of imports from Iran respectively.

Among the neighbors, Qatar and Russia saw the highest growth in imports from Iran (71% and 70%, respectively).

The growth in exports to Qatar comes as Saudi Arabia, the UAE, Bahrain and Egypt have severed diplomatic ties and cut land, sea and air links with Doha since June. Iran and Turkey have stepped in to supply the Qatari market.

Qatar's imports from Iran stood at $91 million during the period under review. Iran's exports to Russia amounted to $123.6 million in the same period.

Notably, Iran's exports to EU’s 28 nations during the first half of 2017 exceeded $5 billion, indicating a 227% rise year-on-year, according to Eurostat.

Petroleum, petroleum products and related materials accounted for a majority of Iran’s exports to the EU during the period, with a total value of €4.4 billion.

Italy was the biggest importer from Iran in H1 among all the European states, as it bought €1.54 billion worth of Iranian goods during the period. France, Greece and Spain followed with €1.26 billion, €638.5 million and €609.4 million worth of imports respectively.

Iran imported €4.94 billion worth of commodities from the European Union during the same period, recording a %38.5 YOY rise. The imports mainly included manufactured goods and chemicals. Germany topped the list of exporters to Iran, shipping €1.39 billion worth of goods to the Islamic Republic. Italy came second with €849.6 million and France followed with €763.7 million.

According to the European Commission, the European bloc imported €5.5 billion worth of goods from Iran in 2016, up 344.8% YOY. The imports were mainly energy-related, including mineral fuels (€4.2 billion), manufactured goods (€0.4 billion) and food (€0.3 billion).

The EU exported over €8.2 billion worth of goods to Iran in 2016, up 27.8% YOY. The exports mainly included machinery and transport equipment (€3.8 billion, 46.2%), chemicals (€1.8 billion, 22.2%) and manufactured goods (€0.7 billion, 8.8%).

Iran's export of non-oil goods in the last Iranian year (March 2016-17) stood at 129.64 million tons with a total value of $43.93 billion. Petrochemical exports amounted to $9.55 billion for the year.

As for oil exports, Iran earned over $23 billion from crude oil sales during the six months, the Central Bank of Iran reported, as the country shipped over 2.6 million barrels per day of crude oil and condensates on average.

Latest statistics show Iran earned $4.6 billion in petrochemical export revenues during March 21-Aug. 22.