Import statistics released by Iran’s Customs Organization for the first seven months of the current Iranian year (March 21–October 22) indicate that the value of imports has increased by 72.24 percent year-on-year. The president of Iran Trade Promotion Organization (ITPO) highlighted that the top ten on the list belongs to basic and intermediate commodities.
This comes amid the announcement by the central headquarters of combating against the smuggling of goods and foreign exchange that smuggled goods, which mainly comprised consumer goods, account for 34 percent of the total imports in the seven-month period. In the meantime, certain associations and unions including Textile Exporters’ Association consider smuggling as a barrier to production. Relevant bodies have also revealed that 90 percent of imported cosmetics and hygienic products are smuggled into the country.
According to an ITPO report, capital goods accounted for 3.47 percent in 2004. The number was reduced to 1.15 percent in 2011 and increased to 12 percent in 2013.
2013 World Development Indicators report by World Bank suggests that manufactured industrial products accounted for 73-81 percent of Iran’s total imports. While the global average of these products stood at 56-65 percent and 66-74 percent in Middle East and North Africa (MENA), Iran stands below the average in this respect, which constitutes a major challenge to domestic industries.
Balance is the Key
While Iran’s trade balance has always been negative in recent years with imports outweighing exports, Valiollah Afkhamirad, president of ITPO believes that the surge in imports should not be censured as many countries have high level exports and imports at the same time. In foreign trade, “balance” is the key and “a product that creates added value for the country should be exported”, he said in a recent interview with Fars News Agency.
Soybean meal, crude soybean oil, and rice are among the major basic goods imported together with other intermediate goods. According to the ministry of industry, mine and trade, since there are no specific legal barriers to imports of goods, customs duties and tariffs should be applied as a tool to monitor and control the imports. Earlier this month, Afkhamirad told Donya-e-Eghtesad that non-tariff and non-technical barriers to imports should be removed. Goods classification that was created based used to act as a deterrent, which has now been removed in practice.
Order registration requirement, as an unnecessary step which only exists in Iran, is one of the many documents needed for the imports of goods that only prologs the process and incurs additional costs on the importers. That is why Iran’s global ranking is not eye-catching in terms of business environment, according to Afkhamirad, who indicated that there are ongoing discussions on whether to remove or keep the requirement of order registration in import process.
He also noted that concurrent increase of imports along with exports is not a problem, particularly because the country needs to import raw materials that are later processed to produce goods with higher added value. However, the number of documents needed for imports (19) and exports (10) is a proof that there are unreasonably high trade costs and long process of trade in Iran.
Surge in Imports Related to Smuggling
Although relevant statistics suggest that consumer goods have mainly contributed to the increase in imports, the increase in the import of manufactured industrial products in the years 2000 to 2011 from 73 to 81 percent indicates that domestic production has decreased.
In the meantime, high tariff rate has fed the smuggling of goods. Statistics indicate that smuggled goods account for 34 percent of total imports in one year, Habibolah Haghighi, director of the central headquarters of combating against the smuggling of goods and foreign exchange.
Experts believe that smuggling of goods will continue as long as unreasonable tariffs exist. Findings of surveys in this respect have revealed that while the total value of imports stands at less than $50 billion, $17 billion worth of goods are annually smuggled into the country and $3 billion based on customs exemptions.
In the textile market, which is worth around 200,000 billion rials, smuggled goods are dominant and foreign garments abundant, according to Mohammad Yekta, secretary of Textile Exporters’ Association.
In the meantime, chairman of Import Management Association believes that the ratio of import infringement cases to the real total volume of import is insignificant, however, they become very controversial when exposed, which is mainly because the mismanagement by the previous administration.
