Economy, Domestic Economy

High Transit Costs Lower Trade Turnover

High Transit Costs Lower Trade TurnoverHigh Transit Costs Lower Trade Turnover

Foreign trade is one of the pillars of world economies. To maximize its benefits, increasing the weight and value of non-oil exports is of vital importance.

Many other factors including, but not limited to, ease of formalities and export-import procedures, and improvement of commercial services like transit, banking and insurance, as well as infrastructures of information technology and customs help develop a profitable cross-border trade. 

The inefficiency of each of these components would have a negative impact on foreign trade, the Persian daily Kasb-o-Kar reported.  

One component of foreign trade that has received less attention is the goods transit sector. In January, Gholamhossein Miri, the secretary of International Transportation Companies Association of Iran, announced that road transit has seen a 35% drop in volume so far in the current Iranian year (started March 20, 2016) compared with the corresponding period of last year.

“The main reason for the decline is the cumbersome regulations and bureaucratic procedures enforced along the borders with neighboring countries,” he said.

Ebrahim Nasri, director general of Khorasan Razavi Road Maintenance and Transport Organization, said international transit in Iran is directly affected by the country’s political relations with the world.

“About 12% of Iranians earn their livelihood through transportation, which proves the significant share of this sector in employment and development,” he said.

Mohammad Sadeq Hamidian, the deputy head of Shiraz Chamber of Commerce, Industries, Mines and Agriculture, blamed the aging road truck fleet in Iran for excessive fuel consumption and higher transit costs.

“So the main problem is the high cost of purchasing commercial heavy vehicles like trucks,” he said. 

Mohammad-Hossein Roshanak, a member of Khorasan Razavi Chamber of Commerce, Industries, Mines and Agriculture, said production, commerce and all economic sectors are deeply dependant on transit.

“This comes as the government has sacrificed all these sectors for truck assembly industry. High tariff rates are imposed on cargo truck imports. Currently, a truck in Iran costs twice as much in Turkey, Iraq or Afghanistan, and this increases the price of transit fares and production cost by up to 15%,” he said. 

Based on a trilateral agreement signed by the Roads Ministry-affiliate Road Maintenance and Transportation Organization, Iranian Fuel Conservation Company and Mammut Industrial Group last month, 5,000 aging trucks will be replaced with new ones.

The trucks will be financed via leasing, with 80% of the costs covered by state facilities.

According to deputy minister of roads and urban development, Davoud Keshavarzian, 120,000-130,000 vehicles in Iran’s cargo truck fleet have an average age of over 25 years.

As part of an agreement between the ministries of roads and oil, the government plans to replace 65,000 dilapidated trucks within five years. 

Keshavarzian, who also chairs RMTO, said this will cost the company roughly $2.7 billion, which averages $42,000 for each vehicle. 

However, based on the inter-ministerial plan, this sum will be covered through Oil Ministry’s savings generated by fuel conservation as a result of the fleet replacement.

According to a report by Roads Ministry, Iran needs 15,000 new trucks each year to renovate its aging fleet. 

More than 4,000 cargo transport companies are active across the country, carrying over 380 million tons of commodities nationwide every year. 

Some 860 companies transport over 4.6 million tons of freight from domestic ports to destinations in European, Central Asian and neighboring countries.

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