Economy, Domestic Economy

Businesses Unprepared for Post-Sanctions Era

Businesses Unprepared for Post-Sanctions Era
Businesses Unprepared for Post-Sanctions Era

Optimism about the future of the ongoing nuclear talks between Iran and the P5+1 (the US, Britain, China, France, Russia and Germany) and the extension of sanctions relief have triggered discussions among officials and experts about whether domestic enterprises can remain competitive in a post-sanction era.

A member of the Tehran Chamber of Commerce believes that local businesses are not ready for a post-sanctions era and must start making preparations well in advance.

“Parallel with the ongoing sanctions relief, the administration has to make every effort to shift its focus to foreign partners willing to invest in and transfer technology,” Mohammad Hossein Barkhordar, chairman of the chamber’s import assembly said this week in an interview with IRNA .

He noted that upon the removal of international sanctions, domestic businesses will find themselves in competition with companies from India, Turkey, China, South Korea and Persian Gulf littoral states which are now waiting for the doors to open.  

  High Tariffs Feed Smuggling

Barkhordar described existing trade tariffs as problematic and said, “In my view, 11.5 percent is a reasonable average trade tariff and close to that of the World Trade Organization (WTO).”

He added that high tariffs can never be effective and will only led to a rise in smuggling, “therefore, it would be better to remove redundant tariffs and prevent further damage to ourselves.”

He noted that the administration can also help businesses by providing them with low-interest loans, but warned that such loans should not be used to fund construction projects.

Fortunately, the Rouhani administration has succeeded in cutting trade tariffs from 23 to 14 percent, however, further adjustment is required as importers are still faced with difficulties, he asserted.

Barkhordar predicted no significant change regarding the issue of smuggling in a post-sanctions era as “there will always be people who seek to evade taxes and work illegally.” He went on to say: “Smuggling hurts the economy, creates problems for legal importers and impairs the legal trade system in terms of cost affordability.”

On falling oil prices, Barkhordar said that global oil supply has reached its highest level, noting that the United States alone produces 10 million barrels per day. “In the meantime, the emerging signs of decline in major world economies can further push oil prices down, which in turn, would adversely affect the resources Iran has to allocate to R&D in oil fields.”

Barkhordar called on the government to treat the management of foreign currency resources as a top priority and warned that “within six months, slipping oil prices will, in parallel, sink global gas prices and create a big threat for enterprises involved in foreign trades.”

The lack of effective legal support for business brands is a major concern for importers. “This has discouraged quality growth of industrial, trade and agro products, and after-sales services, paving the way for smuggled goods to find their way to the market,” he complained.

He said investment and joint ventures with foreign companies are encouraged only when the administration and policy makers start to recognize the legal rights of brands. In the meantime, he clarified that such a practice does not amount to promoting “monopoly” as this is only a fair way to respect and recognize the efforts made by an importer to promote a known brand as an official agent.