Years of sanctions imposed on Iran over its nuclear energy program have restricted the country’s trade with the international community. Non-oil exports have been largely confined to pistachio, saffron, carpet and nuts while a handful of countries including Afghanistan, China, Turkmenistan, Pakistan, Turkey, Hong Kong, Egypt, the United Arab Emirates, India and Turkey accounted for the lion’s share of the exports. However, a possible nuclear deal between Iran and the P5+1 countries (the five permanent members of UN Security Council plus Germany), expected by the end of June, and an ensuing lifting of western sanctions could change the course as it would give Iran a push to reestablish and reinvigorate trade ties with the world.
The questions frequently asked by Iranian economists and experts are: is Iran ready to join the global trade in the post-sanctions era? What steps should be taken to turn Iran into an exporting country rather than merely a passive recipient of imported goods?
Mohammad-Mehdi Behkish, a prominent economist at Tehran’s Allameh Tabataba’ei University, believes that a number of interdependent measures can and should be taken to pave the way for the active participation of the country in global markets.
Productivity, Efficiency
“The first requirement is to enhance productivity and efficiency in the manufacturing units, which would in turn lead to the production of economically feasible and competitive products,” he told Persian economic weekly Tejarat-e Farda.
“Low worker productivity and capital-output ratio translate into high prices of finished products, which in turn make the export of Iranian products unfeasible,” he added.
Business Environment
Unhealthy business environment and cumbersome regulations for starting new businesses were mentioned by the expert as barriers to competitiveness in the domestic market, recalling that Iran was ranked by the World Bank as the 130th economy in the ranking of 189 countries on the overall ease of doing business in 2014.
A supporter of free market economy, Behkish believes the current economic atmosphere in Iran is unfavorable for healthy competition as the market is dominated by monopolies.
“It is only in a competitive business environment that traders are pushed to lower profit margins, leading to reduced cost of production, distribution and exports,” he noted.
Global Atmosphere
The third important measure is to pave the way for increased global acceptance for Iranian products, noted the expert, elaborating that two different sets of policies must be pursued in order to improve the global image of Iran-made products.
“The first is to do with government policy, meaning that the government should improve its international relations by signing bilateral trade agreements such as preferential trade agreements (PTAs), particularly with the neighboring countries,” he said.
The second is the image of Iranian products in the global consumers’ mind. It is important that the world recognizes Iran’s exports as high-quality, reliable and durable, said the expert.
