A survey of businesses conducted by Tehran Chamber of Commerce, Industries Mines and Agriculture sought the opinion of businesses, in particular about the main challenges they face.
The survey got 150 responses on the first day of the launch that reached 800 successful calls by the time the preliminary results were out. It also had one million visits on popular Persian language news websites.
The survey ‘One Voice for Entrepreneurs’ intends to put together “all the hurdles in the way of businesses and entrepreneurs and convey it those in charge in the government.”
The initial findings, reviewed by the Financial Tribune, indicate that the major three barriers pulling back trade in Iran are forex rate fluctuations, international sanctions, and trade and customs regulations.
Iran has not done well when it comes to developing its business landscape and making a magnet of it to attract big investors. Its ranking among 190 economies in the influential World Bank’s Ease of Doing Business Report 2019 fell four places to 128th.
Given the draconian hurdles that emerged after the government dramatically increased controls over the currency market last April, the entrepreneurial climate became more nervous and less friendly.
The rising forex concerns reflect the fact that rial, the national currency, depreciated by more than 50% in 2018. The unprecedented jump in forex rates led to a price hike of up to 70% and above for most essential goods.
The Statistical Center of Iran reported consumer inflation rate for the month to Jan. 20 at 39.6%. According to SCI, the annual inflation rate stands was 20.6%. This is while the Central Bank of Iran has not released inflation figures for the past two months and has no intention to report the figures anytime soon. The reason it says is to avoid controversy and conflicting numbers coming out from the SCI.
In addition to the usual red tape and deluge of directives that have targeted businesses since April, exporters have to deal with the much despised platform called Nima – an integrated forex deal system where as per law all currency deals must be conducted.
For instance, exporters cannot use their own currency to import their own raw materials. This is because raw materials are considered 'priority two' and as this categorization must be upheld, export earnings (mostly considered 'priority 3' in that they are finished or consumer products) cannot be used for importing raw materials by exporters themselves or by other importers. They cannot use their proceeds for their own import needs either.
As per the findings of the survey, 45% complained about the unending forex-related directives issued by the CBI, 25% said they lack access to subsidized currency, 23% had gripes about the overvaluation of the rial despite galloping inflation and 6% had complaints against the CBI currency repatriation rules.
Other Bumps
Out of the 800 companies that took part in the survey, 353 said the exchange rate is a major barrier. Forex concerns were followed by sanctions (320 companies), customs and trade rules (309 companies), (access to funding (228 companies), access to liquidity (212 companies), and tax rates (209 companies).
Other barriers cited by firms were tax management, business permits, price controls, access to land and construction permits, access to foreign finance, management of the social security system, competition from the informal market, sales and marketing, the judicial system and lastly labor laws.
Among the most common solutions for surmounting the barriers by businesses were cutting operational costs, finding alternative suppliers and substitute finance sources.
In the social security arena 62% of respondents complained about unfair penalties, 19% said they had problems with rapidly changing rules and contradicting directives and 10% said complex paperwork remains a major nuisance.
In a separate category, 78% of respondents said they had complained about "illogical price controls on manufactured products, 62% had protested against "unfair fines by the Social Security Organization", 54% had complaints about "contradictory rates" of the Tax Administration and 50% were unhappy about "the time-consuming and complex tax collection system."
On a grim note, 54% of executives said they expected profits to decline by 25% before the Iranian fiscal ends in March and 36% said if the current trends continue they will be forced to downsize to be able to survive.
Despite it all, 80% of executives said they would like to sit down with officials in order to discusses their problems.
