Official: Joining WTO dangerous for Iran’s economy

Business Materials 28 May 2013 13:02 (UTC +04:00)

Azerbaijan, Baku, May 27 /Trend D. Khatinoglu/

Joining the World Trade Organisation would be dangerous for Iran considering the country's deep dependence on imports, head of Tehran World Trade Center, Mohammad-Reza Sabzalipour told Trend in an interview.

Iran announced 18 years ago that it was willing to join the WTO. To date, 159 countries have joined, but Iran's membership has not yet been approved.

Meanwhile, Masoud Movahhedi, the Iranian deputy industry minister said in December 2012 that joining the WTO had been postponed for political reasons.

"We have answered the WTO questions and met our obligations to join," he told ISNA.

Sabzalipour has said that notable and perceivable measures have not been yet taken. The only move was answering 700 questions from the WTO by the ministry of industry.

Joining the WTO requires applying special regulations and accepting special conditions relating to the global economy and trade. Russia managed to join the last year after several years of effort. The WTO estimated that Russia joining will bring $49 billion profit in the short term. The profit will be increased to $162 billion in the mid-term.

According to Sabzalipour, the lion's share of Iran's oil income during the past eight years which equals half of the country's oil revenues so far (exporting some $1200 billion during 103 years), has been spent on exporting goods and running the country.

"The question is why capital goods accounted for just 17 per cent of the imported goods and the rest were consumer and intermediate goods?," Sabzalipour asked.

He said that instead of importing consumer and intermediate goods, the government should have spent the revenues for implementing infrastructure projects and boosting exports which create jobs and provide the groundwork for joining the WTO.

According to him there are two important principles. The government should separate the running budget from the oil income and the government itself should be downsized by privatisation and run the country through tax revenues and other incomes which are currently used by advanced economies.

Based on a report by the U.S. Energy Information Administration, Iran exported $69 billion crude oil and gas condensates last year, compared with $95 billion in 2011. Oil income accounted for some 60 per cent in government revenues and some 80 per cent in export revenues.

The Iranian Customs Administration data shows that the country exported $32.5 billion non-oil goods (including $10 billion petrochemical exports) in the past Iranian calendar year ended on March 20.

In other words, non-oil exports (excluding petrochemical exports) amounted to $22.5 billion. Meanwhile, imports hit $53 billion last year.

Considering Iran's oil-based economy has culminated in underdevelopment and petrodollars have led to inefficiency and laziness by many government officials, joining the WTO will be dangerous for the national economy.

Joining the organisation will be profitable when a country is export-oriented and invests in infrastructure industries. Iran's economy is currently dependent on imports. Many industries are already on their way to bankruptcy.

According to WTO rules, membership requires approval by all the members and adopting obligatory economic and trade standards.

"Iran is facing both internal and external problems on the way to joining the organisation," Sabzalipour said.

In addition to the current economic woes, some national laws are not in accordance with the WTO rules.

For example, despite the stipulation of Article 44 of the Constitution for transferring shares of large industries, banks, radio and TV, shipping and air lines and insurance companies, as well as facilitating foreign investment, the privatisation process has been wrongly interpreted. This means that many state-run organisations such as social security, the retirement fund and the IRGC, have been changed to semi-government ones and have nothing to do with the private sector.

These policies will not only delay Iran's membership to the WTO, but also the country's current trade laws are contrary to the organisation's rules.

According to Sabzalipour, the negative vote of the U.S. is the main hurdle on the way of the membership of Iran to the WTO.