Why Iranian producers losing business to foreign rivals?

Why Iranian producers losing business to foreign rivals?

Baku, Azerbaijan, Sept. 27

By Farhad Daneshvar , Mehdi Sepahvand – Trend:

While imports of unnecessary products inflict serious damages on domestic production and economy, high cost of domestic production has apparently paved the way for imports of goods in Iran.

"Iranian products are incapable of competing with foreign rivals for various reasons," an expert told Trend September 27.

"Besides high production costs, the home-made products are not up to date and they fail to meet the current demands," Abbas Samavati, former head of Iran’s Tire and Engine Oil Association said.

The domestic producers claim that they are losing their businesses to foreign rivals due to the high costs of production in the country.

Mismanagement, lack of efficient technology, high interest rates, shortcomings within the business environment as well as currency fluctuations appear to be among the main reasons behind the high cost of domestic production.

Although the country, in a move to back domestic production, has banned the imports of about 880 items, foreign goods still reach Iranian market.

Consumer goods account for 16 percent of the country’s imports and China over the past several years remained as the biggest exporter of goods to Iran. This is while most of imported goods like mineral water are domestically produced in the country.

The local media outlets suggest that over the past year a number of production units and factories have been shut down due to economic crisis and incapability to compete with foreign rivals.

Imports stats

Over the first five months of the current fiscal year (starting March 20) Iran imported 14.225 million tons of goods, worth $19.442 billion during the 5-month period, which indicates 7.1 and 16.5 percent rise in terms of volume and value respectively, compared to the same period of the preceding year, according to the report.

China, UAE, South Korea, India and Turkey were among the top exporters of goods to Iran in the mentioned period.

Car parts worth $1.204 billion (77 percent increase, 6.2 percent of total imports’ value), passenger cars worth $1.032 billion (50 percent increase), rice worth $962 million (102 percent increase), corn fodder worth $617 million (45 percent increase), modems and phones worth $427 million (40 percent increase), soybean worth $410 million(1 percent fall), medical drugs worth $387 million (2 percent increase) and sugar worth $349 million(175 percent increase) were the main imported goods of the Islamic Republic in the 5-month period.

Jamshid Edalatian, a member of Iran’s trade chamber, earlier said that that the volume of goods imports over the first half of the current year has increased by 11 percent.

Economic growth

This is while a group of experts believe that the growth in the amount of imported goods indicates that the economy is climbing out from the recession.

Abbas Samavati dismissed this claim, however.

"Some factories are still producing parts for cars that are not themselves being produced anymore. They cannot produce any parts for the new models that are poured into the market. Our molds are out of date and no attempt is being made to update them and include new technologies."

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