Baku, Azerbaijan, Oct. 24
By Fatih Karimov – Trend:
Iran’s attempts to promote its non-oil trade in post-sanctions period has not lived up to expectations so far, despite the optimistic forecasts following the removal of international sanctions in March 2016.
Iran’s non-oil export (including condensates) in fiscal year to March 2015 was $50.56 billion, which decreased to $42 billion in fiscal year to March 2016. The figure reached $43.93 billion in fiscal year from March 2016 to 2017, only 3.5 percent more year-on-year. Meanwhile in the first half of the current fiscal year it became $20.5 billion - 3.2 percent less year-on-year.
China, Iran’s traditional trade partner in the sanctions period, has protected its position as the Islamic Republic’s main trade partner.
Intermediary countries, such as UAE and Turkey, which acted as re-exporters of goods to Iran under the sanctions, continue to act as third-party economic partners in Iran’s foreign trade.
Central Asian countries were supposed to become potential markets for Iranian products in the post-sanctions period, given the advantages of market accessibility and lower price of Iranian products, however the statistics indicate that Iran has failed to materialize this goal.
Iran’s non-oil exports to Commonwealth of Independent States (CIS) stood at $901 million in first five months of the current fiscal year (March 20-Sept. 22, 2017), 5 percent less year on year.
It s interesting that CIS exports to Iran also has registered a fall by 42 percent to $596 million during the same span of time, according to Iranian customs administration report.
Kazakhstan's example
In recent years the level of trade turnover between Iran and Kazakhstan was changing, going up and down.
The bilateral trade turnover between the two countries was declining from $986.345 million in 2014 to $635.567 million in 2015 and $596.242 million in 2016, according to the Committee of Statistics of Kazakhstan.
The figure indicates Iran’s very tiny share in the central Asian country’s market, given the fact that the volume of foreign trade turnover of Kazakhstan in 2016 amounted to $61.950 billion, with $25.175 billion worth of imports.
Iran’s export to Kazakhstan amounted to $93.8 million in 2014, $69.8 million in 2015 and $45.7 million in 2016.
The mutual trade turnover stood at $273 891 million during the first half of 2017, with Iran’s export shares of only $34 million.
In the first half of 2017, Kazakhstan's trade with the world countries amounted to about $36.72 billion. Exports amounted to $23.1 billion (38.3 percent more compared to the same period of 2016), and imports reached $13.6 billion (19 percent more year-on-year).
The main buyers of Kazakh products in the reporting period were Italy - 18.7 percent of the total exports, China – 12 percent, the Netherlands - 10.4 percent. The main exporters to Kazakhstan in the reporting period were Russia - 38.5 percent, China - 15.6 percent and Germany - 5.2 percent.
Earlier in April, Kazakh President Nursultan Nazarbayev and Iranian economic officials declared the two countries’ decision to increase their volume of trade turnover to $1 billion per year.
President Nazarbayev called on Iranian companies to cooperate in agricultural and mining sectors in his country, and pledged to take measures aimed at easing visa requirements for Iranian traders.
But the aforementioned figures show that Iran will have a difficult pass to boost its presence in the Central Asian country’s market.
Last month Tehran announced that it has lifted the customs tariffs on certain agricultural products that are exported to Eurasian countries – a move which is expected to encourage exports to countries such as Kazakhstan, Belarus, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.
What is the problem ?
According to Abdollah Mohajer Darabi, head of the Chamber of Commerce, Industries and Mines Office in Iran’s Caspian province of Mazandaran, lack of banking cooperation and high customs tariffs are the main obstacles for Iran’s non-oil exports, including the export of agricultural products to Kazakhstan.
This has led to low trade turn over between the two countries as well, he believes.
However, it seems that Iran’s problem’s regarding the export promotion is a complex issue and goes much deeper and more serious than tariffs or banking issues.
Actually, the Islamic Republic’s economy needs to undergo serious reforms to settle various problems, including the exports.
Iran’s products are not able to compete in global markets in terms of quality. According to Adnan Mousapour, head of export promotion committee of Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), besides competitiveness issue, unreal rate of foreign exchange and weak economic diplomacy are main challenges of Iran’s exports.
Mohammad Reza Modoudi, the deputy head of Trade Promotion Organization of Iran believes that the Islamic Republic needs to launch reforms in terms of trade strategies production to improve goods quality.
Meanwhile, Iran’s regional markets such as Iraq and Afghanistan are completely different from other regional markets, according to the official.
No one in other countries will pay for a poor quality car that Iran is selling in Afghanistan, he said, adding that in global practice, over 50 percent of exports are carried out within the framework of regional accords.
In Iran it is not happening, because the country is self-sufficient in almost all of its needed goods, Modoudi said.
“Iran has no choice, but to open its market to certain goods, because improving trade with 15 neighboring countries is not possible under the ongoing practice,” he added.
“Even if some domestic industries are damaged, we must give part of our domestic market to other countries,” he said, adding that otherwise Iran’s market will no be renovated and the exporting market will not be formed.
In other words, Iran’s economy is an isolated economy suffering from a lot of problems and needs to pursue reform strategies to integrate with the global economy. It is a painful path which is impossible without political will.