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Iran gives non-oil exports a
try
By Hooman Peimani
A
report released on January 28 by the public relations
department of Iran's Customs Administration announced an
increase of 17.9 percent in the value of Iran's non-oil
exports during the first 10 months of the current
Iranian year, ending on March 20, compared to that of
the previous year. The significant increased value
pushed up Iranian non-oil exports revenue to US$4.163
billion during the mentioned period. Of that amount, the
share of exports, excluding the products sold to
"visitors" and via border markets, was $3.809 billion,
which indicated 12.3 percent increase in direct exports
in comparison to those of previous year.
The
overall increase in the value of non-oil exports was
achieved notwithstanding a decrease in their weight. It
therefore fell to 11.216 million tons to register a
decline of 15.1 percent from that of the last year
caused by a reduction in the export of "ironware, steel,
mine-extracted products and building materials,
including cement". A surge in the value of certain
exports, ie "hand-woven carpet, pistachio, ironware and
steel, industrial and petrochemical products, clothing,
tar and methanol", helped Iran not only avoid a loss in
value, but increase it.
The growth in non-oil
export value demonstrated a change in their method of
export. In addition to direct exports, the generated
revenue included the proceeds of selling non-oil
products to "visitors leaving the country" ($53 million)
and the income of exported goods through border markets
($301 million).
The former is part of Tehran's
plan to increase its annual revenue by encouraging
tourism. According to the Iranian government, its total
revenue of such operation was about $1 billion in 2002.
It is now aiming to generate $2 billion annually. Among
other factors, this requires large private investments
in the practically neglected tourist industry since 1979
- the prospect of which is not currently very rosy.
To expand its overall foreign exports and to
encourage cross-border shopping, Iran started
establishing border markets along its northern border
with the Caucasus and Central Asia after the fall of the
Soviet Union in 1991. It has since set up various
shopping centers or markets along its joint borders with
Turkmenistan, Azerbaijan and Armenia. It has also
operationalized such markets along its borders with
Pakistan and Turkey.
Since the Taliban's fall in
November 2001, Tehran has made steps to build such
facilities along its long border with Afghanistan. In
early January, the Iranian government reached an
agreement in principle with its Iraqi counterpart to
construct markets on the Iranian-Iraqi border.
Uncertainty over the direction of the Iraqi crisis will
probably postpone their construction until the latter's
resolution.
The pattern of growth in the value
of exports will likely continue in the two remaining
months of the current Iranian year to mark a value
increase in the overall annual non-oil exports. At a
modest rate, a continued growth in value of such exports
will also be feasible in the next Iranian year beginning
on Mach 21. Various new trade agreements between Iran
and many Asian and African countries, including those
with India and Libya in January, will help the Iranians
expand their share of international trade.
For
example, Iran recently reached an agreement with Libya
as announced on January 28 by Ibrahim Gharacheh-daghi,
the director general of the engineering services export
department of the Ministry of Housing and Urban
Development. The agreement, to be signed in March during
the Iran-Libya Joint Commission's meeting in Tripoli,
will cover certain areas of economic cooperation
discussed over the last few months between Tehran and
Tripoli. They will include the Libyans' interest in
"purchasing electrical appliances and tractors from Iran
and making joint investment [with Iran] in the Central
Asian and African states".
Gharacheh-daghi
stated that Iran and Libya would also discuss the
involvement of Iranian companies in Libya's construction
industry in the Tripoli meeting. His reference to the
two country's agreement to boost their cooperation in
the field of health, agriculture, medicine, sciences and
training of manpower-created grounds for a substantial
increase in the Iranian exports to Libya.
Despite its expanding trade opportunities, it is
highly unlikely that Iran's foreign trade will expand
significantly in the near future unless its economy
undergoes an overhaul. Iran's inefficient and gigantic
public sector, in a practical monopoly position, dashes
hopes for a phenomenal increase in its non-oil exports
in the near future to fill the widening gap between Iran
and certain countries with similar populations, but with
much less resources.
Its ailing state-dominated
economy, in control of about 80 percent of economic
activities, suffers from years of mismanagement and low
investment. Consequently, it is unable to increase its
products to meet the growing domestic demand while
expanding exports on a sustainable significant scale.
Such economy also prevents and discourages the growth of
the private sector, the necessary engine of growth for
non-oil exports.
Since the late 1990s, the
Iranian government's economic liberalization program has
avoided a necessary major overhaul of the economy,
including the downsizing of the public sector through
privatization and the removal of all legal and practical
barriers to private economic activity. The vested
interest of the ruling elite in the large public sector
has resulted in its half-hearted implementation of
economic reforms as evident in small-scale
privatization.
Iran's government's success
record in economic liberalization has been mainly
limited to the financial realm, eg, the elimination of
multiple exchange rates and the ending of constant
devaluation of the Iranian currency, the rial, against
major currencies such as the US dollar. If fully
implemented, its January decision to privatize all the
Iranian banks, excluding the National Bank of Iran, will
be only one step, although a major one, in the right
direction to end the public sector's economic monopoly,
a necessity for the private sector's growth.
The
Iranian regime's economic policy since 1979 has stifled
the expansion of Iran's non-oil exports to create a wide
gap between such exports and those of many "developing
economies" such as its economically-troubled neighboring
Turkey. Lacking most of Iran's rich mineral and energy
resources, the latter's non-oil exports have averaged
around $15 billion over the last decade.
Unless
the Iranian regime shakes up its economy, the status quo
will perpetuate its non-oil exports' insignificance.
Undoubtedly, such a scenario will make the Iranians even
more heavily dependent on oil revenues for their
financial needs than they are today. This is an
increasingly inadequate source of income for a growing
nation of 70 million.
Dr Hooman
Peimani works as an independent consultant with
international organizations in Geneva and does research
in international relations.
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