$8b in Loans Earmarked to Help Boost Iran Industries

EghtesadOnline: The government has allocated 300 trillion rials ($8 billion) in the current fiscal year (March 2017-18) to spur growth in Iran’s manufacturing sector, Industries, Mining and Trade Minister Mohammad Reza Nematzadeh said.

News ID: ۷۴۲۴۴۴

02 July 2017

The move is a follow up to the administration's policy adopted in the last Iranian year (March 2016-17) to grant $4.5 billion in facilities to help complete under-construction factories and support under-performing enterprises to tackle the longstanding recession in Iran’s manufacturing sector.

“This year, in addition to backing new industrial projects, support for guilds and renovation of factories are also on the agenda. Therefore, the amount of credit has been increased,” he told a press conference on Saturday, held on the occasion of the National Day of Industry and Mine.

The measure is part of a comprehensive plan to complete 6,000 unfinished industrial projects with more than 60% progress and help 5,000 industrial firms renovate their machinery, Financial Tribune reported.

Last year, loans were granted to “more than 25,000 industrial, mining and agricultural units”, the minister said. “The facilities helped sustain and increase jobs, production and exports.”

A considerable share of the loans was granted to small- and medium-sized enterprises, which account for about 96% of the licensed Iranian businesses.

According to the minister, the loans helped a majority of SMEs emerge from recession last year, while helping create 7,000 jobs.

Some 88,000 manufacturing units are active in 992 industrial parks across Iran, which account for 42% of all employment in the industrial sector.

Nematzadeh added that 20,000 new industrial projects have come on stream since August 2013 when President Hassan Rouhani took office.

He said 700 trillion rials ($18.6 billion) were invested in these projects, leading to the creation of 300,000 jobs.

According to the minister, more than $7 billion worth of projects are being carried out through foreign direct investment, as part of $8.8 billion worth of FDI projects identified under the Rouhani administration.

> Farewell to Recession

Deputy minister of industries, mining and trade, Mohsen Salehinia, said last week that a longstanding recession plaguing the Iranian industrial sector is now a thing of the past.

He cited the Central Bank of Iran's recent report that put growth in the domestic industrial sector at 6.9% in the last Iranian year (March 2016-17) as well as another report by  the Statistical Center of Iran that shows the sector grew by 6.5% over the same period compared to the year before.

CBI and SCI both publish periodic statistics on Iran’s economy, but the two bodies’ data often differ, as they use different base years to calculate their data.

Salehinia said Iran's industrial sector contracted by 10.5% and 1.7% in 2012-13 and 2013-14 respectively. The sector expanded 7.6% in 2014-15 but again posted a negative 0.3% growth in 2015-16.

He added that the sector grew 2.2%, 4.4%, 6.8% and 12.1% respectively in the four quarters of the last fiscal year, showing a steady uptrend.

Last year's strong growth record is attributed mainly to the remarkable 37% expansion in auto manufacturing sector.

Unofficial data show total car production hit 1.25 million during the 12-month period.

Automakers are aiming at a production rate of 3 million units per year over the next eight years, 30% of which are to be exported, the Industrial Development and Renovation Organization of Iran said.

The production of steel and petrochemicals also posted promising figures last year, amid growth in overseas demand and relaxation of nuclear-related restrictions.

Iran produced 50.61 million tons of petrochemicals last year, of which 20.3 million tons were exported—a new record in outbound shipments. Nominal production capacity reached 61.9 million tons, as output capacity rose by 8% year-on-year. Actual output also increased by 9% year-on-year to 50.6 million tons.

Iranian steelmakers produced 18.46 million tons of semi-finished products last year, up 11% compared to the year before. They also produced 18.15 million tons of finished products during the same period, indicating a 4% rise year-on-year, according to Iranian Steel Producers Association.

Semi-finished and finished steel products' exports stood at 6.69 million tons worth $2.69 billion during the period, up 49% and 0.3% in weight and value respectively YOY, the Iranian Mines and Mining Industries Development and Renovation Organization reported.

However, as a result of a lingering slowdown in Iran’s construction sector, the cement industry was among the worst-performing industries last year, shrinking 5.7% compared with the year before.

According to CBI, construction was the only sector that contracted last year, registering a -13.1% growth.

Iran’s housing sector has been in recession since 2012, with estimates showing little signs of improvement.

The challenge remains for the government to spur the construction sector to generate demand that could further boost industries associated with construction, such as the steel, cement and tiles.

According to CBI, Iran posted a 12.5% growth last year, owing mostly to ramped up oil production and exports after the removal of international sanctions against Iran over its nuclear program in January 2016 after a nuclear deal with world powers months earlier.

GDP growth, without taking oil production into account, stood at 3.3%, the CBI said, noting that the oil sector registered a dramatic 61.6% growth last year.

Experts believe high growth rates will become challenging this year, as oil indices have already reached pre-sanctions levels.