Economist Censures Gov’t Crackdown on Warehouses

EghtesadOnline: Economists and businesspeople believe that cracking down on production units and warehouses, and treating them as criminals will have adverse consequences, as economic players will lose trust in the system.

News ID: ۷۴۵۹۳۴

28 August 2018

Economist Davoud Souri told the Persian weekly Tejarat-e Farda that what can cause chaos in the market is monopoly and not hoarding.

“The prerequisite for hoarding and stashing to cause disruption in the market is for the hoarder to have trade monopoly over a particular product. Then by withholding the good from entering the market, the hoarder can control and increase prices at any given time and gain a higher profit margin,” Financial Tribune quoted him as saying.

“Yet, not every minor supplier who, owing to economic circumstances, purchases goods and stores them to be able to sell them later can be prosecuted on charges of hoarding.”

Souri quoted economist Mohammad Tabibiyan as saying recently that there is no mention of hoarding in economic literature.

“What we have though is the concept of monopoly … And the biggest perpetrator of monopoly in the country is none other than the government itself. And why would the government hold itself accountable?” he said.

On the other hand, added Souri, warehousing is a known principle in economy and helps curb price fluctuations.

“Policymakers need to know that what is causing the problem is monopoly and not hoarding,” he underlined.

New Taskforce

It was around mid-July that Minister of Industries, Mining and Trade Mohammad Shariatmadari appointed his commercial affairs deputy, Hassan Younes Sinaki, head of Consumers and Producers Protection Organization, Mahmoud Navvabi, and the head of ‘Tazirat’ (a judiciary-affiliated oversight body dealing with trading offenses), Jamal Ansari, as members of the newly-formed taskforce named “Intensified Fight Against Hoarding and Stashing”.

According to the minister, the taskforce is tasked with helping maintain market balance by overseeing imported commodities or those produced using imported raw materials purchased using subsidized foreign exchange rates and preventing disruptive activities such as hoarding and stashing.

A few days later, he unveiled a list of goods to be targeted by the new taskforce. It included a wide range of products from essential goods to home appliances, spare parts, rubber, publication paper, washing powder and construction material. The items also included a category titled ‘production raw materials’, without elaborating further.

Meanwhile, officials called on the public to inform authorities of hoarding and stashing cases.

Since then, news of hoarded goods being confiscated in warehouses across the country, the capital in particular, have been splashing all over the media to attest to the taskforce’s “unflagging” efforts in carrying out its responsibility.

President of Chamber of Guilds Ali Fazeli says withholding products from the market is a punishable offense, although he attributed the ongoing practices of stashing to uncertainty in the market and fear of inability to replace goods.

Iran’s market descended into panic after the value of rial fell drastically over a very short period following, among other reasons, the US decision to quit the nuclear agreement between Iran and world powers, and reimpose sanctions on Iran’s economy.

It’s Only Normal

Warehousing is a normal stage in the cycle of production, supply of goods and providing services.

As a matter of fact, Souri explains, it is a tool by which manufacturers can manage the amount of production and their profits.

“You cannot expect a big auto company, for example, to import the spare parts it needs, go through customs clearance and immediately assemble them and sell the end products all at once. It’s the same for a pharmaceutical company and most other businesses,” he said.

“You can’t omit warehousing if you want a steady, uninterrupted and stable supply of goods to the market, but if you do that, you have damaged the natural course of economic events.”

Souri noted that some warehouse owners might have committed offences, but this cannot be applied to all businesses active in the field.

“It is also very probable that in the wake of the sanctions being reimposed on Iran, all these warehouses were being filled with goods to prepare for the days to come … The government has to explain how and why it considers the amount of stored items in these warehouses as unusual,” he said.

The economist said one needs to see how much of these goods are normally stored in warehouses, so that a comparison can give a clearer view of whether or not there has been an unusual growth in warehousing.

“These kinds of measures taken by the government result in economic operators losing trust in the system. In fact, the government is sending out signals to business owners for them not to invest their economic resources in the production and supply of goods,” he said.

“The government is making daily decisions which, right or wrong, are threatening the activities of businesses. Working in such conditions is very difficult.”

Souri noted that interacting with someone who does whatever they desire, obeys no rules and sets the rules themselves is practically impossible, because people will not trust this system and this will give rise to consequences.