Iran Government Announces Concessions to Placate Exporters

EghtesadOnline: Iran's minister of industries, mining and trade announced new concessions to exporters and promised closer cooperation to help resolve pending issues outlined in the long list of demand of businesses.

News ID: ۷۴۶۵۲۹

21 January 2019

Attending a meeting of the Iran Chamber of Commerce, Industries, Mines and Agriculture on Sunday, Reza Rahmani tried to assure a vexed business community that he personally cares about their concerns but that he also needs to strike a balance between varying demands when final decisions are made.

"In the current circumstances, the most important threat (to the economy) is the closure of factories and production units, lack of funds and shortages of raw materials," Rahmani told the gathering.

Confronted with the deluge of complaints and grievances of exporters, in particular about currency repatriation rules (a topic discussed ad nauseam), Rahmani said a working group comprising representatives from ICCIMA, the Central Bank of Iran and other relevant agencies is needed to debate and decide on problems that have been piling up since last summer when the US announced new scansions and the rial tanked, according to Financial Tribune.

CBI rules demand exporters return their earnings to the economic cycle three months after shipment – a time frame exporters reject as impractical since under the current US sanctions regime, repatriation would take at least six months.

Earlier this month the CBI threatened exporters with "legal measures" if they fail to meet forex commitments. A business representative said Sunday that if the current state of affairs continues, court proceedings against exporters would not be far-fetched.

The CBI communicated its last currency repatriation rules in December according to which up to €1 million in export earnings is exempt from selling through Nima – a regulated online exchange platform where exporters are required to offer their currency at rates lower than the open market).

Holding Middle Ground

Rahmani referred to that decision as a middle-way between the CBI view that any failure to repatriate export earnings would be tantamount to "smuggling" and the exporters’ insistence that they be left alone in deciding how and when they bring back their earnings.

Two other measures to ease conditions for exporters, the minister said, will be the extension of the registration time for imports from three months to six and the possibility of importing a category of goods without the cumbersome rules of currency transfer.

Extension of the registration period had for long been demanded by importers on the premise that the short deadline at times led to the expiration of their orders and getting involved in cumbersome registration process.

According to the minister, the government has also passed a measure allowing imports without ‘currency transfer’ for raw materials and spare parts for  production units.  This means such companies can import their factory needs with their own resources or currency from the open market.

Rahmani also said that import of raw materials in the free trade zones is now possible without the usual tiring registration rules.

Iran’s ease of doing business ranking among 190 economies in the World Bank’s Ease of Doing Business Report 2019 fell by four places to 128th.

Rahmani said his ministry is launching a ''special project'' in collaboration with the private sector to promote non-oil exports to 15 neighboring countries plus China and India, which he said would emerge as an locomotive for growth in 2019 amid anemic prospects for the domestic economy.

Budget Inefficiency

ICCIMA President Gholamhossein Shafei in his speech  criticized the government for failing to include the views of the private sector in next year's proposed budget (for March 2019-20).

"True, the Plan and Budget Organization (the entity that drafts the budget bill) invited the private sector at the time of writing the budget bill for the very first time. But in practice, it ignored its views and in some cases no opinion was sought at all," Shafei complained.

He noted that as a last resort ICCIMA sent its proposals to the Majlis (which is currently reviewing the bill) and hopes the legislature will deliver.

Supporting domestic production, promoting competitiveness, prioritizing revenue over expenditure, transparency in budgeting, dealing with loss-making state companies and easing the private sector’s tgax burden  are among ICCIMA's demands.

"Drafting the budget in an overoptimistic way in conditions that stagflation and sanctions are taking a toll on the economy renders the oil export and tax revenues rather unrealistic in the proposed budget," Shafei said.

He criticized the overreliance on oil revenues (which has increased compared to the current year's budget), manipulation of the exchange rate at the government's wish and whim and the increased funding for state companies.

He urged business leader urged the government to find new income venues by ending large-scale tax exemptions and diversifying its sources of tax revenue.