Businesses Decry Self-Imposed Sanctions

EghtesadOnline: The Majlis Research Center, the research arm of the parliament, has published the results of three meetings with representatives from the private sector and business owners in the country. The report covers major hurdles from the perspective of businesses.

News ID: ۷۴۶۹۶۵

19 March 2019

Apart from the detrimental effects of US sanctions on key sectors of the economy, the business reps said they also are saddled with “self-imposed sanctions, tactlessness and mismanagement” which if appropriately addressed could curb the impact of the US restrictions.

They specifically complained about the piling up bylaws and regulations - which at times overlap and contradict each other – the bureaucracy-plagued registration process for importing goods, the cumbersome customs clearance rules, flaws with currency repatriation mechanisms, extended delays in launching the promised international monetary channels and restrictions on money exchange bureaus.

Representatives from the manufacturing and import-export bodies voiced concern over the shutdown of their businesses and a host of other issues like widespread unemployment and shortages of the raw materials and other goods, according to Financial Tribune.

The report quoted the business community and manufacturing unions as saying that they can handle the sanctions as they had done in the past, but flawed trade policies, complex banking procedures and problems of the sort have made it difficult for them to dodge the unfair American restrictions and hostility.

Participants were asked to present their views on developments in the volume of export and import, output volumes, price of raw materials and cost of finished products plus regulations governing their businesses. They were also asked to provide the parliament with solutions and ways that could change the existing economic structures for the better.

Jamishid Nafar, secretary general of the Iran Export Confederation said each enterprise has its own share of problems and it wouldn’t be wise to prescribe a panacea for the ills.

He was of the opinion that the export sector is harmed more by domestic sanctions than external restrictions, and pointed to the currency repatriation measures that oblige exporters to return their currency earnings to the country via the Nima system (integrated forex deals system).

Currency repatriation mechanism and Nima functions as a sort of a policeman exposing Iranian traders to the hostile US administration and its minions, he complained.

The same concern was voiced by Reza Noorani, head of the National Union of Agricultural Products of Iran, saying these systems expose trade secrets to the “enemy”.

He regretted the excessive focus on imports at the cost of ignoring domestic potential, criticizing overnight decisions and hasty policies made by regulators who hardly ever bother to find the root causes of the problems nor seek the advice of experts.

In the same vein, the general director of the National Assembly of Agricultural Experts, Mohammad Ja’far Fesharaki, claimed sanctions have nothing to do with the agriculture sector, blaming the hurdles largely on inefficiency of the government decisions in setting low prices for the guaranteed purchase of basic agricultural of products. “Farmers will turn to growing other crops if purchasing prices are not revised” upwards, he warned.

Morad Mohammadzadeh, vice president of Iranian Day-Old Chicken Association, lamented the discord between the assorted bodies of decision makers. “The poultry industry has not been affected much by the sanctions. Rather it is the hasty decisions and inconsistent foreign currency policies that has undermined our business, he told the rare gathering.

MRC Position

The MRC stressed that the positions taken by business-owners are their own and does not necessarily reflect the views of the research group.

Moreover, the think tank said given the aim of the businesses that is maximizing profit, their views should be analyzed based on this perspective.

The MRC said the stance of businesses bear significance in that it demands closer attention of the policymaking establishment. It warned that unclear and unpredictable policies and inconsistency in decision-making has jeopardized investments.

Regarding currency repatriation, the MRC implicitly dismissed the businesses’ concerns arguing that exporting goods without returning the earnings to the country is tantamount to capital flight. “Given the ongoing economic war, the government insistence on repatriating currency is justified.”

Nevertheless, the think tank doesn’t deny the faults with the currency repatriation system. As an example it points to the pressure on exporters to repatriate their currency in Nima where the forex rates are lower than those in the open market.

“Considering the hikes in the price of raw materials, it wouldn’t be fair to expect exporters sell their earnings via Nima while they buy raw materials at open market prices,” the influential research body argued.

As for self-sanctioning, it admitted the inconsistencies in and among decision making bodies and multiple directives issued by them noting that contradictory and short-lived directives have indeed confused business owners. The existing chaos gives them the message that they have been affected more by “domestic sanctions” than foreign restrictions, it concluded.