No Roadmap for Export of Engineering, Tech Services

EghtesadOnline: Lack of a roadmap for long-term engineering services’ export has hurt domestic businesses in this sector over the past few years, vice president of Iran Electrical Industry Syndicate said.

News ID: ۷۸۵۰۰۲

09 November 2019

“Although domestic equipment and technical services comply with international norms, the absence of an independent regulatory body has undermined the related export market,” IRNA quoted Payam Baqeri as saying.

Exporters are confused and businesses are selling their engineering services and goods in international markets in a rather haphazard manner, he noted.

The Trade Promotion Organization of Iran, a body that oversees Iran's foreign trade is (regretfully) import-oriented and facilitates imports rather than help exporters expand their trade, Financial Tribune quoted him as saying.

Baqeri said that there should be a strong structure in the Presidential Office to regulate and monitor export affairs, in his opinion, a comprehensive roadmap needs to be drawn to tackle exporters’ problems.

“The longer exporters’ concerns remain unaddressed, the more limited will be Iran’s share in foreign markets.”

Referring to the effects of US economic sanctions, he said besides the stagnant domestic market for engineering services, financial problems have become an added concern as rivals gradually capture Iran’s share in the overseas electric equipment market.

“For example, despite the investment potential, officials have been oblivious to the untapped markets in Africa.”

Data released by TPO shows income from exports in the power industry surged to a record $2.5 billion in fiscal 2016-17, over 98% of which came from technical and engineering work overseas.

Observers say this revenue could have been much higher if an effective export strategy was in place and the Export Guarantee Fund of Iran had access to the necessary funds.

Short of Funds

While Iran needs to increase non-oil exports (including technical services) due to the tough US economic restrictions on its oil exports, its export credit agency (EGFI) has a meager $100 million, barely covering 5% of the value of annual non-oil exports that is close to $40 billion.

The figure is irrelevant compared to the export credit agencies in neighboring countries namely Saudi Arabia ($4 billion) and Turkey $2 billion.

“The capital of some peer funds in neighboring countries is 40 times that of Iran,” Afrouz Bahrami, head of EGFI said.

Reiterating the need to enhance non-oil exports and the  EGFI’s role in covering export risk during the sanctions regime, Bahrami said a letter has been sent to President Hassan Rouhani asking for raising the capital of the fund.

The EGFI chief singled out capital inadequacy as the main challenge and spoke of government and parliament pledges to help raise EGFI capital up to $200 million in 2020.

According to media reports, EGFI is able to cover export risk to the tune of $2.3 billion or 5% of the $40 billion non-oil export market.

Bahrami underscored capital inadequacy as a main challenge and spoke of government and parliament pledges to help raise EGFI capital up to $200 million by next year.

“Capital inadequacy is a key impediment to the expansion of risk coverage capacity of the fund.”

EGFI was established in 1973 as the first export credit agency in the Middle East and North Africa.

Established in 2000, Iran Electrical Industry Syndicate has 450 members including manufacturers, contractors and consultancies from the electrical industry. It has a mandate to help promote Iran’s electrical industry in other countries.