The Fifth Iran Export Potential Exhibition, also known as Iran Expo 2023, opened in Tehran on Sunday.
President Ebrahim Raisi, deputy foreign minister for economic diplomacy, Mehdi Safari, the head of Trade Promotion Organization of Iran, Alireza Peymanpak, and other trade officials attended the inaugural ceremony.
According to Safari, 750 domestic companies are participating in this year’s event and 60 countries have expressed readiness to visit Iran Expo 2023, IRNA reported.
Foreign participants include those from the UAE, Pakistan, Russia, Turkey and China, he added.
The expo will last until May 10.
The event is hosting 70 commercial and governmental delegations, including more than 1,200 traders and government officials. It is aimed at expanding Iran’s export markets with special focus on East Asia, Eurasia, Africa and Latin America, as well as diversifying the country’s exports (particularly knowledge-based products and those with higher added value) in order to increase the resilience of Iranian economy.
The TPO chief believes the event will lead to a $2 billion increase in Iran’s export revenues, considering the high turnout of foreign traders.
Twelve groups of export products, including knowledge-based products, medical equipment, home appliances, food products, petrochemicals, construction, handicrafts and techno-engineering services, are being showcased during the four-day event.
Record High Exports in Fiscal 2022-23
Iran’s exports, excluding crude oil, reached 122.56 million tons worth $53.16 billion in the fiscal 2022-23, registering a 10% rise in terms of value, according to Rouhollah Latifi, the spokesman of the Iranian House of Industry, Mine and Trade’s Trade Development Commission.
“This is a new record, as the highest exports value was previously registered in the fiscal 2014-15 with $50.56 billion,” he was quoted as saying by IRNA.
China with $14.58 billion was Iran’s main export destination during the period (unchanged), followed by Iraq with $10.23 billion (up 15%), Turkey with $7.45 billion (up 23%), the UAE with $5.76 billion (up 28%) and India with $2.14 billion (up 18%).
Shortcomings
Iranian exports have several shortcomings, according to experts. First is the fact that only a handful of countries account for the lion’s share of exports. In other words, the destinations are not diversified.
Iran’s exports to its neighboring countries stood at 75.18 million tons worth $30.53 billion in the fiscal 2022-23. The value is more than half of Iran’s total exports during the period.
Another issue is the limited basket of exported commodities.
Iran’s Export Concentration Index, which estimates a country’s reliance on a limited group of commodities as its primary source of foreign exchange income, is relatively too high.
According to a report by ILNA, citing Economic Analysis Center of Tehran Chamber of Commerce, Industries, Mines and Agriculture, high concentration score must be a concern for economic planners as it suggests the country’s trade vulnerability to changes in global demand.
The index is calculated as a sum of squared shares of products constituting a country's exports. Ranging from 0 (perfect diversification) to 1 (concentrated on a single product), a comparison of index scores to the contribution of natural resources to GDP worldwide shows that countries that are resource-rich tend to have less diversified export bases.
Among 13 countries surveyed by TCCIM, Iran ranked first in the index and Turkey and Poland came last. After Turkey and Poland, the Southeast Asian country Thailand ranked higher than other countries. These countries were followed by China, India, Indonesia, Mexico, Brazil, Vietnam, Malaysia, Georgia and Russia.
“Iran’s high score is driven by its export concentration in petrochemicals and gas condensates,” Mohammad Lahouti, the head of Iran Exports Confederation, told the Persian economic daily Donya-e-Eqtesad.
“Petrochemicals which are the raw materials for factories and intermediate goods [producer goods] account for 50% of Iran's export basket. We need to lend support to downstream industries and gradually create production chain to increase the diversification and added value of the country’s exports.”
He also believes that there is no less concern about Iran’s limited export destinations than its limited group of export commodities.
“Sanctions have created this restriction for the country and increased the risks associated with trade. Therefore, regardless of conditions, we need to expand our export markets. Or, at least shift exports to our neighboring countries from exports of raw materials to exports of consumer goods. Preferential trade tariffs would also be of help to exports and reduce exporters’ expenses,” he said.
According to a report by the research arm of the Iranian parliament, the Majlis Research Center, despite efforts made by the government to improve the share of industrial goods from total exports, foreign trade data show that a large part of the so-called "non-oil" exports actually come from oil as gas condensates and petrochemicals top the list of Iran’s non-oil exports.
Surveying a 17-year period from the fiscal 2010-11 to fiscal 2018-19, MRC said between 17% and 33% of non-oil export revenues came from exports of five items. On average, 24.66% or around a quarter of non-oil exports revenues is generated via exports of five items. The annual share of top 10 exported goods from foreign exchange income stood at 35.57% on average. And the share of top 15 export products from overall export revenues has been 42.77% on average.
On top of that, the report says, the overall direction of exports over the years under review hovered around exports with low- and medium-degree of sophistication.
According to MRC, Iran has very few trading partners with whom it conducts a large volume of trade.
The center has urged the government and the private sector to identify new export markets and maintain the current ones. There is mounting evidence that countries grow when they export a wider variety of goods to different destinations. Market and product diversification protects countries from export collapse due to changes in demand or competition in one particular market.
According to the World Trade Organization, Iran’s share of international trade has been declining for the past 40 years, reaching 0.24% in 2022, whereas at its peak in 1974, it accounted for 1.1% of global trade, Kourosh Ahmadi, a former diplomat, stated.
“More importantly, just like the decrease in Iran’s share of world trade, the country’s gross national income per capita has also been falling. According to the World Bank data, Iran’s income per capita decreased from $7,490 in 2012 to $3,530 in 2021,” he wrote for the Persian daily Shargh.
“The experience of emerging economies is right before our eyes. These economies could never reach their current status without having access to foreign markets to sell goods and import essential commodities, without attracting foreign investment, expertise and technology, and without being a link in the global supply and demand chain. The failure of countries that followed a different path is not a secret,” he said.