Events | Number 3, December 2003 | Can Iran Be an Exporting Country?

Can Iran Be an
Exporting Country?

M Nahandast

This is no longer the age of exporting raw materials which are limited in quantity and therefore may face
depletion. Today all countries are after producing and exporting added value, and the more sophisticated goods
technologically the higher the added value.

Developing countries lack the technological know-how of the developed countries and rely on these for many technologically sophisticated products. This is why in the second half of the 20th century they all made some effort – to varying degrees – towards industrialization and to catch up with the advanced world.

Iran began its efforts in the 1960s. Its strategic location and oil export earnings allowed the country to create a relatively favorable fabric in which to develop strong productive units. Many processing entities were set up; many assembly lines were established; many heavy industrial plants were developed. Soon the country was exporting processed foods, medicines, electrical appliances, clothings and shoes… not only to the neighboring countries but also to many that lay far beyond.

During the last three decades the country has been continuously and rapidly becoming industrial, (except for
some interruptions caused by the Islamic Revolution and the war with Iraq that soon followed it). But not all its products are yet up to the highest international standards. Some even have much to be desired.

And although the Institute of Standardization and Industrial Research of Iran (ISIRI) has been in existence for 50 years now, there remains a good deal of work to be done and indeed ISIRI has been seriously working in this regard. In fact any Iranian product bearing the mark of standardization by ISIRI, today, is bound to meet world
standards.

There are several organizations in Iran that are in charge of developing the country’s exports, notably: the Ministry of Commerce; Export promotion Center; Iran Chamber of Commerce, Industries and Mines; ISIRI; Export Promotion Bank; Export Guarantee Fund; and a few others of lesser importance.

Awards are given to the most successful exporter, medals are granted to the firm that produces best quality goods for exports, endless praise is given to the company that increases its exports significantly… Yet, overall growth in exports is sluggish. Sometimes this is not because of quality. Iranian steel, for example, is of highest
standard anywhere, but far too expensive.

There is still great hope as the country is producing more and more goods of high quality and reasonable price and exports are expected to expand with relative speed soon in the future. Iranian healthcare and cosmetic
products, tiles and ceramic sanitary ware, decorative stone slabs, automotive spare parts, gas cookers, fridges… are being exported to as far away as Italy and Japan.

Yet the country still needs to expand its non-oil exports at a much faster rate and here foreign investment can play a singular role. Readers may have noticed that EVENTS seems to keep coming back to this subject as though obsessed by it. The truth is that all of us at EVENTS are convinced that foreign investment, wisely
reviewed and carefully selected, is the way – perhaps the only way – to rapid industrial and technological development and speedy expansion of exports.

With the recent ratification of the Act on Attraction & Protection of Foreign Investment, the Iranian nation and government opened the door to foreign investment, an event many economists had predicted, and were expecting to happen for very long. Now, foreign investment can be made in Iran for up to 51% of the total
capital of any entity.

According to the Management & Planning Organization (M&PO) of Iran, if the current economic conditions and trends continue Iran shall face an economic crisis soon and if the country is to prevent such a crisis from
occurring, investment should increase by 10.9% a year and jobs should be provided at a rate of 4.4% a year as against the present level of 1.5%.

The M&PO also maintains that foreign direct investment should enter Iran at the rate of 6.3b USD a year instead of the present rate of 1.1b. But some experts believe that all this could only be possible if the
international oil market remains stable for some time, and if Iran finds its way into WTO which does not presently seem very likely.