The Forum for Partners in Iran's Marketplace

October 2021, No. 98

Foreign Trade

Where Is the Outlook for Foreign Trade?

There are no more than two courses in front of the country that can at least save Iran from trouble and from taking irreversible course.

Mohsen Jalalpour

Iranís foreign trade is currently in its weakest position in regional and international circles. Neither imported goods are cleared at customs in a timely manner and the required foreign exchange is secured, nor do export goods enter competitive markets with a specific strategy. What atmosphere does the new government face?

For the first time in decades, a convergent government with the parliament and the judiciary has gained power in the country. In other words all the three powers are now in the hands of the Principlists (Osoul Garayan) and therefore the conditions have been prepared for the new administration to start work; In the meantime, the Principlists had announced that if one day the government became uniform, everyone would work together and things would go better; Now the time has arrived for this group to administer the country in a way that the situation would improve for economic activists and the Iranian economy. When Ronald Trump became president of the United States, I pointed out that more important than Trumpís efforts to cause Iran more trouble, it was the first time that Congress and the Presidency were in harmony, and that created a lot of problems for Iran. Today, the same is happening in Iran, and the parliament, the judiciary, and the president all belong to the Principlist camp. Meanwhile, economic activists expect now that the government is in line with the Principlists, better conditions should prevail in the country. 

What courses should the government take in order to meet the expectations of economic actors?

There are no more than two courses in front of the country that can at least save Iran from trouble and from taking irreversible course. The third path is a catastrophic course that no one is interested in its implementation. In fact, the two paths are fundamentally different and their performance is different in the short, medium and long terms. One way is to reform the structure so that the entire Iranian economy undergoes a serious surgery; another way is to introduce reforms which also has its own terms. The third route, if it is taken, is the Venezuelan experience, which is a convenient and accessible route such as the current situation in which the Iranian economy is immersed in sanctions, increasing liquidity and unhealthy budget conditions that have plagued the country since 1997; Therefore, we should distance ourselves from the third path, because we hope that reason, logic and responsibility will require that this path is not one of the leading pathways; Because it pushes the country towards irreversibility and four-digit inflation.

But they have two different approaches to structural reform and policy reform. When I was the chairman of the Chamber (of Commerce), we had a meeting with Mr. Tayebnia, the then Minister of Economy, about the reform of Iranís economic structure; moreover, we voiced our interest in a serious structural reform in the midst of the developments related to the Joint Comprehensive Plan of Action (JCPOA) era; There, social capital, the possibility of interaction with the world and hope in the future seemed to let this happen; Mr. Tayebnia recalled that he had a trip to India where he asked an Indian official how structural reforms had taken place in his country. The Indian official said that when the issue of structural reform was raised in the government, everyone knew that this path would make things difficult for the people for a very long period of time, and even this could lead to the fall of the government or not winning peopleís vote but in any case, a government would come to power for a 4-year term.

In the 1940s and early 1950s, the then Minister of Economy, Mr. Alikhani, established industry in the country through merchants and foreign traders

But after much deliberation, the government and the prime minister came to the conclusion that they should accept the damage with open arms and be prepared to face charges, grievances and ambiguities, Nevertheless, the reform of the structure and initial movement began and huge pressure was put on the people. Our first four years passed under these conditions and the incumbent party did not receive enough votes.

The next party won the race and the new Minister of Economy held a meeting with the officials in charge of reforming the structure of the previous government, and it was decided that they should continue the previous process and go ahead with structural reforms. Interestingly this party too could survive only for one term (four years) but the projects continued. The third party also supported the project and as a result the restructuring took place;

So when we want to do some infrastructural work, we must not look at the ballot box and the flow of desirability and popularity; But Iranís economy is moving from a distribution, rent-seeking, government-dependent economy to a free and competitive economy based on market economy; But the first thing that occurs is that the bad effects and bad results of the past, which have plagued the rentier and government economies for more than five decades, are visible; But the basis of the economy is reformed and the atmosphere becomes competitive, which is what Turkey, India and Poland have done.

This is the basic and fundamental way; But I do not hope that the thirteenth government will follow this path; Because, unfortunately, the desirability and continuity of work and the path of power have always dominated the infrastructure and structural work; So if the first step, which is long-term, is chosen in the short term, it will put serious pressure on the people; But the way to victory and salvation of Iranís economy is that we will change from a bankrupt economy to a prosperous economy. The second step is to reform the policy, which may move the situation from the status quo for a while, but this is the five principles of entering the international arena and overcoming sanctions, which is the main need in the current situation, without which our work will yield no result and we cannot move the next four step to the next side. The twelfth government is doing its best and is interested in handing over power to the thirteenth government after settling the sanctions and reaching a new agreement.

The second step is for the government to avoid entering the market and pricing. It must stop, for instance holding market regulation meetings and constantly pricing and monitoring goods and managing the market by force and in practice so that a market environment for competitive work in this field is created.

Exercising supervision over the activities of producers and controlling the prices is actually moving the country in a direction that poses a serious problem for production and employment. The third step is to dry up the sources of rent and the exchange rate of 4,200 tomans (for one USD), and to eliminate the many restrictions and deprivations, incorrect pricing and unwarranted supervision. We need to correct the wrong policies of the past to change the situation. If we take away this item of 4200 tomans (per USD), tens and hundreds of circulars and instructions must be changed; because all of them have been rented in the currency space, and because of the wrong base, wrong decisions have been made on it.

The fourth step is to remove the annoying laws and the many licenses that all the presidential candidates mentioned, which also goes back to the amendment of the laws and must be done, while to facilitate the work, we must move the space towards removing the bothersome laws; Because it is not necessary to obtain a license for production from ten organizations; Instead, all these permits should be collected and what is referred to as the single trade window should be operationalized so that we could have a better space to start businesses.

The fifth step is to fight corruption; we must prosecute corrupt individuals and arrest embezzlers and bribe-takers; we must eradicate corruption because some of the misplaced money in the possession of some organs has caused corruption; so these five steps can be effective in policy reform. 

What are the doís and doníts in foreign trade for the 13th government?

In foreign trade, three basic principles must be considered; First, our relationship with the outside world , including neighboring and other states; Secondly, the conclusion of regional and global treaties; and thirdly, halting releasing numerous directives and creating an unsuitable environment for exports and imports, all three of which, incidentally, have been violated in recent years. This means that today we do not have stable exports and imports from neighboring countries and the world, nor in trade agreements, we have defined a reciprocal flow for any of the countries and international unions. But the most important thing in the discussion of laws is that hundreds of other destructive circulars have been issued with the support of a directive such as allocation of one USD for 4,200 tomans.

These issues have made the space unfavorable for doing business, which should be seriously revised. Things must take place from the very beginning that the US dollar was set at 2400 tomans and export restrictions and bans were imposed; this should be done in a way that would lead the economic environment towards competition and interaction with the world. In my opinion, the locomotive of a countryís economy is not industry and mining but trade; That is, if a countryís trade is active and its trade activities flourish, industry, mining, production, and agriculture will certainly follow suit.

In the 1940s and early 1950s, the then Minister of Economy, Mr. Alikhani, established industry in the country through merchants and foreign traders; because these people, as businessmen, had the opportunity to produce commercial goods in the country. So the driving force is economic movement and the creation of a trade economy. If you build a house without doors and windows, a greenhouse will be created that has no way out and will destroy you; A country should also be considered as a greenhouse, whose economic space should have a window to the world and a way in and out, and if we want to have a prosperous economy, the air of this space is trade, which should be connected to the world and based on needs. And the connections of the world, on this earth and space to produce the necessary product. Therefore, the priority of the thirteenth government is neither industry, nor mining, nor agriculture. The priority goes to trade in order to actually provide the space for productive output in industry, mining and agriculture.


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