April 10, 2018
By Roshanak Asteraky
In a speech marking the arrival of Nowrouz on March 20, Iran’s Supreme Leader Ayatollah Ali Khamenei designated 1397 as the year of “Support for Iranian Products.”
Mr. Khamenei said: “Many problems will be solved if we were to accelerate production. Government officials and the public should take part in this initiative.”
However, the leader’s hopeful slogan is unlikely to usher in a new era of prosperity in Iran given the current economic crisis and the country’s dismal record for production and exports.
The government must implement a comprehensive production policy to revive an ailing economy. The Islamic Republic has, however, consistently failed to outline a coherent economic plan. If anything, the regime has destroyed domestic manufacturing in the past 40 years.
Khamenei began his annual address by designating 1378 (1990) and 1379 (2000) as the years of “Imam Khomeini” and “Imam Ali.” He named the subsequent years after some social or economic causes. These initiatives are mere window dressing and empty promises aimed at appeasing an angry public.
Curiously enough, Mr. Khamenei’s annual slogans have had the undesired effect of highlighting the problems facing the country; they include “Doubling Efforts, Working Harder,” “Economic Jihad,” “National Production, Protecting Labor and Iranian Investment” and “Resistance Economy, Production and Employment.”
In stark contrast to these catchy phrases, the country has experienced an economic meltdown, double-digit inflation, and high unemployment in the past decade. The discrepancy between these lofty ideas and the truth has become a national joke. Many people have suggested that the best way to get rid of the Islamic Republic and the leader would be to name a year after them.
To endear themselves to the Leader, members of the cabinet and Majlis (Iranian Parliament) deputies champion Khamenei’s slogans in the first weeks of every new year. Yet they abandon those lofty goals as the year progresses. It is abundantly clear that officials in the executive and legislative branches of the government do not heed Khamenei’s slogans; otherwise, the country wouldn’t be in such a dire social and economic situation.
Still, “Support for Iranian Products” is probably Khamenei’s most absurd slogan to date.
Ironically, the same people who are supposed to develop and support domestic production are the ones who have destroyed it in the past four decades. There is currently not much demand for Iranian goods in the international market. According to some reports, thousands of manufacturing plants closed down during Presidents Mahmoud Ahmadinejad and Hassan Rouhani’s terms in office. More than 15,000 industrial factories stopped production in 2015.
The Iranian rial continued to fall against the U.S. dollar at the end of the Nowrouz holidays. The exchange rate was 57,000 rials to a dollar on April 8. It is clear that anyone whose business depends on foreign currency faces a challenging future. It is next to impossible to support production and export of domestic goods under these circumstances. A strong dollar would make it difficult for manufacturers to buy raw material and technology from abroad. The high cost of production would naturally raise the wholesale and retail prices of domestic goods. They cannot compete with those imported from China and other countries. Many businesses which rely on foreign currency market have gone bankrupt in the last decade.
“The volatile currency market has caused a 6 percent increase in the price of housewares in the last few days,” Mohammad Tahanpour, the Head of the Union of Home Appliance Retailers, said last week.
Iran imports $45 billion worth of goods every year. More than $30 billion of that total is used to purchase around 300 items that are identical to those manufactured domestically. Chinese and Turkish products monopolize the domestic market, most of which have entered the country illegally. An elite mafia comprised of the Government, the Islamic Revolutionary Guards Corps (IRGC), influential clerics and affluent individuals control the smuggling, distribution, and sale of these foreign goods.
Many Majlis deputies have called on authorities to crack down on illegal imports of goods. President Hassan Rouhani promised to tackle this problem during his 2013 and 2017 campaign elections. Product smuggling, however, remains a significant part of the black market economy, despite the government’s claim that the latter dropped to $10 billion in 2017. While some of these goods enter Iran illegally, others are traded for oil.
Iran was hoping to restore its business relationships with international banks following the signing of the JCPOA (Joint Comprehensive Plan of Action, better known as the Iran nuclear deal.) However, the easing of the sanctions didn’t resolve Iran’s banking problems. Russia, India and China trade useless goods for precious Iranian oil. These items include pumice stones, lolly sticks, shovel, pick, sewing needles, scissors, and umbrellas. Most of these articles are also manufactured domestically at a much lower cost.
The regime’s ineffective and disastrous policies in the past four decades have brought the county to the brink of a complete economic meltdown. There has also been a sharp drop in demands for Iranian goods such as saffron, pistachio, rugs, and pottery which have traditionally done well in foreign markets. Domestic producers of saffron and pistachio cannot compete in international markets any longer. China buys many of these goods from Iran at a meager price. It then repackages and sells them in the global market. The profit goes into the pocket of the foreign exporters and not the Iranian manufacturers.
At one point, Iran was the sole producer of saffron in the world. But many countries including Afghanistan compete with Iran in the international market. The import-export mafia smuggles saffron bulbs in massive quantities out of Iran. Iranian pistachio has suffered the same fate. The same well-connected mob buys pistachio crops at a cheap price from farmers who can hardly make ends meet. Many of them abandon their farms and find employment in the cities.
Chinese and Turkish machine-made carpets have replaced traditional hand-made Iranian rugs. The Iranian machine-made rugs were in high demand in the 1990s, but the sales have dropped sharply in the past decade.
Chinese pottery has replaced domestic products in the market. The handicraft and souvenir shops in Iran stock their shelves with Chinese decorative objects, even in cities like Yazd and Hamadan which are famous for their high-quality porcelain pottery.
Many manufacturers of established brands have shut down their production plants in the past couple of decades. Qoo Vegetable Oil, Arj (home appliance began production in1937), Azmayesh (home appliance founded in 1959), Pars Electric (manufacturing televisions, started business in1963) and Darugar (bath products and cosmetics company, established in 1957) have all closed down. Massive debt forced Darugar to shut down in 2016.
Many companies have lost their competitive edge in recent years. The lack of support from the government and an influx of foreign goods have forced many manufacturers into bankruptcy. “Consumers, particularly the working class, prefer Chinese goods because of their low prices and attractive packaging. Iranian brands are not marketed well,” Gholamreza Abbasi, the secretary-general of the Supreme Labor Council said.
Some domestic clothing and shoe manufacturers even put fake foreign labels on their products to make them more attractive to consumers; otherwise, they would not be able to survive in the current market. Many factories have barely managed to stay in business. Most of them have been unable to pay the salaries of their staff for months.
Iranian manufacturers have been unable to access the international market even after the signing of the JCPOA in 2015. Meanwhile, domestic products cannot compete with foreign goods in the Iranian market. Under these dire conditions, the slogan of “Support for Iranian Products” is more of a bad joke than a realistic mission statement.
