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Iran Economy Update
Issue 42/2017 WEDNESDAY APRIL 5TH
TPO bans imports of some foreign cars for 1396
The list of the automobiles that are allowed to be imported in this Iranian year has been published by a TPO affiliate website. The list, re-published by Tasnim news agency on Wednesday afternoon, excludes cars brands of Kia, OPEL, AUDI, Hyundai, Skoda, and Se.at. Tasnim wrote that according to the instruction of the Ministry of Industry issued last January, the importing companies that failed to set up an agent office on behalf of the foreign carmaker will be removed from the list of authorized companies to import cars. “The main reason for the reduction of the number of the cars allowed for imports is issues such as observing the criteria set by IRISI (Institute of Standards & Industrial Research of Iran) or the Environment protection organization.
Also, part of the decline can be attributed to the changes in regulations the ministry of Industry made last year.”
Figures on annual smuggling value in Iran vary from $12 to $25 billion
The following table includes some information about the volume of smuggling in Iran’s economy in the past 3 years that was provided by Ghassem Khorshidi, spokesman of Headquarters for Combating Smuggling of Goods & Foreign Exchange, published on Tuesday in the daily Etemad.
Year volume of smuggling 1393 $19.5 billion
1394 $15.5 billion 1395 $12-13 billion
Khorshidi has accused some lawmakers and governor generals of being passive in countering the smuggling of goods saying
“we noticed them dozens of time but [normally] a lawmaker is worried about his
reelection and a governor general [just]
thinks about not to have any voice of criticism be arisen,” he said.
Khorshidi said that the number of discovered smuggled goods in 1395 increased 93% compared with the previous year and that the goods smuggled in containers included home appliance, decorative accessories and toys, wallpaper, refrigerator and tire. “For a country whose total imports amounted to $43 billion in 1395, the smuggling figure of $10 billion is a huge amount,” said Khorshidi, adding that smuggling accounts for a quarter of our imports, which is a “shocking” figure.
But one day later, Mohammadreza Pour- Ebrahimi, head of the Majles Economic Commission gave a different figure for the volume of smuggling and put the total at
$20-25 billion annually. In an interview with the reporter of the state TV, Pour-Ebrahimi admitted that about 70 percent of smuggling of contrabands is conducted through the formal trade channels and/or through the free trade zones that are not under comprehensive supervision.
On Feb 2, 2017, Amir Khojasteh, head of the Majles commission to fight economic corruption criticized the volume of smuggled goods and said 3,000 containers of contrabands enter Iran on a daily basis, and warned that this is sabotaging the economy hurts national production. According to Tasnim, Khojasteh said economic corruption is undermining the foundations of the Islamic Republic like “termite”. The lawmaker said “some people are plundering the wealth of the nation through the corrupt networks they’ve established.” “The corrupt economic networks are developing very coordinated and strong,” he said, without
2 specifying any name. He said the corrupt people are fighting back by threatening or coaxing the people who try to fight them. He referred to some banks that have
“swallowed up” savings of people, and referred to the Bank Dey, along with the Martyr Foundation (Bonyad Shahid) as two corrupt systems.
In a related development, Eghtesad Online, a Persian-Language news website wrote on Monday that the Arman Credit Institute has blocked the money of its depositors and is not responsive to their criticism. Of note, Arman was one of the unauthorized credit institutions that was operating without permission of the CBI. In a related development and in early March, depositors of the Caspian Credit Institution had staged a protest in front of the institution headquarters in Tehran and accused the managers of embezzling and plundering their money. Contrary to Arman, the Caspian Credit Institution had received a conditional permission from the CBI in 2015 for its activities. Samen-ol-Hojaj has been another Iranian credit institution that had its depositors staged protest in late 2016 for its failure to fulfill commitments.
Meanwhile, the Minister of Economic Affairs and Finance announced on Tuesday that now “the time is opportune to conduct long- term economic reforms,” and underscored that the banking system is among the sectors that needs to be put on a different rail. Details of the speech of Ali Tayyebnia who was speaking to a group of senior managers of banks and capital markets have not been published by the local media but IRNA, the Iranian government’s news agency wrote that Mohammad Parizi, the minister’s deputy for banking and insurance affairs refrained from attending Tayyebnia’s speech because he will soon be removed by Tayyebnia as part of the minister’s plan to make overhaul in the banking system.
Also, CBI Governor Valiollah Seif has taken the same line in calling for an overhaul in the banking system. “Our banking system is
influenced by (suffering from) two factors, which are the imbalance of revenues-costs and the imbalance of assets and debts.”
According to Mehr news, Seif said the credit crisis facing the banking system is the result of mounting bad loans. The CBI governor also criticized the high interest rate in the banking system and said now that the coutnry’s inflation rate has entered into the single digit realm, the interest rate on deposits should accordingly be tamed to around 10%.
Meanwhile, Mohammadreza Jamshidi, the secretary general of the Private Banks &
Credit Institutions’ Association has criticized what he described as the politically- motivated measures to spread the [fault]
rumors that the country’s banks are on the verge of bankruptcy. “Our banks are not bankrupt but the compulsory facilities they are obliged to extend, along with the existing cumbersome regulations have caused this sector to face problems,”
Jamshidi was quoted as saying by IRNA on Wednesday. He admitted that most of the country’s banks ended their financial year with scant profit gains or registered loss but underscored that this does not imply that they are on the verge of bankruptcy.
Without referring to any particular group, Jamshidi said that spreading the rumor of an imminent bankruptcy in the banking system is the effort made by those who are trying to panic the people and cause them to withdraw their capitals from the banks.
Ina separate but related development, a banking sector expert has warned about the overflow of liquidity in Iran and that it is like
“water breaking over dam”. “at any moment, this dam is likely to be broken,” Mehr news quoted Kamran Nadri, head of the Islamic Banking Group at the Monetary & Banking Research Institute, affiliate with the CBI, as saying on Wednesday. He put the liquidity growth rate at 17.6% and said that in the past four decades, the rate on average has grown by 24%. Nadri said Iran is among the top ten countries in the world in terms of inflation rate and blamed it mostly on
3 mounting liquidity. On the credit crisis gripping the banking sector which is mostly resulted from bad and non-performing loans NPL, Nadri expressed doubt that such NPL being cleared “because mostly, such loan facilities have been received by the large quasi-governmental organizations.”
Iran’s Aseman Airline and Boeing sign agreement over purchase of 30 aircrafts The spokesperson of the Iranian Aseman Airlines declared details of the agreement the airliner has recently signed for the purchase of Boeing 737. On Tuesday, Reuters reported that Aseman Airlines has signed a deal to buy 60 Boeing 737 MAX jets, and wrote that Boeing has described the deal as “MoU” meaning it is only outlines for the time being and subject to government approval. “It covers plans for Aseman to buy 30 aircraft with options for a further 30 (worth $3.4 billion), it added,”
Boeing has said, according to Reuters.
In an interview with Mehr news agency, Amir-Reza Mostafavi, the Aseman Airlines spokesman said that the planes will start being delivered as of 2019 with the initial delivery of 5-10 aircrafts. He said the planes will be purchased on finance and that details of the financing method will be announced in 3.-4 months after the US OFAC issues license. Mostafavi said that the agreement covers plans for Aseman being delivered with 30 aircrafts at the first stage and the further 30 planes will be sold after the Boeing experts confirm suitable infrastructures and actual needs of the Aseman Airlines. He confirmed that what the two sides signed on Tuesday was an agreement that will turn into a contract after the permission of the OFAC.
French central bank lifts limitations on Paris branch office of Bank Saderat In an official letter to the Iranian Bank Saderat branch office in Paris, the French central bank has officially confirmed the elimination of limitations imposed by the sanctions. “Therefore, the Paris branch office of Bank Saderat will be able to
provide all banking activities and services as of 31 March,” reads a report issued by the Saderat Bank and published by Mehr news on Tuesday. “Earlier, the EU had officially announced the removal of Bank Saderat and Bank Saderat Plc London from the sanctions list, and the lifting of sanctions on the assets of the country’s largest bank and also the lifting of restrictions on the branch offices in Paris will be beneficial not only to the stakeholders, but also to the Iranian economy,” added the report of the Bank Saderat.
In a separate development and in an official letter to the Islamic Financial Service Board (IFSB), the CBI governor declared Iran’s desire to develop banking relations, Mehr news agency wrote on Tuesday afternoon.
Valiollah Seif’s message was sent to the 15th IFSB’s 2017 annual meeting that was commenced in Malaysia on April 4th. “[...] it is my honor that for the second time, the Islamic Republic was elected as the rotating chairman.” “I would like to take this opportunity to declare that the CBI is very eager and interested in developing cooperation with the IFSB members, to exchange experience and have educational cooperation especially in the areas of corresponding relationships, establishing bank and branch office, clinching supervising agreement, and opening accounts.”
Meanwhile, Vice CBI Governor Akbar Komeijani who has attended the IFSB seminar gave some info about the Iranian banking system. “With 35 banks and credit institutions and 23 thousand branches and 225 thousand clerks, the Iranian banking system is one of the largest one among the Islamic countries,” he said. “The value of total deposits made in the bank accounts amounts to $364 billion, and the loan facilities extended by the banks reached
$250 billion in Feb 2017,” he added. The CBI official also portrayed a picture of the country’s capital market that according to him, its value amounted to $131 billion in February 2017.
