February 15, 2019
A new survey of Iranian businesses shows that the second biggest problem they face is US sanctions. The biggest problem is the erratic foreign exchange system and the third biggest problem is state rules and regulations that change constantly.
The survey was conducted by the Tehran Chamber of Commerce, Industries, Mines and Agriculture. The survey got 150 responses on the first day of the launch and reached 800 successful calls by the time the preliminary results were put out.
The survey, “One Voice for Entrepreneurs,” intends to put together “all the hurdles in the way of businesses and entrepreneurs and convey it to those in charge in the government.”
The initial findings, reviewed by the Financial Tribune, indicate that the major three barriers holding back commerce in Iran are foreign exchange rate fluctuations, foreign sanctions, and bureaucratic trade and customs regulations.
Iran has not done well when it comes to developing its business landscape and making the country a magnet for big investors. Its ranking among 190 economies in the 2019 World Bank’s Ease of Doing Business Report fell four places to 128th.
Given the draconian hurdles that emerged after the government dramatically increased controls over the currency market last April, the entrepreneurial climate became more nervous and less friendly.
The rising foreign exchange concerns reflect the fact that rial depreciated by 61 percent in 2018, based on the rates posted by Sanarate.
The Statistical Center of Iran (SCI) reported annual inflation rate as of the month ending January 20 at 39.6 percent. This is while the Central Bank of Iran has not released inflation figures for the past two months and has no intention to report the figures anytime soon. The reason it says is to avoid controversy and conflicting numbers coming out from the SCI.
In addition to the usual red tape and deluge of directives that have targeted businesses since the rial crisis began in April, exporters have to deal with the much despised platform called Nima – a foreign exchange platform that all traders are required by the regime to use.
For instance, exporters cannot use their own currency to import their own raw materials.
As per the findings of the survey, 44% complained about the unending forex-related directives issued by the CBI, 25% said they lack access to subsidized currency, 23% had gripes about the overvaluation of the rial despite galloping inflation and 6% had complaints against the CBI currency repatriation rules.
Out of the 800 companies that took part in the survey, 353 or 44 percent said the foreign exchange system is a major barrier. Forex concerns were followed by sanctions (40 percent), and customs and trade rules (39 percent). There was then a drop-off to access to funding (29 percent), access to liquidity (27 percent), and tax rates (26 percent).
Other barriers cited by firms were tax management, business permits, price controls, access to land and construction permits, access to foreign finance, management of the social security system, competition from the informal market, sales and marketing, the judicial system and, lastly, labor laws.
In the social security arena, 62 percent of respondents complained about unfair penalties, 19 percent said they had problems with rapidly changing rules and contradictory directives and 10 percent said complex paperwork remains a nuisance.
