Iran hopes to resist sanctions by boosting production

The Washington Post

TEHRAN — With an economy struggling through some of the most punishing economic sanctions in history, Iran is looking inward to meet its basic needs while attempting to change the consumption habits of a society accustomed to enjoying a range of foreign products.

Iranian officials call it “the resistance economy,” reflecting their defiance of Western attempts to halt the country’s uranium enrichment program. Efforts to wean Iran from imports and to produce more goods domestically, however, have proved challenging.

While Iran’s non-oil exports have strengthened steadily in recent years, its total imports have risen more dramatically. Since Mahmoud Ahmadinejad became Iran’s president in 2005, total imports have increased from $39.1 billion to $57.5 billion, according to statistics published by Tehran’s Chamber of Commerce.

To reverse that upward trend, the Islamic republic has implemented a policy of reducing what has been deemed unnecessary consumption.

The plan lays out a hierarchy of imports, starting with essential goods, including medicines that Iran does not produce, and ending with luxury items that authorities believe could be produced at home.

But any effort to increase domestic production faces serious head winds.

An immediate issue for local producers is that sanctions have made accessing raw materials impossible or prohibitively expensive, forcing the closure of hundreds of factories and increasing Iran’s already high unemployment rate.

“Unfortunately, this year the obstacles in production have increased,” Seyed Hamid Hosseini, a manufacturer and member of Tehran’s Chamber of Commerce, recently told reporters. He cited currency fluctuations, the difficulty of obtaining loans and increased labor costs as particular challenges.

Even before this year, domestic producers had been struggling with foreign competition. As a result of the Iranian currency’s relative strength in recent years and a lifting of high import tariffs on luxury goods by the Ahmadinejad administration, many more Iranians have had access to foreign goods, especially appliances and electronics from East Asia. Domestic production and sales of locally made goods began to suffer.

With the currency, the rial, losing approximately 80 percent of its value in the past year, conditions would seem ripe for Iranian producers to recapture market share. But first Iranians will have to regain confidence in the domestic brands they have long shunned as inferior to imports.

With inflation, hope

At the Hyperstar, a Western style mega-market in the west of Tehran, many of the challenges facing Iranian producers are in plain view, as are some of the signs of hope.

In the electronics and home appliances sections, sales of LG and Sony flat-screen televisions come with attractive service plans and free home installations. Local brands, such as Pars, go mostly ignored.

Across the shop, though, one of the few potential bright spots for Iran’s struggling economy is on full display.

Hyperstar’s fresh produce section rivals the quality and selection of any Whole Foods or local farmers market. On the placard for each item is the price per kilogram alongside a flag representing its country of origin. All but a handful of the fruits and vegetables are marked by the green, white and red of the Iranian flag.

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