An Expert Assesses Irans Polymer Industry Extremely Worrying

An Iranian economical related newspaper “Donyaye Eqtesad” has recently published a story of a meeting about the current situations of the polymer industry in Iran. Speaking at the event, Director of the “Petrochemical Downstream Industries Development Office” Reza Mohtashamipour said he was “extremely worried” about the current circumstances.

The importance lies in that there are over 20 organizations in the petrochemical downstream industry (PDI), whereas only about 5,000 industrial units are operating in Iran.

The official’s statements are summarized in seven points as follow:

1. PDI have not had a good progress in the past few years. Quite to the contrary, they have been in a stagnant state and growing like a tumor. Last Iranian year’s (which ended March 20) statistics show that it was the first year we had a plunging amount of raw polymer consumption in over ten years. That is a fact that undermines the country’s plastics industry. Today we are extremely worried about the market. The Ministry of Industries believes the installed plastic industry capacity is 18.9 million tons. This is while the entire polymer that has been sold in Iran has never gone beyond 3.4 million tons.
2. Seeing European countries when they adopt the strategy of using high-tech machines, there they also use a number of environmental laws as their support, which also create some special benefits for the purchase of high-tech machines. This issue has always faced two questions in our country. One is, if acquiring higher tech would be economically feasible for the company. The second is whether doing so is a priority in the policies of the industry.
3. Iranian Custom’s Tariffs on importation of processing machinery are now lower than those on parts and spare parts, therefore the import of parts for assemblage does not pay. It would pay better if the machines are finished abroad and imported under Iranian brands. Therefore, it can be said that not only has the source of technology been weakened or completely removed out of sight in the past years, but also the capacity that is created is on the daily rise.
4. The other issue is the market for plastics products. Our market, for one thing, is not looking for high-tech products. A combination of the above points and the existence of access to overseas processing machinery and investment in machine manufacturing inside, the country have made the industry stay at its current level and not progress as it should.
5. We use the highest amount of polyethylene for pipes and bags. This shows there is quite some oscillation in the range of low-tech products, and that we have created much capacity, whose result is that we have goods with high prices. This prevents the use of high tech in our production, damaging our opportunities for trade. As an example, last year’s trade deal with Turkey shows that the corridor we gave to Turkey in the plastics industry is in fact tantamount to giving our major rival the chance to replace us in our major market Iraq by using our land to export its products there. Therefore we will be easily put aside in our biggest market. On the other hand we are increasing our capacities. Doing so we are both shrinking the market and facilitating imports. Also, exports will gradually turn infeasible for us.
6. If we take a look at organizations in European countries, we will see that they decide and act wisely. It can be said plastics organizations have the final word there. This is while in our country the organizations do not do their job properly. For example, the huge Iranian plastics industry did not even bother to issue one single statement against the corridor we gave to Turkey.
7. There are free zones in Iran that lack walls or fences. The result of that is weak monitoring over governmental organizations (such as provincial industrial organizations), wrong perceptions of capacities, and the creation of situations like our current situation.

The meeting ended by announcing five demands from the government:

1. The government should allocate more and more time to transparency. The share of registered enterprises active in this industry is by degrees smaller than that of unregistered ones.
2. Regarding value added taxes, the role of the customs and the management of codes should be required, with the Customs Organization taking the job in hand. For example, there is no customs fencing in Arvand Free Zone. There, anyone setting up any factory around Abadan will be given tax exemption. Thus, lack of proper order is quite easy to guess. If we remove value added taxes in circumstances when the customs does not do its job properly, we have laid much burden on the selling companies, forcing them to retreat.
3. The problem of standards. Iraq for example does not accept our standards which are much higher than those of other countries. Therefore we have much problem for goods that are in fact of much higher quality than Iraq imports. Take as an example PVC profiles. They are of much higher quality than the Iraqi market demands. But, if they are to find a place in Iraq, they would have to acquire the PVQ standard which is a long story.
4. Assessing the Iraqi market, we see replica Iranian brands are more present than the real ones. For example there are two types of products for the same brand. A border city there produces the replica and ships it to the market with ease.
5. Both the government and the industry body itself have called for supporting the industry. In Iran we consider support for small industrial units only as financial aid, a point that has not been given attention. If we look at an advanced country like South Korea we see quite the contrary. They enjoy almost every support but financial support. If we look at Turkey we see the same. The Turkish government gives a lot of the resources to the organizations rather than factories, allowing them to keep a strong presence in Iraq and launch an office there and make demands.