Is it possible to ban imports without creating a monopoly?/ Will the experience of automobile manufacturing be repeated in other industries?

Today, Ebrahim Raisi entered Central Province on his 29th trip to the province as President. In part of his speech, he announced to the industrialists of this province that the government does not allow the import of goods with domestic equivalents. Statements that some analysts take to mean adopting policies based on Import ban They know in different markets.

Based on this, it seems that the government intends to repeat the experience of industries such as automobile manufacturing, household appliances, clothing, etc. in other industries and markets. While looking at the past experiences show the failure of the government in pursuing the policy Import ban has it. In particular, the creation of monopoly and the distancing of private sector activists from commercial activities are among the consequences that we have witnessed in this type of policy.

How did the car manufacturers monopolize the market?

After the ban on car imports and the withdrawal of foreign brands from Iran, two state-owned car manufacturers quickly took the path of monopoly. With the unequivocal support of these car manufacturers from various governments, they left out any competitors and now, without the private sector being active in this field, they have taken over 90% of the demand in the Iranian car market. But they have never been able or in better words they have not wanted to supply according to the demand in the market.

Reza Fatemi-Amin, who took the helm of the Ministry of Security with the goal of producing three million cars, could not adjust the policies in such a way that even the goal of producing one million and 200 thousand cars in 1400 would be realized.

The statistics of the Ministry of Security show that 963 thousand 179 cars were produced in the country last year. 868 thousand 130 vehicles, that is 90.1% of the production, were made by domestic car manufacturers. The important point is that in this year, the amount of ride production decreased by about four percent compared to 2019.

Considering the weight of demand over supply, turning to lottery schemes was the last idea of ​​the government to meet the market’s needs. A plan that many analysts consider similar to a lottery. Perhaps the chance of winning the US green card lottery is more than buying a car directly from Iranian car manufacturers.

car purchase; Need or desire?

The statement of the spokesperson of the Ministry of Security indicates that in the last implemented plan, more than six million and 57 thousand people participated in the joint sales plan of car manufacturers. Statistics depicting the minimum accumulated demand in the Iranian car market. This is despite the fact that only 76,700 cars are sold by car manufacturers in this plan. It means that only one out of every 79 people owns a car. The interesting thing to note is that almost one out of every 45 participants in the US Green Card Lottery registration has a chance to win the lottery.

Of course, depending on the type of car, the chances of winning the lottery of the most popular models in the market, Pars and 206, are much lower than other models. Of course, the fans of these cars are not only fascinated by their appearance and design. Peugeot 206 Type 2, which was priced at 150 million tomans in the last sales plan of the integrated system, is traded up to 300 million tomans in the open market. Or the price of customized Peugeot Pars TU5 ELX, which is 211 million tomans in the factory, is 449 million tomans in the market. The gap of more than two times the price of these cars from the factory to the market has made lottery schemes very attractive for dealers and market mafia.

The effect of import ban on the price of domestic goods

the effect Import ban And the withdrawal of foreign brands from the Iranian car market can be clearly seen in the prices. In 1996, when companies such as Peugeot, Renault, etc. were still operating in Iran, 206 Type 2 and Peugeot Pars were sold at factory prices of 32 million and 37 million tomans, respectively. That is, if we even take the factory price as a basis, in less than five years, Peugeot 206 and Peugeot Pars have experienced a price increase of more than 4.5 times and 5.7 times. This change is 8.5 and 10.5 times higher than the market standard, respectively.

Of course, this does not mean that all these events are in the shadows Import ban have occurred; Certainly, other factors have influenced this process, but if domestic car manufacturers had a serious competitor in the market, could they have pushed the country’s largest non-oil industry to such an unplanned level?

Even the supreme leader of the revolution criticized these approaches in a meeting with industrialists a while ago. Criticisms on the other side included home appliance manufacturers. Another industry where the import ban has been applied for several years.

In addition to the removal of imported goods from the home appliance market, LG and Samsung, which had more than 70% of this market, limited their activities in Iran from May 2018 and officially left the country’s market in February 2018. There was no news even of Bosch and other foreign brands.

Another type of monopoly after import ban

Although government officials and even industry activists considered the departure of Koreans from Iran after two decades as a golden opportunity, now, after about three years of this situation, another type of monopoly is emerging in the home appliance market.

Although more than 400 Iranian companies are active in various sectors of this industry, in the last few years only a few brands have been close to the government and the pillars of power, which have taken over one of the industrial groups of Anan Bazaar. During this time, they showed that the import ban is a golden opportunity, but not for Iran’s industry and production, but only for a few profit-seekers. Profit seekers who, even by falsifying the brand, are trying to place themselves as the only non-Iranians in the market in the absence of foreigners.

According to the information obtained, these companies even take over the production line of smaller companies and call their production under their name. In this way, they have been able to introduce themselves as the flagship of production by presenting high numbers in the annual statistics.

Although after the withdrawal of foreign companies from the Iranian home appliance market, Iranian manufacturers were able to set new records in the field of production, but it seems that these manufacturers have followed the path of automobile manufacturers in meeting the needs of the final consumer. Especially the production of large household appliances such as televisions, refrigerators and washing machines faced serious challenges in the last three years.

As some brands have turned to pre-sale of home appliances in the last year! It is even heard that a number of companies have contracted with some government agencies to encourage employees and retirees to participate in these pre-sale plans. But these companies have defaulted on the delivery date.

From incentive plans to refrain from selling

Domestic brands, which did not have much room for maneuver during the presence of LG and Samsung, have repeatedly raised the prices of their products during this period. As surveys show, the prices of various products have increased between two and six times during the last two years. These events happened while before Import banthe manufacturers put attractive incentive plans for sale so that they could attract applicants with discount plans.

Due to the large presence of private sector companies in the home appliance industry, a different path was expected compared to the government car manufacturers. But with the direct intervention of the government in this industry, a similar and exclusive experience was repeated much stronger. Perhaps, due to the type of product and existing sensitivities, the home appliance industry is also struggling with the problem of smuggling.

As the market activists say, in the most optimistic case, more than 40% of the market is made up of contraband goods. Smuggling is no longer limited to the illegal import of goods from the borders. Rather, the videos published on social networks show that some workshops have smuggled home appliances into the heart of Tehran using labels and cartons of foreign companies.

This is an incident that was observed before in the country’s clothing industry and continues.

Import ban is apparent?

In addition, many of the goods that are marketed as national production, their parts are completely imported from China. For example, the TV panel, which is almost 70% of the product, does not have a few main manufacturers in the whole world. Iran also has to supply these panels from China to produce this product. Of course, the financial statements of the companies show that the scope of importing parts is not only limited to TV panels or washing machine motors and refrigerators, but even smaller parts are supplied from other countries. An incident that can be seen in the country’s automobile industry.

As a result, although in appearance Import ban It is applied, but the production is still based on imports, and sometimes it has a higher exchange rate than the import of the final product.

Despite such experiences, the president once again announced that the government does not allow the import of goods with domestic equivalents. Perhaps this is a necessary measure to support domestic production, but can banning imports bring Iran’s industries closer to development?

Perhaps, to examine this issue, it is better to examine the model of other countries. Does Germany, which can be regarded as the world’s auto manufacturing ID card, refuse to import cars? Or is there no news of foreign brands of home appliances in the South Korean market?

Did Germany and Korea become industrial giants by banning imports?

The production of Benz, BMW, Porsche, Volkswagen and Audi products is enough to make a country unnecessary to import any other car. But despite these productions and being at the top of the list of exporting countries, Germany is the second largest importer of cars in the world after the United States.

The question should also be raised whether Germany and South Korea with politics Import ban Did they become giants in the automotive and home appliance industries?

In justifying the import ban, Iranian statesmen always emphasize the same policy as South Korea in the 1960s in the home appliance industry. But was this country able to succeed in industries such as household appliances and automobile manufacturing only through the import ban, or were there other factors involved in this?

5 principles of success of industrialized countries

Many economists divide the industrial success factors of Korea and Germany into five principles. Strong money (low inflation), small government, private sector activity, free foreign trade and welcoming foreign investment are the principles that put these countries on the path of development.

The five main ones that can be considered as the missing links of Iran’s economy in the current situation. Now there is no news of foreign executive investment, nor of foreign free trade. The spot inflation rate also broke the record of this index after the revolution by crossing 52%, and the value of the national currency against foreign currency is at its lowest level. Also, while the private sector is more and more in trouble, the government follows policies such as separating ministries and interfering more in the economy. Events that forced many private sector activists to migrate or leave their business in recent years.

On the other hand, after General Park’s coup d’état in South Korea and assuming the presidency of this country in the 1960s, the establishment and development of heavy industries was included in the country’s five-year development plans. Using these programs, General Park was able to increase the per capita income of South Korea more than five times between 1972 and 1979.

What is the Iranian government’s plan for the development of heavy industries? Is it other than that the industries should lower the production shutter in the hot season of the year in the absence of electricity and in the cold days in the absence of gas? Or now that the seventh development plan is being compiled, how is it different from the previous six imaginary plans that did not achieve even 30% of their goals in the best case?

Are domestic cars similar to Benz?

Also, it is still not clear what the meter and criteria are for distinguishing similar domestic goods? Now that the import of Benz and BMW to Iran is prohibited, are domestic cars similar to it? Or this question is also raised about LG and Samsung home appliances. Do the goods produced in Iran have the same quality? Also, now that the import of the iPhone to Iran is prohibited, will similar production be carried out?

Or industrial Germany, which rose like a phoenix from the ashes of the destruction of the World War, did it rely on Import ban became the center of world industry?

This country also turned to monetary, economic and institutional reforms before any policy. As with expansionary policies, government investments and tax incentives led people to save.

By creating tax incentives, the German government was able to attract the capital of private sector activists to production and industries. Of course, this country did not use a single model to achieve industrial and economic development. Rather, by being flexible and leaving the doors of investment open, he was able to create two economic miracles in two periods after the World War and the collapse of the Berlin Wall. This is despite the fact that in the current situation, the tax pressure in Iran on various businesses, especially the private sector, has reached its maximum. It seems that these are the private activists who have to pay the government’s oil sanctions by paying taxes.

As a result, one should ask whether the Iranian government is willing to implement the main policies of Korea and Germany in the current situation, or by emphasizing on sub-topics such as Import ban Or myths such as making the parking doors of residential units smaller still want to lose the production and industrial opportunities of the country?

To read more, how much was Iran’s foreign trade volume last year? read the