The Forum for Partners in Iran's Marketplace

October 2018, No. 89


Double Corruption!

We say the government is the servant of the people.
But the government has shown it is the guardian of the people.

The frequent changes in government laws and regulations, especially in the area of foreign trade, have outraged many economic activists. Particularly, the fact that the scope of these prohibitions and the restrictions on the allocation of foreign currency and the ban on import of goods has also been extended to Commercial International Import/Export Licenses and a certain limit has been set for those who have recently acquired their Commercial License. Now this group is obliged to import only $500,000 in the first year and two million dollars in the second year and should comply with the new rules and regulations that the first vice president has just announced.

Assadollah Asgaroladi, a veteran figure in the field of foreign trade speaks about the foreign trade restrictions these days and believes that double corruption is hidden behind the government related collusions. He maintains that “corruption must be stopped from occurring by preventing the emergence of misconduct so that no one can violate the law, instead of discovering a case of corruption first and then arrest violators. Well, even if the wrongdoers are detained which would be useless, they have disrupted the order of an economy.” 

There have been some changes in Iran’s foreign trade. How logical are these changes in the current situation?

The current state of foreign exchange generated by the government is not at all appealing in foreign trade, and since the beginning of this policy, which is known as the foreign exchange rate unification, a big mistake has been made and that is the announcement of 42,000-rial-rate per US dollar. However this rate was not at all reasonable for the US dollar and should have been seriously thought through, and determined on what basis this rate was set. Meanwhile, to set this rate, the government has consulted neither economic activists nor economy professors and elite economists.

This is the first issue related to the problems occurred in our foreign trade and is originated from the foreign currency issues. This is a mistake, and the consequences of that mistake will gradually emerge. Permission has practically been issued for import registration at a currency rate of 42,000 rials (per US dollar). Thus some people whose work had nothing to do with goods import became importers.

This occurred under conditions that the 42,000-rial-dollar was supposed to be available only to those who import essential goods and primary materials such as wheat, barley, rice, corn, livestock food, medicine, industrial machinery and oil. The forex was not supposed to be allocated for import of cell phones and automobiles!

The government’s mistake was placing orders for these goods and allowing the import of auto spare parts, various types of cars and mobile phones at official forex rate. The official rate was even allocated to grains and consumer goods, including bean and lentil which lead to some people’s corruption. They received foreign currency from the government at official rate (42,000 rials per dollar) and imported goods while setting the rate of their commodities in the market at 6,0000-7,0000 rials per dollar; some of them even did not import goods and instead sold the currency at higher prices at the open markets. 

Why does not the government deal with the sources of rent seeking and corruption?

The causes of corruption are inside the government itself, not at the high-level ministers of course, but at low-level agents who issue licenses. By issuing directives and regulations of this sort, the government also creates a golden signature that may lead to corruption. Corruption is caused by those who issue permits. Issuing a license for importing a specific product which is prohibited is not an easy process. This banned license is made available to certain people; it must be made clear who has issued this license and on what basis it has been given to a certain importer; in the meantime it must be clarified on what basis the customs has cleared the goods! The license holders are corrupt; they would not do anything for free but they would do it for their agents. The government itself may be clean, but its agents may engage in wrongdoing. 

What is the purpose of issuing numerous directives and regulations?

The issuance of these directives and regulations in the Iranian economy is unnecessary. There are import/export laws and regulations that are approved by the Parliament at the beginning of the year, and communicated by the government. These laws and regulations should not be changed and must be implemented till the end of the year. Changes in these regulations would definitely lead to corruption. If a license is issued, it should be given to all applicants.

We say the government is the servant of the people. But the government has shown it is the guardian of the people. It believes whatever it says must be done while economic activists believe that the government should consult with them. The government lacks sufficient expertise in the field of trade, and therefore makes one-sided decisions. Even these directives are often not fully implemented, which gives certain people at the beginning of the queue the opportunity to enjoy the benefits. And when it is halted after a while it will be too late because those involved in the corruption have done their job.


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  October 2018
No. 89