The Government-Private Sector Dialogue Council on Tuesday approved seven proposals out of nine to ease rules and procedures for repatriation of exporters’ overseas earnings and help promote the key sector.
The council, comprising business leaders, senior government officials and lawmakers, meets every month at the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) to address economic issues.
In the Tuesday meeting, which was attended by Economy Minister Farhad Dejpasand and officials from the Central Bank of Iran, the council agreed to extend the deadline for repatriation of export income in the last fiscal year (March 2019-March 20) until late September. The CBI had earlier set July 21 as the closing date for the repatriation.
It was also decided that repatriation procedures be the same as last year in order to avoid confusion and help maintain stability in rules and procedures, said Hossein Selahvarzi, the ICCIMA vice president.
Deadline(s) set for the repatriation of export earnings was long a bone of contention between the central bank and private businesses sector with the former insisting that earnings should be returned as per the deadline.
In a letter to the ICCIMA president Gholamhossein Shafiei earlier in the month, the CBI Governor Abdolnasser Hemmati had warned that “all exporters are given until July 21 to fulfill their financial commitments, otherwise they would not be eligible for export incentives and trade services offered by relevant administrative bodies”.
He was referring to the refunds of value added tax levied on exporters if they repatriate their overseas earnings within CBI-set deadlines.
Four Options
Outlining other discussions in the meeting, Selahvarzi said the council agreed on measures to facilitate a process based on which exporters can import goods instead of bringing back their earnings.
Accordingly, exporters now have four repatriation methods. Export earnings are supposed to be returned via one of the following ways: selling currency on the secondary foreign exchange market, known as Nima (Persian acronym for Integrated Forex Deal System), cash transfers through hawalah, selling currency to exchange bureaus, and finally using their money to import goods and machinery or allow a third party to do so.
Rules stipulate that companies exporting non-petrochemical goods sell at least half of their earnings via Nima and 20% in cash to moneychangers. The balance can be used for importing goods either by the exporting firm or a third party.
Petrochemical exporters must bring back a minimum of 60% of their currency earnings and sell it via Nima.
Nima is a platform where exporters sell their overseas earnings to companies importing non-essential goods. It logs data bout repatriated and purchased forex for import and export.
The council also agreed to set a cap on the amounts new exporters can handle. The newcomers can export a limited amount of goods with their special commercial cards for the first time to demonstrate that they are capable of fulfilling their financial commitment.
“The cap will be removed if they fulfill their commitment,” Selahvarzi said.
The session conditionally approved a proposal based on which the government’s role in allocating forex to importers is minimized.
According to Selahvarzi, as per this proposal the CBI will allocate maximum $10 billion of export earnings to importers of high priority goods in the “real private sector”. The term seemingly applies to importing companies that have no affiliation to state and government bodies.
Samad Karimi, head of the CBI Export Department and the bank’s representative in meeting, said the bank has concerns about the balance of payments. “This should be sorted out within a clear framework.”
“It was agreed that ICCIMA and the Trade Promotion Organization of Iran prepare grounds to supply foreign currency, from non-oil export earnings, for importing high priority goods up to $10 billion and with minimum government intervention,” Selahvarzi was quoted as saying.
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‘Import Without Forex’ Policy
The council dropped a proposal that asks the CBI to recognize the so-called “import without forex” policy and referred it to special committees for further evaluation. Import without currency allocation refers to a method of import where companies can use their own foreign currency, in or outside the country, to import goods.
The CBI said in a notice last month that it welcomed this process on the condition that importers first declare the origin of their foreign currency.
According to media reports, the same method was common in the recent past for imports for which the government was unable or unwilling to open letters of credit.
However, the CBI imposed restrictions on the practice reportedly due to transparency issues.