The Forum for Partners in Iran's Marketplace

September 2004 / No. 31


Smuggling an Economic Phenomenon

We can prove that governmental organizations have nothing to do with smuggling. I have the authority to shut down illegal docks and I will do so.

Mohammad Baqer Qalibaf, Secretary of the Goods and Foreign Exchange Anti-Smuggling Headquarters

With new posts, come new responsibilities. The once camera-shy General Qalibaf who was not used to take part in press interviews is now arranging a series of meetings with the press to improve ways of fighting goods smuggling. He was appointed Secretary of the Goods and Foreign Exchange Anti-Smuggling Headquarters and now wields the Presidential powers at the headquarters. He attends meetings with an official suit carrying the title of “Dr”. Perhaps this is the first step toward brining the economic and controlling aspects of smuggling close together. Although economists believe that smuggling is an economic phenomenon and should be treated in this way.

It was the first time that Mohammad Baqer Qalibaf joined reporters after accepting his new post. He always emphasizes coordination with the press who establish a main pillar of the anti-smuggling drive. He believes smuggling is an ominous phenomenon that aims to meet a demand that has not been met through correct channels. In addition to damaging the economy and employment of the country, smuggling sometimes leads to problematic approaches adopted by economic directors.

Qalibaf says, “This is the worst aspect of smuggling. I have tried to carefully examine past experiences. I came to the conclusion that there is no single definition of smuggling.” Iranian economic officials look upon smuggling from different angles and for this reason figures produced by them on the magnitude of smuggling differs; so that, statistics on the volume of smuggling vary from $4 billion to $11 billion. Therefore, perhaps the first and foremost step to fight smuggling is to come up with a single definition of this phenomenon.

There are two approaches to smuggling with one being supply-oriented and the other demand-oriented. The supply-oriented approach believes that anything that is produced inside the country at any price and with any quality should be consumed by people. That is, the system should supply as much as it can and people are obliged to use them. The other approach believes that we must recognize people’s demands and give a reasonable response to that demand. Smuggling is a result of not meeting people's demand. As long as this problem has not been solved, we cannot be successful in fighting smuggling.

Due attention should be paid to four basic principles. Firstly, we must focus on fighting smuggling in the short term. Organizations that have caused problems for the country's economic system should organize their activities accordingly. Secondly, we must pay attention to tariff and trade. Tariffs must be revised to become more rational. With regard to many items, domestic production cannot meet demand. We cannot cover all the country's needs by defending the low quality of most domestic products. In fact, if the gap between domestic production and domestic demand is not filled through logical imports (at reasonable tariffs), that gap will be filled up through smuggling. In this way, domestic production will be harmed. Thirdly, we must support domestic producers. This is a time-intensive method and does not mean illogical support for domestic manufacturers. Producers should not be given special privileges. Otherwise, the country's progress will be barred. Fourthly, we must propagate a correct culture for using domestic products. We must pay attention to the type and quality of consumption and have respect for domestic production.

Dubai does not observe the law of international trade. However, the problem of illegal bills of lading is being followed up by foreign diplomatic apparatus.

A problem is that the trade and tariff sector is trying to give incentives to businesspeople for more imports, but they insist that imports should be carried out at the tariff that they determine. Therefore, the blame does not entirely lie with security, judicial and disciplinary forces. He pointed to cigarette smuggling as an example. "Importing cigarettes were previously banned. Today, 50 million cigarettes are used inside the county on a daily basis, while domestic production stands at 17-18 million. Fortunately, importing cigarettes is now free, tariffs have been reduced to zero and there are more controls."

It is believed that the main crisis in the country is one of management. "In fact, management is shabby in all ultra-sectoral fields. The main task of the anti-smuggling headquarters pertains to this ultra-sectoral management. Anyway, after all that has been done, we decided that any kind of foreign cigarettes sold outside the frame set by the police force will be considered smuggled. The same problem existed with regard to tea. About 120,000 tons tea is consumed in the country, of which 50,000 tons is produced inside the country and the rest must be imported.”

Focusing on the smuggling charges leveled against the government, Qalibaf says they are merely a consequence of factional and political skirmishes. He openly says that some people intend to mar the government. “We can prove that governmental organizations have nothing to do with smuggling. I have the authority to shut down illegal docks and I will do so. However, the charges are not true. Unfortunately, political differences are sometimes taken to fields that are totally irrelevant.”

Unfortunately, during the last year of Khatami’s government many circles have tried to prove it to be inefficient by leveling false charges against the government. With regard to his economic approach, he says, “I pursue an approach oriented toward wealth generation, relative advantages and competitive production.” He is the first official to outspokenly say that supporting domestic production would not mean that the government will do everything to support low-quality products. Although, he is a staunch supporter of domestic production, Qalibaf opposes rent seeking.

There are trade problems between Iran and Dubai. Dubai does not observe the law of international trade. However, the problem of illegal bills of lading is being followed up by foreign diplomatic apparatus.

With regard to activities of anti-smuggling headquarters he says that, “According to Article 127, the President’s powers have been delegated to me; according to Article 138, a seven-member team of Cabinet members has been established; if there would be any need to gain Majlis’ approval, the government will send a bill to the parliament. However, a representative of the Majlis is also present at the headquarters.”

With regard to forex smuggling, he says that people taking foreign currency out of the country will not be considered smugglers anymore, but those who play a role in changing rial to dollars will be considered smugglers.

He puts official figure for smuggling at $5.4-$5.5 billion and mentions Mirjaveh as a good example for fighting smuggling while protecting people’s livelihoods. He complains about contradictory decisions made by the government with regard to imports and mentions apprehension of a computer parts smuggler at the airport as an example. “We fined him one billion tomans, but he settled the sum in five minutes. Anyway, we had to punish him. If we had not talked about him so far we wanted to avert the issue being treated politically.” A person with such wealth and power could not be an ordinary man. If the police could fight such people some day it would be a great achievement for the country and a feat in fighting smuggling.


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  Sep.  2004 / No. 31