Tue, Apr 04, 2006
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Private Banks Allowed Higher Lending Rates
Plans to Join Europe Power Network by 2020
In 2005:
Import Bill From Dubai $28.7b
Tehran, Cairo Agree on Broader Ties
Kuwait Water Export Deal Will Be Updated
Share Transactions Decline Sharply
Tea Industry Problems Persist
Shadow Budget Uncertain

Private Banks Allowed Higher Lending Rates
TEHRAN, April 3--the Money and Credit Council has decided to fix profit rates charged on loans extended by private banks at three percent higher than state-owned banks.
According to Fars news agency, the council made the decision in mid-March and ordered immediate implementation of the directive.
The government says it is committed to bring lending rates down to seven percent by the closing year of the Fourth Five-Year Economic Development Plan (2005-2010).
Bank rates have declined from 24 to 16 percent following mounting pressures from parliamentarians on the state-controlled banking system.
Lawmakers say a further decline is necessary.
“We have held 20 meetings to examine the issue with senior experts and managers,“ said Mohammad Shahi-Arablou, who heads the Majlis Economic Commission.
“The government has also been committed to pay 20 percent of its debts to the banking system per annum (in return),“ he added.
The banking system has always complained about the huge government debts, blaming it for the failure of banks to cut profit rates.

Plans to Join Europe Power Network by 2020
Once Iran's power network is connected to Europe, local supply disruptions will be curbed significantly while network security and other facilities will be boosted.
TEHRAN, April 3--Iran’s power network will join Europe within the next 15 years provided domestic political conditions remain stable and global technological advancements do not experience a huge leap in this period, a senior power industry official was quoted as saying Monday.
Massoud Hojjat, deputy head of Tavanir Power Generation, Transmission and Distribution Company, told ISNA that the national power grid can be connected to Europe via Russia and Turkey, and relevant technical studies are underway.
“Given our positive outlook on both routes, we are now studying ways to enhance electrical connections,“ he said, adding that the country is planning to improve the national power network in cooperation with a German consultancy group.
Once Iran’s power network is connected to Europe, local supply disruptions will be curbed significantly while network security and other facilities will be boosted, the news agency quoted Hojjat as saying.
He said Iran has the capacity to emerge as a regional power distribution hub thanks to its strategic geographical location, abundant oil reserves and its access to advanced power plant construction technology.
Hojjat said the Energy Ministry has given priority to export, import and transit of power. He, however, noted that more power plants need to be constructed in the country to achieve higher growth levels in this key sector.
Iran presently has power transmission agreements with Afghanistan, Azerbaijan, Iraq, Nakhichevan, Pakistan, Turkey and Turkmenistan.
The country needs to generate an extra 4,000 megawatts of electricity annually to meet growing domestic demand. Nominal power generation capacity has reached 39,000 megawatts, and the number of subscribers has exceeded 19 million.
Some 800,000 new subscriptions are made in the power sector each year.
Iran has one of the world’s highest power consumption rates, which currently is 10 percent per annum.

In 2005:
Import Bill From Dubai $28.7b
Saudi Arabia with $17.7 billion and Qatar with $5.8 billion are Dubai's largest target markets after Iran.
TEHRAN, April 3--Iran was reportedly the largest export market for the Persian Gulf state of Dubai, United Arab Emirates (UAE), in 2005.
Fars news agency quoted a report by the Dubai Chamber of Commerce as suggesting that Iran imported $28.7 billion worth of goods from Dubai in 2005, when the sheikhdom’s total exports reached close to $96 billion.
Iran has emerged as Dubai’s largest export market in recent years.
Imports from Dubai grew by seven percent in 2005 compared to 2004.
Saudi Arabia with $17.7 billion and Qatar with $5.8 billion are Dubai’s largest target markets after Iran.
Saudi imports from Dubai rose by 33 percent and Qatar’s imports jumped by 6 percent in 2005 compared to the preceding year.
It was announced in mid-2005 that some 6,500 Iranian companies are registered in the free port of Dubai.
UAE authorities are quoted as saying that 400,000 Iranians live in the Persian Gulf state. They say Iranians have invested a total of $200 billion, which is expected to increase to $300 billion in 2006.
Iran’s Standard and Industrial Research Institute announced last year that the UAE has the largest share of exports of low-quality and substandard products to Iran.

Tehran, Cairo Agree on Broader Ties
TEHRAN, April 3--Economy Minister Davood Danesh Jaafari said in Cairo Sunday that Iran is willing to expand cooperation with Cairo, notably in the economic, industrial and investment sectors.
According to IRNA, Danesh Jaafari told Egypt’s Minister of Foreign Trade and Industry Rashid Mohammed Rashid that the two countries enjoy vast potential for boosting cooperation in the said fields.
Rashid noted that his country is also interested in expanding ties with the Islamic state in various commercial and economic domains.
The two countries are presently cooperating in the banking, textiles and shipping sectors, he recalled.
After arrival in Cairo, Danesh Jaafari and his entourage Inspected the Misr-Iran Textile Company (Miratex).
Established in 1974, Miratex is also involved in processing and exporting Egypt’s cotton crop.
Iran and Egypt do not full diplomatic relations since the victory of the Islamic Revolution in 1979 and interest sections represent the two countries in each other’s capital.

Kuwait Water Export Deal Will Be Updated
TEHRAN, April 3--Energy Minister Seyyed Parviz Fattah said here Monday the 2004 water export agreement with Kuwait would be updated.
The minister told Fars news agency that the water deal was brought up during President Mahmoud Ahmadinejad’s recent visit to the neighboring Arab state.
Fattah said his Kuwaiti opposite number has been invited to Tehran for talks on the long-publicized project. He did not mention the date of the visit.
“I’m positive that once the agreement is updated, issues related to the construction of the water pipeline will be resolved,“ he said, adding that the Kuwaiti government is determined to purchase water from Iran.
“Fortunately, differences of opinion in the past have given their place to a consensus on water export from the country,“ he said.
As per the 2004 agreement, Iran had pledged to export 900,000 cubic meters per day of potable water to the parched Persian Gulf state via a pipeline.
Exports will be conducted in accordance with the climatic conditions in Iran. Talks on water export to Kuwait have been clouded among increasing concerns that Iran will face serious water shortages in coming years due to the ever-increasing consumption, low precipitation and declining underground reserves.
The Energy Ministry announced earlier that desert provinces in central Iran are facing a severe water deficit and that it is planning to construct several dams to bring the situation under control.
According to published figures, some 97 percent of the urban population and 63 percent of rural residents have access to clean water in Iran.

Share Transactions Decline Sharply
TEHRAN, April 3--Central Bank of Iran (CBI) said in a report Monday that the value of shares offered on the stock market fell drastically during March 2005-January 2006 against the corresponding period in the previous year.
According to Fars news agency, shares on offer declined by 89.3 percent in the period to reach 648.9 billion rials.
Shares offered in the Iranian month of Azar (Nov. 22-Dec. 21 2005) declined by 95 percent to reach 25.9 billion rials in the next month of Dey.
The Tehran Stock Exchange (TSE) chief has cautioned small shareholders against pursuing short-term interests, stressing that it would be safer for them to create portfolios and develop a long-term vision.
Ali Saleh-Abadi advised the newcomers in the stock market not to risk their capital on shares of a single company. He said the people must view the bourse as a place for saving their money.
Several major investors have distanced themselves from the TSE and prefer to buy shares in regional bourses following the crisis visiting the country’s capital market over the past few months.

Tea Industry Problems Persist
Contraband tea is available in the local market in unusually large volumes while domestic produce rots in the warehouses.
TEHRAN, April 3--The Tea industry remains in limbo as the government has failed to provide the sector with its legal rights almost six years after it handed over the industry to the private sector, an expert said here Monday.
Qassem Rezaian, managing director of Tala-ye Kouhpayeh Company, told ISNA that the State Tea Organization is operating parallel to private sector tea companies that has led to chaos and confusion.
He claimed the government has failed to protect the embattled industry, stressing that state-sponsored guaranteed purchase of tea has been unable to give it a new lease on life.
“Last year the government purchased tea at 5,400 rials per kilo when the cost price for farmers was 6,820 rials a kg. As a result tea processing factories suffered huge losses,“ he complained.
The already declining industry remains unclear and uncertain about the situation of tea production in the current Iranian year that commenced on March 21.
The tea offical further noted that the relevant industry associations lack the necessary clout to reduce their bulging inventories.
Contraband tea is available in the local market in unusually large volumes while domestic produce rots in the warehouses. Almost 97 percent of the national demand for tea is met by smuggled tea.
Close to 240,000 tons of tea was stocked in the year to March 2005 and another 240,000 tons was added in the March 2005-2006 period due to the growing demand for foreign brands that has put many tea plantations in the northern regions out of business.
Nemat Yavar-Zadeh, managing director of North Tea Factories Syndicate, said earlier that domestic tea industry is likely to incur losses of up to two trillion rials, if huge tea stocks decompose in the warehouses.
He said 100,000 tons of tea is stored in the syndicate’s warehouses, whereas the Tala-ye Kouhpayeh Company’s inventory alone has reached 18,000 tons.
Experts say one major problem is that tea produced domestically must be blended with foreign brands to improve quality and taste.

Shadow Budget Uncertain
TEHRAN, April 3--Iran’s planning chief said Monday the Ahmadinejad administration has not ’yet’ taken any initiative to prepare a ’shadow budget’, leaving the door open to speculations that the government is planning to have one.
Farhad Rahbar, head of Management and Planning Organization (MPO), told Fars news agency that a shadow budget will not need parliamentary authorization and the government has the authority to take any such action of its own accord.
“The issue does not need parliamentary study or ratification and the government can take such decisions in the framework of the (annual) budget.“
According to Fars, a shadow budget is a secondary budget, which is normally drawn up in times of economic crisis. Some experts say it is necessary for the government to have a shadow budget ready in the face of possible UN sanctions in relation to the nuclear dispute with the western countries.
However, the March 2006-2007 budget does not make any mention of the shadow budget, and the same has drawn protests from experts and lawmakers alike.
Some government officials had said earlier that there is no need to draw up or even discuss the shadow budget to help the government cope with possible economic sanctions. Their argument was based on the premise that international oil prices are of the ascending order and the higher revenues would be enough to fix the deficits if and when they occur.
Deputy economy minister, Kamaleddin Shahriari said in February that some sections of the annual budget can be “adjusted“ later in line with international developments concerning Iran’s nuclear issue.
Observers believe Europe is rather reluctant to lose its present lucrative share in the growing Iranian consumer market in the event of economic sanctions that may be imposed by the United Nations Security Council if Tehran refuses to reverse its uranium enrichment program.
Farhad Khorrami, a lecturer at Allameh Tabatabai University, said earlier that imports from Europe constitute two-thirds of Iran’s total imports and if economic sanctions are imposed, the Europeans will resort “to smuggling“ to protect their business interests.