Iran: Going Beyond Oil With Textiles

Editor’s Note: For international readers, the Iranian calendar year as referenced in the story
begins March 21 of each Gregorian calendar year and ends on March 20 of the following Gregorian
year. For example, the Iranian 2005-06 year began March 21, 2005, and ended March 20, 2006.


he Islamic Republic of Iran’s rich petroleum resources — discovered in the Khuzestan
province in 1908 — along with its natural gas reserves, have undoubtedly played a prominent role in
the economy of that Middle Eastern country. Oil now accounts for 80 percent of all export revenues
for the country, which possesses about 10 percent of the world’s crude oil reserves and is a member
of the Organization of Petroleum Exporting Countries. However, Iran’s government has shifted its
attention away from oil exports in recent decades and focused instead on the development of other
sources of value-added products, such as the textile industry.


Export-Focused Development Strategy

According to Iran’s Ministry of
Industries & Mines, the government has taken steps to increase non-oil exports by changing the
country’s industrial structure and implementing new technology and machinery. As part of an
industrial development strategy published in 2003, the government has focused on: “self-sufficiency
through supporting consumers; import substitution through securing basic needs and protecting the
domestic producers; and enhancing the social welfare of the nation and strengthening the
international position of the economy through export of goods and services to meet the needs of the
other nations and [to] increase … the per capita income of the country.” The strategy for the
consumable goods industries, which include the textile sector, involves meeting domestic market
demands as well as expanding exports by awarding “exemplary exporters” on a yearly basis, providing
facilities, expediting exporters’ participation in international exhibitions and marketing Iranian
products that are competitive in the world market.

There has been a push to renovate machinery and produce high-quality fabrics in the Iranian
textile industry, which employs more than 400,000 people and is centered around Tehran, the capital
city, and Esfahan, located 414 kilometers south of Tehran. According to the Statistical Centre of
Iran, the textile industry produced 396 million meters of finished fabrics during the Iranian
2003-04 calendar year — a figure that was 8.8 percent greater than that of the 2002-03 Iranian year
and 6.2 percent greater than that of the 2000-01 Iranian year. In the 2001-02 Iranian year,
however, finished fabric production surged to 551 million meters. Machine-made carpet production
slowed by about 33 percent to 41.2 million square meters (m2) in Iran’s 2003-04 calendar year when
compared to the 2002-03 Iranian year — the first decrease since the 1998-99 Iranian year. The
production of moquette — an upholstery fabric or carpet with a velvety pile — increased by 25.8
million m2 from the 2002-03 Iranian year and nearly doubled from the 2000-01 to 2003-04 Iranian
calendar period to a total of 81.3. million m2 in the 2003-04 Iranian year. Likewise, blanket
production also grew by approximately 75 percent within the 2000-01 to 2003-04 Iranian calendar

With regard to the exportation of those goods, the ministry reported that during the 2003-04
Iranian year, the textile and garments group exported products including man-made fabric, moquette
and clothing worth US$300.4 million, or 8.6 percent of all industrial and mineral exports. That
total reflected a 35.6-percent increase compared to the previous Iranian year. The country’s
textile and apparel exports include wool, cotton and man-made-fiber fabrics; bags and shoes;
interior and kitchen furnishings; towels, blankets, quilts and mattresses; leather and leather
products; ready-made apparel; knitted fabrics; moquette and floor coverings; furniture and
wallpaper; and machine-made carpets, the Iranian embassy in Ottawa, Canada, notes.

Additionally, during the first four months of the 2005-06 Iranian year, Iran exported
textile products and apparel worth $56 million, down 15 percent from the year-earlier period,
according to the Islamic Republic of Iran Broadcasting News Network, which cited Iran’s Customs
Administration. Of that total, $25 million came from clothing exports. Countries that imported
Iranian clothing during the period included Azerbaijan, with $11.33 million; Afghanistan, with
$7.23 million; Kazakhstan, with $2.54 million; the United Arab Emirates, with 1.84 million; and
Kyrgyzstan, with $1.82 million worth of Iranian apparel.

A January 2005 article in Iran Daily, a Tehran-based newspaper published by the Islamic
Republic News Agency, stated the ministry reported that 10 to 15 percent of Iranian textile
facilities still needed to be overhauled as part of a development plan initiated in 2001 that had
cost the government $220 million at that point. As of that writing, the ministry had requested $540
million from the Foreign Exchange Reserve Fund, which it hoped would stimulate 6.6-percent growth
if the funds were disbursed in time. Iran Daily noted that, in comparison, China, which has flooded
Iran with its textile exports, invested more than $50 billion in its textile industries in

Iran Daily further observed that,
under the country’s law, the government was responsible for formulating plans for the sector’s
partial privatization and merging of units that remained under its control in addition to upgrading
factories and training textile workers in the latest manufacturing methods.

Golnaz Nasrollahi, managing director of the ministry’s textile and clothing department, told
the newspaper that 70-plus percent of those obligations had been fulfilled, but more had to be done
to keep pace with rapid changes in the global textile industry.

Even though there has been a major overhauling of facilities, low productivity has continued
to be the main challenge for the country’s textile industry, Nasrollahi said. Many textile
factories have struggled with serious financial problems, or closed completely, and have not been
able to cut production costs because of the “failure in making the best of the available resources
and lack of modern technology,” as well as the challenge of acquiring high-quality raw materials,
such as cotton, at competitive prices, according to Iran Daily.


Industry Structure, Machinery

For 2004, Iran’s installed spinning
capacities included 2.2 million short-staple spindles, 110,000 long-staple spindles and 88,000
open-end rotors, the Switzerland-based International Textile Manufacturers Federation reported in
the 2005 edition of its International Textile Machinery Shipment Statistics report. Those
capacities were the same in 2003 with the exception of open-end rotors, which numbered 500 less in
2003. With regard to weaving capacity, Iran reported 10,000 shuttleless looms in 2004, compared to
10,000 shuttleless looms in 2003 and 14,600 shuttle looms in 2003.

Spinning shipments to the country in 2005 totaled 72,096 short-staple spindles, 10,800
long-staple spindles and 5,328 open-end rotors. Texturing false-twist spindle shipments numbered
480, and 2005 shipments of circular-knitting machines with working widths greater than 165
millimeters totaled 112. In the weaving sector, there were shipments of 179 rapier/projectile looms
and 57 air-jet looms. Eighty-one electronic flat-knitting machines were shipped to Iran, and the
country also invested in some finishing machinery in 2005.

According to the Milan-based Association of Italian Textile Machinery Manufacturers
(ACIMIT), which — in cooperation with the Rome-based Italian Trade Commission — recently held a
textile machinery workshop in Tehran, sales to Iran of Italian machinery in 2005 were worth about
40 million euros.

Spinning proved to be the most popular machinery type and made up 62 percent of total
exports to Iran. Finishing machinery, 16 percent of total exports, followed, and knitting machinery
followed close behind, making up 14 percent of total exports to Iran.

Additionally, Ehsan Soltani, a Yazd, Iran-based industry consultant, said in his
presentation at the ACIMIT workshop, entitled “Current Trends of Iran Textile Industry and Future
Options for Textile Supply Chain,” that Iran ranked 20th among global textile machinery importers
in millions of US dollars during the 1997-2003 period. China, the United States, Turkey and Italy
led the group. Furthermore, Iran ranked 10th among the biggest Asian textile machinery importers in
terms of millions of US dollars during the same period. China, Turkey, Hong Kong Special
Administrative Region, Japan, India, South Korea, Indonesia, Thailand and Pakistan came ahead of


Handwoven Carpets

As another strategy to move away from
oil, the ministry also has focused on the exportation of handwoven carpets, which it separates from
other textile goods and places in the category of handicrafts. Those carpets have long been one of
Iran’s chief export items. According to Iran’s Customs Administration, Iran exported handwoven
carpets worth $471.7 million during the 2004-05 Iranian calendar year — a 17.7-percent decrease
from the previous Iranian year. In the 2002-03 Iranian year, the country exported $517.3 million
worth of those goods.

When comparing the first quarter of the Iranian calendar year of 2005-06 to the same period
in 2004-05, handwoven carpet exports dropped by 3.8 percent to $86.4 million. Exports of ironware
and steel products and other petrochemical products led those carpets during that period. During
the first 11 months of the 2005-06 Iranian calendar year, the country exported handwoven carpets
worth more than $402 million. Germany and the United States received 42 percent of those products,
the customs administration noted.

Although the United States currently has an embargo against Iranian products, imports of
certain carpets, textile floor coverings and carpets used as wall hangings are allowed. Those wool,
non-apparel imports made up 9.15 percent of the respective import market in terms of millions of
dollars, according to the US Department of Commerce Office of Textiles and Apparel’s (OTEXA’s) May
9, 2006, Major Shippers Report. When those exports were analyzed as million square meters, they
captured 2 percent of the share of the total import market in that category. With the exception of
wool products, which had 2.33 percent of the total US import market in millions of dollars, the
other Iranian product categories OTEXA reported had less than 1 percent of the share of total
market imports in their respective categories.

Before industrial sector investments, the country had focused on the production and
exportation of handwoven carpets. Although Iran’s carpets were once in great demand in European
markets, especially Germany, the Middle Eastern country has been unable to regain its previous
foothold in the world market as other countries have begun producing similar carpets. According to
an August 2005 ministry report, handwoven carpet exports had decreased by 9.3 percent in the
previous nine months, for a total of $360 million. That slowdown was the result of Indian and
Chinese products “that were presented to the market as handwoven carpets,” the ministry

Industry Outlook

To be sure, Iran’s textile industry
certainly faces the many challenges that textile industries around the world are confronting.
Nevertheless, there is still optimism the textile industry of Iran — a country with an estimated
68.69 million people by July 2006 — can continue to add greatly to its gross domestic product,
which, by 2005 estimates, will total $552.8 billion on a purchasing-power-parity basis. Through the
government’s development strategy of value-added exports, machinery and facility renovations, and
greater product marketing, the textile industry has been moving in the right direction.

As the Iran Daily wrote in the aforementioned January 2005 article: “Despite obstacles,
adversaries, ordeals and setbacks, the potential available points to a great future for the textile
industry if the right policies and environment are created.

“Iran has the potential to become an important player in the global economy.”

Islamic Republic Of Iran At A Glance

• Capital: Tehran

• Known as Persia until 1935

• Government type: theocratic republic

• Currency: Iranian rial

• Gross domestic product (GDP): $552.8 billion (2005 estimate) on a purchasing power-parity
(PPP) basis

• GDP per capita: $8,100 on a PPP basis

• Population: 68.7 million (July 2006 est.)

• Population growth rate: 1.1% (2006 est.)

• Median age: 24.8 years

• Labor force: 23.7 million, shortage of skilled labor (2005 est.)

• Total area: 1.6 million kilometers squared

• Land use: arable land 9.78%, permanent crops 1.29%, other 88.93% (2005)

• Natural resources: petroleum, natural gas, coal, chromium, copper, iron ore, lead,
manganese, zinc, sulfur

• Industries: petroleum; petrochemicals; textiles; cement and other construction materials;
food processing, particularly sugar refining and vegetable oil production; metal fabrication;

• Exports: $55.4 billion free on board (f.o.b.) (2005 est.)

• Export commodities: petroleum 80%, chemical and petrochemical products, fruits and nuts,

• Export partners: Japan 18.4%, China 9.7%, Italy 6%, South Africa 5.8%, South Korea 5.4%,
Turkey 4.4%, The Netherlands 4% (2004)

• Imports: $42.5 billion f.o.b. (2005 est.)

• Import commodities: industrial raw materials and intermediate goods, capital goods,
foodstuffs and other consumer goods, technical services, military supplies

• Import partners: Germany 12.8%, France 8.3%, Italy 7.7%, China 7.2%, United Arab Emirates
7.2%, South Korea 6.1%, Russia 5.4% (2004)

• Telephones, main lines in use: 14.6 million (2003)

• Cellular phones: 4.3 million (2004)

• Internet users: 7.5 million (2005)

Source: The World Factbook, Central Intelligence Agency

July/August 2006