. Commercial Tax was collected on II4I items which were supposed to he free of tax.
e. If these unauthorized collections are ignored, the customs duty is 99 P e^ cent efficient and the Commercial Tax 6 9 per cent efficient, the efficiency of both together being 85 per cent.
If it is assumed that the overall 88 per cent effic-^
iency ratio applies to all years In the study, then the amount of customs duties and taxes included in G.D.E.C.P.
in imported capital goods will:be overstated by about 11 per cent for each year. .
However, it is unlikely that the efficiency ratio has been stable throughout the period. After Belgian offi
cials took over the operation of Iranian customs in .1898,^^
they abolished-the system of customs - farming and the mult
iplicity of internal road tolls and octrois (although these remained in force in East Persia for three decades m o r e ) . ^ They brought in new weighing equipment and increased border patrols,^1 As a consequence it could be reported in 1925
that the efficiency of duty collection (with constant rates of duty) had improved considerably.^. This is illustrated in Graph 6-2 and implies that duty was evaded rather more regularly in the early years , of the century. It can be assumed that this improvement continued until 193h* when
Imports of Capital Goods — 4 r
the Belgians were dismissed from their pos&s.
.Since the mid^l920s, the stated policy of the Iranian government has been to exempt from duty all imports of
machinery.^ Even allowing for the difference in defin
itions between capital goods (as used in this study) and
’ machinery1., it is clear that this policy has not been fully implemented. The fact that duties have been paid
(see Table 6-5) implies that the procedures for obtaining exemption from duty have been unsatisfactory, and probably more expensive than the duties themselves.U5
Difficulties in the calculation of duties have arisen for two short periods within the study;
a* From 1928 to 1936, customs duties were collected in
’gold rials1, while imports were valued in ’silver rials’ (silver being the base of the Iranian currency until 1 9 3 8 ) . ^ This method of collection amounted to a surcharge on duties which fluctuated with the changing price of silver with respect to gold. In this study ’silver rials’ have been used to; estimate duty paid, and the amount of total duty is therefore subject to a higher degree of error in these years than in:other years,
b. From 1952 to 1955, importers were required to pay a surcharge on their purchases of foreign exchange However, duties were apparently calculated on the
Imports of Capital Goods 4 r
I * '
• ' . ; ) Pi
c.i.f. prices without this surcharge. If this were the case, then the total amount of duties,
calculated for these years will overstate the duties actually paid, as they have heen calculated from c.i.f. prices, which include the surcharge*
Minor Duties and Taxes
Apart from customs duties and Commercial Tax, there are a number of other small taxes; in existence. These include municipality taxes, health and charity taxes, export promotion duties, port and stamp charges and a variety of other f e e s . ^
Por 1 9 6 5 it is possible to estimate the importance of these charges and taxes with respect to c.i.f. values of total imports. 50 It is found that they equal about three per cent of c.i.f. values;. . The Central Bank of Iran suggests 8 per cent of c.i.f. value will cover these various 'charges^1 (although this is not taken into account in its study,of capital formation1.), while, the commercial counsellor of an embassy in Iran puts the figure at 4 per c e n t , ^ and two merchants independently use 5 per cent in their calculations Fjjh It is possible that the differences arise from different assumptions about the weight of im
ports and therefore about different porterage fees.
Since items which are exempt from duties are also expected to pay most of these small charges, 155 it has been.
Imports off Ca-oital Goods 1 6 0
decided to include all these charges in the percentage mark-up of c.i.f. prices for distribution expenses, rather than in the calculations of duties paid. This method overcomes the difficulties involved in estimating the small charges for the earlier part of the study, for which data are scarce. In other words, duties calculated refer only to customs duties, and, for the relevant years, road taxes and Commercial Tax.
Freight Charges
Freight charges; to he added to c.i.f. values are calculated by means of data on the weight of capital goods imported and the average distance over which they travel from customs warehouse to place of installation (or regular base in the case of non-installed items such as vehicles).
For later years in the study an assumption has been made about the quantity of goods carried by rail compared with the quantity carried by road.
Three major methods of inland.transport have been used in- Iran during the period 1900-1-965; pack animals carried many imports from 1900-1930,^ trucks started regular ser-vices; from the mid 1920s, 58 while th e . trunk line of the Trans-Iranian railway was completed in 1938. ^ Inland waterway transport is restricted to the Khorramshahr-Ahwaz
stretch of the Karun River and was used extensively by the go
oil company in the early years of the century.
Imports of Capital G-oods
161
The change from pack-transport to trucks, and the later cut-throat competition of the railway, led to a rapid reduction in freight rates between 1922 andl 9U 0 .61 During the Second World War the transportation network of the country was taken over by the Allied Occupation Forces,62 and freight rates for private importers rose by as much as 1000 per cent. 63 After the war freight rates fell to the level of the mid 1930s, and from 1950 road carriage rates have been declining with rail charges; remaining stable at a rather higher level. 6U Consequently there has been a switch to a more intensive use of road transport, which has been further, encouraged b y the general improvements in the state, of the nation!s highways and the expansion of the
■’ 65
road network. -The railway is now mainly used for freight
ing very heavy goods, government imports and customs-bonded items.
66
For this reason it has been assumed here that all imports exempt from customs duties travel b y rail, and non-exempt items travel by road. This is a less arbitrary distinction than the 50-50 split assumed by the Central Bank of I r a n . ^The rates used in this study are as follows (in rials per ton)
Period Non-exempt items Exempt items
1900-1921 3*3 3*3
1922:-1928 5*0 5.0
1929-1932 1.7 .1*7
1933-1936.. 1.2 1.2
Imports of Capital Goods
Per iod Non-exempt, items Kxempt items 1937-1940
These rates are averages for the.periods concerned and are hased on a number of independent studies of freight rates
Distance Travelled
The average distance travelled by capital goods from customs warehouse to final destination is assumed in this
based on two features of the Iranian economy; firstly, that most capital goods enter the country through the ports of Khorramshahr or Abadan; secondly, that most cap
ital goods are destined.for Tehran. And the distance between Tehran and Khorramshahr-Abadan is approximately
1000 km. 9
In 1956, the only year for which information is avail
able, 70 per cent of potential capital goods (by value) entered Iran through Khorramshahr, and another 10 per cent through Bandar Shapour (which is approximately the same distance from Tehran). 70 Of the remainder, half were
reported.to have been cleared from Ahwas or Tehran customs, and it is certain that at least 90 per cent of these items would have been put in bond at Khorramshahr or Bandar Shapour.1 71 Thus .for 1956 it can be stated that ax*ound made during the 65 years.68
study to be 1000 kilometres• The use of this figure is
Imports of Capital Goods J
nine-tenths of1 all potential capital goods were originally landed at one of the ports at the head of the Persian Gulf, 1000 km. from Tehran.
Moreover, data for total imports for the years 19h7~~
1957 indicate that, on average, 72 per cent of imports entered Iran through the Gulf-head points. 72 And one
would expect the percentage to he higher for capital goods because of the better facilities for dealing with bulky
7-5 and heavy imports at these ports.
It has been estimated that 90 per cent of Iran’s imports are destined for Tehran,711 either for use in the city or for redistribution to other areas, and it is certain that this percentage (quoted for 1965) was formerly even
- 75
higher. The reasons for this are fourfold:
a. There has always been a tendency for industry to be centralised inoor near Tehran.*^
b. -There has always been a preference for giving import licences to Tehran merchants.77
c . The road and rail network of the country has been built in such a way that, until recent years, it
has usually been easier and quicker to transport goods via Tehran
d. Truck owners have insisted on routes via Tehran because of the greater possibility of full return loads and ihter-route business.79
Imports of Capital Goods
Distribution Expenses
By far the largest addition to c.i.f. values, on average, is a percentage for distribution expenses, which may be described as all expenses, excluding basic freight charges, made between clearance of an item from customs and its arrival at its final place of destination (ready, if necessary, for installation). The percentages used for each tariff item during each different period of tariff classification are given in Appendix C.
Included in distribution expenses are
a. Port and customs taxes other than customs duties and Commercial Tax. These have been discussed above and may amount to about 5 pe:r cent of c.i.f.
value. In most cases they apply with equal force to goods which are exempt from the major duties and taxes. .
b. Loading and unloading charges at port of entry and final destination. These charges are usually related to weight rather than value, but a rough estimate has put them at about 3 per cent of c.i.f.
values.^
c» Inland insurance premiums. According to insurance and forwarding agents in Iran, the inland insurance is usually included in the c.i.f. price of any item.
This is because insurance is easier and cheaper from
Imports of . Capital Goods jpg'
factory, gate to. factory gate than on a split basis.
However* before the mid 1930s inland insurance was usually made separately and" amounted to about 3 per
cent of the F.O.B. value.of the goods (which would ' e q u a l about 2 per cent of c.i.f. values).82
d. Stamp duties on bank, trade and exchange documents.
These duties have changed as regulations have changed, but it has been estimated that in 1965, they amounted
• • A X
to about 1 per cent of c.i.f. valties.
e. Commission taken by agents or importers. This
"amount will vary with the methods of purchase of 01.
capital goods. It is probably true that govern- ment imports, or those imports by the final user, will not be subject to extfa commission charges.
Yet this is not certain; nor is it certain what proportion of capital goods are imported by final users into Iran. Written into the assumed distri
bution percentages is a subjective estimate of how capital goods of various types are imported, and the
An types of commission likely to be charged,
f * Bribes, tips and sundry expenses.. It is inevitable in If an that any process of ordering, financing,
clearing, collecting, transporting and delivering^
any item will involve the purchaser, in a number of such expenses. The extent of these expenses can
Imports of Capital Goods
only be guessed at, and they are assumed here to he about 1 per cent of c.i.f. values.
86
It can he seen, therefore, that 10 per cent must he added to c.i.f. values for distribution expenses even If no commission or distributor’s profit is involved. Con
sequently, for every item exempt from duty in this study 10 per cent is added. For non-exempt items, a further addition is made to cover distributor’s margins, this being based, as far as possible, on discussions with
people involved in the import trade. In almost all cases, the final marlc-^up is considerably higher than that used by
Q*y
the Central Bank of Iran, which has been criticised as too low.88
Installation Expenses
A distinction can readily be made between those cap
ital goods which require extra expense for installation and those which do not. Examples of the latter type are all kinds of vehicles and small durable goods. Of those in the former category an estimate has been made.of the per
centage addition to c.i.f. values required to meet instal
lation expenses, and these are listed fully in Appendix C.
A general assumption is that the ’heavier’ the item, the greater will be the. installation expense, although a special case is made for water pumps which are estimated to have a high cost of installation relative to their
Imports off Capital Goods
167
c.i.f. values due to the need for excavation and ditching w o r k .^
Installation costs include labour charges, electric and water connections, machine foundations and sundry other expenses. 90 For the installation of machinery in three large types of textile plant, costs have been estimated at between 20-28 per cent of c.i.f. v a l u e s . ^ For lh small
industrial projects, installation charges are estimated at between 3 per cent and 11 per cent (average 8 per cent for
\ 92
all 1 h) * And for machinery in two medium-sized food processing plants 10 and 13 per cent are the estimates.Q7 This range and pattern of percentages has been followed h er e.
Exports of Capital Goods
The estimates of capital formation in imported capital goods must relate to net imports. It is therefore necessary :to examine the volume and value of essports of ’potential1
capital goods. 9h This is not done in any other G.D.F.C.F.
estimates for I r a n . ^ The figures in Table 6-h, however, indicate that such exports have been insignificant during the period I9OQ-I9 6 5*
Results
Capital formation in imported capital goods 1900-1965 is given in Table. 6-1 in current rials and in Table 6-3 in constant (1965) rials* The weight of imported capital
Imports of Capital Goods
IS
goods 1 9 3 8 -1 9 6 5 (tie only period for which full figures are .comparable) is shown in'Table 6-2. Finally, Table 6 - 5 shows the percentage composition of market values of imported capital goods* All these results are discussed, together with the other components of G.D-.F.C.F*, in
Chapters 5.
Imports of Capital Goods
1
Table 6-1: . G^D.E.C.F* in Imported Capital Goods,
1900-19.65_»_ : _ ■ > ; ■ , (in,millions of rials at current domestic prices)
% change % change
Imports of Capital Goods
Table 6-2: Weight of Imported Capital Goods* 1958-1965 (in thousands of metric tons)
Y e a r . Weight Year Weight
1 9 3 8 132.6 19 52 19.1
1 9 3 9 78.5 ' 1953 30.4
1 9 4 0 46.8 1954 . 59.3
1 9 4 1 53.6 1955 170.2
192+2 64 *3 19 56 148.7
192+3 1 3 . 6 1957 114.9
1 9 4 4 14.7 1958 200.8
1 9 4 5 68.2 1959 226.3
1 9 4 6 98.0 I960 233.1
19 47 55.3 1961 178.6
1948 38.1 1962 . 119.0
1949 57.8 1963 97.0
1950 57.5 1964 129.4
1951 6 2 . 4 1965 197-8
Imports of Capital Goods
Imports of Capital Goods ^v
Table 6—24-: Weight and Value of Exports of Potential Capital G-oods, 1900-1965° (in current rials)
(in millions of rials and metric tons)
Year -Weight Value Year Weight Value understate the true figures because not all
export items were weighed.
b. The figures for 1900-19355 originally given in mans (batmans) have been converted to kilo
grams b y a multiplier of 3*
Imports of Capital Goods
1
Table 6-5: Composition of Market Values of Imported
Year C.i.f Duties Freight Distrib. , Install. Total
1 9 0 0) n.a. 1 n.a. n.a. n.a. 100
Imports of Capital Goods
17
:Table 6-5 Continued
Year C.i.f. Duties Freight Distrib. Install. Total
191+0 57 : ' 4 1'5 - : 18 7 100
Imports of Capital Goods
voin V"
CvJ
a
VOO^J
§ M
*po
•Ha PW
o H
<P o fH<D
Pp;
Pcdh
r*it5;
XJ
P3 O
VOI
.cf
P4cd
<£>u l. -u> <£ O 1J__!._.V... . .. Cl.
Of . . U . . „ :£ " { _ :.IT .____
tk« q i t i
Source:IranianTradeStatistics,MonthlyBulletins,1962and1965
Imports of Capital Goods
176
i.Om
Cu>hcf*s i>\ (MxVV\c>n r\als - -1.
imports »“* vc fM\Uo<> r»«i$,
Graph 6-2: Comparison of Customs Revenue and Imports. 1913-1925.______
Source: Millspaugh, A.C., 'The Financial and Economic Situation of Persia, 1926*, New York, 1926.
Imports of Capital Goods
177
Notes
1, Bank Markazi Iran, 'Provisional Estimates of National Income df Iran, 1959-1963V Tehran 1 9 6 6, pp.21-2.
This series has been extended to 1 9 6 5 by figures obtained privately from Dr. Bahman Homayoon of the bank's Economic Research Bureau (letter of December
2 6, 1967).
2.. The general title 'Foreign Trade Statistics of Iran' covers the following publications:
1900-1917 Empire de Perse, Minister© des Douanes et des Postes,. 'Statistique Commercial©:
Tableau General du Commerce avec les Pays Etrangers'•
1 9 1 8 -1 9 3 2 Empire de Perse, Administration des Douanes, 'Statistique Commercial©: Tableau General du Commerce avec les Pays Etrangers*.
1933 Iran, Administration des Douanes, title as for 1932.
, 1934-1935 Iran, Minister© des Finances, Administration General des Douanes, 'Tableau General des
Importations et des Exportations de l&Iran avec les Pays Etrangers'.
1936-19 3 8 Iran, Minister© des Finances, Administration General des Douanes, 'Statistique du Commerce de 1 * Iran avec les Pays Strangers'.
1939-1955 Iran, Minister© des Finances, Administration General des Douanes, 'Statistique Annuelle du Commerce Exterieur de 1'Iran*.
1956-1957 Iran, Ministry of Customs and Monopolies, Customs Administration,. Department of Stat
istics, 'Foreign Trade Statistics'*
1958-1959 Iran, General Administration of Customs, Department of Statistics and Economic
Affairs, 'Foreign Trade Statistics of Iran’.
I9 6O-I96I Iran, Ministry of Commerce, Department General of Statistics and Researches,
'Foreign Trade Statistics of Iran*.
1 9 6 2 -1 9 6 3 Iran, Ministry of Economy, Department General of Statistics and Researches,
'Foreign Trade Statistics of Iran*•
1961^-1965 Iran, Ministry of Economy, General Depart
ment of Trade Statistics,. 'Foreign Trade Statistics of Iran*.
I am’'grateful for the assistance of Dr. G.R. Farzaneh- pour in obtaining some of the less accessible volumes, and also to Roger Cooper;, B.A., for obtaining figures from the volume for 19^5 which were unavailable to me.
Imports of Canital Goods
1 7 8
3. See Table 6-2.
h. Temple, B., TReport on Trade and Transport Conditions in Persia, to January 1922*, Department of Overseas Trade,. London, 1922, p.h*
5 . Agah, M., fSome Aspects of the Economic Development of Modern Iran*, D.Phil. thesis (unpublished), Oxford, 1956, p.7h* Also the relevant years of the foreign tx*ade statistics*
6. The total annual surcharge paid on each tariff item imported and exported can be found in the foreign trade statistics for the relevant years.
7. It would also be necessary to make an adjustment were it required to construct an index of imported goods in foreign, currency.
8. Exempt items were defined in 1938 as *Les machines industrielles importees.en franchise de droits en vertu de la loi du (Fevrier 1925) et les machines agroicoles et autres marcliandises qui, d*apres le
Tarif douanier, sont libres de droits a 1*entree...T.
Foreign Trade Statistics 1938, p.279* .
9. For some years in the study this process was made still more complicated by the fact that the tariff numbers of the exempted items were omitted, and these numbers^
had to be allocated before totalling was possible.
See Foreign Trade Statistics 1951-1955•
10. For example, Lingeman, E.R., *Economic Conditions In
; Persia*, Department of Overseas Trade, London, 1930, p . 22, who states *The fluctuations in the imports of machinery, tools, nails, rivets, etc., depend very largely on the Anglo-Persian Oil Company’s programme of extension.* Yet he is referring to statistics which do not include A.P.O.C. imports.
11. Annual balance sheets of the Anglo-Persian Oil Company (later Anglo-Iranian Oil Company, and still later
British Petroleum) 1910 continuing. File no.102^98 at Companies House, The Board of Trade, London.
12. Anglo-Persian Oil Company, Balance Sheet, 1910.
1 3. United Nations-E.C.A.F.E, Port Survey Team, *The Ports of Iran*, Tehran, 1 9 6 6, restricted, p.20.
Imports off Capital Goods
11+. ... G-oodfellow, B.R., ’United. Nations Industrial Survey Mission in Iran » Interim Report to the Government of Iran1, Tehran, 1961+* restricted, p#38.
151'. U.N.-E.C.A.F.E. Port Survey Team, op. cit*, p.20.
16. Williams, Richard M., ’United States of America
Operations Mission to Iran Port Survey 1'955 1» Tehran, ,1955, p.53.
17. - G-oodfellow, B.R., op. cit., p.38; Peace, G.L.,
’Report on the Development of Small-Scale Industries in Iran*, Tehran, 1 9 6 2, restricted, p.35*
18. See above, Chapter .2:.
19. No information exists on this time lag.
19. No information exists on this time lag.