While South Korea is pushing for expansion of trade with Iran, the latest government data shows that uncertainty continues to loom large. Despite the lifting of international sanctions in January, Korean exports to the Islamic republic have dropped.
According to Korea Customs Service, exports to Iran were down 44.7 percent on-year in the first quarter, at $660 million.
While it is premature to be disappointed with the lackluster export performance, given the huge expectations, there is a need to refrain from being impatient and excessively upbeat.
We should keep in mind that there are a few unfavorable factors regarding the Iranian market which will continue to frustrate exporters.
First, due to decades-long sanctions, the Iranian domestic market has been downbeat, which has undermined its citizens’ purchasing power. It could take a while for the nation to see a steady recovery in private consumption.
Second, exporters from across the world are closely competing to penetrate the “land of opportunity” as a desperate breakthrough to overcome the global slowdown. Even if Korean businesses win supply contracts, they would have no choice but to offer cheaper prices amid the heated competition.
Third, the ongoing era of low crude oil prices, despite the recent bounce-back, is restricting rosy projections on the oil-producing nation. The economic vitalization of Iran -- which is set to resume oil exports -- is largely dependent on the global demand for raw materials.
President Park Geun-hye is scheduled to hold a summit with her Iranian counterpart, and she will be accompanied by a delegation of business leaders during her state visit to Tehran from May 1-3.
Like her trip to four Mideast nations last year, the two countries are expected to sign big pacts on partnerships in several industrial sectors. Analysts expect the sectors to include energy, construction, automobiles and medicine. Exports of Korean information technology products could increase, while imports of Iranian petroleum are likely to increase.
It is welcome to see that the summit diplomacy could spur local businesses -- pursuing diversification of trade partners -- as well as bolster ties with Iran. Her scheduled visit will also indisputably be a historic event, as she will be the first Korean president to make a state visit.
More significantly, the visit should not be a one-off thing, but a stepping-stone for Korean businesses to build sustainable trade partnerships with Iranian counterparts.
Simultaneously, Korea should not be negligent in developing halal products. Local cosmetics manufacturers have been passive in looking into halal standards on cosmetics products for Muslim countries. They should be more proactive.