It appears that the efforts of the REAP delegation that visited Iran to enhance rice export opportunities may have borne fruit (for more information read “Rice exports to Iran – idle hope or possibility?” published on April 12, 2018 by this column). Iran’s state grains buyer GTC has issued an international tender to buy 20,000 tons of rice from Pakistan, in two 10,000 ton consignments.
As per PBS data, Pakistan has exported over 3 million tons of rice of which basmati rice was 332,000 tons, so far this year. On average rice was priced at $477 per ton; however the premium priced basmati rice was sold for $1,043 per ton this fiscal year. Thus, a 20,000 ton order would net Pakistan an increase in rice exports by nearly $21 million.
Iran’s rice market is valued at $2 billion so the current tender accounts for a small portion of it. However, given that Pakistan’s FY17’s exports to Iran were $30 million, this would indicate nearly doubling of Pakistan’s exports to Iran and may pave the way to increase rice exports.
Attempts to set up banking channels between the two countries have not been successful since local banks in Pakistan did not take up the option presented by the Banking and Payment Arrangement signed by the central banks of both the countries. With the recent Trump announcement regarding Iran’s nuclear deal, the banking channels seem all the more nebulous. Government tenders may be one way to circumvent these huddles and become an additional channel to conduct trade other than cash and barter used currently.
Having said that, even at its peak in FY10, Pak-Iran trade comprised mostly of oil imports with the bulk of Pakistan’s exports consisting of rice. Increase in rice exports through government tenders is a step in a right direction to rectify this and may lead the way for other goods for which Pakistan has high export potential with Iran, such as cotton fabric and medical instruments.
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