IN THE NAME OF GOD

FORECASTING THE CHANGE OF TRADING PARTNERS OF IRAN WITH EMPHASIS ON CONTINUING SANCTIONS IN HORIZON OF FIFTH DEVELOPMENT PROGRAM Summer 2014

Summary of this study Non-oil exports as a communication channels of Iran’s economy with the world is one of the factors affecting on Iran’s economy, therefore, an extensive explore and study is needed that expand the non-oil exports and diversify the country's export earnings, in order to reduce the vulnerability of objectives of development’s economic of country is needed. In this paper an attempt has been to review and forecast process of change Iran's major trade partners on non-oil exports from 1996 until the end of the fifth development plan. For this purpose, share of the Iran’s trade partners from export of agricultural products as part of the non-oil exports were studied by using the data of the Customs Administration of Iran over the period , then process of change the trade Partners since 2015 were predicted by using econometric techniques with regard to sanctions. Mahdi Bastani and Ebrahim Ensan

Importance of Exports The role and importance of the non-oil exports development, especially the non-oil export in the process of economic development is widely accepted. Export development providing currency resources for economic development and can be determining role in shaping economic structures, optimal allocation of resources, advantage of economies of scale in production, access to international expertise and etc.

IMPORTANCE OF EXPORTS Exchange Revenue

Export has a key role in: Creation of economic infrastructures Optimal resource allocation Use of economies of scale Having much more specialization

Non-oil Exports and Development Programs During the first, second and third-economic developments program of the country, condition of the Iran’s non-oil export were lower than expected, but in the fourth development plan, non-oil export as an effective and key component in economic development and also in preparation of the social and cultural infrastructure for employing exports strategy has been emphasized, so in this respect the performance of non-oil export is indicative of the success of policies adopted, so that in the third development plan achieving the desired goals about 92%, and the figures for the fourth development plan to nearly 149 percent.

This situation indicate that exports in the context of development was risen and government policies have a positive impact on exports trend, so that in end of the fifth development plan was expected that the country's export had to reach $ 300 billion.

To achieve a desirable level of development, in addition to using internal facilities and resources, it is necessary to establish economic and trade relations with other countries will be more effective.

WHAT IS THE QUESTION? How will change the share of trading partners in the future, if these sanctions will continue? How will change the share of trading partners in the future, if these sanctions will continue?

DATA :

FIVE CHOSEN PARTNERS IN TRADE OF IRAN

Germany's share of agricultural products export during the period S ource: Data released by the Islamic republic of Iran customs administration

Emirate’s share of agricultural products export during the period S ource: Data released by the Islamic republic of Iran customs administration

Iraq's share of agricultural products export during the period S ource: Data released by the Islamic republic of Iran customs administration

Hong Kong's share of agricultural products export during the period S ource: Data released by the Islamic republic of Iran customs administration

Afghanistan's share of agricultural products export during the period S ource: Data released by the Islamic republic of Iran customs administration

FORECASTING METHOD Stationary has been checked by Dickey-Fuller test Assess the accuracy of predictions based on the Mean Absolute Percentage Errors criteria Forecast methods: ARIMA Single exponential smoothing ARIMAX Double exponential smoothing

RESULTS AND DISCUSSION Table 1. Unit Root Test Results VariablesTest Critical Value Amount of Computational Significant Level Test Results HKADF %1%I(1) IrqADF %I(1) AfgADF %I(1) UAEADF %I(2) GerADF %I(1)

Error Percentage of Forecast in ARMAX Method VariableForecasting Method Within-sample Forecast Error Outsourcer-sample Forecast Error HK ARMAX (0, 0, 5)2.26 %1.68 % single30.12 %- double28.98 %- Irq ARMAX (2, 0, 5)2.87 %0.41 % single4.48 %- double14.55 %- Afg ARMAX (2, 0, 4)0.44 %0.09 % single12.90 %- double5.93 %- UAE ARMAX (1, 0, 2)4.92 % 0.79 % single10 %- double12.92 %- Ger ARMAX (2, 0, 5)3.93 %0.99 % single34.65 %- double41.13 %-

ADF Test Results for the Fitted Residual Residualst-Statistics Res HK -5.32* Res Irq -7.49* Res Afg -4.24* Res UAE -8.78* Res Ger -5.92* * Significant in 1%

Predicted Values ​​ by the ARMAX Method VariableMethod Mean HK(0,0,5)ARMAX7.39 %5.59 %6.29 %6.42 % Irq(2,0,5)ARMAX31.33 %28.71 %27.56 %29.2 % Afg(2,0,4)ARMAX7.68 %7.39 %7.09 %7.38 % UAE(1,0,2)ARMAX13.63 %14.22 %14.67 %14.17 % Ger(2,0,5)ARMAX4.45 %4.75 %5.23 %4.81 %

Policy implications to the government:   Identifying potential business opportunities in new markets and introduce them to traders and merchants of private sector.   Trying to eliminate non-tariff barriers on the way to development of trade.   Trying to for the conclusion of "free trade agreements" with other countries.

Thank you very much for your attention