




































Copyright © CC-BY-NC 2019, CRIBFB | AFBR 

                       Asian Finance & Banking Review; Vol. 3, No. 1; 2019 

                                       ISSN 2576-1161   E-ISSN 2576-1188 

Research Article               Published by Centre for Research on Islamic Banking & Finance and Business, USA 

 

     24 
 

Effects of Iran's WTO Accession on the Cement Industry: A 

Dynamic Disequilibrium Adjustment Model (DDAM) 

of Simultaneous Equations 

 
Bijan Bidabad

1 
 

Nahid Kalbasi Anaraki
2
  

 
Abstract 

Many companies around the globe are re-examining their business operations to explore profitable growth 
in international markets.The attractiveness of the membership in WTO can be recognized not only in the 

growing number of its members but also as a result of increasing access to potential markets around the 

world. Iranian economy suffers from huge inefficiency in its trade relationships with other countries due 
to import compression policy and strict import controls. Iran's import profile is heavily skewed towards 

those tradable that are not strongly under the effects of WTO, indicating protectionism policy in the 

industry sector. Besides the need for easing protectionism, the emphasis placed on the growth of non-oil 

exports and reducing oil dependency as an objective in the five-year development plans provides a strong 
argument for joining WTO. Measuring technical efficiency in the cement industry in Iran suggests that 

companies with export-orientation policy have potentials to succeed in increasing their technical 

efficiency.The new discovering realm of WTO for Iran's trade policy has been evaluated in this paper. 
The pros and cons for joining induced us to investigate the effects of Iran's membership on the cement 

industry. By designing a dynamic disequilibrium adjustment model (DDAM), we use annual data for the 

period 1963-2002 to estimate a simultaneous system of econometric equations including cement supply, 

exports, imports, and consumption functions in order to quantify the effects of joining on the cement 
industry of Iran. One of the main challenges confronting the Iranian cement industry is to improve the 

competitiveness of the industry by reducing the subsidies, removing restrictions, and price controls. 

Indeed, the experience of other counties after joining WTO portrays a conflicting profile on the effects of 
accession on domestic economies. While some countries have developed important trading partners, 

others have suffered due to the loss of domestic industries. In this paper, we intend to examine the 

hypothesis of whether reducing the tariff rates will promote Iranian cement industry. The results reveal 
that joining WTO has negligible effects on consumption, production, and exports, though, will raise 

imports substantially. 

 

Keywords: Cement Economics, Dynamic Disequilibrium Adjustment Model, DDAM, WTO, Econometric 
Model 

 
1. Introduction 

Iran has a special geographical advantage regarding mining products international trade due to locating in 
the Persian Gulf region with high potentials since mineral products have been among the top ten imports 

of the Persian Gulf region. Due to import compression policy and strict import controls, Iran's import as a 

share of GDP is relatively low. Moreover, her import profile is heavily skewed towards bulk foodstuffs 
and essential capital goods, reflecting recent currency shortage, import bans on many products and 

heavily protected industrial base. However, higher oil revenue since 2000 has eased pressures on Iran's 

                                                             
1 - (B.A., M.Sc., Ph.D., Post-Doc.) Professor Bijan Bidabad, Fars-o-Khozestan Cement Co. economic advisor. This paper has 

been prepared by the order of Fars-o-Khozestan Cement Co. and the authors acknowledge financial support of this company. The 
views expressed herein are those of the authors and not necessarily those of Fars-o-Khozestan Cement Co. 
presented at the 4th European Cement Conference Barcelona, Spain 14-17 March 2004. 
2 -Dr. Nahid Kalbasi Anaraki, Fars-o-Khozestan Cement Co. economic consultant. 



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25 
                           

debt obligations, permitting the growth of imports in the essential goods. Though, the cement imports as a 

share of GDP still stands at a very low level and is estimated to reach 0.025% in 2004.   
 

Iran's cement is a 70 years old industry. The Iranian cement industry dates back to 1993 when the first 

manufacture established in Rai city. Trends of consumption, production, and trade show that Iran has a 

more or less closed cement economy due to import restrictions and export bans in specific years. As 
fluctuations of cement demand and supply clarify, whenever the price of oil grows up, demand increases 

due to increasing government development expenditures. As a result, excess demand appears, cement 

price increases and the import of cement grows up. To respond to the excess demand, cement producers 
try to enlarge cement production capacity with some lags, and after few years excess demand is removed 

by domestic supply, instead of imports. For many years, this was the case for the Iranian economy. 

According to this dynamic procedure, we try to build up a dynamic disequilibrium adjustment model 
(DDAM) to explain this phenomenon. But before going through this procedure, we will have a closer 

look at the cement industry with an emphasis on its output and trade.  

 

Production: This section portrays a profile of the industry production. Cement output has experienced 
sharp fluctuations during the period under investigation, 1963-2002. Though cement production has 

increased by an average annual growth rate of 10 percent during the mentioned period, it stands at a very 

low level compared with other developing countries like China, India, and Korea. Indeed, the industry has 
produced above the nominal capacity due to demand pressures and restricted imports. Over the period 

1973-1978 with the oil shock and sharp increase in oil revenues cement production increased 

dramatically. However, after then and during the imposed war, the production plunged due to the war 
damages and scarcity of foreign exchange resources. The industry experienced a negative growth rate of -

3.6% in 1988 due to unused capacity and reduction of productivity. However, during the post-war era, the 

production turned to an increasing trend due to the reconstruction activities in such a way that the output 

growth reached 16.7 percent in 1990. 
 

Supply has exceeded the demand growth with the establishment of new plants and with the reduction in 

government expenditures since 1997. However, lack of access to international markets has induced 
cement producers to reduce their production due to the restriction imposed on cement exports. 

 

Imports and Exports: Word trade of cement stands at a lower level than its production since the raw 

material for production are abundant and generally found in most parts of the world. Despite the low ratio 
of world cement trade to the world production (7 percent in 1995), the growth of the cement trade has 

exceeded that of output due to the high volume of trade in South East Asia. Cement imports have been 

close to zero during the period under investigation except for the mid-1970s when Iran confronted with a 
sharp increase in its oil revenues. However, this trend turned dramatically during 1975-1995, leaving the 

industry without any competitors due to a high level of protection, which has adversely affected the 

productivity of the industry. 
 

With the increase in the demand during the 1970s, domestic production failed to respond the aggregate 

demand, and as a result of this failure, the cement import increased substantially, recording a growth rate 

of 134% in 1977, compared with the previous year. Though cement import has been relatively stable 
during the 1980s and 1990s, it experienced gradual growth in the early 2000s due to reconstruction 

activities and higher growth of the real-estate sector of the economy compared with other sectors.    

 
Indeed, Iran's cement imports and exports have been subject to tariff and non-tariff barriers. Despite the 

cement shortage during the war, exports were subject to the permission of the ministries of commerce and 

mining. Although exports incentives and tax exemptions were introduced in 1987, the instability of policy 
decisions and export bans in specific years contributed to the low growth of exports. For instance, the 

export of different types of cement and clinker was abandoned in 1996 and 1997. However, the 



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26 
                           

government was induced to remove exports barriers in order to avoid greater loss of manufactures in the 

following years. 

 
Pricing: Administrative controlled prices during the 1980s and 1990s have led to the low production of 

cement industry compared with other developing countries. It is worthwhile mentioning that a major 

factor contributing to cement prices is personnel expenses, which makes up 34 to 42 percent of the total 
costs, whereas the share of raw materials in total costs does not exceed 6 to 7 percent. The share of energy 

expenses and foreign exchange resources amounts to 18 and 14 percent of total costs, respectively. 

 

During the post-war era, the distribution and pricing policy was under the control of the government 
through the "Cement Planning Committee" established in the management and planning organization 

(MPO). According to the regulations approved by this committee, cement producers were obliged to 

deliver their products to the ministry of commerce. With the end of the war in 1988, the distribution came 
under the control of the ministry of industries within the framework of a rationing system, and the share 

of the private sector, capital expenditures, and public sector amounted to 50, 40, and 10 percent, 

respectively.   
 

A major challenge confronting the Iranian cement industry is administrative controlled prices. As it is 

seen in Table (1), controlled prices have been fixed for a long period of time during 1982-87 and have 

huge gaps with international prices. For instance, the controlled price in Iran has been $17.1 per ton, 
compared with $78.5 of the world price in 2000, which is almost less than one-fourth of the world price. 

Indeed, the prices have been kept at very low levels artificially as a result of the high amount of revealed 

and disguised subsidies which have been allocated through the central government.  
 

With the exchange rate unification in 1990-91, and due to the increasing gap between the controlled and 

mark-up prices, there has been increasing pressures on domestic prices. With the start of the privatization 
program and the increase in the personnel and energy expenses, and with the increasing gap of the official 

exchange rate with the parallel black market exchange rate, the loss-making enterprises were unable to 

bear depreciation costs and as a result prices were liberalized in 1992, though still stand at much lower 

level than the world prices. Since then, the equilibrium prices have been set through adding the book price 
with a margin profit rate set by the "Production and Distribution of Cement Committee" including the 

members of "Protection of Producers and Consumers Organization (PPCO)", ministry of industry and 

management and planning organization (MPO). Meanwhile, producers were allowed to distribute the 
production of higher than 90 percent of the nominal capacity and the cement enterprises were obliged to 

0

500000

1000000

1500000

2000000

2500000

3000000

65 70 75 80 85 90 95 00

IREXP IRIMP

Iran's Cement Export and Import

Graph (1). Iran's cement imports and exports 



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27 
                           

pay $ 0.9 to the ministry of industries for each ton of cement they deliver in order to help the cement 

projects. In addition, the PPCO received the following share from each ton of sold prices. 
Share of PPCO=.9[sold price – (mark-up price+5000Rls)] 

 

However, the consumer price was calculated by adding up the mark-up price to 15 percent margin of 

profit and 1 percent municipalities' fee, 2 percent ministry of education fees, and $ 0.5 for helping the 
ministry of economic affairs and finance. 

 

Although considering 15 percent margin of profit rate for produces has alleviated the financing problem 
of energy inputs and personnel expenses, this method of pricing has failed to cover the depreciation costs. 

In addition, the prices are lower for the older plants due to lower mark-up prices. 

As Table (1) suggests, the price of cement has been relatively stable during the post-war period 
throughout 1982-1990. However, since the early 1990s, the controlled price has jumped up dramatically 

and has reached $ 17.1 in 2000, which is around one-fourth of the world price, $78.5. 

 

Table (1) - Iran's cement controlled prices compared with the world prices 

Year Controlled prices per ton in Rials $ Price per ton in Iran World price ($ per ton) 

1982 3100 24.1 56.69 

1983 3100 23.2 55.61 

1984 3100 22.2 57.18 

1985 3700 27.4 55.92 

1986 3700 31.6 54.78 

1987 3700 23.5 54.41 

1988 4200 16.2 54.80 

1989 4200 13.4 54.80 

1990 4200 10.07 55.34 

1991 10000 17.7 55.46 

1992 10500 14.9 55.30 

1993 20000 18.7 56.36 

1994 25000 15.2 61.88 

1995 33500 16.6 67.84 

1996 42000 17.7 70.89 

1997 55000 19.1 73.46 

1998 71500 20.7 76.45 

1999 85800 17.7 78.27 

2000 102960 17.1 78.56 

0

10

20

30

40

50

60

70

80

65 70 75 80 85 90 95 00

IRPRICE/IREENOIL WPRICE

Iran's Domestic and International Cement Prices

0

50

100

150

200

250

300

65 70 75 80 85 90 95 00

IRPRICE/550 IRWPRICE

Approved and Market Cement Prices

Graph 2. 

Iran's cement controlled prices and the wholesale price index of cement 

Iran’s domestic and world cement prices (ton/dollar) 

 



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28 
                           

2. Literature Review 

Unfortunately, little empirical study has been carried out on the cement industry of Iran. Ramin Dadras 

(1999) tries to measure the technical efficiency of the industry, using Stochastic Frontier Translog 
Production and Cobb-Douglas functions.

3
 The estimated results suggest that the inefficiency has 

increased during the time, and the ownership type and presence of exports affect the efficiency of the 

industry. Moreover, the estimated elasticities for the Translog function suggest increasing returns to scale 
in the cement industry. The estimated elasticities with respect to capital and labor according to the 

Translog function are 0.82 and 0.22, respectively. The estimated technical efficiency of the industry 

according to the Translog function and Cobb-Douglas functions amounts to 0.87 and 0.85, respectively. 

Put differently; the industry has produced 13 percent less than it could, given the amount of inputs and 
energy.  

 

As it is seen in Table (2), mean of efficiency has jumped up since 1992, with the start of the First Five 
Year Development Plan. However, since 1994, the industry has experienced a decreasing trend of 

technical efficiency. This shift, in turn, is attributed to the excess supply and to a substantial reduction in 

government expenditures in infrastructure and real estate sectors. As a result of the excess supply, the 
number of enterprises forced to export their products increased from 8 in 1994 to 13 in 1996. However, 

cement export bans in 1996 acted as a slash to the efficiency of the industry. It is worthwhile mentioning 

that some of the enterprises have experienced stable efficiency during the period under investigation. For 

example, Fars Cement and Sepahan Cement enterprises have experienced stable efficiency during the 
time and the highest amount of efficiency in the sample, whereas Khazar Cement Co. had the lowest 

efficiency score. 

 
Since 1994 with the entry of the cement enterprises to the Tehran Stock Exchange (TSE) efficiency has 

decreased substantially. However, one cannot argue that the decreasing trend of efficiency can be 

attributed to the accession to TSE. Indeed, one of the main reasons for the decreasing trend of efficiency 

is the instability of regulations governing exports of the industry, particularly, exports bans in 1996 and 
1997.        

Table (2)-Technical efficiency of the cement industry in Iran during 1991-1997 

  1991 1992 1993 1994 1995 1996 1997 

Number of plants 9 13 14 15 16 16 16 

Mean Efficiency 0.80 0.90 0.91 0.89 0.87 0.88 0.85 

Standard Deviation 0.10 0.06 0.05 0.06 0.16 0.14 0.11 

Minimum 0.59 0.73 0.76 0.73 0.27 0.40 0.50 

Maximum 0.93 0.95 0.95 0.95 0.95 0.96 0.94 

Source: Dadras, Ramin, "Measuring the technical efficiency of the cement industry in Iran, a dissertation 

guided by  B. H. Zonooz, Allameh University, 1999 

  

In another study, Morteza Sameti (1995)
4
 measures the efficiency of cement industry in different sectors. 

His sample includes four cement companies, two public enterprises, one private, and one cement 

company affiliated to the Mostazafan and Janbazan Foundation, which is a semi-government 

organization. He uses a Cobb-Douglas production function to measure the efficiency of the production. 
The estimated results suggest that the elasticity of production with respect to the labor force for Tehran 

Cement Company, which is affiliated to the Foundation, has had the highest elasticity score. The private 

cement company, Shargh Cement Co. stands at the second level, and finally, the public sector companies 

have had the lowest elasticities.   
 

                                                             
3 -Dadras, Ramin, "Measuring the technical efficiency of the cement industry in Iran, a dissertation guided by B. H. Zonooz, 
Allameh University, 1999. 
4 -Sameti M., "Reducing Government Interventions", Ministry of Economic Affairs and Finance, 1995.  



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29 
                           

He also has estimated the productivity of the labor force in different companies. His results indicate the 

highest level of labor productivity in Tehran Cement Co. and the lowest level in public sectors companies. 
However, with respect to capital productivity, the private sector company has experienced the highest 

productivity level.  

 

Finally, a long-run total cost function has been estimated with pooling data on different companies with 
different types of ownership. The estimated results indicate that the Tehran Cement company has had the 

lowest production costs and then the private sector and public sector companies stood at the second and 

third levels, supporting the estimated results of productivity. Put differently, companies with higher 
productivity have experienced lower production costs. Indeed, the estimated results suggest that public 

sector enterprises confront with higher costs since they have been assured of receiving a large amount of 

government subsidies and has taken no important invention to reduce their operating costs.  
 
WTO and countries experiences  

The treaty negotiated during the Uruguay round established the WTO, the international institution to 

govern the world trade. The success of GATT as a dynamic institution that has fostered dramatic increase 
in worldwide trade lies in its founding principles of most favored nations treatment (MFNT), voluntary 

export restrictions (VERs), orderly marketing arrangements (OMAs), rules of origin, government 

procurement, safety rules, market access commitments and reciprocity and non-discrimination. Thus, 

nondiscrimination extends the benefits of a reciprocal tariff reduction beyond the two parties. 
Nondiscrimination is a convenient way to reduce the complexity of international trade relations. As an 

importer, a country can charge a single nondiscriminatory tariff on imports from all countries, or it can set 

different tariffs on imports from different countries. Under a nondiscriminatory tariff system, imports will 
be sourced from the lowest-cost producers in the world. When a country uses a nondiscriminatory tariff, 

this facilitates the allocation of resources worldwide to their most productive uses. 

  

Countries' experiences portray a contradictory profile. While some countries like China have benefited 
from joining WTO, others have suffered due to the loss of domestic industries. In China, foreign 

investment is playing an increasingly important role in shaping up the Chinese market. In 1998, there 

were 287 foreign-invested enterprises accounting for about 3% of all cement producers and 15% of 
national output. China is the world's second-largest cement exporter, accounting for about 17% of total 

global cement trade. China had cut the average tariff level of imported goods from 15.3 percent to 12 

percent in 2002; this reduction is fully in conformity with the commitment China has made for its 
accession to the World Trade Organization.  Indeed, WTO accession should not have much of an impact 

on the cement industry, as a tariff on cement and clinker dropped only from 12 percent to 10 percent in 

2001 and is not due to falling any further. In sum, China's experience reveals a success story because 

domestic protection has not stood at high levels before joining WTO.   
    

Taiwan is another success story. Before the accession, the average levels of tariffs on imports of industrial 

and agricultural products into Taiwan were 6.03 and 20.02 percent, respectively. Upon accession (2002), 
the two figures were reduced to 5.78 and 14.01 percent, respectively.  Following the completion of all the 

scheduled tariff reductions on the 3470, industrial and 1021 agriculture products for which Taiwan has 

made commitments; the average levels of tariffs applied on industrial and agricultural products fell further 
to 4.15 and 12.86 percent, respectively. The economic impact of its WTO membership on the economies 

of its trading partners, as well as Taiwan itself, will be worth billions of dollars annually. According to a 

recent report by the Council of Economic Planning and Development (CEPD), Taiwan's GDP is likely to 

expand by an additional 0.77-4.7 percent in the first five to ten years of WTO membership. 
 

Others, like Indonesia, confronts a possible crisis. When the crisis was at its peak in 1998 in Indonesia, 

the utilization rent of cement industry went down to 50 percent. This forced the producer to export at 
lower margins than those available in the domestic market. Indonesia exported some 4.5 million tons of 



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cement and clinker in 1998 following the plunge in domestic demand, while production reached 22 

million tons per year. The increasing cement exports since the crisis pushed export's share of total cement 
production from 1 percent in 1996 to 33 percent in 1999. Though there was an increase in exports, the 

country's total cement production continued to decrease as domestic consumption dwindled.  Now that 

increasing domestic demand has pushed up the cement industry back to its pre-crisis levels, the 

Indonesian Cement Association (ASI) has signaled that cement exports would likely decrease. Last year, 
exports reached around 8 million tons. However, the increasing domestic demand could bring about a 

rising crisis in the years to come if the present production capacity is not increased. As itself, has 

projected a problem will rise in the cement supply in the coming years because the growth of product 
capacities would be less than the average of 3-5 percent growth rate of demand. To prevent a possible 

crisis, new plants, and more supply of raw materials are needed. To encourage investment, the 

government could provide such incentives as tax holidays.    
 

WTO membership and associated trade liberalization are crucial for the Persian Gulf region's future 

economic prospect, lifting economic growth and boosting foreign investor confidence. Oman, Saudi 

Arabia, and Yemen have applied for membership and are negotiating entry conditions, although Yemen's 
accession is in its infancy. Iran's application for WTO membership has not been scheduled for 

consideration due to US opposition. Indeed, WTO membership is an important driver of reform, limiting 

the amount of protection. Trade liberalization, particularly elimination of subsidies, protection of 
intellectual property rights, and equal treatments for domestic and foreign companies are all requirements 

of WTO memberships.  Members also must remove non-tariff barriers, such as certification, licensing, 

government procurements, and inspections not in accordance with WTO rules.   Oman's accession is 
imminent. The accession process has driven major reforms. Oman has agreed to liberalize tariff and bind 

tariff commitments for agricultural exports as well as minerals, cars, information technology products, 

chemicals, paper products, and construction materials. Oman has also agreed on no tax discrimination 

between domestic and foreign companies and has increased foreign ownership limit from 49 percent to 70 
percent.  

 

Saudi Arabia WTO accession has important domestic and regional implications, given the Saudi 
economy's size. Saudi Arabia's unilateral foreign investment liberalization announcement in April 2000 

and its improved tax treatment for foreign companies already have placed the region countries like UAE 

under pressure to improve their treatment of foreign investors. Bilaterally agreed market access 

improvements, which will apply to all WTO members, will yield significant benefits. Multilateral 
negotiations also could yield major improvements in access to the Saudi Arabia market via reduced 

agriculture subsidies, fewer quantitative restriction, improved intellectual property rights, equal tax 

treatment for domestic and foreign companies, and improved customs procedures.  
 

Indeed, countries' experiences reveal that a crucial factor affecting success story of countries is the 

structure of the domestic industry and the level of protection on the domestic industry before joining 
WTO. Countries that have already reduced their tariff rates before joining WTO more likely will benefit 

from entry, though, countries with high tariff rates that need to liberalize their domestic markets to 

imports suddenly will more likely confront with potential losses.   

    
Tariff and non-tariff barriers in Iran 

Tariff barriers vary substantially across the Persian Gulf economies; Kuwait and the UAE have the lowest 

average tariffs around 3.5 percent, and Saudi Arabia has had the highest tariff rates among Arab 

countries. In the UAE, most tariffs are 4 percent, although around 75 percent of import is duty-free 
including foodstuffs, medicines and public sector imports.  Saudi Arabia's simple average tariff rate is 

12.5 percent. Imports of basic foodstuffs and medicines are duty-free, with a general 12 percent tariff on 

most other imports, and a 20 percent tariff on many imports which also are produced locally.  
 



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Qatar: The general tariff rate is 4 percent, but tariffs of 20 to 30 percent apply to goods competing with 

local products such as cement, steel, and urea.  
 

Bahrain: Imports of raw materials, semi-manufactured goods, and products for development projects or 

re-exports are duty-free. Tariff starts at 5 percent on foodstuffs and necessities, and as in many other 

regional economies, much higher rates apply to cigarettes (50 percent). 
 

Oman: A wide range of essentials consumer goods enter duty-free, as do industrial inputs. Luxury 

consuming goods, including tea, coffee, and prepared foods, attract 15 percent tariff, while cars incur 10 
to 15 percent tariff rates depending on the engine size. 

 

Yemen: Since 1996, as part of the IMF sponsored reform program, tariffs have fallen to the domain of 5 
to 25 percent. 

 

Iran: Most consumer goods imports incur 30 to 50 percent tariffs. Capital and intermediate goods attract 

lower tariffs, while medicines, wheat, and other strategic/essential goods are duty-free, and non-essential 
imports are often banned. Indeed, the cement industry has been heavily regulated through tariff and non-

tariff barriers on cement imports and exports, resulting in a low level of trade compared with domestic 

production. To review the tariff and non-tariff barriers in Iran, we focus on the data in 1999, the most 
recent available data on tariffs. According to export-import regulations, goods and commodities are 

categorized under 21 sectors. 

 
Table (3) presents the minimum, maximum, and average tariff rates of different categories in 1999. As it 

is seen, the lowest tariff rate applies to chemical industries among different sectors. The cement industry 

in the fifth category has experienced an average tariff rate of 35.7 percent. Indeed, the cement industry 

has been relatively less protected than sectors like food industries or textile; however, has been heavily 
protected compared with sectors like chemical industries with an average tariff rate of 18.9 percent. 

Moreover, the industry has confronted with export bans in specific years, especially in 1995 and 1996. 

Indeed, the high level of tariff and non-tariff barriers has contributed to a low level of cement production 
in Iran.  

 

Comparing average tariff rates in Iran with other countries, as revealed in Table (4), shows that Iran has 

experienced a much higher level of protection. For instance, the average tariff rates in the industrial sector 
in Turkey, Singapore, and Philippine amounts to 5.7, 2.7, and 9.1, respectively. Even compared with 

Thailand with an average tariff rate of 43.7, and India with an average tariff rate of 29.5, Iran has 

experienced much higher tariff rates in some industries including food and textile. The matter of the fact 
is that Iran's protectionism policy has been very intense compared with other developing countries leading 

to smuggling and trafficking of goods due to the high amount of subsidies allocated to some sectors 

through the central government.  
 

With a new era of international trade, many countries have reduced their tariff and non-tariff barriers to be 

eligible to join WTO. The research studies carried out in developing countries suggest that amount of 

reduction in tariff rates vary substantially depending on trading partners, the composition of foreign trade, 
the structure of the ownership, and the level of protection before joining WTO.  

 

Table (3). Average tariff rates for different categories in Iran (1999) 

Category Items No of 

tariffs 

Min 

tariff 

Max 

tariff 

Average 

tariff 

1 Animal and animal products  201 0 180 62.3 

2 Vegetables, fruits and wheat 271 0 200 85.9 

3 Soya bean oil and non-vegetarian  oil 46 0 175 55.0 



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4 Food industry, beverage, and tobacco 186 0 200 103.7 

5 Mineral products 148 5 110 22.6 

6 Chemical industries and related items 786 0 210 18.8 

7 Crude rubber and caoutchouc 198 5 215 38.5 

8 Leather and leather made commodities 74 5 215 127.1 

9 Wood and wood products 81 5 215 71.6 

10 Paper and paper products 148 5 135 37.9 

11 Textile and related items 824 10 270 109.0 

12 Shoes, umbrella, and sun-glasses 55 120 220 204.7 

13 Chalk, asbestos, tile, and glass  147 5 220 78.3 

14 Pearl. Precious stones and gold 52 5 270 39.0 

15 Non-precious stones 571 5 325 43.7 

16 Electronic instruments, tape records, TV 804 0 180 41.5 

17 Transportation vehicles 132 0 190 Na 

18 Optics, cameras, medical and surgery 

instruments 

238 5 145 35.6 

19 Guns and related items 17 80 80 80 

20 Sport goods and toys 130 15 215 130.6 

21 Paintings and antiques 7 5 5 5 

Source: Razini Ali, rationalizing tariff rates in Iran, trade research center, ministry of commerce, 1999. 

 

Table (4)- Tariff commitments of selected countries for industrial products in 1999 

Member Percent of imports with bound tariffs Current mean industrial tariff Applied bound tariff 

Philippines 67.4 9.1 21.3 

Indonesia 92.3 14.9 36.9 

Malaysia 79.3 9.4 8.9 

Singapore 96.5 2.7 6.9 

Thailand 67.4 43.7 27.3 

Brazil 100 18.3 27.7 

Chile 100 10.9 24.9 

India 69.3 29.5 34.2 

Sri Lanka 9.2 19.8 17.9 

Turkey 49.3 5.7 16.3 

Zimbabwe 13.6 20.5 23.6 

Australia 96.9 4.4 12.1 

Canada 99.8 3.2 4.3 

European Union 100 3.5 3.2 

Korea 89.9 7.8 6.9 

Mexico 100 12 33.3 

United States 100 2.7 3.5 

Source:www.cementdistribution.com/industryinfo/trade.html 

 
Non-tariff barriers in Iran 

The Market Regulating Committee
5
 is in charge of cement pricing and has approved the following 

regulations in 2002 regarding the cement industry in Iran. According to these regulations, the clinker 

price for the year 2003 is obtained by adding up the base price in 2002 to 15 percent growth rate. The 
amount of sale by each company should be determined by a committee, which consists of the vice 

minister of commerce, vice minister of industries and vice minister of housing. According to the 

regulations approved by the cited committee, enterprises are obliged to use the difference between 

                                                             
5- A committee established for confronting with shortage of the essential goods and commodities which is under the control of 
the expediency council.  



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33 
                           

controlled price and the equilibrium price for increasing the capacity of the cement industry. Meanwhile, 

the main shareholders of the cement industry including; Social Security Organization, Mostazafan and 
Janbazan Foundation, and the National Bank of Iran are responsible for importing cement or clinker 

according to the needs announced through the above-mentioned committee. 

 

The controlled price will be set on a quarterly basis. In addition, the profit margins for the wholesale and 
retail sellers will be determined by this committee and will be approved by the Consumers and Producers 

Protection Organization (CPPO). The ministry of industries will be in charge of determining the cement 

prices in different enterprises, depending on the region and the quality of production. All producers and 
distributors are subject to administrative controlled prices. Moreover, the cement producers are 

responsible for allocating a portion of their profits for financing the difference in the controlled price and 

the import price of cement and clinker. Ministry of industries is responsible for the imports of clinker and 
cement. The Management and Planning Organization (MPO) and the Central Bank of Iran (CBI) are 

committed to providing financial facilities to respond to the needs of establishment and especially for 

increasing the existent capacities. However, white cement is excluded from the above-mentioned 

regulations. 
 

As it is seen, the cement industry in Iran is heavily regulated and protected through different committees 

and organizations, which are involved in determining administrative controlled prices and distribution 
mechanism. Indeed, the industry has failed to respond to domestic demand due to the existence of tariff 

and non-tariff barriers. Accession to the World Trade Organization (WTO) requires removing the 

controlled prices, quantitative restrictions, and bans on imports and exports, which are all requirements 
for improving the competitiveness of the industry. Indeed, joining the WTO requires carrying out 

essential reforms to reduce the tariff rates substantially. To assess the effects of tariff reduction on the 

cement industry, the next section develops a structural system of equations, including supply, demand, 

exports, imports, and prices.   
 
Future Trade Prospects 

Trade prospects are good in the short-run and medium term. During 2000-2003 high oil prices have 

driven rapid import growth in the Persian Gulf economies, though beyond 2003, this factor may not 
sustain continued growth. In the medium term, WTO is becoming an increasingly important force for 

liberalization in the region, reducing tariff and removing non-tariff barriers, improving intellectual 

property right protection, deregulating and liberalizing agency arrangements and opening rapidly growing 
sectors such as telecommunications and e-technologies. Its influence is likely to increase if Saudi Arabia's 

accession is successful. Common GCC external tariffs may raise average tariffs in some of the region's 

most open economies, like the UAE and Kuwait; however, increased integration also can promote intra-

regional trade and hence manufacturer's ability to move beyond the Gulf region from base manufacturing, 
the oil. 

 

In the medium term, Iran may become a substantially more important trading nation in the Persian Gulf 
region since she has rapid population growth and is willing to carry out economic reforms in accordance 

with WTO agreements.  

   
3. Methodology 

To determine the quantitative effects of Iran's joining WTO on her cement industry we try to build up a 

dynamic disequilibrium adjustment model (DDAM) to investigate the effects of tariff reductions on 

production, consumption, and trade, with emphasis on simultaneous domestic price effect in changing 
domestic production and consumption. The sample under investigation covers the period 1963-2002. The 

data on the cement industry has been obtained from the cement companies and  macroeconomic data 

including GDP , cement wholesale price index, and Iran's effective exchange rate has been obtained from 



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34 
                           

the data bank of the Central Bank of Iran. The world production and prices have been obtained from 

International Trade Statistics.   
  
List of Variables 

IRYCD=Iran's cement output (domestic supply) 

IRIMP=Iran's cement imports in tons 

IREXP=Iran's cement exports 

WPRICE=World price of cement 

IRPRICE=Iran's approved cement price (Rials per ton) 

IRWPRICE=Iran's cement wholesale price index 

IRGDP=Iran's GDP at constant factor prices 

IRGDPNF=Non oil GDP at factor costs 

IREENOIL=Iran's effective exchange rate (Units of Rials per U.S. dollars) 

EXCESS=Change in cement inventory in Iran 

NCAPACITY=nominal capacity of cement production in Iran 

CONSD=Cement consumption of domestic production  

Variables starting with "D" and following with two or four digit numbers are dummy variables whose 

values are one for the specific period denoted by digits and zero otherwise. The proposed DDAM consists 

of the following equations: 

IRIMP=C(10)+C(11)*IRGDP+C(12)*IREENOIL*WPRICE/IRWPRICE+C(13)*IRIMP(-1)+ 

C(14)*D5972*IRIMP(-1)+C(15)*D77+C(16)*D79+C(76)*D7905 

IREXP=(1-D7286)*(C(21)*NCAPACITY+C(22)*IREENOIL*WPRICE/IRWPRICE+ C(23)*IREXP(-

1))+C(24)*D0205+C(25)*D71 

LOG(IRYCD)=C(30)+C(31)*LOG(IRWPRICE)+C(32)*LOG(NCAPACITY)+ 

C(33)*LOG(IRYCD(-1)) 

LOG(CONSD)=C(40)+C(41)*LOG(IRWPRICE)+C(42)*LOG(IRGDPNF)+C(43)*@TREND+ 

C(44)*D5978 

LOG(IRWPRICE) =(C(51)*EXCESS+C(52)*LOG(IRWPRICE(-1)))*(1+C(53)*D9405) 

EXCESS=IRYCD+IRIMP-CONSD-IREXP 

TBALANCE = IREXP-IRIMP 

The interaction mechanism of the model is very simple. Import, export and domestic production and 

consumption of cement are determined by the first fourth equations, and the sixth identity calculates 

changes in the inventory of cement. Price of cement is determined by the fifth equation, which is a 

difference equation and can oscillate in varieties of ways based on its lags structure, parameters' signs and 
magnitudes. Cement price simultaneously is determined by the existence of this variable in the first four 

equations.   

 
 



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35 
                           

4. Estimated Results 

All equations have been estimated by OLS method. The estimated results suggest, as presented in Table 

(5) that all statistics are econometrically meaningful and statistically significant in all equations.  
 

The estimated results suggest that cement import covaries positively and significantly with GDP and 

negatively with the real effective exchange rate. Export equation reveals the fact that cement export is 
significantly and positively related to nominal capacity and real effective exchange rate.   

 

Cement production covaries positively and significantly with the cement wholesale price index through 

the size of influence is negligible. However, the nominal capacity has a positive and significant influence 
on domestic production. Domestic consumption is negatively and significantly related to the cement 

wholesale price index, as expected and positively and significantly in relation to GDP.  

 
Table (5). Estimated results for the DDAM for the cement industry of Iran 

Independent 

variable 

IRIMP IREXP IRYCD CONSD IRWPRIC

E 

IRGDP 1.61 

(4.12) 

    

IRGDPNF    0.91 

(17.08) 

 

IRENONOIL -167 

(-3.4) 

27.6 

(2.44) 

   

IRIMP (-1) 0.55 

(11.3) 

    

NCAPACITY  0.69 

(2.27) 

0.27 

(3.87) 

  

IREXP(-1)  0.32 

(1.97) 

   

IRWPRICE   0.02 

(2.41) 

-0.20 

(-7.51) 

1.08 

(62.13) 

IRYCD(-1)   0.59 

(7.25) 

  

EXCESS     8.46E-08 

(2.55) 

R-Squared 0.97 0.88 0.99 0.99 0.99 

Adjusted R-squared 0.97 0.87 0.99 0.99 0.99 

Durbin-Watson 1.29 1.76 2.10 1.34 1.20 

 

To analyze the effects of Iran's WTO accession on the Iranian cement industry we solve the model for the 

period of 1993-2002 by stochastic simulation with 1000 replication to find out the baseline scenario 
which is used as a control solution to compare with an alternative scenario which has been modified to 

measure Iran's WTO joining effect. The result of the baseline solution model is presented in Annex 1.   

 

Since the data on tariff rate for the time period under investigation is not available, to measure the effects 
of tariff reduction within the model, we decrease book price of cement both for imports and exports to be 

in conformity with WTO agreements. To do so, we multiply the real effective exchange rate variable in 

both import demand and export supply equations of the model by )1(  , where   is the percentage of 

tariff reduction that may be proposed by WTO. The results are presented in Annex 2.  
 

To measure the amount of tariff reduction, we use pre and post WTO joining tariff profiles for imports of 

industrial products by the country group as a proxy for the tariff reduction rate. According to unbalanced 



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36 
                           

tariff reductions for developed and less developed countries, and regarding previous studies
6
 we adopt to 

apply 69% tariff reduction on Iran's import of cement from DCs and 14% tariff reduction for Iran's 
exports to DCs. Though these numbers are guess estimates but can show the effects of joining WTO on 

Iran's cement economics. Using stochastic simulation of model 2 with the same characteristics of model 

1, regarding the sample period and 1000 replication, we produced the alternative solution which can be 

compared with the control solution (Annex 3).  
 

The following graphs and tables compare the mean and standard deviations of these two solutions. The 

results of the simulations are presented in Annex 4.  
In sum, the estimated results and simulations indicate that Iran's joining WTO: 

 Does not affect her domestic cement consumption. 

 Has negligible decreasing effects on cement exports 
 Will dramatically increase Iran's cement imports 

 Price adjustment is as dynamic as changes in total cement demand and supply and will adjust 

itself more rapidly after joining WTO 

 Changes in domestic supply will be negligible after joining WTO 
 All in all, joining WTO may cause the cement trade deficit 

 

                                                             
6 Bidabad B., "Designing econometric model to measure the changes in imports and exports of the industry sector", Chapter 5, 
1996.  
______ "Quantitative effects of joining WTO on Iran industrial sector", 2004.   

1.2E+07

1.6E+07

2.0E+07

2.4E+07

2.8E+07

3.2E+07

3.6E+07

93 94 95 96 97 98 99 00 01 02

Actual

CONSD (Baseline Mean)

CONSD (Scenario 1 Mean)

CONSD ± 2 S.E.

-1.5E+07

-1.0E+07

-5.0E+06

0.0E+00

5.0E+06

1.0E+07

1.5E+07

93 94 95 96 97 98 99 00 01 02

Actual

EXCESS (Baseline Mean)

EXCESS (Scenario 1 Mean)

EXCESS ± 2 S.E.

-100000

0

100000

200000

300000

400000

500000

600000

700000

800000

93 94 95 96 97 98 99 00 01 02

Actual

IREXP (Baseline Mean)

IREXP (Scenario 1 Mean)

IREXP ± 2 S.E.

-600000

-400000

-200000

0

200000

400000

600000

800000

93 94 95 96 97 98 99 00 01 02

Actual

IRIMP (Baseline Mean)

IRIMP (Scenario 1 Mean)

IRIMP ± 2 S.E.

-100

0

100

200

300

400

500

600

700

93 94 95 96 97 98 99 00 01 02

IRWPRICE

IRWPRICE (Baseline Mean)

IRWPRICE (Scenario 1 Mean)

IRWPRICE ± 2 S.E.

1.2E+07

1.6E+07

2.0E+07

2.4E+07

2.8E+07

3.2E+07

93 94 95 96 97 98 99 00 01 02

Actual

IRYCD (Baseline Mean)

IRYCD (Scenario 1 Mean)

IRYCD ± 2 S.E.

-500000

0

500000

1000000

1500000

93 94 95 96 97 98 99 00 01 02

Actual

TBALANCE (Baseline Mean)

TBALANCE (Scenario 1 Mean)

TBALANCE ± 2 S.E.



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37 
                           

4. Conclusion 

Iran has a unique geographical situation in the Persian Gulf region for boosting trade in different 

commodities, especially minerals. Reducing oil dependency as one of the main objectives of the Five 
Years Development Plans has induced the Iranian officials to undertake some essential reforms in trade 

and government policies. Though Iran still suffers from high levels of tariff and non-tariff barriers on her 

trade relations and internal obstacles on domestic industries, in the medium term, Iran may become a 
substantially more important trading nation in the Persian Gulf region since she has rapid population 

growth and is willing to carry out economic reforms. 

 

The administrative price controls besides import compression policy have contributed to the low level of 
cement production. Iran's import profile is heavily skewed towards those tradable that are not strongly 

under the effects of WTO, indicating protectionism in the industry sector. Trade liberalization that has 

been carried among the Persian Gulf region's economies provides a supportive argument for Iran's 
accession to WTO. Since countries' experiences provide a contradictory profile after joining WTO, this 

paper tried to investigate the quantitative effects of the entry accession on the cement industry of Iran.  

 
To do so, we developed a dynamic disequilibrium adjustment model (DDAM) with data covering the 

period 1963-2002. Assuming 69 percent tariff reduction on Iran's imports of cement from DCs and 14 

percent tariff reduction for Iran's exports to DCs after accession and applying stochastic dynamic 

simulation results for the period 1993-2002 with one thousand replications suggest that Iran's accession to 
WTO has negligible effects on her domestic consumption, production, and exports, while it substantially 

raises its cement imports. 

 
All in all, the results suggest that Iran's WTO accession does not have tremendous effects on its 

production, exports, and consumption. Though the entry may accelerate cement imports. Since the cement 

is used as an essential input for the industry and real-estate sectors, which has highly contributed to the 

GDP growth in recent years, it is expected that it may contribute to a higher level of economic growth in 
years to come. 

 

To pave the way for joining WTO, Iran has to take important measures to liberalize controlled prices, to 
remove quantitative restrictions, and to deregulate the industry in conformity with WTO arrangements.   

 
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Bidabad, Bijan. (1994). Quantitative effects of joining WTO on Iran industrial sector.  
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Bidabad, Bijan; Mahshid Sherafati, Roohollah Mohammadi.(2014).Measuring Efficiency of Production 

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Bidabad, Bijan; Mahshid Sherafati, Roohollah Mohammadi.(2014).A Financial Model for Economic 

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http://www.bidabad.com/doc/abyekfunction-en.pdf
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www.cribfb.com/journal/index.php/asfbr                                       Asian Finance & Banking Review                                                 Vol. 3, No. 1; 2019 

 

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Bora, B., A. Kuwahara, S., Laird. (2002). Quantification of non-tariff measures, Policy issues in 

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prepared for the OECD workshop with non-member economies on barriers to trade in goods and 
services in the post-Uruguay round context. Paris, 27-28 September. 

Bouet, A., L. Fontagne, M. Mimouni, X. Pichot (2001), Market access maps: A bilateral and 

disaggregated measure of market access. 
Corden W.M.  .(1971). The theory of protection. Clarendon Press, Oxford. 

Dadras, R. 1999, 'Measuring the technical efficiency of the cement industry in Iran, a dissertation guided 

by Dr. B. H. Zonooz, Allameh University, Tehran. 

Deardorff, A., R. Stern. (1998). The measurement of non-tariff barriers, OECD, Economic Department 
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Fieleke N.S. (1995) The Uruguay round of trade negotiations. Industrial and geographic effects in the 

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      http://www.cepii.fr/anglaisgraph/communications/pdf/2001/washington/macmaps.pdf  
      http://www.nuca.ie.ufrj.br/infosucro/biblioteca/negociacoes/Baldwin_regulatory.pdf   

 
Annex 1 

System: SYS02 

Estimation Method: Iterative Least Squares 

Sample: 1963 2002 

Included observations: 40 

Total system (unbalanced) observations 196 

Convergence achieved after 2 iterations 

 Coefficient Std. Error t-Statistic Prob.   

C(10) 356713.0 89239.77 3.997242 0.0001 

C(11) 1.614763 0.391224 4.127468 0.0001 

C(12) -167.8328 49.08161 -3.419465 0.0008 

C(13) 0.553647 0.048830 11.33823 0.0000 

C(14) -2.844118 0.717737 -3.962618 0.0001 

C(15) 1575730. 118637.0 13.28195 0.0000 

C(16) -1029487. 139216.0 -7.394891 0.0000 

C(76) -465079.1 65039.66 -7.150699 0.0000 

http://r0.unctad.org/p166/module2002Bangk/Module4/boralairdkuwa.pdf
http://heiwww.unige.ch/~baldwin/papers/NTBs_brookings_trade_forum00_baldwin.pdf
http://www.cepii.fr/anglaisgraph/communications/pdf/2001/washington/macmaps.pdf
http://www.nuca.ie.ufrj.br/infosucro/biblioteca/negociacoes/Baldwin_regulatory.pdf


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39 
                           

C(21) 0.693379 0.305329 2.270925 0.0244 

C(22) 27.63896 11.29419 2.447184 0.0154 

C(23) 0.324899 0.164908 1.970181 0.0504 

C(24) 394125.0 47465.98 8.303316 0.0000 

C(25) 174850.0 45179.54 3.870114 0.0002 

C(30) 3.553863 0.626057 5.676581 0.0000 

C(31) 0.029530 0.012247 2.411316 0.0170 

C(32) 0.271043 0.069899 3.877621 0.0002 

C(33) 0.598896 0.082511 7.258341 0.0000 

C(40) 4.136804 0.553261 7.477131 0.0000 

C(41) -0.208590 0.027749 -7.517172 0.0000 

C(42) 0.910048 0.053252 17.08955 0.0000 

C(43) 0.059990 0.006514 9.208956 0.0000 

C(44) -0.267502 0.044555 -6.003929 0.0000 

C(51) 8.46E-08 3.31E-08 2.557616 0.0114 

C(52) 1.089052 0.017527 62.13742 0.0000 

C(53) -0.040562 0.018605 -2.180109 0.0306 

Determinant residual covariance 3.07E+12   

Equation: IRIMP=C(10)+C(11)*IRGDP+C(12)*IREENOIL*WPRICE /IRWPRICE+ 

       C(13)*IRIMP(-1)+C(14)*D5972*IRIMP(-1)+C(15)*D77+C(16)*D79+C(76)*D7905 

Observations: 39 

R-squared 0.977260     Mean dependent var 263560.7 

Adjusted R-squared 0.972125     S.D. dependent var 620654.5 

S.E. of regression 103623.4     Sum squared resid 3.33E+11 

Durbin-Watson stat 1.296946    

Equation: IREXP=(1-D7286)*(C(21)*NCAPACITY+C(22)*IREENOIL 

        *WPRICE/IRWPRICE+C(23)*IREXP(-1))+C(24)*D0205+C(25)*D71 

Observations: 39 

R-squared 0.885778     Mean dependent var 93074.18 

Adjusted R-squared 0.872340     S.D. dependent var 120420.2 

S.E. of regression 43025.50     Sum squared resid 6.29E+10 

Durbin-Watson stat 1.767650    

Equation: LOG(IRYCD)=C(30)+C(31)*LOG(IRWPRICE)+C(32) 

        *LOG(NCAPACITY)+C(33)*LOG(IRYCD(-1)) 

Observations: 39 

R-squared 0.995544     Mean dependent var 15.84935 

Adjusted R-squared 0.995162     S.D. dependent var 0.927457 

S.E. of regression 0.064510     Sum squared resid 0.145656 

Durbin-Watson stat 2.109574    

Equation: LOG(CONSD)=C(40)+C(41)*LOG(IRWPRICE)+C(42) 

        *LOG(IRGDPNF)+C(43)*@TREND+C(44)*D5978 

Observations: 40 

R-squared 0.995519     Mean dependent var 15.79203 

Adjusted R-squared 0.995006     S.D. dependent var 0.989941 

S.E. of regression 0.069955     Sum squared resid 0.171278 

Durbin-Watson stat 1.347284    

Equation: LOG(IRWPRICE) =(C(51)*EXCESS+C(52)*LOG(IRWPRICE(-1)))*  (1+C(53)*D9405) 

Observations: 39 

R-squared 0.994469     Mean dependent var 2.031391 

Adjusted R-squared 0.994161     S.D. dependent var 1.888493 

S.E. of regression 0.144301     Sum squared resid 0.749616 

Durbin-Watson stat 1.205921    



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40 
                           

 
 

Annex 2. Model for Baseline Solution  

 

IRIMP=356712.976885967+1.61476270618398*IRGDP-167.832811413045*IREENOIL* 

WPRICE/IRWPRICE+0.553647193085624*IRIMP(-1)-2.84411769308308*D5972*IRIMP(-

1)+1575730.35363319*D77-1029487.01407616*D79-465079.055437859*D7905 

@INNOV IRIMP  103623.3858 

IREXP=(1- D7286)*(0.693379435212086*NCAPACITY+27.6389569885331*IREENOIL* 

WPRICE/IRWPRICE+0.324898912988592*IREXP(-1))+394125.044423648* D0205+ 

174849.960849296*D71 

@INNOV IREXP  43025.49704 

-200000

-100000

0

100000

200000

300000

400000

65 70 75 80 85 90 95 00

IRIMP Residuals

-100000

-50000

0

50000

100000

65 70 75 80 85 90 95 00

IREXP Residuals

-.20

-.15

-.10

-.05

.00

.05

.10

.15

65 70 75 80 85 90 95 00

LOG(IRYCD) Residuals

-.25

-.20

-.15

-.10

-.05

.00

.05

.10

.15

65 70 75 80 85 90 95 00

LOG(CONSD) Residuals

-.4

-.3

-.2

-.1

.0

.1

.2

.3

.4

65 70 75 80 85 90 95 00

LOG(IRWPRICE) Residuals



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41 
                           

LOG(IRYCD)=3.55386253259695+0.0295302269682137*LOG(IRWPRICE)+0.271043101241564*LO

G(NCAPACITY)+0.598896470243663*LOG(IRYCD(-1)) 

@INNOV IRYCD  0.06451036764 

LOG(CONSD)=4.13680392769509-

0.20859037839689*LOG(IRWPRICE)+0.910047792543505*LOG(IRGDPNF)+0.0599895559828637*

@TREND-0.267502133314843*D5978 

@INNOV CONSD  0.06995458186 

LOG(IRWPRICE)=(8.45645793256322e-08*EXCESS+1.08905173285413*LOG(IRWPRICE(-1)))*(1-

0.0405615985167576*D9405) 

@INNOV IRWPRICE  0.1443005985 

@IDENTITY EXCESS=IRYCD+IRIMP-CONSD-IREXP 

@IDENTITY TBALANCE=IREXP- IRIMP 

 

Annex 3. Model for Alternative Scenario Solution 

IRIMP=356712.976885967+1.61476270618398*IRGDP-167.832811413045*(1-0.69)* IREENOIL* 

WPRICE/IRWPRICE+0.553647193085624*IRIMP(-1)-2.84411769308308* D5972*IRIMP(-

1)+1575730.35363319*D77-1029487.01407616*D79-465079.055437859*D7905 

@INNOV IRIMP103623.3858 

IREXP=(1-D7286)*(0.693379435212086*NCAPACITY+27.6389569885331*(1-0.14)* 

IREENOIL*WPRICE/IRWPRICE+0.324898912988592*IREXP(-1))+ 

394125.044423648*D0205+174849.960849296*D71 

@INNOV IREXP43025.49704 

LOG(IRYCD)=3.55386253259695+0.0295302269682137*LOG(IRWPRICE)+0.271043101241564*LO

G(NCAPACITY)+0.598896470243663*LOG(IRYCD(-1)) 

@INNOV IRYCD0.06451036764 

LOG(CONSD)=4.13680392769509-0.20859037839689*LOG(IRWPRICE)+ 

0.910047792543505*LOG(IRGDPNF)+0.0599895559828637*@TREND-0.267502133314843*D5978 

@INNOV CONSD0.06995458186 

LOG(IRWPRICE)=(8.45645793256322e-08*EXCESS+1.08905173285413* 

LOG(IRWPRICE(-1)))*(1-0.0405615985167576*D9405) 

@INNOV IRWPRICE0.1443005985 

@IDENTITY EXCESS=IRYCD+IRIMP-CONSD-IREXP 

@IDENTITY TBALANCE=IREXP-IRIMP 

 



Copyright © CC-BY-NC 2019, CRIBFB | AFBR 

www.cribfb.com/journal/index.php/asfbr                                       Asian Finance & Banking Review                                                 Vol. 3, No. 1; 2019 

 

42 
                           

Annex 4. Simulation results 

 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 

CONSD 

      Actual 162065
54 

162664
73 

156783
50 

171079
58 

189310
72 

195837
44 

195009
37 

220950
48 

252683
41 

2740193
7 

      Baseline 160378
84 

159024
30 

170185
63 

187991
38 

196545
92 

206607
99 

211199
47 

221799
57 

229871
99 

2644272
1 

         S.E. 189530
8 

177855
4 

199889
3 

242584
2 

258778
8 

279584
5 

289242
8 

315305
0 

356637
8 

4324011 

      Scenario 1 159762
23 

156799
65 

169063
97 

186323
74 

195647
76 

204079
61 

208858
06 

221704
49 

227162
77 

2648527
8 

         S.E. 184489
9 

170640
1 

189683
8 

221846
3 

255274
5 

265193
9 

281484
2 

311062
9 

336131
3 

4625671 

EXCESS 

      Actual -
122047 

-
254573 

484747 184983 -
467738 

-
520582 

-
235484 

-
298363 

-
373231 

-
1201499 

      Baseline -
653809 

337059 -
631364 

-
193253

2 

-
137618

2 

-
117860

8 

-
490759 

-
763234 

110986
0 

-57875 

         S.E. 254328
1 

251518
1 

270573
6 

317882
9 

347307
7 

380232
2 

393140
6 

426033
5 

483606
4 

6000669 

      Scenario 1 -

353901 

788030 -

196046 

-

140545
1 

-

101910
6 

-

530351 

47128 -

413340 

169112

8 

176323 

         S.E. 247505
9 

241068
5 

255582
6 

289040
6 

332797
4 

350623
4 

373277
5 

401788
8 

448301
7 

6098156 

IREXP 

      Actual 111239 134488 197054 260388 235238 261208 122375 155087 194850 610693 

      Baseline 86759 128144 152419 180749 206906 207866 225355 190251 183278 612082 

         S.E. 46090 46387 47534 53072 51064 53496 53706 60049 53014 63026 

      Scenario 1 78532 120113 138204 169730 194205 191684 210607 173976 173039 603892 

         S.E. 45263 45866 46397 47404 47280 47773 49995 53907 48096 60812 

IRIMP 

      Actual 46985 7876 6205 7717 1369 917 4633 5906 8234 9944 

      Baseline 98823 31597 -52485 -66917 -36401 -49132 -66666 -43403 101500 54936 

         S.E. 141048 143723 164024 190253 201540 218589 234663 251001 215611 291782 

      Scenario 1 291764 239516 210658 227560 251176 251709 251855 275379 333432 344262 

         S.E. 106942 108506 106966 114738 117116 118803 115158 128777 109627 141848 

IRWPRICE 

      Actual 48.0 56.4 68.2 85.3 100.0 126.9 158.4 195.8 220.9 254.2 

      Baseline 40.1 61.0 67.3 75.2 99.4 120.3 164.0 204.2 299.6 326.4 

         S.E. 11.9 18.1 20.1 24.9 34.1 45.5 64.3 82.5 133.1 173.7 

      Scenario 1 41.0 63.2 69.3 77.4 101.7 126.0 168.3 207.1 312.5 331.3 

         S.E. 12.0 17.5 19.8 24.5 35.0 44.4 62.2 80.4 133.9 175.9 

IRYCD 

      Actual 161487
61 

161385
12 

163539
46 

175456
12 

186972
03 

193234
53 

193831
95 

219458
67 

250817
25 

2680118
8 

      Baseline 153720
11 

163360
36 

165921
02 

171142
71 

185217
17 

197391
88 

209212
09 

216503
77 

241788
38 

2694199
2 

         S.E. 106335
0 

112759
7 

111892
6 

116522
8 

125557
9 

137305
3 

146096
6 

152440
8 

178744
9 

2046775 

      Scenario 1 154090
91 

163485
91 

166378
95 

171690
92 

184886
99 

198175
85 

208916
87 

216557
05 

242470
13 

2692123
2 

         S.E. 109221

5 

118091

1 

112483

3 

118349

4 

128232

1 

139980

6 

149520

0 

149853

0 

170371

2 

2072341 

TBALANCE 

      Actual 64254 126612 190849 252671 233869 260291 117742 149182 186615 600749 

      Baseline -12064 96547 204903 247666 243306 256998 292021 233654 81778 557145 



Copyright © CC-BY-NC 2019, CRIBFB | AFBR 

www.cribfb.com/journal/index.php/asfbr                                       Asian Finance & Banking Review                                                 Vol. 3, No. 1; 2019 

 

43 
                           

 
 

 

 

Copyrights  

Copyright for this article is retained by the author(s), with first publication rights granted to the journal. This is an 

open-access article distributed under the terms and conditions of the Creative Commons Attribution license 
(http://creativecommons.org/licenses/by/4.0/). 

 

         S.E. 156447 160653 183615 218804 228204 250681 267514 291900 248578 338083 

      Scenario 1 -

213231 

-

119403 

-72455 -57830 -56971 -60025 -41247 -

101403 

-

160392 

259630 

         S.E. 118499 123734 121384 129132 135799 137472 135965 156101 127913 179772 


