La Turquie en Europe Progrés Économiques et Défis Globaux Toplantı Konuşması
Ladies and Gentlemen,
I would like to thank to the organizers of this conference for offering me this opportunity to address such a distinguished audience.
Today I would like to provide an analysis of the transformation in Turkish economy within the last 20 years. I will attempt to highlight a few features of the changes in the balance of power in political economy and how the EU membership process has influenced these changes. By doing so, I will point out the shifts in economic power between the national, regional and global actors. But before going into the economic analysis, let me make a brief introduction of the confederation I represent.
TURKONFED is a non-governmental, voluntary and politically independent business organization in Turkey comprising of 6 regional and 3 sectoral federations, 96 associations, and over 9600 businesspeople.
TUSIAD, the oldest and the most influential Business Association in Turkey, is also a member of our organization. Our confederation represents a turnover of 208 billion US dollars, exports of 65 billion US dollars and our members have almost 1,2 million employees.
TURKONFED was founded in 2004. The reason behind the establishment of this confederation is a reflection of the changes in balance of power in Turkish political economy. Before the establishment of the confederation, the Turkish business community was represented by mainly two big economic actors:
The first business organization is the Turkish Union of Chambers of Commerce and Industry, shortly TOBB. It is a semi-governmental organization with obligatory membership, thus financially very strong. TOBB, founded by law actually to serve the business world in Turkey, has never been an ideal platform to represent the SME’s. For years, it could or would not lobby for the SME’s at the government level nor offer workable solutions to the Anatolian SME’s facing problems of articulation to global economy. Businessmen, with the experience of many decades, consider most of the TOBB bureaus operating in all of the cities throughout Turkey rather politicized and ineffective.
The other business organization representing companies was TUSIAD, which is an independent, voluntary business association. With its 1500 member companies, it represents almost 40% of the value added created in the industrial and business sectors. The big companies in Turkey are members of TUSİAD and are efficiently represented by this influential organization. The SME’s, constituting 99.5% of all the companies in Turkey, however, did also not find TUSIAD as the most convenient platform to voice their problems.
From 1980’s on, because of the disparities in many aspects to TOBB and because of TUSIAD’s unreachable economic level, independent and voluntary local business associations called SIAD’s were created everywhere in Anatolia by SME’s, after the sample of the big brother, TUSİAD. At the same time, sectoral associations were formed to represent business sectors. These economic pressure groups started to play an important role on issues that affect their businesses such as institutional strategies. With the support of TUSIAD, the local and sectoral Associations created a Confederation, TURKONFED, filling the gap of representation of the SME’s by a strong voice throughout Turkey, also in EU.
Today, approaches to regional development, sectoral and national economic policies, policies that foster the integration of Turkish business world to global markets, ways to improve competitiveness of the Turkish industry are among our agenda. One of the main objectives is to enhance Turkish regional and sectoral potentials.
To accomplish this objective, our associations force the governments to adopt strong economic liberalization policies, as those supported by TUSIAD. Of course, the associations add regional and sectoral dimensions to those nation wide policies. Besides economic policies, they also have strong social demands for the improvement of democratic standards in Turkey.
The liberalization process in Turkey had started in the 1980s. The first stage included the transformation of the economy from a state dominated, heavily regulated, closed, import substitution economy to a market based and open economy. The foreign trade, financial system and later on capital account have been liberalized. The domination of the state in economic life has been reduced in time.
During 1990s, Turkey has adopted steps to enhance the institutional structure of its newly established market economy. But this attempt had some shortcomings. These shortcomings have manifested themselves in the intensive instability through 90’s, which ended with a big crisis in 2001.
As the previous speakers have outlined, Turkey has lived hard times during this crisis. Just after the crisis, Turkey embarked on a new economic program. The economic program rested on two pillars:
1- Improving the economy’s resilience to shocks and reduce its vulnerability in the short run.
2- Achieving sustainable growth via fundamental structural reforms from medium to long run.
The crisis of 2001 marked the end of an era. A decade of political and economic instabilities was left behind. The program resulted in a paradigm shift in Turkey. The IMF and the EU were the two facilitators of this change. The economic stabilization program supported by the IMF initiated a low inflation-high growth process with a consequence of a significant improvement in the economy as a whole.
On the other hand, the EU accession process has also a constructive impact on sustainable economic and institutional development and ongoing reform process, by providing a suitable framework for institutional evolution. Thus, the structural reforms that could be implemented now, have introduced a second stage to the liberalization process of the economy.
The IMF and the EU anchors helped to establish the institutional structure for the economy. The steps taken regarding the financial sector, public banks, independence of the Central Bank, privatization, independent regulatory authorities, public fiscal management, agricultural policies and deregulation and liberation of the markets under the structural reform program has definitely enhanced the resilience of the economy but also has changed the way of doing business in Turkey. The program was put into action after the crisis. Especially the structural reform component of the program and the role exercised by the external anchors, the IMF and the EU had implications on the balance of power of economic actors.
The reforms have changed the way of doing business in Turkey.
The establishment of independent regulatory authorities introduced an arms length relationship between the business and economic decision makers in the state and government. In the previous period, the usual way of doing business rested on close ties between the businessmen and the politicians or state officials. The newly established independent authorities made such relations redundant.
On the other hand, the re-regulation in the banking sector and the decrease in interest rates have improved the conditions of access to bank credits for the SMEs. The banking sector has replaced former traditional within family finance modalities. The decrease in the inflation rate reduced the use of commercial loans.
All in all, we have witnessed a loss of power in traditional business attitudes against modern ways of the business life. This shift of economic power from traditional to modern companies has also coincided with the attitude towards globalization. In general, those who strengthened their positions were those having international ties. The loser included those who served only to national and regional markets. Companies that do not have any interaction with global markets, found it difficult to cope with the changing business environment. Such companies mostly operate on the unrecorded side of the economy. Needless to say that these companies are from traditional sectors, whose main competitiveness rest mostly on cheap labor input, mostly in textile business.
The companies who have close links with global markets, either big exporters or have joint ventures with foreign capital, found it less difficult to adapt to changing circumstances. Furthermore, when we look at the sectoral level, we also find out that the sectors with a higher technological content have done much better in terms of production, exports and job creation. A very important point is that the automotive industry is rising enormously, giving opportunities to EU companies to collaborate with Turkish companies, mostly SME’s. Those companies also are fully professional, quality conscious and operate in the fully recorded economy. Looking at the data, we can easily depict that outcome.
Naturally, the flow of foreign direct investment is rising steadily, also. As noted in the previous session, FDI amounted to 20 billion dollars from a level of only 1 billion dollars. Exports have increased 2.5 times since the 2001 crisis. The process of transformation of economic attitude and power in Turkey is not over yet. It will continue because there are still important loopholes in the structural reforms.
The two important ones are tax reform and social security reform. Both of these reforms will negatively affect the unrecorded companies but will improve the conditions of competition for the formal companies.
The transformation of economic power has occurred not just within the big business capitals but deep in Anatolia as well. The last few years, in Anatolia, we have witnessed the flourishing of many new modern companies as part of global value chains. Recently, we witness mergers and acquisitions between these Anatolian tigers and the foreign companies. We may call these companies as the drivers of change in the Turkish economy. These companies have been the pioneers of new forms of business organizations. And as I have noted earlier, these companies have chosen to be organized under the SIAD’s, Businessman Associations and then have established our organization, namely the TURKONFED.
Though there are hundreds of examples, I want to share with you a few of these success stories.
-An iron and steel company called Tosyalı Holding is based in Iskenderun. It has exports to 43 different countries
-Solen Gida, a chocolate producer, is based in Gaziantep. Its exports are over 150 million dollars. Their products are in the shelves of biggest retailers such as Tesco and Wal-Mart.
-Eroğlu, machinery and tools producer based in Bursa, won the Oskar-Patzelt Stiftung Award for the medium business in 2007. Eroğlu exports to EU member states, Sweden, Norway, USA, Australia, China, South Africa, Iran, Japan, Canada and Russia
-Kırmızıdam Gıda, an organic agricultural products firm of Adana, is one of the major exporters of Turkey.
-Ozantex, a textile manufacturer of Denizli, Babadağlı, is within the top 500 industrial companies of Turkey since 1995. Ozantex exports to France, United Kingdom, Germany, Italy and many other European countries.
-Ece Banyo, a company in Çorum, has wide range of products in the area of washbasins, closets, bathroom furniture, ceramic and metal accessories. Ece Banyo received the most innovative company award in 2006. Ece exports its products to 40 countries in 5 continents.
-Dimer is a marble and precious stone producer based in Diyarbakır. In 1995 the company supplied the market with marble blocks called Orient Pink. Orient Pink has been registered by Turkish General Directorate of Mining Affairs as the first marble product produced in Diyarbakır. Dimer exports to more than 40 companies all over the world.
We can expand this list to hundreds of other success stories.
The message is there is a big change in the business life of Turkey and the transformation will continue for some time.
The transformation in the agricultural sector and the changes triggered by the EU harmonization process will be the impetus of this shift in balance of economic power. Indeed, the EU membership process will continue to reshape especially the product markets.
The need for redefining the role of the government, together with an accomplished privatization program including the banking sector, the ultimate liberalization of network industries and an efficient competition policy have further impacts on competitiveness of different types of companies. Therefore, Turkey should also have proper strategies to offer relief for the losers in this process.
There are positive signs that the government is aware of the situation and is promoting innovation and R&D of the SMEs. Reducing regional disparities, diminishing the informal sector, deepening the financial markets, promoting the development of small-medium size enterprises and adopting good governance in the public sector are among the modules of this strategy.
The EU membership process also entails an intensive political agenda. The atmosphere within the Turkish SME’s is: we will soon be in the EU. So, let’s be prepared, let’s raise our quality and productivity. The regional development approach is one of the areas in which there will be a major change. One way to help the losers and establish the grounds for social cohesion is the elimination of regional differences. As the previous speaker has excellently demonstrated there are huge regional disparities. Policies enabling the sectoral diversification and specialization in accordance with the competitive advantage of the regions may facilitate balancing these disparities. As the organization representing regional business federations, we follow very closely the policy changes in regional development in the EU.
We, as TURKONFED, are undertaking various studies for increasing the competitiveness of regions. Rather than a system of redistribution and direct incentives for less-developed regions, we are trying to figure out which barriers hamper the competitiveness of the region.
For each region, with the involvement of regional stakeholders, we are developing proposals to eliminate these barriers and create a suitable environment.
As TURKONFED, we have started a new project to facilitate the transformation of the companies in Anatolia from traditional, local, inefficient unrecorded companies towards formal, efficient, modern companies positioned within global chains. Because well planned, effective and innovation based clustering strategies enables such a transformation, we initiated a comprehensive project on the establishment of sector-based Regional Innovation Centers throughout Turkey.
Ladies and gentlemen,
The transformation in Turkey’s economy has opened the way for SMEs in Anatolia. This is a process that has been started after the 2001 crisis. The EU membership process will further accelerate the transformation from traditional to modern companies in Anatolia. That transformation in return, will enhance growth and employment creation in the Turkish economy.
I would like to end up by emphasizing the importance of the roadmap that is offered by the EU. Thank you very much for your attention.