Foreign Trade Policy

An interview with the Minister of Trade Mr. Kürşad Tüzmen...

TURKISHTIME: Does Turkish industry presently possess a capacity to elevate exports to $50 billion in the up-and-coming period? If not, what needs to be done in order to improve this capacity?

KÜRŞAD TÜZMEN: First, we have to make the right diagnosis. For the moment, Turkey does not have a major market problem. Turkey has problems in reaching the present markets with the right exports, pricing and marketing techniques. Turkey's capacity use is problematic. I had always underscored our sectoral and regional dependencies. In the 1985-1995 interval, we were dependent on the food sector and on Iraq and Iran, regionally… 50% of our exports were to these two countries. After the 1990s, especially in 1995-1996, there was a new development and our dependence on the European Union rose. We do more than 50% of our trade with EU countries. We have a sectoral dependence, too; the textile and apparel sector dominates nearly 30% of total exports. A balance has to be struck in this dependence issue. Five years ago, I had said that Turkey would score significant export increases in the sectors of automotive, ready wear, technical textile, software, chemicals, electric and electronic devices and soil products. In the past five years, the accuracy of this strategy was justified. I had received much criticism when we had said that these would be the star sectors of Turkey. Next to these, in Turkey, there are sectors that I would define as "cash-cow". I use that definition because these are sectors that, no matter what you do, feed on grass and which you can benefit from their milk and meat; to put it correctly, they are sectors that we can always feed with grass and get their milk and meat readily. Textile and apparel are as such. These are vital for the Turkish economy. They have to be protected and developed in a way so that better milk and meat can be obtained.

So, what are the basic problems?
It is possible to explain Turkey's problems concerning production and exports with three factors: labor force, capital and information. Of these three factors, capital is insufficient, labor force is inefficient and unproductive and we are only at the stage of reaching information. Since this is the situation, I can't be very optimistic about Turkey's competitive advantage in the period to come.

There is also the issue of input costs...
Yes. The notion of the steep input costs that constantly troubles our exporters is also very important. Cheaper inputs could have provided a competitive advantage in exports. Water, electricity, transportation and labor (because it is unproductive) are above world prices. Another sector very much above world prices is financing. As AKP (Justice and Development Party), during the election period, we had stated that we would gradually pull down input costs and reconcile the state with businessmen. There are now studies going on in the Energy and Finance Ministries with regards this issue. You can't proceed with the issue of competitive advantage without resolving these.

In Turkey, an industrial culture independent of the state is in the making. Habits that are remnants of the statist period still hold sway in companies. What do you think about this subject?
We have to develop different approaches. We should encourage creativity, differences and originality. For instance, we should encourage students we finance to study abroad to set up companies there. Let them produce goods and let us bring the information they acquire during that process into Turkey. We need foreign capital to raise our exports to the $50 billion we aim. That is where these young people will step in. Germany is the most attractive country in this respect. We have a considerable population and capital accumulation in Germany. They may make key contributions about the inflow of foreign capital. Nowadays, everyone talks of the Chinese miracle. 25 billion of the $40 billion foreign capital in China is investments brought in by the Chinese living abroad. It comes from the USA, Taiwan, Hong Kong, etc. In records, it is foreign capital, but it is virtually Chinese capital. In order to succeed ourselves, we have to ensure our reliability. We can make considerable progress on this issue if we can carry on the positive mood that was spurred by the new government. In order to make more progress on this issue, we have to first sell the world the image of Turkey. If you can't sell your image, you can't sell your goods or entice foreign capital, either. There are incomplete projects on this issue from my tenure as undersecretary such as "Turquality". If it had obtained support, the project would have worked out well. Now we will continue where we had left off. Turkey should now become the country that sells quality. That is why I had named that project, "Turquality". We have to be the country that sells quality to the world at the right price. Since political instability has ended, the period to follow is going to be a period when the right decisions will be made in Turkey.

The cost of political instability was high...
Yes. Even with the Contract for the Atatürk Airport, a decision could not be made. We lost ten years. For ten years, each year we treated Greece with $5 billion, air transportation was done by Greece; a staggering $50 billion. Such indecisiveness has cost Turkey dearly. As such, I believe that in the period ahead, Turkey will turn into a country that sells quality at the right price. I would like to see the public and private sectors together as a group of people from businessmen to industrialists and exporters who knit together around a success story where peace prevails and people complete their procedures in state offices without cursing. To be frank, this country has granted me the luxury of serving in bureaucracy for two, three years as specialist head of department, deputy general manager, general manager, assistant undersecretary and undersecretary. Afterwards ministerial service…I would like to leave a nice success story behind when I leave my post as State Minister. I would like to achieve this success together with Turkey's exporters, industrialists and the state.

What do you think of doing for Turkish foreign policy to work in harmony with the Turkish foreign trade policy, to support it, to mediate and lobby for it?
We have to determine our place in the globalizing world rather well. Turkey should be the country that sells products of quality at the right price; it should use the opportunity of neighboring countries around it very well and should evaluate countries within its region equally well. For example, we have to make an analysis of the Central Asian Turkic Republics and then go there with certain goals and projects. This was not done in previous times. It mustn't be forgotten that 350 million people live approximately within two hours flying distance from Turkey. In the future, we have to work in these places in depth with the right policies. Whether we like it or not, we will live within this geography together with these countries. Then, let's come and increase our trade with them. Lasting trade relations breed lasting political relations. Turkey cannot evade the role weighed down on it by its geographical location. Turkey should be a country that contributes to solution of problems in the Middle East, taking a more active part in solution of problems in the Caucasus and doing this by trade, by a model of solution that places export and foreign trade at the core. The 21st century will be a century when trade is going to steer politics and not the other way around. Turkey is entering a period of time when foreign trade is going to steer foreign politics. At this point, exporters are going to be the foot soldiers of Turkey because they will serve as ambassadors.

How will the Turkish bureaucracy adapt to the new era? What do you think of doing about the resistance that can come from the bureaucracy?
A major political change has been experienced in Turkey. For Turkey now, nothing can go back to the time prior to November 3. Nothing will be the same. Laws and institutions that are backward in time and in the business world must change. Nobody can resist this, such a process of change has begun that noone can stand against it. Today, laws are changing; tomorrow, you'll see institutions and organizations change. We dropped the number of ministries from 38 to 25. We also decreased 17 state ministries down to four. Four ministers do the jobs that 17 used to do. Nothing gets disrupted. Now, that's change.

The business world and exporters need change as much as bureaucracy and the state administration do. What should be done for this change to come off in a coordinated way?
Actually, a mutual interaction has started. In Turkey, public institutions have repeatedly remained behind the private sector. Because of laws and legislation, it could never step ahead. Turkey has suffered for this. Some things occurred 20-30 years previously. Now the change in the public sector will surely influence the private sector. In Turkey, you can't find an importer company that's been in the business for 100 years, there are very few. Unlike Europe, where there are rooted companies. In Europe, there are companies that have been doing exports for more than 100 years. You can't find any Turkish companies exporting for over 50 years. As opposed to the West, I think that the Turkish private sector has just started to institutionalize. You see that many companies try to change their logos and to open new management units within. Many companies are downsizing, many others bring small firms together in an attempt to restructure them. And this is all done in a very narrow and shallow stocks and bonds market. The stocks and bonds market will also deepen shortly. There is need for foreign capital inflows so that the stock exchange will deepen beyond portfolio investment. We need foreign capital investments for companies that go through a problem of financing. This would invigorate the export sector. If we accomplish the inflow of foreign capital, turn it into exports and if production of foreign capital triggers exports, then a success story will inevitably arise. We can't make ourselves heard with this GNP. Lots of our problems come out of poverty. Our income per capita must not be around $2,000. If we take it up to the level of $5,000, we will not have any such trouble as democratization and freedom. If it will correspond to $10,000, there will be no ethnic or sectarian discrimination left. The way for this is increasing production and exports. This is my approach.

At the process of promoting exports, we know of the Japanese model aiming for producing goods with higher value added and selling them. We see that in certain sectors, the appropriate large-scale companies are directly bankrolled by the Japanese state. Instead of training people from scratch, it invites citizens who have made progress in that area and says "You will specialize on this subject and I will support you on that subject". It is possible to create big brands by accumulating the resource in certain centers instead of shrinking and making it meaningless. How do you view this matter?
For Turkey, this situation entails obstacles of market entry. There is no such thing as obstacles of market entry in Turkey. In foreign markets, we can't work that easily because there are obstacles before market entry. In Turkey, you see many pharmacies aligned next to each other on a street; none of them earn any proper money. You see many barbers, many grocers. Entry into the market is very easy. In the apparel sector, you see that one guy has left his job as a goldsmith and become involved in apparel. However, specialization is crucial. At this point, a major duty falls upon TOBB (Union of Turkish Chambers and Commodity Exchanges), public institutions, exporters associations, of course to TİM. A person without a history and background on a subject should not be allowed in the association just because they pay fees. In Turkey, there are jobs for everyone in every area, but what matters is for the state and organizations such as associations of chambers and exporters to provide guidance. Everyone should do their homework well. When there is no restriction for entering the market, costs rise because the entrepreneur unknowledgeable on that subject buys the time needed to come to the level of somebody who's been doing that job for 15 years. That is an additional cost. He tries to keep up from that point by stealing the trained specialist of the other person. And that creates fragmentation in the sector. There will be room for change and interaction, but this has to be guided in a constructive way. At this point, nobody does their homework well, including us.

What kind of a change or renewal will take place with respect to relations with exporters and their organizations?
You know that I had an unfinished project: To collect exporters and importers under the same roof. But the name TİM is nice, as well. For example, it may remain as The Turkish Exporters and Importers Assembly. Then it was thought to make it a foreign trade association. There is no clear-cut distinction of exporter-importer in Turkey. Those who import also export. The idea is to turn it into a large organization like this so that there will be a place where we can follow everything in Turkey instantaneously. While I was undersecretary, I could follow exports day by day, by the hour but I followed imports three months in arrears. Upper organizations should be made more functional. We will work on this. Also by listening to you well, we will bring an organization like this to the level it deserves. Organizations are important. They should not remain simply as nametags. They should have serious functions. But there is the trouble of administrative and sectoral structuring. For example, in my opinion, TİM should structure itself in a way to increase Turkey's exports and conduct its imports adeptly. We should do whatever is necessary for TİM to be able to work more effectively as a stronger upper organization.

You're saying that a change of status is a requisite...
Yes, but we'll do this together with you. As you know I've received much criticism about this at the time. But in the upcoming period, this issue will be one of the important corner stones for us. We will make the correct diagnoses on problems. Our promotions abroad are not very good. The working areas of consultants sent abroad by the foreign trade undersecretariat are narrow, their physical credentials are inadequate. In the future, The Foreign Trade Undersecretariat, TİM and TOBB must act together on this. Teamwork is necessary among foreign trade consultants sent by us and our friends entrusted by TİM and TOBB. We have one person in Shanghai, China and another in Beijing. However, Italy has 15 and China 7 personnel members in Turkey. We have to open up to China, but we do not have adequate personnel. China has entered the World Trade Organization, but you're present in that huge country with just two people. This has to change.

"Out-source" is needed in such situations...
Yes. For example, as the undersecretariat, we do the technical work in foreign trade. We should do structuring within the matrix model that we call, the 21st century structuring. If our work will be sufficient, I would like to turn units connected to the ministry into a matrix model. Not the classical export general manager or import general manager or so. Like the DGs (Directorate General) in the EU, let there be general manager number one and general manger number two, but when you view the issues let them be like dumping, anti-dumping. Standards for example, "CE" (consumer electronics) is very important. We should do restructuring on a sectoral and regional basis, meaning forming a new matrix and combining the sector and region matrix with the administrative structuring here. There is such a demand at the grassroots. We will find the chance to implement these with time. This is the right thing to do. We have to accomplish these in the 21st century.

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