TRADE IS THE WAY

Turkey 2011 | ECONOMY | INTERVIEW

TBY talks to Zafer Çağlayan, Minister of State for Foreign Trade, on Turkey's foreign trade performance and expectations for the medium term.

Zafer Çağlayan
BIOGRAPHY
Zafer Çağlayan began his career as a businessman and industrialist in 1980. In 1987 he was elected as an assembly member of the Ankara Chamber of Industry (ASO), and he later became the acting chairman of the board of directors in 1991. He was named the Vice-President of the Union of Chambers and Commodity Exchanges of Turkey (TOBB) three times between 1996 and 2005. He began his political career in 2007 as an elected MP for Ankara’s 2nd District, and became Minister of Trade and Industry in the 60th government until his appointment as Minister of State in May 2009, and has been serving as the Minister of State for Foreign Trade since then.

Turkey's foreign trade expectations index rose by 11.4 basis points from October of 2010 through January. What is your outlook for trade growth in 2011?

Parallel to developments during the recovery process of the global economy, recent improvements have been recorded in the Turkish economy. As a result of the precautions implemented in order to lessen the negative effects of the global crisis on Turkey, successful figures have been achieved in export and import rates.

Right after the crisis, booming export rates were achieved thanks to the outstanding economic performance of the country in 2010. In comparison to the previous year, there has been a 23.1% increase in the foreign trade rate, reaching $302.4 billion. The total value of exports was $113.9 billion, an 11.5% increase, whereas imports increased by 31.6%, reaching $188.5 billion. Due to the steady increase in import rates, there has been a decrease in the import coverage of exports.

Starting from the beginning of the 1980s, import substitution industrialization strategies were abandoned in order to open the economy up more to international markets. With these reforms implemented, the government aimed to establish a free market economy that would be better integrated with the world economy. Recently, the volume of exports has become one of the most powerful tools of the national economy. However, exports are going through important restructuring processes parallel to the transformations in the Turkish economy in general. In regards to developments in industry, the focal point of exports has started to move away from traditional sectors to technology-oriented sectors.

For the forthcoming years, it can be said that economic policies and precautions will be implemented in light of the needs of our growth strategy based on exports. In this context, stable growth rates are expected in 2011 for the world economy as well as Turkey. A medium-term program has been launched that aims to ensure sustainable economic growth, defined as export-oriented, for the upcoming years. Forecasts for foreign trade assume that the total value of exports will reach $160 billion by end-2013. For 2011, it is expected that the total value of exports will reach $127 billion, whereas imports are estimated to hit $199.5 billion. I strongly believe that we will soon achieve export figures higher than the $132 billion achieved in 2008.

How has Turkey's “zero problems" foreign policy outlook with its neighbors influenced regional trade?

Turkey's export success depends on nurturing its deepening relations with neighboring countries, with which we share a certain geography, culture, and tradition. For this reason, in order to achieve more success in the future, a market diversification strategy in exports and the encouragement of foreign companies to enter new markets play a significant role. Considering the highly competitive market conditions, the orientation of exporters to the various markets is crucial if we are to reach our targets.

Turkey has been implementing a foreign policy that aims for zero problems with its neighbors in order to establish more fruitful economic cooperation. In line with these foreign policy objectives, the Undersecretariat for Foreign Trade has been conducting diplomacy with a motto of “zero problems, unlimited trade" in cooperation with the Turkish Ministry of Foreign Affairs. Establishing long-term cultural, economic, and political relations lie at the center of our foreign trade policies.

In the last few years, we have achieved remarkable success in our relations with neighbors and periphery countries. For instance, the total value of exports with neighbors and periphery countries will reach $49 billion in 2010, a figure that was only $9.3 billion in 2002. Similarly, the total value of imports increased to $60.7 billion, higher than the number recorded in 2002 of $12.8 billion. According to these numbers, the market share of exports with neighbors and periphery countries in overall exports will increase 43%.

In the January-December 2010 period, our exports to neighbors and periphery countries increased by 14%, reaching $49.2 billion, compared with the same period in the previous year. As for export rates, there has been a 34% increase, reaching $60.7 billion in comparison to the previous year. Looking back on relations with our neighbors in terms of foreign trade, our export rates were $5.4 billion with the Caucasus, $7.2 billion with the Balkans, and $17 billion with the Middle East in 2010. It is understood that there has been a 23% increase in comparison to the same period in 2009.

Even before the global financial crisis, your Ministry initiated a strategy to diversify into new foreign trade markets. With which countries do you expect the most trade growth?

I am very proud that, despite the global financial crisis, the Turkish economy has managed to maintain its export rates at over $100 billion. To achieve these objectives, Turkey has been pursuing policies to diversify its market and its products. In this regard, I would like to emphasize the fact that a special priority has been placed on exports based on medium-term projections. Currently, we are working closely with our exporters to develop a 2023 Plan. One of the main aims of the Undersecretariat of Foreign Trade is to diversify exports in geographic and sector-specific terms. Therefore, our headquarters and international offices are conducting comprehensive research about possible developments in international markets. Within the context of these information sources, our experts analyze the potential data and inform exporters about opportunities abroad.

In regards to our forecasts derived from our market-oriented research, the US, China, Russia, India, Brazil, Jordan, Nigeria, Egypt, Iran, Saudi Arabia, and Qatar were defined as the target countries for 2011. In 2010, overall exports were increased by a moderate 11.5%, while this figure rose to 20% in target countries' exports. Our export rates to China and Canada increased by 20% and 58%, respectively.

Which sectors do you feel have the most potential for Turkey's external trade?

Recent changing trends in production and consumption in national economies led to a qualitative as well as a quantitative transformation during the 2000s. As for production, the main motivators have become high technology and branding. We attach great importance to producing authentic designs, creating value-added, and keeping in line with EU standards.

Looking at recent developments in the world, production and profit moved away from the sectors that rely on labor-intensive industries such as textiles and agriculture to new technology-oriented sectors such as automotive, mining, and chemicals. Electronic products have also been prioritized among the upcoming sectors.

On the other hand, one of the main problems in the world is the loss of water and energy resources. To be more precise, the problem of energy is a barrier standing in front of world economic growth. Thus, I firmly believe that as a result of the ongoing problems relating to water, food, and energy resources, alternative energy resource developments will profoundly affect potential investments.

In terms of technology-oriented sectors, Turkey has been striving hard to achieve its aims with the cooperation of the public and private sectors. In Turkey, there have been important investments and technology transfers in the sector. Our main objective is to increase our export rates, which are currently 3.2% for high-technology products and 29.7% for middle-technology products. Additionally, in this globalized world, exporters should carefully follow the trends in technology and design competitive products for the international market. In this context, Turkey has been developing itself in the defense, automotive, and machine industry sectors to become an export center.

What is your outlook for the performance of Turkish economy in 2011 and beyond?

It is highly expected that our national economy will keep growing thanks to the improvements in the economy in 2010. Over that year, Turkey's economy grew by 4.4%, higher than IMF expectations in its updated report, and in 2012 a growth rate of 4.5% is anticipated. In the same report, it is stated that there will be no extreme changes in the world economy in 2011, even though there is an expectation of increases in trade volumes for 2011 and 2012 by 7.1% and 6.8%, respectively. Since the beginning of 2010, the first signs of recovery from the global financial crisis have started to be seen, even though financial vulnerabilities still exist in some parts of the world. Especially debt problems and low growth rates and the US economy's ongoing recovery process from the financial crisis lead to deceleration in the enlargement process of the global economy.

In contrast to this, Turkey's economy has appreciated with its sustainable economic growth, deep-rooted banking system, low debt rates, and disciplined budget. In the latest OECD reports, the growth rate for the Turkish economy was anticipated at 8.2% in 2010, 5.3% in 2011, and 5.4% in 2012. Also, it is stated that unemployment will steadily decrease to 11% in 2012. Turkey has already achieved notable success in this field. In my opinion, Turkey will continue to increase its exports and growth rates in the future as in the year 2010. While increasing these rates, financial and economic stability will be provided as well.