The Chairman's Speech at the Assembly / 23 May 2007
Distinguished guests, and members of the press,
On behalf of the Board of Directors I would like to welcome all of you to our May
assembly meeting.
Mr. Chairman,
Esteemed members of the Assembly,
Our May assembly meetings have a special meaning for us since our first assembly
meeting was held in May of 1952, the year in which our Chamber was founded. This
May we are celebrating the 55th anniversary of that founding. And today, on the
occasion of that anniversary, attendance at our meeting is higher than usual.
For the distinguished chairmen who served Turkish industry and our chamber in the
past have not forgotten us today! It gives us great pleasure to have you with us
today on this special day. Welcome!
Esteemed members of the assembly,
Distinguished guests:
Our Republic adopted industrialization as its fundamental goal on the path to development.
But the young Republic lacked everything that was needed for industrialization,
from capital, technology, infrastructure and knowledge to, and most important of
all, an entrepreneurial private sector. How then was the goal of industrialization
to be anything more than a dream in such a country? In the beginning the state was
the pioneer in industrialization. But within a short time, starting in the 1950s,
the private sector started to run neck in neck with the state in industrialization
and soon outstripped it altogether.
Then, in 1952, a group of industrialists came together and founded the Istanbul
Chamber of Industry, one of the most important indications that the private sector
had begun to make its presence felt in industry.
Having only extremely limited resources, this first generation of intrepid Turkish
industrialists pursued that path despite all hardships.
And the goal of industrialization, that yearning to industrialize, went beyond a
dream and became a reality thanks to the conviction of those men and the sweat of
their brows. We would like to remember once more with respect, gratitude and mercy
on their souls those men who made Turkish industry what it is today.
When we look back at the past from our present vantage point, it is plain that the
point we have reached in industry today represents an unqualified success. Turkish
industry was created virtually out of nothing. A country that once could not produce
a safety pin is exporting industrial goods all over the world today.
Industrial goods make up ninety-five percent of Turkey's exports! A figure that
clearly underscores the success of our industry.
In the period from 1923 to 2006, the agriculture sector grew ten-fold, the services
sector 57-fold and industry 170-fold in real terms.
If we take the combined shares in GNP of the various sectors as equal to 100 in
1923, in 2005 that of agriculture had declined to 26 while that of services was
up to 136 and that of industry to 192.
Industry was also the sector that most increased the number of workers it employs
in the period from 1950 to 2006. If we take the combined shares of the various sectors
in employment as equal to 100 in 1950, in 2006 that of agriculture was down to 34.6,
while that of services was up to 318.3 and that of industry to 405.7.
Looking at all these figures, we could easily say that industry has been the single
biggest contributor to Turkey's acquiring the economic power she has today.
Our industry successfully passed the tests of outward orientation and customs union
of the 1980s. As far as adapting to global competition goes, our industry is the
most successful sector of the economy today. As industrialists, we justifiably take
great pride in all of this, but in addition to that pride we also feel the need
to ask ourselves if perhaps we might have done even better.
When we look at international comparisons, it emerges that we in fact could have
done better when we consider the point reached today especially by South Korea and
the other Asia countries with whom we set out on this path, as well as Spain and
Portugal, even though they had special advantages deriving from the European Union.
Why were we unable to exhibit similar success? Which opportunities did we fail to
exploit fully? Where did we go wrong?
Are we able today to do what is needed to boost the competitiveness of our industry?
Such questions are always on our agenda here at the Istanbul Chamber of Industry.
We regard the 55th anniversary of our founding as an important occasion for bringing
those questions to the agenda, both in public opinion and with the relevant parties.
For, as an institution that has witnessed 55 years of the history of Turkish industry,
and as one of the key players in that process, we believe that this is an important
part of our responsibility.
Such occasions give us an opportunity to assess our industry from a broader perspective
by getting away from the usual approaches, and to spell out our pluses and minuses
in an objective fashion. We are also aware that we can learn new lessons that will
throw light on our future from every evaluation, from every attempt to question
the past.
Now, with your permission, I would like to brief you very quickly on our 55 years
of activity.
In a little while we are going to watch a film, made by our Chamber, that looks
at the 55-year history of our Chamber and of Turkish industry. A special stamp was
issued in honor of our 55th year, which I am sure that you, our esteemed members,
are going to appreciate. A special logo was also designed for our 55th year. Moreover,
the Turkish Ekonomist magazine has compiled a special supplement for the 55th anniversary
of our Chamber which will be distributed together with the May 27th issue.
At the same time, efforts are under way to update our documentary film, which was
made for the 50th anniversary celebrations and tells the story of the development
of Turkish industry from the Republic up to the present, by adding the developments
of the last five years.
We aim to have the updated version shown on some of the TV channels this fall.
Efforts are also under way to update our book on the history of Turkish industry,
which again was compiled for the 50th anniversary, so as to include the developments
of the last five years, as well as bringing out a new edition.
Plus, we have another new book in our 55th year, "55 industrialists in 55 years",
which presents in book form a series of interviews we held with our member industrialists
and published in our Chamber's journals. Through this book we aim to pass along
to future generations the experiences of the deans of Turkish industry. We believe
that this book, which puts the focus on individual experience, will make an important
contribution to the history of our industry.
Another of our activities for the year is the ISO innovation award. By giving this
award we aim to encourage the development of the capacity for innovation in all
our industrialists, starting with our own members.
Mr. Chairman,
Esteemed members of the Assembly,
Distinguished guests:
We have lived through some highly eventful days since our last meeting on 26 April.
The upshot is that Turkey is now looking forward to new national elections on 22
July. The lead-up to the elections will naturally have an impact on the economy.
When we look back at the past, we see that problems in the economy tend to be exacerbated
during periods of election campaigning. On the eve of the 2007 elections, however,
the situation is a little different from in previous years. Important gains have
been made in the Turkish economy in the last five years. Above all else, growth
in the last five years has been uninterrupted, fiscal discipline has been maintained,
and the public deficits have been considerably lowered relative to the past.
Therefore, important gains have been made in precisely those areas that created
problems in previous years, and the economy has been put on a more solid footing.
In its current situation, the economy does not appear to be in trouble. There is
very limited movement in the interest and exchange rates. In fact the exchange rates
are coming down. But however calm the situation may appear, we know that the economy
remains fragile at certain points, namely the very high current account deficit.
And because of that fragility Turkey was the country hardest hit by last year's
global fluctuation.
When we consider that uncertainty surrounding the election has now been added to
that fragility, it is plain to see that Turkey would be far more hard hit by a possible
global fluctuation this year than it was last. High costs could result if the current
favorable global trend turns around. We are always saying that attention needs to
be focused on the economy. But in this sensitive period, there is a need to insist
once again that attention should not be distracted from the economy even for one
minute.
Certain questions have arisen regarding fiscal discipline in the recent period.
There must be no compromise on fiscal discipline! The fight against inflation must
continue! The elections are naturally going to cause a relative slowdown in the
economy, because uncertainty regarding the outcome could have the effect of postponing
consumer demand. Signs of this are already apparent in certain sectors.
Along with consumption, investment too is showing signs of slowing down. And any
slowdown in demand is going to impact adversely on our industry.
The upward trend in industrial production in the first two months of 2007 was followed
in March by a modest gain of 2.6%. It is distressing to think that this slowdown
in the rate of production growth could become permanent.
In a period of slowdown in domestic demand, only strong exports will be able to
keep our industry afloat, as they have up to now. We never fail to point out from
this platform how difficult it is to keep on exporting and at what cost our industrialists
are continuing to boost their exports.
We try to draw attention to the high economic and social costs of the methods our
industrialists are resorting to in order to stay on their feet and preserve their
markets abroad. We take every opportunity to point out falling profitability and
the increased use of imported inputs.
Among the developing countries Turkey is the one that has boosted her exports the
most in the last five years. But alongside this success Turkey is, unfortunately,
also the country among them with the highest current account deficit, and the weakest
capacity for creating jobs.
We have increased out exports, granted, but unfortunately we achieved this success
at the cost of raising our foreign trade deficit and our current account deficit
to record levels. In a more positive development, in the first quarter of 2007 growth
in imports was lower than that in exports. It is distressing however that imports
of intermediate goods in the same period swelled from 70.8% to 74.9% of total imports.
This points to an increasing dependence on imported inputs, all of which is very
worrying from the standpoint of the future of our industry.
At the same time, structural reforms to shore up competitiveness appear to have
disappeared completely from the agenda, indeed to have been forgotten. According
to the most recent figures, Turkey in 2006 was the country with the highest labor
costs and premiums among all the OECD countries. Energy prices remain high. There
is no improvement in the black economy. Single-party rule, on which we had pinned
such hopes for structural reform due to the AKP's sizable parliamentary majority,
has unfortunately produced no solutions to these problems in the last five years.
We gave up on macro reforms and said, at least give us some improvements at the
micro level, but unfortunately there too no results have been forthcoming.
This five-year experience has shown us that single-party rule may not be, indeed
is not, a magical formula for solving problems.
We think it's high time we stopped fearing a coalition.
Esteemed members of the Assembly,
Distinguished guests:
We say that Turkey should target a knowledge and skill-based and technology-intensive
industrial structure high in value added for the 21st century.
At this point I would like to share with you another calculation.
In 1960, in what we could call the 'childhood' of our industry, close to sixty percent
of the total value added in the manufacturing industry came from our sectors in
the foodstuffs and textiles group. Today this ratio has fallen to around 35%. Again,
in 1960, the share in total value added of the primary metals, machinery, metallic
goods and transit vehicle sectors was in the vicinity of 20%. This has risen today
to around 28%. In other words, up from 20% to only 28% in almost fifty years.
This tells us that structural change in our industry is far below the desired level.
I therefore feel a need to reiterate here: Turkey for the 21st century must target
an industrial structure that is knowledge, skill and technology-based and content-intensive,
and high in value added!
For this, we say, we must improve our capacity for R and D and innovation as well
as our competence in creating brands, in making a difference and in design. Here
at the Istanbul Chamber of Industry we are trying to do our best to assist our member
firms in this way.
This goal needs to be adopted as a policy and to be fulfilled and plans then need
to be laid and instruments identified for translating those plans into reality.
The ones who will do this are the ruling parties, the governments! When we look
at the pre-election picture, we see that the political parties have not clearly
outlined what their approaches to the economy are and what kind of industrial policy
they will pursue. I would like to point out here and now that we expect them to
do that.
I ask those who want to govern Turkey: what are your plans, what are your policies
for the future of our industry? Are we going to drift into unknown harbors blown
by global winds? Or are we ourselves going to determine our fate by our own compass?
Are we going to achieve the goals that we have set?
Esteemed members of the Assembly:
Another key post-election issue is in what direction the EU project and the goal
of full EU accession is going to go. Developments in this area are a matter of close
concern to the Turkish economy, and will have an effect on the course of the economy
in the period ahead.
The Justice and Development Party and government demonstrated firm resolve on the
subject of the European Union in its early years and achieved significant success,
taking Turkey, for example, into the negotiating stage.
Unfortunately, however, the subject of the EU has fallen off the agenda since 2005.
It is a matter of debate whether the changing political mood in Europe was responsible
for this.
At the same time however doubts regarding the EU have arisen in Turkish public opinion
during this process, and support for the accession process has gradually dwindled.
Added to this public indifference is the fact that, after Germany, in France too
a conservative leader has now come to power who is openly opposed to Turkey's membership.
Relations between Turkey and the EU have again entered a difficult phase. Nevertheless,
Turkey should not lose sight of the European Union perspective.
At the moment the two sides appear to have forgotten the benefits of partnership.
An obligation falls upon all of us to better explain to Europe the sensitivities
of Turkey and of the Turkish people, most importantly, in our opinion, to those
who bear the responsibility for governing.
Mr. Chairman,
Esteemed members of the Assembly,
Distinguished guests:
Yes, we have problems in the economy and in industry!
But we also have hopes! And our biggest reasons to be hopeful are the Turkish Republic,
the Turkish people, Turkish industrialists and the success we have created out of
nothing in the years we have put behind us! Turkey and Turkish industry are going
to surmount their difficulties and achieve the success they deserve in the 21st
century.
With these sentiments in mind I wish you all another 55 years. In closing I would
like to salute all of you once again on behalf of the board of directors.
C. Tanıl KÜÇÜK
Istanbul Chamber of Industry
Chairman of the Board of Directors