The Chairman's Speech at the Assembly / 24 March 2010
Mr. Chairman, Distinguished Members of the Assembly and of the Press:
On behalf of the Board of Directors I would like to welcome you to our March assembly
meeting. We have with us as our guest today Turkey's Minister of State, Mr. Cevdet
Yılmaz. We would like to thank him and his colleagues for accepting our invitation
and joining us at our meeting. We welcome our distinguished bureaucrats!
Esteemed Members of the Assembly:
Shortly before this assembly meeting, we came together last Saturday at the second
joint meeting in 2010 of our professional committees where the Ministry of Labor
and Social Security, Mr. Ömer Dinçer, was a guest. The meeting was in our view extremely
productive.
Two factors were responsible for that success: the good news our Minister gave us,
and the recent positive developments that have led to resolving at least a portion
of the problems relating to working life. All progress in the solution of our problems
gives us hope. Even more importantly, as I said that day at the meeting, when our
industrialists see that their voice is being heard and their demands, to some extent
anyway, are being met, this boosts their morale and spurs them on to continue producing
and creating jobs.
Today I would like to take this opportunity to thank once again the members of our
assembly and of our professional committees who contributed to that second joint
professional committee meeting, and to point out that we on the Board of Directors
are going to continue to follow up on those of our problems that have not yet begun
to be resolved.
Esteemed Members of the Assembly:
At today's meeting we are going to try to look from a slightly more long-term perspective
at the problems of our economy and our industry. For our Minister of State, Mr.
Cevdet Yılmaz, comes from two visionary and productive institutions like the State
Planning Organization and the Turkish Bureau of Statistics, and is the minister
responsible for major projects for transforming Turkey such as the South East Anatolia
Project, the Eastern Anatolia Project and the Konya Plain Project.
We met with our distinguished minister for the first time on our visit to Southeast
Anatolia in May of last year. Today as well we take great pleasure in having him
as a guest at our assembly meeting. For the sake of our industry, we believe that
we are going to have a constructive and productive exchange.
Mr. Chairman,
Esteemed Members of the Assembly:
Two important industrial plans were drawn up in Turkey in the 1930's. But the formation
of the State Planning Organization at the start of the 1960's was a turning point
in the history of planning in Turkey. We are therefore talking about a history of
approximately fifty years - fifty years into which, as far as we know, nine development
plans were squeezed. The 1960's were the golden years of planning, both in Turkey
and in the world. In the seventies, planning was even more important.
But when the 1980's rolled around and the concept of the free market economy gained
currency around the world and Turkey, too, took important steps in this direction,
planning fell out of favor, so to speak. The 1990's were fraught with a series of
economic crises and stabilization programs that were abandoned in medias res. The
economics of planning and development were virtually forgotten during those years
when the world was changing at a mind-boggling pace. Power in the global economy
passed into the hands of the financial markets, and globalization continued apace
in the first year of the 2000's, which we entered mired in a severe crisis.
The process of integration of the Turkish economy with the global economy also gathered
momentum in those years as our exports and imports rose to record levels. Significant
gains were made in fiscal discipline and price stability, and our economy embarked
on a process of rapid growth. But this boom, which had in any case lost momentum
starting in 2007, was unfortunately interrupted by the global crisis.
In fact, while they might have been perceived as marginal for the most part, voices
critical of the global economic system, of 'uncontrolled globalization' in particular,
have been audible for a long time. Together with the global crisis, however, the
whole world started asking where things went wrong. Belief in the market's 'invisible
hand' and in that hand's regulatory power began to wane. Now we are in a transition
period when the world is seeking a new direction.
With regard to the period ahead of us, for now we can say the following:
If certain innovations and changes in the global economic structure can be implemented,
it would appear to be possible to turn globalization around. What kind of path should
Turkey follow in the circumstances? How should the government's regulatory role
be viewed? What should the government's regulatory role be seen to be? What should
be the role of planning, which has been forgotten over the last thirty years?
In our view, the need for planning was not eliminated when globalization, outward
orientation, private initiative and the free market system gained currency. There
is definitely a need for planning! However, this planning should be a kind of planning
that answers today's needs and takes account of how the global economy functions.
It should be a kind of planning that exploits the advantages of the global economy
and avoids its disadvantages and pitfalls!
What is the nature of this new planning going to be? On what is it going to be based?
Naturally these are questions that necessitate preparations and a very broad, comprehensive
discussion.
We would like to take our distinguished minister's presence here as an opportunity
for bringing out a few points that we, from our vantage point, consider important
so as to make a few small contributions. First of all, following the sweeping privatizations
of the recent period, the Turkish economy has been firmly put on a private sector
footing. The private sector is now the driving force of the Turkish economy. According
to the results of our Chamber's annual survey of Turkey's top 500 industrial firms,
the share of state-run corporations in the total production-based sales of the ISO
500 fell from 49% in 1982 to 6.3% in 2008. Similarly, our exports as well are largely
due to the private sector. Our business community is engaged in efforts to be represented
in the international professional organizations. And it has had great success so
far. In short, the Turkish private sector is keeping an eye on the world and shouldering
its share of the burden.
It is undeniable that we have a very well-established and important bureaucratic
tradition in Turkey, and very capable and experienced bureaucrats. But the dynamism,
experience and knowhow of the private sector should not be underestimated either,
and should certainly be reflected in the planning process. For - let us not forget
- the fundamental thing in planning is to correctly determine in which direction
the world is moving and then to be able to find a niche for oneself in that trend.
The vision of our private sector, whose relations with the rest of the world are
gradually intensifying, is undoubtedly going to make a major contribution to determining
the right direction in planning. As complementary elements, our bureaucracy and
our private sector should definitely be in close contact and work in close cooperation
with each other during the planning process. Not only the private sector but all
sectors and institutions in Turkey should be able to contribute to the planning
process with their views and vision. In short, what I would like to underscore here
is that a participatory approach and participatory action be adopted.
At this point I would like to say that we place great importance on the inspection
tours that our sector experts from the State Planning Organization made to our member
industrial firms last July and August as part of a joint initiative that developed
during our Ankara visits. It is our hope to increase such contacts even further.
At the same time, Mr. Minister, one major shortcoming we observe in our country
is a lack of coordination and continuity. Many agencies are working in the same
area, but on the whole those effort and data are not coming together. As far as
we can see, it is of critical importance for planning and realizing planning goals
that different agencies and institutions be able to work together in coordinated
fashion towards a common strategic goal. It is very important that we develop our
capacity for working together in a coordinated way.
Mr. Chairman,
What is most important for us as industrialists during the planning process are
the industrial policies and goals outlined for industry.
To start with, our State Planning Organization has a tradition of giving a lot of
importance to industry and industrialization. With the help of planning much ground
was covered, in the 1960-80 period especially, on the path to industrialization.
As a result of the emphasis and importance placed on industry, the industrial sector
outstripped agriculture to become the primary sector of the Turkish economy for
the first time in 1982. Since then our industry has continued to be the primary
sector and driving force of the economy. Recently, however, GDP figures show that
this engine is gradually running out of steam. Industry's share in GDP, in current
prices, fell from 26.8% in 1998 to 19.7% in 2008 and 18.8% at the end of the first
quarter of 2009. This is a worrying development that absolutely cannot be brushed
aside. Furthermore, in national income figures, manufacturing is one of the sectors
with the smallest implicit price deflators. What this means is that Turkish manufacturing
does not completely reflect in its sales prices price hikes on the goods and service
inputs it uses in production. So much so that our ISO survey of the top 500 industrial
firms points to a similar situation.
Early in the decade when the economy was growing, return on sales, return on profits
and economic profitability were all contracting in Turkish industry. As a result,
industrial return on sales, value added and savings declined relatively during those
years. Erosion of industrial capacity is not good news for a country of 72.5 million
with an unemployment problem. Our goal therefore should be to create an industry
that is strong and high in profitability, value added, savings and competitiveness.
Indeed, when we look at the global system, it appears that we have little chance
for competitiveness based on cost or cheap labor. China and India today, and others
tomorrow, can produce many products more cheaply than we can. Turkey must target
a transition to a structure of production based on high value added, R and D, technology
development, innovation, knowledge and individual skills. It would be correct, I
believe, to identify the problem ahead of us as one of creating a qualitative leap
in industry. For this, there is a need for Turkey to develop a new industrial strategy,
planned as a whole and thought out in all its macroeconomic and social ramifications,
in particular occupational training, imparting skills to the labor force, university-industry
collaboration, growth, competitiveness and jobs. Some important steps, like the
recent R and D law, have been taken in this area. For lasting success however it
is essential that these important steps, which for the time being appear scattered
and isolated, be incorporated into an integral whole.
While unemployment in Turkey is at very high levels, finding skilled workers is
one of our industrialists' biggest problems. The gap between the labor force produced
by our educational system and the labor force demanded by our industry must definitely
be eliminated. Furthermore, let us not forget that what we are targeting are products
high in value added, which can only be produced by a skilled labor force. Countries
like the Asian countries in particular, which have made a qualitative leap in their
economies, have given enormous importance to education.
Mr. Chairman,
Esteemed Members of the Assembly:
Incentives are one of the most salient aspects of any industrial policy. Is it unfortunately
questionable to what extent the incentive policies implemented up to now in Turkey
have been effective. We at the Istanbul Chamber of Industry have been of the opinion
for a long time that a sectoral and regional approach needs to be taken towards
the incentive system, and we were critical of Incentive Law No. 5084 for having
undesirable results such as unfair competition between two neighboring cities. We
said at the time that we found the new incentive package that was made public in
June of 2009 positive in its main outlines, primarily its regional and sectoral
focus. One shortcoming that we saw was that large-scale investments were restricted
to 12 sectors.
In addition, we believed that incentives aimed at the East and Southeast need to
be of longer duration. Indeed, when the results since June of that implementation
were publicized, it appeared that incentive certificates have remained for the most
part in the first region and that very little investment has gone to the fourth
region. Eliminating the imbalances between the regions is an important goal of our
incentive policy. To achieve this goal, however, there is clearly a need to introduce
more attractive and longer term incentives.
Apart from all this, the most glaring oversight of the incentive package for us
was that it did not include any form of special support for Istanbul, which is the
region hardest hit by the crisis and had the sharpest rise in unemployment in Turkey
in 2009. Industrialists planning to make new investments in Istanbul, which is in
the first region, stand to benefit least from the incentives that have been introduced.
Special support aside, as Istanbul industrialists we have been faced recently with
certain special concerns. Residential, industrial, recreational, agricultural and
similar areas have been redefined in Istanbul within the framework of the 1/100,000-scale
environment plan. Serious questions have arisen regarding the future of manufacturing
plants that fall outside the areas designated as industrial in the plan. We should
point out here that this is not knee-jerk reaction to, or a wholesale rejection
of, the re-planning of industry in Istanbul on the part of Istanbul's industrialists.
We realize that there is a fine line between being an Istanbul resident and being
an Istanbul industrialist. Our basic goal during this process is to establish a
healthy balance between the interests of Istanbul and the interests of our industry.
This process imposes important costs directly on us as industrialists. Our primary
demand therefore, considering that it has social dimensions as well, is that the
process of relocating be backed up by a comprehensive incentive package.
Secondly, it is very important that answers be found to questions like: Are the
regions indicated as addresses for relocating adequate? Is the requisite infrastructure
for industry going to be provided there? Are port and rail connections going to
be considered? Are purification and waste removal plants going to be built? Is a
skilled labor force going to be available?
Mr. Minister:
These questions and the picture before us tell us that this is a problem that goes
beyond Istanbul and definitely requires planning on a national, countrywide scale.
We offer it here for your information.
Mr. Chairman,
Esteemed Members of the Assembly:
I would like to conclude my remarks with hopes for a stronger and more productive
Turkey and Turkish industry in the 21st century, and to salute you all one again
on behalf of the Board of Directors.
C. Tanıl KÜÇÜK
Istanbul Chamber of Industry
Chairman of the Board of Directors