The Chairman's Speech at the Assembly / 24 June 2009
Mr. Chairman,Distinguished members of the Assembly and of the Press:
On behalf of the Board of Directors, I would like to welcome all of you to our June
meeting.
We have with us today our distinguished Minister of Industry and Trade, Mr Nihat
Ergün. Welcome, Mr. Minister! We would like to thank you for accepting our invitation
to join us at this meeting.
Esteemed members of the Assembly:
The Board of Directors and the Presidency Council of the Assembly completed their
first round of Ankara visits on 16-17 June. These visits made up the agenda of our
May assembly meeting. On the first day of our visit, we had an opportunity to meet
first with our President and later with our Ministers of State, Mr. Cevdet Yılmaz
and Mr. Zafer Çağlayan. Lastly, we met with the chairman of the Union of Chambers
and Commodity Exchanges of Turkey (TOBB), Mr. Rifat Hisarcıklıoğlu.
We started our second day with a visit to the Minister of Forests and Environment,
Mr. Veysel Aroğlu. Following that we came together with the Minister of Labor and
Social Security, Mr. Ömer Dinçer, and, finally, with the Minister of Industry and
Trade, Mr. Nihat Ergün.
During those talks, which we believe were very fruitful, we shared with our President
and our Ministers our mutual views and assessments regarding the situation of our
industry in the face of the crisis, the measures currently being taken, the additional
ones that are needed, and the obligations of our public officials and of the private
sector during the process of recovery.
In addition to presenting our opinions and recommendations regarding the problems
of our industry and their solutions in writing, we also made them clear in our visits
with the ministers.
We are going to undertake our second round of Ankara visits on 25 June, immediately
following this assembly meeting.
Mr. Minister:
I would especially like to say what a special pleasure it is to come together with
you under the aegis of our assembly so soon after our Ankara visit. Here again we
are going to assess together the problems of our industry, and our expectations
and recommendations regarding their solution. Once again, welcome!
Esteemed members of the assembly:
As of April, we left behind nine consecutive months of contraction in industrial
production. One encouraging aspect of the picture facing us now is that the rates
of contraction are gradually decreasing. Nevertheless, we unfortunately cannot predict
how much longer the contraction process is going to continue. The contraction in
industry in 2001 continued without interruption for 13 months from February of that
year through March 2002. And in 2001 the highest rate of contraction was 14%, whereas
in 2009 we faced a contraction of almost 24% in February alone!
Since February, for the first time in seven months production fell by 20.8% in March,
a lower rate than in the previous month. The same trend continued in April when
the rate of contraction was 18.5%. These rates, which we have taken from the monthly
indexes of industrial production published by the Turkish Bureau of Statistics,
reflect a comparison of the months of the current year with the same months a year
ago in 2008. In addition to these data, the Bureau also publishes a comparison of
the monthly figures with those of the previous month. This index, too, points to
a relative recovery, albeit slight, in industrial production. Accordingly, production
in March rose for the first time in 2009, by 13.5% on February. Although the percentage
is small, the fact that it occurred at all is encouraging.
On the jobs front however the picture is unfortunately not so rosy...
The quarterly index of industrial employment published by the Turkish Bureau of
Statistics shows a loss of industrial jobs of 7% on the previous quarter and 10.4%
on the same period last year in the first quarter of 2009. A loss of 7% in industrial
jobs in a single quarter shows without any need for words in our opinion how difficult
this quarter was for the producing sector.
Yes, the first quarter was difficult! But, the indicators, details of which we just
shared with you, show that, in production at least, the negative trend began to
slow slightly in the second quarter. This slowdown and relative recovery however
are extremely fragile and vulnerable to setbacks.
The problem facing us now is to make the recovery trend stable by adding momentum
to the improvement. At this point I believe we need to ask the following question:
What should we do to speed up the recovery process and make it lasting? First of
all, in what areas should we bring measures into play?
In an important step, our government in recent days unveiled a new incentive and
employment package. We have welcomed this package and regard it as a positive development.
In particular, when we consider the fact that the incentives are regional and sectoral
and that the investment incentive is being reinstated in the form of a 'reduction
in corporation tax', we can say that the package squares in its overall framework
with our chamber's recommendations.
Naturally there are also aspects we find lacking: For example, rather than limiting
the large-scale investments our country so desperately needs to 12 sectors, all
sectors should be supported without regional distinctions. Similarly, the lack of
any support at all for energy, which is an indispensable industrial input, is a
major oversight in our opinion. Another oversight is the failure to include any
special incentives aimed at the organized industrial zones.
It is also mandatory that the investment start by the end of 2010 in order to qualify
for the incentives. This cutoff point is clearly a significant limiting factor when
one considers the crisis conditions in which we find ourselves and how difficult
investment decisions and financing have become. I should also point out that Istanbul
is located in the first region. Therefore, an industrialist planning to make new
investments in Istanbul can take least advantage of the incentives that are being
introduced. We of the Istanbul Chamber of Industry therefore regard it as an important
omission that additional measures have not been included to compensate for this
unequal treatment of Istanbul industrialists, who make up the great majority of
our industry and who have been profoundly impacted by the crisis.
As we made clear to our distinguished ministers, our purpose in drawing attention
to these shortcomings is to contribute to eliminating them along the way and to
achieving a better result from the incentives.
Leaving these shortcomings aside for now however, as I said a short while ago, the
very offering of such a package is significant and positive! It is indisputable
that the incentives and innovations aimed at employment are the most comprehensive
among those announced to date. Their impact on morale is also very important. The
positive psychological effect they create is definitely going to impact favorably
on the economy as well.
It must be admitted, however, that most of the incentives being offered are measures
of the type that will produce results in the middle and long term and whose return
to the economy will take time. To accelerate the recovery process that is beginning
to develop in the economy, emphasis needs to be placed on measures aimed at dealing
directly with the crisis. Continuing to invest is very important; however, existing
investments and existing employment are at risk under the conditions in which we
find ourselves. Already existing enterprises also need to be supported!
Esteemed members of the Assembly:
We expressed even earlier, on several different occasions, the view that, in tackling
the crisis, measures to stimulate the domestic market need to be brought into play
in order to get results in the short term. The economic indicators and supporting
data bear this out. For example, when we examine exports and industrial production
in detail and in comparison with each other, we are confronted with the following
picture: According to figures published by the Bureau of Statistics, Turkey's exports
had fallen by 27.9% on a dollar basis at the end of the first four months of 2009.
The Bureau also publishes an index showing the volume of exports: When we look at
exports on the volume index, we see that the decline in volume in the first four
months was around 10 percent. The question as to where this difference between the
rate of decline on a dollar basis and the rate of decline on a volume basis arises
can be answered as follows:
In the first four months of 2009 the Turkish lira depreciated sharply against the
dollar compared with the same period last year. Consequently, the monetary change
in exports was significantly above the change in volume.
At the same time, when we look at the change in industrial production and the change
in the volume of exports in the first four months of the year, it appears that while
production in the manufacturing industry fell by an average of 23.4% in the first
four months of 2009, the volume of exports in the same period fell by around 10%.
In our opinion, this situation indicates that the fall in industrial production
in the first four months stems from a major fall in demand on the domestic market
more than from exports. Therefore, if the domestic market is the primary factor
in the decline in production, in other words, if the sickness is in the domestic
market, then the domestic market is where the treatment should begin! Our exports
are going to bounce back depending on developments in the world, quite independently
of us.
It is indisputable that we have far more room for movement and many more means and
possibilities at our disposal for stimulating domestic demand. In fact, the lowering
of VAT and SCT constitute a very important and positive example in this respect.
In those sectors in which the quarterly tax discount has been implemented, major
developments have been recorded in rates of production and capacity utilization
as well as in turnover and orders. What's more, this implementation also led to
a rapid improvement in taxes collected on goods and services in April and May. In
that sense, the implementation has financed itself.
It was our wish that the VAT and SCT discounts continue and be extended to all sectors.
Our government decided to continue the tax discounts but to scale them back. Although
this does not meet with our expectations, the fact that the discounts are continuing
at all is key for its impact on morale.
The fact that the discount rates were kept very low in the second phase, however,
paved the way to new losses in sales momentum, especially in the automotive sector,
which had been rising in the wake of the attractive implementation in the initial
phase. Additional supports therefore need to be considered aimed at increasing sales,
especially in our production-intensive sectors such as automobiles.
As the private sector, we too are seeking to contribute to galvanizing the potential
in our domestic market. The 'There's a crisis, there's also a solution' campaign
launched by the Union of Chambers and Commodities Exchanges of Turkey (TOBB) is
an extremely important initiative in this sense. As part of the campaign, it is
aimed above all to motivate those who, even though they have spending potential,
are hesitant to spend because of the crisis environment. The consumer is being reminded
that spending too is virtually a part of our responsibility. At the same time, an
appeal is also being made to producers to sacrifice themselves by making shopping
attractive to the consumer. What we expect from our government is that it support
this campaign by creating additional spending potential for low-income groups as
well.
Mr. Minister:
As we of the Istanbul Chamber of Industry frequently emphasize, in confronting the
crisis we have carefully avoided giving the impression that we expect the state
to do everything when it comes to boosting Turkey's competitiveness. Yes, we are
asking the state to do what it is supposed to do, but we are always aware of our
own responsibilities as well.
We know very well that, like all crises, this crisis too will end one day and we
will resume the competition from where we left off. Consequently, as we remind our
government that it is crucial not to neglect the medium and long term reforms aimed
at boosting our competitiveness - and the new incentive and employment package is
an important step in this sense - we are also warning our private sector that, crisis
or not, we must relentlessly pursue our efforts aimed at boosting competitiveness.
We also strive to conduct our Chamber's operations within the framework of this
understanding. As industrialists, we regard the transition to a structure of production
high in value added as the most important target in the medium and long term. On
several different occasions in our assembly in 2008 we described how we were compelled
to import approximately 152 billion dollars' worth of intermediate goods, energy
included, to make exports totaling 132 billion dollars.
We believe that the way to boost value added lies in developing our capacity for
and skills in R and D, technology development, innovation, design and branding.
We have been taking up these topics for seven years now, with emphasis on the private
sector, at our industry congresses, which we have been holding since 2002 on the
theme "Sustainable Competitiveness". In a new departure this year we introduced
the 'ISO Innovation Awards' as a way of contributing to the development of innovation
and innovation infrastructure in Turkey. Unlike other innovation awards, the ISO
innovation awards assess and reward not only commercial success and products but
also the climate of innovation created by industrial firms under such rubrics as
'leadership', 'strategic planning', 'knowledge', 'human resources', 'processes'
and 'business outcomes'. All industrial firms in Turkey are eligible for the 'ISO
Innovation Awards'.
Mr. Minister:
I have taken pains today to stick to the agenda in my talk. Since you took office,
we have taken up the problems of our industry both in our talks in Ankara and during
the courtesy visits you have paid to our Chamber. Today, in addition, our members
are also going to air their views.
Before concluding my remarks I would like to say once again that the Turkish private
sector is extremely dynamic and virtually immune to crises, having weathered so
many, both large and small, up to now.
The distance Turkey's industry has covered, in spite of crises and difficulties,
during the Republican period is, despite everything, a success story. Between 1923
and 2008 the agriculture sector grew by 10 times, the services sector by 70 times
and the industrial sector by a whopping 192 times in real terms. By far the greatest
contribution to Turkey's arrival at the point she has reached today has come from
industry. Our country's future too depends on how industry performs. As industrialists,
we are proud of our contribution in the past and we would like to succeed even better
in the future. We are therefore going to pursue to the end our struggle to stay
afloat and to protect our production and jobs in the face of the current crisis.
It is our expectation that our government and the management of our economy will
continue to lend, even augment, their support for us.
It is with these hopes that I conclude my remarks and salute you all once again
on behalf of the Board of Directors.
C. Tanıl KÜÇÜK
Istanbul Chamber of Industry
Chairman of the Board of Directors