The Chairman's Speech at the Assembly / 26 May 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 May assembly
meeting. Before starting my talk, I would like to begin by remembering our very
valued member, Peniyamyn Teker, who died just after our April meeting. We remember
him with fondness and respect. Every death comes too soon, but Peniyamin Bey?s death
was premature indeed. He had broad experience in his field and was an active member
of our assembly. His passing is a great loss to his sector, to our industry, to
our economy, and to us. He will always be missed. We pray that he rest in peace,
and we offer our heartfelt condolences to his family and friends and to our entire
assembly.
We as a nation suffered another great tragedy in May. We ask God to have mercy on
the thirty miners we lost at Zonguldak and offer our deepest sympathy and condolences
to their families. Mine inspections should definitely be stepped up and further
measures taken to ensure that such accidents do not happen again.
Esteemed members of the Assembly:
As we remind you every May, our May assembly meeting has a special significance
insofar as our Chamber, founded at the initiative of 750 industrialists, commenced
its operations at the first assembly meeting on May 30, 1952. Today, as we leave
behind 58 years and enter our 59th, we have over 14,800 members, and our member
firms account for close to 40% of Turkey?s industrial output and value added, 9.3%
of GDP, 35% of total exports and 17% of total employment in industry. We mark our
59th year with the hope for another 59 years in which we can take our country and
our industry even further forward.
Esteemed members of the assembly:
As we approach the second half of 2010, the month of May has been a time of intense
traffic in both politics and the economy. On the one hand, fueled by the negative
developments in Greece, uncertainty about the European economy and the future of
the Euro, as well as the visit of the Russian President Dmitri Medvedev and the
role of mediator Turkey has undertaken on the issue of Iran and the uranium swap
have put us high on the international agenda. On the other hand, some very fast-moving
and important developments have occurred in our domestic politics. Namely, the main
opposition Republican People?s Party (CHP) has a new leader. I would like to say
first of all that we strongly condemn the ugly conspiracy aimed at bringing down
Mr. Deniz Baykal. Mr. Baykal is one of the most prominent figures in recent Turkish
political history, and his having to leave the party chairmanship in this fashion
has deeply hurt all of us. But beyond that, the incident is also disturbing in terms
of revealing the dimensions that interference in private lives and individual rights
has now reached. Turkey must cease to be a nation of fear in which rights of privacy
and communication are violated.
The Republican People?s Party Congress that took place following Mr. Baykal?s resignation
resulted in Mr. Kemal KylyçdAroğlu?s election as party chairman. Mr. KylyçdAroğlu?s
messages aimed at clearing the way for our industry and for a producing Turkey hold
out hope of our achieving a democracy more in line with contemporary standards starting
with intra-party democracy. We congratulate Mr. KylyçdAroğlu and the officials who
have been elected to serve in the different party organs and wish them success in
their new posts.
Esteemed members of the assembly:
On the same weekend as the Republican People?s Party Congress, we held the 65th
General Assembly of the Union of Chambers and Stock Markets of Turkey (TOBB). The
meeting, which was attended by our Honorable Prime Minister as well as Mr. Devlet
Bahçeli and Mr. Faik Öztrak of the CHP representing the opposition took place in
a constructive atmosphere. Jobs and unemployment were the topics that especially
came to the fore. I must say, we are pleased a climate of reconciliation was born
at the meeting around a consensus that the unemployment problem can only be resolved
by cooperation between the government and the private sector. The private sector
has in any case been engaged for a long time in efforts on this issue. The last
household workforce survey released by the Turkish Institute of Statistics for February
2010 points to a relative improvement in unemployment.
The unemployment rate, which peaked during the same period last year at 16.6%, fell
in February of this year to 14.4%. This is still very high, but the falling trend
is positive and encouraging.
Furthermore, when we look at the figures in terms of those who are employed, we
see that this number has increased by 1,488,000, or almost a million and a half,
on the previous year. That a million and a half new jobs were created in a crisis
year is a very positive development. However, since the number of working age people
increased by 863,000 in the same period, these numbers unfortunately represent only
a limited improvement in our rate of unemployment. And that is the basic problem
which Turkey has yet to overcome!
As long as sufficient jobs are not created to keep up with our cumulative unemployment,
our unemployed working age population is going to keep on increasing. The latest
unemployment figures have also revealed a positive development in industrial jobs.
As you will remember, a significant number of jobs were lost in industry in 2009.
A few months ago this negative trend slowed. The figures released show that industrial
jobs rose by 293,000 over the past year. As of February 2010, industry accounted
for 20.3% of the total jobs in Turkey. Looking at other sectors as well we see that
agriculture accounts for 23.7%, construction for 5.3% and services for 50.7%.
Another piece of data worth noting in the unemployment figures is the high rate
employment in the black economy in Turkey, a point which needs to be emphasized.
The share of such jobs in total employment in Turkey in February 2010 had risen
by one percentage point on the same month in 2009 to 41.7%. In other words, almost
half of all the jobs in the country are in this sector. Clearly the black economy
is big social problem in Turkey.
But beyond all that, due to passage of the social security reform - and we realize
it is too early yet to see the positive results of the reform - the transfers being
made to cover the deficit in the social security system still constitute one of
the big black holes in the budget even though they have not yet come to the agenda.
The largest spending item in the budget in 2009 was interest spending at TL 53.2
billion. This is followed by transfers of TL 52.7 billion to the social security
administration. As you can see, unemployment is a multi-layered, multi-dimensional
problem. And as we have always said, such a problem can only be solved through a
comprehensive national strategy. For that reason we welcomed Mr. Ali Babacan?s announcement
in the press following the TOBB meeting to the effect that work is under way on
a national employment strategy. In his announcement Mr. Babacan said that, with
the advance of technology, industry?s employment potential in certain areas is not
as high as before and therefore the new employment strategy is going to be services-focused.
We are sure this is not what our Honorable Deputy Prime Minister had in mind, but
we are concerned that his statement will be construed by the public to mean that
we can get along without industry. We are of the opinion that such statements can
be misinterpreted.
What is certain is this. Under conditions of global competition, while a transition
to a structure of production high in value added is targeted in industry, and while
competitiveness depends on productivity, technology and R and D, it is not realistic
to view industry as a repository of labor-intensive jobs. The services sector may
offer the possibility of a broader employment initiative for Turkey. But we should
remind listeners of the fact that, starting with commerce and transportation, industry
is what spurs development in the services sector.
If your industry is strong, your services sector will be stronger too! As we always
say, production is the only way out for a country the size of Turkey which lacks
sufficient natural resources. Indeed, Turkey at this very moment takes her strength
from a production capacity spread over a broad sectoral spectrum. What Turkey needs
to do in order to solve her problems and go where she wants to go is to boost her
production potential even more.
And what we need to do for that, together with an employment strategy, is to urgently
put in place an industrial strategy that will make our industry even stronger. Essentially,
and as has come up frequently at our assembly meetings, under the conditions of
global competition simply producing is no longer enough; it is also necessary to
create and to add new links in the value chain. At the same time, having the capacity
to use the knowledge created by others is indeed important, but it is also essential
to aim at becoming a nation that produces knowledge itself.
An interesting announcement recently appeared in the press. The owner of a consulting
firm that does analyses of Turkey described our country?s population structure and
potential as enormous but said that our basic shortcoming is education. And the
solution he suggested for this was to lure back to the homeland the half a million
Turks who are German citizens and have had a good education in Germany by offering
them attractive opportunities.
Yes, Turkey has major deficiencies in education, in professional education in particular,
and in producing knowledge. Endowing our population with skills should be a basic
aim of both our employment strategy and our educational policy. In this connection
we consider it important that a new project be undertaken jointly by our Ministry
of Labor and Social Security, our Ministry of Education and our chambers to add
momentum to professional education as part of the employment campaign that was put
forward at the TOBB meeting.
Another encouraging announcement on the road to creating a knowledge-producing Turkey
came from Mr. Nihat Ergün, the Minister of Industry and Trade. We regard Mr Ergun?s
announcement of special support for SME?s that have ideas and projects and are open
to cooperation as part of the SME support package as a significant step in the sense
of encouraging them to compete globally, and we support its underlying vision.
Esteemed members of the assembly:
If we look now at other developments in the economy, we see that industrial production
is on an upward trend. Production in our industry has been on the rise for four
consecutive months since December 2009 with growth of 25.3% in December, 12.1% in
January, 18% in February and lastly 21.1% in March. Industrial production was up
by 17.2% in the first quarter. Although the base effect of the large-scale losses
incurred in the same months last year is evident in these rises, they are significant
and positive nonetheless.
Last year?s losses are being made up. But, we must also remind listeners that industrial
output remains below the pre-crisis level. The average production index, which was
89.7 in the first quarter of 2009 when the crisis was at its worst, rose to 105.1
in the first quarter of 2010. This is a significant rise. However, if we remember
that the index average was 115 in the first quarter of 2008, it is apparent that
we remain far below the pre-crisis level. Therefore, for the economy to make the
transition to growth in the true sense of the word, it is essential, first of all,
that industrial production return to its pre-crisis level and then rise above it.
Compensating losses is a valuable gain; it provides us with a firm groundwork. But
the real goal is to start adding production.
The 17.2% rise in industrial production in the first quarter is also important as
a harbinger of rather high growth in the first quarter of 2010. At the same time,
the rate of capacity utilization in manufacturing in April exceeded 70% for the
first time in 17 months to 72.2%. According to figures released on Monday, capacity
utilization in May too was 73.4%.
The rise in capacity utilization has also boosted hopes for production in April
and May. Looking at the table in front of us, we could say that growth in production
is going to continue in the second quarter as well. Even if it falls slightly in
May relative to April, both the real sector confidence index and the consumer confidence
index are on an upward trend.
As is often remarked, the Turkish economy is quickly affected by crises but also
bounces back more quickly than other countries. The situation was no different in
this recent crisis. In the last quarter of 2009, Turkey, together with the Asian
countries, was among the fastest growing countries in the world. And with great
probability she is going to be so again in the first quarter of 2010. So, looking
at these positive signs in the economy, can we say that everything is back on track?
Our answer is no, because, together with the positive developments, our economy
is also showing signs of a relapse of its old structural ills.
According to the Turkish Bureau of Statistics, exports were up by 7%, imports by
32.7% and the foreign trade deficit by 175.3% in the first quarter. The foreign
trade deficit, as you know, triggers the current account deficit. Our current account
deficit in the first quarter of 2010, increased at the rate of 402.8% on the same
period the previous year to approximately ten billion dollars.
Looking at the first quarter, it would not be wrong, I think, to say that it is
going to exceed by significant proportions the 18 billion dollars envisaged for
all of 2010. In a positive development, our government recently announced the details
of a revision of the financial rules. This is an important step from the standpoint
of preventing a shift towards populism on the part of the administration and of
ensuring lasting fiscal discipline.
With a public debt burden of 49%, Turkey at the moment is in a much better position
than many European countries and it is essential that this be sustained. As with
its public debt, however, Turkey also needs to be cautious and sensitive when it
comes to the current account deficit. Lasting structural reforms absolutely must
be implemented in this area. Alongside the high rate of unemployment and the rises
in the foreign trade and current account deficits, a low rate of investment constitutes
another uncertainty regarding the future of our economy.
The crisis in Greece has the potential of coming full circle and affecting all of
Europe. A second crisis in the European Union, Turkey?s largest foreign trade market,
would have an impact on many aspects of the Turkish economy starting with exports.
The Euro is hemorrhaging value by the day and one dollar = one euro scenarios are
being bandied about. Radical changes in parity will also affect the balances of
our exports and imports. The Euro zone is our largest export market. Our industrialists
purchase raw materials with dollars. How will they - how can they - reflect their
mounting costs in the products they sell?
Yes, as we move towards the second half of the year we see increasing signs of a
recovery in the economy. There is a positive trend, but at the same time there are
also risks, most notably the current problems in Europe. Nevertheless, the base
effect is going to be relatively reduced in the second half, and our task in the
economic indicators is going to get a little harder. What we are going to say, therefore,
is that we must not be lulled into complacency! It is essential to focus attention
on the economy in order to preserve and strengthen the gains already under way and
to overcome probable adverse effects that could come from outside. The economy must
not be ignored despite a full domestic and foreign agenda!
Recently Turkey?s vision of becoming a regional and global power has been more felt
and more talked about around the world. Holding on to that vision, Turkey should
fill it and consolidate it with successes in her economy. I should also point out
that in order for a country to be a global power in the true sense of the word it
is essential that all sectors and institutions share that vision and structure themselves
and complement each other accordingly. As Turkey?s industrialists, we have been
looking for a long time to develop relations with our region in the struggle with
global competition. Finally, in May two of our delegations made visits abroad, to
Northern Iraq and to Poland. Beyond its market potential, Northern Iraq is important
from the standpoint of regional integration. Both visits were extremely productive.
I would like to conclude my remarks by reiterating that we as industrialists are
going to continue our struggle to produce, to export, to create jobs and to meet
the global competition under all conditions. In closing I 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