The Chairman's Speech at the Assembly / 26 November 2008
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 November
meeting. We have with us today Dr. Hasan Ersel, a faculty member of Sabancy University.
We would like to thank him for accepting our invitation to join us and welcome him
to our midst. Mr. Ersel was our guest once before, in September of 2005. Unfortunately
a lot has changed in the Turkish economy since then. We are going to listen to Mr.
Ersel's assessments again today with great interest. Esteemed members of the assembly:
In November we entered a period in which the adverse effects of the global crisis
are becoming more palpably felt in the Turkish economy. During the month we were
unfortunately forced many times to read about industrial firms that either had to
suspend production or close down completely. Our people lost their jobs! Like the
news, the economic indicators are also not very encouraging.
According to the Exporters Association of Turkey, our exports contracted by around
2% in October. Nor is the outlook very bright for November's exports when an even
bigger contraction is expected.
Turning now to industry, industrial production contracted by 5.5% in September following
a contraction of 4.1% in August, and thus shrinking twice in 2008 in two consecutive
months for the first time since January-February of 2002. At the end of the first
nine months of 2008, industrial production was up by 2.5%. Growth in the same period
last year was 5.5%.
While 2007 may have been a loss, 2008 was even more dismal by comparison as the
growth rate in industrial production slowed by more than 50% - a harbinger of adverse
developments in the economy.
If the figures are not revised, GDP for the third quarter of 2008 is going to be
in negative territory for the first time in 26 quarters. Problems had already emerged
in our industry whopping rate of 9.8% in 2004, it 2005 it declined to 5.4% and was
only around 5% in 2006 and 2007.
Just when we were saying that 5% was not enough, growth at the end of the first
three quarters of 2008, as I said a little earlier, came to only 2.5%. The Turkish
economy had in any case begun to slow following the fluctuation in May 2006, which
was followed by a serious decline in domestic demand. In a climate in which domestic
demand was stagnant, our industry tried, and did manage, to sustain production growth
by putting greater emphasis on exports. And, in a climate in which no measures were
taken to shore up its competitiveness and in which the YTL was over valued, it succeeded
in continuing to produce and to export by using all the means at its disposal.
Now, in the global crisis, the EU market, to which Turkey makes over 50% of its
exports, is facing a recession. Indeed, beyond recession there is even talk of a
deep recession in the Euro zone. Therefore, no matter how hard our industry tries
to diversify its markets, the period of sustaining production based on external
demand would now appear to be in serious jeopardy.
For years we have tried to draw attention to the problems of our industry. But our
warnings went unheeded because the favorable atmosphere in the global economy was
continuing and the wheels of the economy were turning. Timely measures to bolster
the competitiveness of our industry were not taken.
Then, when our industry's competitiveness and resilience had been severely weakened
and its production and exports were hanging in the balance, along came the global
economic crisis. While our industry was in such dire straits, instead of support
it unfortunately met with increases in the natural gas and electricity rates. Not
only that but financing costs rose as well. Besides the adverse effects of the global
crisis, our enterprises were also faced with the pressure of rising costs. And to
financing costs were added the problem of even finding financing in the first place.
Esteemed members of the assembly:
When the crisis deepened, the whole world beginning with the U.S. began announcing
rescue packages one after the other. Indeed, the U.S. has now announced an additional
package aimed at jump-starting the economy. News of tax cuts, additional loan opportunities,
and new spending packages is coming out of China, Japan, Germany and England.
Turkey meanwhile gave the appearance of being rather slow, first to assess the dimensions
of the crisis, then to take measures. We on the other hand have from the beginning
drawn attention to the need to take urgent measures and to act swiftly and proactively.
Beyond our public statements on the subject, we also passed our views along in person
to our government representatives. We have been in Ankara two or three days a week
almost every week since the beginning of November.
During this period our dialogue with the Deputy Prime Minister and Minister of State
for economic coordination, Mr Nazym Ekren, has been almost uninterrupted. We explained
the problems and demands of our industrial firms and how important it is that they
maintain production. On 6 November we met with the board of directors of the Association
of Chambers and Stock Exchanges of Turkey (TOBB) and of the Banks Association. On
19 November, the 5th Turkey Trade and Industry Congress was held under the aegis
of TOBB. As the representatives of the real sector, we again came together at the
meeting with the relevant ministers, mainly with Mr Nazym Ekren, and we found an
opportunity to assess the situation with them once again and to convey to them the
real sector's expectations.
In all our contacts we expressed the view that Turkey must maintain her production,
employment, exports and investments at all costs, and that measures need to be taken
in line with this goal. We also drew attention to the fact that Turkey once again
had been slow to react on the pretext that it was being extra cautious.
Mr. Ekren, our Deputy Prime Minister, characterized the situation, which we saw
as being slow to react, as 'a process of building a bridge between being proactive
and being prudent'. In all good will, we believe that by now this bridge should
have been in place long ago. And in our opinion, the time has come to move forward
over the bridges that have been thrown up. Concrete measures against the crisis
should be implemented with all due speed.
We are hearing from our government explanations to the effect that work on a package
of anti-crisis measures is nearing the end and that the package will be announced
publicly within a few days. We have high expectations of that package! We hope that
the package to be announced will be one that answers expectations, that restores
confidence to the economy, and that will get results. For no half-way package that
fails to comprehend the existing needs is going to be able to solve the problems.
What's more, it could damage our morale even further by creating disappointment.
Up to now Turkey has weathered many an economic crisis and has succeeded in quickly
coming out from under them despite the hits she has taken. Let us not forget, however,
that the crisis we face today is a very different crisis.
This is a crisis of the whole world! A global crisis!
Consequently, as we confront this crisis, all sectors of society and of the economy,
starting with our government and our economic managers, need to be far more creative
and to act very differently from how they have in the past. Aware that we are all
in this together, we need to join hands in all sectors and confront the crisis in
concert. We need to strain all the resources at our disposal and utilize them to
their last drop. Otherwise, the effects of the crisis, starting with unemployment,
are going to gradually deepen and we are going to be unable to get out from under
its economic and social dimensions.
We are all going to strain our resources and make sacrifices. In this context, our
government, too, as it puts together the package, must not feign a stance of being
hamstrung by limited resources.
There has been enormous deterioration in both the consumer confidence index and
the real sector confidence index in the last two months. We all know that raising
expectations and boosting confidence are of the utmost importance in confronting
a crisis. We hope that the package will go some way towards raising the morale of
both consumers and producers and and bolstering their confidence in the future.
Unemployment has been one of Turkey's biggest problems for years. Unfortunately
the global crisis seems to have exacerbated this problem even further. We in the
real sector have from the beginning expressed the view that laying off workers needs
to be regarded as a last resort. Besides, no employer wants to lose skilled workers.
Our government should quickly pass some legislation that would give employers a
chance to protect both their business and their employees by making working conditions
more flexible. A big responsibility falls on the banking sector as well. It should
not be forgotten that if the real sector enters a bottleneck and is forced to suspend
production and eliminate jobs, the country's whole economy, the financial sector
included, is going to be adversely affected. Naturally the banking sector is going
to put its own priorities first. But it must definitely keep in mind the economic
and social costs of its implementations and their probable results. It should not
panic, nor should it behave opportunistically! Credit must be kept flowing to the
real sector!
As I said a little while ago, Turkey has experienced more severe crises in the past,
crises in which the real sector did not have the backing of the government and the
financial sector. After so many crisis experiences, we expect things to be different
this time.
Esteemed members of the assembly:
Turkey has signed 19 stand-by agreements with the IMF up to now. The 19th and last
stand-by agreement expired on 10 May. After that date the government gave signs
of not looking favorably on a new agreement with the IMF. However, the existing
problems in the economy and their further deepening under the adverse impact of
the global crisis have put the IMF alternative back on the agenda. An agreement
would have been a lot easier a few months ago, but we won't go into that; an agreement
with the IMF at this time when the global crisis has also impacted on Turkey is
important in terms of providing funds and serving an insurance function.
Certainly funds that come from the IMF should be used primarily to protect and maintain
production and jobs! A special fund should definitely be created to give financial
support to the SME's, and Eximbank's resources should be beefed up by amending the
law.
I would like to reiterate once again the necessity for urgent reductions in the
cost of state-produced inputs in order to sustain production, jobs and exports.
Such resources could be very helpful in financing those reductions. At the same
time, the Turkish economy has spent the last ten years under IMF scrutiny. In addition
to its successes, the IMF program also paved the way to certain areas of fragility
in the economy. Production, employment, competitiveness and investment must not
be overlooked in any agreements to be concluded with the IMF from here on out. Given
the existing situation, finding funds abroad is crucial, but the availability of
foreign funds should not lull us into complacency again. Turkey can turn the crisis
into an opportunity only as long as she comes up with lasting solutions to her structural
problems and not by applying a poultice to the wound. Crisis periods afford an opportunity
for us to recognize the weaknesses in the system and to go for improvements. The
2001 crisis is a prime example in this sense. Following the crisis, Turkish industry
and the Turkish private sector quickly embarked on a process of self-repair. But
the reforms that were essential for completing that repair process were not implemented
in time. We hope that the crisis can in this sense be turned to advantage this time.
Esteemed members of the assembly:
Before concluding my talk, I would like to share with you two pieces of news. The
first is that yesterday, with our Minister of Education in attendance, we held the
opening of our ISOV professional training complex, whose foundation our prime minister
laid by symbolically laying a brick back in 2003. In five years we succeeded in
turning that symbolic brick into a model professional training complex with a technical
high school, a center of continuing education, a conference hall and a gym.
We would like to thank you, our donors, who were unstinting with your moral and
financial support, for making our dream a reality. We give special thanks to our
principal sponsors, the Dinçkök Group, the Vehbi Koç Foundation, the Sabancy Foundation,
Ülker Gyda Sanayi and Ticaret A.Ş., and to TOBB-ECA Elkinkan-Borusan, the Ministry
of Education, Istanbul province and the Istanbul Department of Education.
I would also like to thank Mr. Engin Koyuncu, who first had this dream and convinced
all of us that it could be realized, and Mr. Hakky Kalkavan, the former Chairman
of the Board of our foundation, who toiled at great self-sacrifice to complete the
construction, as well as his deputy chairmen on the board, and the board members
and their colleagues.
My second piece of news concerns our Industry Congress.
We will hold the seventh of our industry congresses, which we have been organizing
without interruption since 2002, on 3-4 December this year, once again at the Cevahir
Congress Center. With a total of seven sessions - six parallel sessions and one
closing session - our congress this year will feature forty-four speakers, ten of
them from abroad. As with our previous congresses, the name of our seventh congress
will again be "sustainable competitiveness" with the sub-title, "a suitable climate
for industry".
Our congress is sub-titled "a suitable climate for industry", but as we organize
our seventh congress towards the end of 2008 we face a macro economic climate in
which it is difficult to define the word 'suitable' in reference to the economy.
As I said a little while ago, the primary responsibility for the measures to be
taken against the global crisis lies with our government and the managers of our
economy. However, it is essential that the private sector also contribute to the
anti-crisis macro economic policies that our government and economic managers pursue.
Another important dimension on the micro scale is that firms succeed in weathering
the crisis with minimal damage by outlining strategies that are correct for them.
It is our opinion that the seventh congress is going to constitute a major platform
for our industrial enterprises in both those senses.
It is going to give us great pleasure to see you, our valuable assembly members,
at our congress again this year. In closing, I salute you once again on behalf of
the board of directors and wish you all a happy Feast of Sacrifice next month.
C. Tanıl KÜÇÜK
Istanbul Chamber of Industry
Chairman of the Board of Directors