The Chairman's Speech at the Assembly / 28 February 2007
Mr. Chairman, Esteemed 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 February
assembly meeting.
We have with us Mr. Bayram Mecit, President of the Small and Medium-sized Industry
Development Organizations (KOSGEB). We would like to thank him for accepting our
invitation to join us today. Welcome, Sir!
Esteemed members of the assembly:
The data have not been released yet, but it is almost certain that growth in 2006
was around 5-5.5%. On an annual basis we have been growing without interruption
since 2002. Assuming growth in 2002 is 5.5%, a total growth of 42.5% will have been
achieved over the last five years, and exports have played a key role in that growth.
Turkey?s exports rose from 31 billion dollars to 85 million dollars within five
years. As you know, industrial products make up more than 90% of those exports.
Our industry has therefore had a major share in the growth achieved. Recently however
we have been trying to draw attention to the following point:
Turkey?s exports are on the rise. But this apparent success should not prevent us
from seeing the other side of the coin. Our exports are growing, but at what cost?
And is this growth sustainable? These are pressing questions that need to be asked.
We know that our industry is engaged in a desperate struggle to remain competitive,
but the current low exchange rates put it at a disadvantage in that respect. In
order to turn this to advantage, industrialists are forced to turn to imported inputs,
and to the use of foreign loans on favorable terms at the cost of incurring exchange
rate risk.
Fewer workers are being employed in the name of boosting productivity, profits are
being sacrificed in the name of preserving markets abroad and, as we have again
tried to underscore recently, these methods, to which our industry has had to resort
in order to continue exporting, unfortunately entail certain social and economic
costs.
We are always saying that the profitability of our enterprises is steadily falling
and urgently trying to draw attention to the fact that an enterprise that is not
sufficiently profitable cannot fulfill its responsibility to itself or to society.
How is an unprofitable enterprise going to be able to make new investments or create
new jobs? When profitability falls, enterprises have more trouble finding equity
capital and end up going into debt. Borrowing from abroad then comes into play in
an environment in which financing opportunities are scarce and relatively expensive.
While the total volume of foreign debt rose by 74.5% in the post-2001 period, foreign
debt in the private sector jumped by 165%!
Our recently published survey of the state of the economy in the second half of
2006 revealed that foreign currency, or foreign currency-indexed, loans make up
over 80% of the credits used by one out of every three enterprises in Turkey.
A large-scale fluctuation in the exchange rates could therefore be rather disastrous,
particularly for enterprises without foreign exchange revenues. Yesterday and today,
for example, there has been some movement in the international markets, the effects
of which were also felt in Turkey. Things have calmed down now, which is some relief
to us. And we hope that the existing movement does not turn into a fluctuation that
upsets the balances in the economy.
Let us look now at the situation in foreign trade at the end of 2006. The picture
we see is the following: imports worth 137 billion dollars, exports worth 85 billion
dollars, a foreign trade deficit of 52 billion dollars and a current account deficit
of 31 billion dollars.
Ninety-eight billion, or almost 72%, of our 137 billion dollars? worth of imports
are imports of intermediate goods. Energy imports too fall into this category. But
when our 28 billion dollar energy bill is subtracted, we are left with 70 billion
dollars? worth of imported industrial inputs.
If we compare this picture with that of five years ago, on a dollar basis exports
have risen by 172%, imports by 213%, and the foreign trade deficit by 415%. Jobs
on the other hand are up by only 5% on five years ago! A measly 5%!
Cheap imports are eroding the competitiveness of our local producers of inputs,
who make up most of our SME?s. And despite the surge in exports and the sustained
growth in the economy, there has been no significant increase in the number of jobs
either!
According to the Turkish Bureau of Statistics, there were 2,344,000 unemployed at
the end of October 2006. Compared with the same period a year ago, the number of
unemployed had fallen by 143,000 and the unemployment rate had dropped from 10.1%
to 9.3%. On the other hand, when we add to the so-called actively unemployed, i.e.,
those who are looking for a job, the number of those who are prepared to work although
not actively seeking employment, plus those without hope of employment and the phenomenon
of underemployment, their number exceeds five million and the unemployment rate
rises to a figure over 20%.
All of which goes to show what a big problem unemployment continues to be despite
some token improvement in the recent period.
Based on the total amount of investment tied to incentive certificates, an investment
of 128,000 dollars was required in 2006 to create a job for just one person. This
means that our foreign trade deficit of 52 billion dollars in the same year is equivalent
to jobs for approximately 405,000 people. Our foreign trade deficit with China alone
was 8.8 billion dollars in 2006. With that money we could have made investments
that would create jobs for 70,000 of our own people - simply from our foreign trade
deficit with China, a country whose production is in areas similar to those of Turkey
and in the mainly labor-intensive sectors.
How distressing it is that because of policies that encourage imports, Turkey, who
herself faces a very serious level of unemployment, is using her valuable resources
to create jobs in other countries.
Esteemed members of the assembly:
In its main outline, the macro picture in our industry is as follows:
We have urgent problems awaiting solution such as improving the investment climate
in our country and boosting our competitiveness. But let us leave aside these problems
at home for the moment and focus instead on the world outside. When we look at the
climate of global competition we see that we don?t stand a chance when it comes
to cost-based competitiveness, cheap labor in particular. China and India can manufacture
everything cheaper than we can today. And tomorrow others are going to manufacture
those same things even more cheaply then they do; there will always be somebody
who can manufacture things more cheaply.
For us the target should be to develop a special skill, a knowledge-based industry
and a competition policy and then to convert them into reality so that we will be
in a position to raise the living standards of our workers and our people. For a
competitive edge in the international markets we should target a structure of production
based on quality, special knowledge and skill.
For this we are compelled to develop our capacity for research and development and
the development of technology above all, but also for innovation, design and the
creation of brands. We know however that SME?s make up more than ninety percent
of our industry in Turkey. And our SME?s are in dire straits when it comes to adapting
to the global competition.
It is imperative - and we are always saying this - that we further develop cooperation
between the public and private sectors in order to boost our competitiveness, and
to be able to equip our entire industry, starting with our SME?s, with the skills
required by global competition.
We can achieve our aim if all the relevant institutions pool their strength, their
resources, their attention, their knowledge and their energy in harmony. We of the
Istanbul Chamber of Industry are also engaged in a quest to develop our cooperation
with all parties.
In the transition to an industry that is based on knowledge, skill and high value
added, we believe that it is crucial to develop cooperation with the universities
and research institutions and with organizations like KOSGEB.
We all acknowledge how important it is to develop our capacity for research and
development in order to succeed in the global competition. The number of published
articles a country has in the international citation index for science is a significant
criterion of its capacity for R and D. Turkey has made progress in this area in
recent years, rising from 41st to 19th place in terms of number of articles published.
Unfortunately however our country is among the last in terms of turning articles
into patents and patents into industrial products. We believe one of the reasons
for this could be that when we look at dissertation topics in our universities we
see that they are very different, very disconnected, from the items on our industrial
agenda today. And this disconnect makes it difficult for our industry and our universities
to work together. Bringing the areas of interest of the universities and industry
into sync requires that the two sectors get together and become cognizant of each
other?s needs.
Let me say at this point that up to now we have always couched this in terms of
the universities cooperating with industry. But we see now that it would be make
more sense to describe this process as one of industry cooperating with the universities.
As industrialists, we should be the locomotive force behind it. And we should not
consider the problem merely in terms of Istanbul and the Marmara region either.
When it come to making the transition to a skill- and knowledge-based industry,
it is very important to be able to develop communications and cooperation between
our industrialists and universities in Anatolia as well.
Mr. Chairman,
Distinguished members of the assembly,
Mr President:
We on the board of directors give great importance to developing our cooperation
with KOSGEB, which we regard as one of our key partners and which is working to
boost the effectiveness and influence of our SME?s. The Small and Medium-sized Industry
Development Organizations have been providing services since 1990, offering a wide
range of support programs to promote technology, research and development, and entrepreneurship,
to improve quality and productivity, to encourage promotional activities, branding
and participation in fairs abroad, and to stimulate e-commerce, the production of
computer software, training of skilled personnel, and test analyses and calibration.
Manufacturing concerns with upwards of 250 employees are eligible for KOS-GEB support.
When we consider that over 96% of our member enterprises employ upwards of 250 workers,
our chamber and KOSGEB can easily be said to have common targets and a common area
of service.
We are currently conducting joint projects with KOSGEB, which we might dub our ?sister?
organization. As an example, I could site our successful partnership at the Istanbul
office of the European information center. The Istanbul office of the Europe information
center, which has separate branches on the city?s European and Asian sides, was
set up following a joint application to the European Commission by KOSGEB. The Istanbul
Chamber of Industry and the KOSGEB ?mes center of operations have been acting as
the representatives of the Istanbul office of the Europe information center on the
city?s European and Asian sides since 2003.
We are also finding ways of pursuing our partnership with KOSGEB in other projects
oriented towards the European Union. As you know, not so long ago we signed a protocol
for a new cooperation with KOSGEB. Under this protocol a new office was created
within our chamber; the official opening was held today. Through this office we
aim to make it easier for our industrialists to obtain KOSGEB support.
We would like to develop our cooperation with KOSGEB even further, and we regard
Mr. Mecit?s presence here as a sign that KOSGEB shares this desire. We would like
to thank him once again for being with us today. We are going to listen closely
and with great interest to the information he is going to give us about KOSGEB support
and projects. And, with the ideas and suggestions that come from you, our esteemed
assembly members, I hope that the door will be opened to further cooperation with
KOSGEB as a result of our coming together today.
Mr. Chairman,
Esteemed members of the assembly:
Finally, I would like to share with you a development concerning our assembly meetings.
As you know, from time to time we get suggestions from you, our esteemed members,
regarding the day of our special assembly meetings and the hour of our regular assembly
meetings. Our secretariat has therefore conducted a survey to determine our assembly?s
preferences on the subject.
The survey presented four alternatives:
1) the special assembly meeting at 9:30 followed by the regular meeting at 10:30
on the same day;
2) the special assembly meeting at 1:30 pm followed by the regular meeting at 3
pm on the same day;
3) the regular assembly meeting at 10:30 am with the special meeting on a different
day;
4) the regular assembly meeting at 3 pm with the special meeting on a different
day.
Eighty of our members have responded to the survey so far. Forty-four of them (49%)
have indicated a preference for the fourth alternative, namely, holding the regular
assembly meeting at the usual hour but the special assembly meetings on a different
day. Thirty-one of the respondents (35%) have indicated a preference for the 2nd
alternative, i.e., holding the special assembly meetings at 1:30 pm followed by
the regular meeting at 3 pm on the same day.
You may have noticed that while only 80 members have responded, 89 alternatives
appear to have been ticked. The reason for this is that nine of our members ticked
two alternatives without indicating any preference between them. Only one of our
members indicated a preference and this was taken into account. The results of the
survey are going to be evaluated by our board of directors.
I would like to close by saluting 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