The Chairman's Speech at the Assembly / 25 March 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 January
meeting. This meeting, our first assembly meeting of 2009, is also the last meeting
of my four-year term of office. With that in mind, I would like to make an assessment
of the situation in industry and in the economy by looking back over the past four
years.
On behalf of the Board of Directors, I would like to welcome all of you to our March
meeting. We are coming together today for the first time since the elections we
held in February. As we begin this first meeting of the new term, I would like to
express my appreciation on behalf of the board of directors for the confidence you
have demonstrated in us by honoring us once again with the authority to lead the
Istanbul Chamber of Industry, one of the most prominent and respected organizations
of civil society in Turkey. Throughout my term of office I shall make every effort
to be worthy of that confidence. I shall also endeavor to represent Turkish industry
in the best way possible in the new period, and as I work towards that end I shall
take pains as always to cast no shadow on the reputation of the Chamber.
Yes, as democracy demands and as befits our chamber's traditions, we have put another
election process behind us. Now a period awaits us in which we shall join hands
for our industry and work together in unity and cooperation. For your information
we have submitted our working program for the new period together with the agenda
for today's meeting. In our program we attempted to put forward in its main outlines
the path we intend to follow in the period ahead. Those main lines are not going
to change. However, as you will appreciate, our working program is going to develop
and be revised along the way in line with the situation in the economy and the demands
of our members. To begin with, the views and recommendations of you, our valuable
assembly members, are going to make an important contribution in that sense today.
As the Istanbul Chamber of Industry, we have for many years defined our basic goal
as that of boosting the competitiveness of Turkish industry. Up to now we have always
shaped our working programs and our efforts in line with that goal. At the point
where we are today, however, we are unfortunately concerned about being able to
preserve the status quo in 2009. We are entering our new term of office under extremely
difficult conditions from the standpoint of our economy and our industry. The global
crisis, signs of which first appeared in the summer of 2007 and gathered force in
the fall of 2008, began in the west as a financial crisis. In Turkey however the
crisis hit the real sector, and industry especially, more than the financial sector.
Turkish industry has literally been in free fall since August 2008. Industrial production
has fallen without interruption for the last six months since August and is continuing
to fall at an increasingly faster rate. At last count it declined by 21.3% in January,
as manufacturing fell by 24.2%. We did not see such sharp falls in industrial production
even in 2001. This sharp drop in industrial production is a sign that a contraction
well beyond expectations awaits us in 2009. Nor do February and March warrant any
optimism either.
The capacity utilization rate also remained at the low level of 63.8% in February.
And exports fell by 35% according to figures released by the Turkish Association
of Exporters (TYM). These falls in production and exports are naturally having an
adverse effect on jobs as well. The latest figures published by the Turkish Bureau
of Statistics have shown that unemployment broke a record in December 2008 at 13.6%.
A look at jobs by sector shows that while there was an increase, albeit small, in
employment in the agriculture and service sectors over the last year, employment
in industry is down by around 5% with some 205,000 jobs lost. These data indicate
that in employment too industry is bearing the brunt of the downturn.
All these figures make clear without any need for words what a difficult period
we are going through and the depth and seriousness of the crisis we are facing.
In the circumstances, as the board of directors, our primary aim in the new period
will be to contribute to overcoming the adverse effects of the global crisis on
our industry as soon as, and with as little damage as, possible. Actually, as we
have always said, our industry was already having problems even before the global
crisis. Industrial production has been wobbly and unsteady since 2005. Domestic
demand slowed following the fluctuation in May 2006. Even then, however, our industry
managed to boost export-oriented production, albeit on a very fragile balance. Then,
when the global crisis hit Turkey's export market, foreign demand dried up as well.
Now, at a time when both domestic and foreign demand are almost flat and the private
sector has run out of steam, a greater responsibility than ever falls on the shoulders
of our government and the managers of our economy. We have been trying to draw attention
to this from the very first months when the crisis was just beginning to gain strength.
Despite all our efforts, however, no measures were taken to put out the fire, which
was obviously going to grow larger, and precious time was lost. And when you are
slow to take measures, you pay a higher price.
We are pleased to see that our government's efforts, albeit six months late, to
take measures have gathered speed in the recent period. The package of measures
aimed at the automotive, white goods and housing sectors has shown significant development,
albeit late. We are following with pleasure, for example, the positive impact on
the automotive sector of the support provided in the form of a lowering of the Special
Consumption Tax. We hope that our sector too is going to make good use of this support
and manage to record it in the plus column in terms of jobs.
At the same time we should also note that production in Turkey's automotive sector
in January fell at the steep rate of 60%. If support had been provided earlier,
losses of this magnitude would probably not have occurred in automotive production
and employment. Here again we are confronted with the importance of taking timely
measures.
The support provided by the fourth package is important, but it cannot be said to
be enough. And supportive measures aimed at the other troubled sub sectors besides
automotive and white goods should be introduced without delay. Anti-crisis measure
packages need to be continued without interruption, and there has indeed been an
important and encouraging development in this sense: A fifth package was announced
today.As with the fourth package, however, we see that this package is weighted
in favor of trade, whereas our expectation was that it would be weighted in favor
of industry. We are expecting other measures aimed at reviving production and providing
businesses with at least a modicum of relief to be brought into play with speed.
In this connection, we find the credit guarantee fund on which work is ongoing to
be of special importance, because worsening credit conditions and the banks' unwillingness
to lend during the crisis have left our small and medium size enterprises especially
in dire straits. The volume of credit oriented to the SME's declined by 4.4% in
a single month from December 2008 to the end of January, a decline which clearly
underlines the bottleneck in this area. If the credit guarantee fund went into effect,
it would make a significant contribution towards alleviating the situation and opening
the credit taps.
Tax and premium payments must definitely be deferred to afford enterprises, production
and jobs some respite. We conveyed our demand for a temporary tax deferment to our
minister in February. We have not yet been able to get a result.
On the other hand, we greeted with pleasure our distinguished trade and industry
minister's announcement to the effect that the TRT (Turkish Radio and Television)
share in electricity bills was going to be abolished entirely, something we have
been pressing for for years. There is still no concrete development however. We
are continuing to follow up on both issues. On another long-standing issue, we are
also awaiting a similar initiative for the Resource Utilization Support Fund (KKDF),
which is collected on imports of raw materials and investment goods. Although perhaps
insignificant in amount, such supports, in the difficult straits in which we find
ourselves, will at least have a positive impact on our industrialists' morale.
Social security premiums are still quite high despite a five-point lowering in the
employer's share. For the sake of preserving jobs, such reductions should definitely
continue, during this process especially, until premiums reach tolerable levels.
Having said that, we know that our country is short on resources and that we don't
have much room to move. The supports that have been, and are going to be, given
are causing a strain on the budget. It is very worrying, for example, that while
a budget deficit of TL 10,398 billion has been envisaged for all of 2009, there
is already a TL 10,359 billion deficit in the January-February period. Current conditions
however require us to take a new look at the economy. Let us not forget that fiscal
discipline may be relaxed in controlled fashion in order to create a way out for
employment. What is important is that fiscal discipline be relaxed for result-oriented
investment spending and for reductions to support production and employment through
careful cost-benefit analyses. Channeling limited resources into the right kind
of spending!
Esteemed members of the assembly:
There is no disputing that this difficult period is going to persist for a while
yet in the Turkish economy and throughout the world. To weather at least the remainder
of the crisis with as little damage as possible, we must make good use of the limited
resources we have. We must also make effective use of our narrow room for movement.
We must enact rational, feasible and result-oriented measures. We cannot foresee
when a revival will get under way in the export markets. In the circumstances we
must take another look at the potential of our seventy-million-strong domestic market.
Turkey's national income in 2008 has been estimated at 725 billion dollars. Our
exports in the same year came to 132 billion. The share of exports in GNP is therefore
around 18%. This shows us how sizable a contribution our domestic market makes to
value added created. Despite the efforts of our exporting industrialists to diversify
their markets, there is not much we can do about the foreign markets.
By pulling out all the stops however we can tap the potential of our domestic market
during this difficult period. And thanks to this, relatively speaking we can preserve
production and jobs. The sense of urgency in the automotive and white goods sectors
should be an example to us all, and the temporary lowering of VAT and the Special
Consumption Tax should also be applied in other sectors.
I should point out at this juncture that palliative, one-off measures aimed at boosting
household spending may not produce the desired results. The most crucial factor
now is establishing confidence. Allaying fears for tomorrow, primarily fear of losing
one's job. Here, too, the onus falls on the government. It is urgent that enterprises
be offered additional supports and incentives aimed at preserving jobs.
Esteemed members of the assembly:
Today we are cooperatively engaged in a quest to create a way out for the economy.
We managed to grow by around 6.8% a year on average in the 2002-2007 period. But
behind those growth figures there were other realities that made up the other side
of the coin in that period. The competitiveness of our industry was weakening. The
current deficit was widening, the debts of the real sector were growing, and unemployment
was on the rise.
We have been speaking out about these fragilities from the start. We strove to draw
attention to the fact that the way things were going was a dead end. And during
that period we were misunderstood time and time again. Had our words been heeded,
we could perhaps have been standing tall now in the face of the global crisis.
Today too such an atmosphere has been created that when we draw attention to the
realities in the economy we stand a chance of being accused of pumping negativity.
This approach, when we voice our warnings, is what causes us anxiety that we are
perhaps contributing to the downturn. The truth is however that we, as the Istanbul
Chamber of Industry, have taken pains always to speak in clear figures and to put
problems forward in concrete, objective and realistic terms.
Today too we are striving to take the same approach, and we will tomorrow as well.
Nevertheless, in the existing situation, there is no need for words or comments
in any case. The figures speak for themselves and make the urgency of the situation
clear.
When expressing negative views, our purpose is to ensure that measures are taken
without delay and to keep the fire from growing bigger. I would like to remind you
once again of this fact, namely, that the decline in production is not a problem
of the industrial sector alone. Problems in the industrial sector are in time reflected
in other areas of the economy as well, the financial sector included, and exert
a downward pressure on indicators across the board.
Furthermore, we should also remember that like all serious crises, sooner or later
this one too is going to end, and in the post-crisis period the competition is going
to continue from where it left off. If we survive, we too are compelled to join
in the fray. Consequently, besides solving the urgent problems caused by the crisis,
we also have no choice but to strive to effect medium and long-term reforms aimed
at boosting our competitiveness and improving our climate of production and investment.
We intend to remind our government of this at every opportunity in the period ahead
and to strive to get results.
One should not conclude, however, from these words of ours that we are putting the
responsibility entirely on our government and the managers of our economy. As private
sector firms we know that important responsibilities also fall upon us in getting
through this difficult process. We are as always cognizant of our own responsibilities.
As the private sector, it is essential that we sustain our efforts aimed at developing
our competitiveness without interruption despite the crisis. It is crucial that
we continue our efforts to raise productivity and to boost our capacity for R and
D, innovation, design and branding. We aim to further develop our member-oriented
activities in these areas in the new period. At the same time, we are also going
to continue, and to further boost, our efforts to support our enterprises and to
brief them on how to weather the crisis with minimal damage.
Esteemed members of the assembly:
Our efforts in the new period will succeed thanks to the contributions that you,
our valuable assembly members, make along the way. We on the board believe that
you will not be stinting with those contributions and support, and we hope that
the new period will be propitious and beneficial for all of us and culminate in
success. 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