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Turkish State Minister Mr. Zafer ÇAĞLAYAN gives interview with People's Daily
2010/01/04

Mr. Zafer ÇAĞLAYAN, Turkish State Minister responsible for foreign trade gave a paper interview with the People's Daily during the Daily's journalists visited Turkey on Dec 9-16, 2009.

1. Turkey experienced a financial crisis from the late 2000 till the early 2001.What is the difference between the crisis of 2001 and the current crisis? How did the international financial crisis affect the Turkish economy and society? What type of measures were taken by your government? Did those measures produce successful outcomes?

As is remembered, increasing vulnerabilities in the macroeconomic structure, stemming from the fiscal and monetary policies implemented throughout 1990s undermined the stable growth of Turkish economy. Also, the relatively high growth rates were always followed by the years marked with economic contraction or sluggish growth rates. Besides the unstable growth, this period was also characterized with high inflation, increasing public deficits and debt stock as well as high interest expenditures and inefficiencies. These structural problems combined with political vulnerabilities inevitably led to economic crisis in 2001.

In the post-2001 crisis period under the rule of our government, the political stability was restored, the fiscal dicipline principles measures were introduced and above-all several structural reforms were adopted. These policies supported by the favourable environment in the international markets produced macroeconomic stability and improved the fiscal balances. In the six-year period between 2002 and 2008, annual average of 5.9 percent growth rate was realized. This outstanding economic performance was not only the result of the structural reforms but also of the booming exports.

The current global financial crisis whose first signs came from the US financial system in August 2007 hit the other economies of the world in 2008 and 2009. There is no doubt that this crisis also negatively affected Turkish economy and its exports. However, from our perspective, there is a crucial difference between the 2001 crisis and the current one. While the root causes of the 2001 crisis was the cumulative outcome of the national macroeconomic instabilities and fiscal vulnerabilites, the current crisis which first began in developed countries such as USA and UK and then spreaded to the almost every economy integrated to the world bears a global character.

The last two years of the crisis was depressing for the whole world not only for Turkey. Also, it was not easy to cope with such a global problem which affects almost every economy. Global crisis affected Turkish economy mostly through trade and financing channels. In order to lessen the adverse impacts of the global crisis on Turkish economy series of expenditure and revenue measures have been taken since mid-2008. With these measures, it is aimed to stimulate the economic activity which is under pressure due to the crisis, by increasing the transactions in the markets of good and thereby increasing the flow of goods and money; to accelerate the process for economic growth by restricting the effects of the crisis on potential production and to sustain the employment and production levels. Since the global crisis hit the Turkish economy mostly through trade and financing, we, as the Undersecretariat fort he Foreign Trade, started to work on reducing the effects of these channels immediately after the first signals of the crisis emerged.

First of all, a number of measures addressing the increasing financing problems stemming from the crisis were taken. In this regard, the capital of Turkish Eximbank was raised from 1 billion TL to 2 billion TL and some adjustments were made in interest rates and maturities. In February 2009, "Credit for International Fair Attendance" program was introduced for the exporting firms attending international fairs abroad to market and promote their products and for the organization agency firms. In addition, with the "Overseas Contracting Services Bridging Loan" program, the contracting firms operating abroad, which was not able to receive their progress payments was provided with a new credit facility.

To sum up, we have been working hard to limit the adverse effects of the global economic fluctuations and crisis on our exports, to achieve sustainable export growth and to ensure diversification in exporting sectors and export markets via successful market access operations and innovations.

2. What are the main economic problems of Turkey? What are the plans of your government to tackle these problems? And what are your expectations regarding your economic situation in 2009 and 2010.

In the current international economic environment, a Medium Term Programme (2010-2012) was prepared within the context of measures against and exit strategies from the global financial crisis. With this programme, it is aimed to ensure sustainability in economic growth which was interrupted due to the global crisis. In this regard, the following is the summary list of the policy measures assumed to be taken:

· Public investments will be directed to priority areas and made more efficient.

· A comprehensive industrial strategy based on technological innovations will be introduced.

· The resources to transform production structures towards advanced and informational technologies will be increased.

· The reforms in public expenditure policies will be continued. In this regard, health services and expenditures will be made more efficient.

· Tax base will be extended, and losses and frauds in collecting taxes will be reduced.

· Training the human capital will be accelerated in the nature that the business world demands.

On the other hand, in order to ensure sustainability in export growth, our Undersecretariat will continue to support the production and marketing process of goods and services based on R&D and creating high value-added. In addition, within the context of ongoing market diversification strategy, our objective is to increase the exports to the least-affected regions from the crisis such as neighbouring and surrounding countries, African countries and Asia-Pacific region.

Given the global economic contraction in 2009, deteriorating domestic and foreign demand and financing facilities, our forecasts show that Turkish economy will shrink by 6 percent in 2009, but will grow by 3,5 percent in 2010 and the growth rate will accelerate gradually in 2011, in 2012 growth rate of 5 percent will be achieved.

As regards to our forecasts on foreign trade, the recovery will start in 2010 but the actual and high economic growth will be seen after 2011. In this regard, as is stated in the Medium Term Programme (2010-2012), it is expected that the total value of exports in 2009 will be 98.5 billion Dollars. In 2010, exports increased by a moderate 9.1 percent, reaching to 107.5 billion Dollars. However, we are working hard to remain above 100 billion Dollars in 2009 and I strongly believe that we will achieve export figures higher than forecasted 107,5 billion Dollars in 2010.

3. Turkey is an important country considering its geographic location. Also, Turkey has been very active in diplomatic activities for the last couple of years. Turkey is not only an important actor in Balcans, Middle East and Black Sea regions but also, as a NATO member, is in close cooperation with western countries in economic and security issues. Can you please explain Turkey's diplomatic mission in the last few years? What are the developments on regional integration?

The primary objective of the Turkish foreign policy is to help secure and nurture a peaceful, prosperous, stable and cooperative environment that is conducive to human development at home and its neighborhood. To achieve this objective, Turkey has been pursuing a pro-active diplomacy. In line with this foreign policy objective, the Undersecretariat for Foreign Trade under my administration has been undertaking an active commercial and economic diplomacy in cooperation with the relevant governmental institutions especially with the Turkish Ministry of Foreign Trade. In today's world in which the effects of the globalization is more and more visible, the significance of regional integrations on international trade is remarkable. In this regard, let me briefly explain the recent developments about our regional and bilateral trade.

In the last couple of years, we have introduced some regional trade development strategies towards neighbouring and surrounding countries, Asia-Pacific region and the continents of Africa and America to ensure durable export growth and diversification of export markets. Those strategies produced successful results. In this regard, I would like to emphasize that a special priority has been placed on increasing our commercial relations with our neighbouring and surrounding countries with which we share a certain geography, culture and tradition. Thanks to these policies, the adverse effects of the current contraction in our traditional markets such as EU economies due to the crisis were kept in minimum levels. For instance, in the first ten months of 2009 our exports to Egypt increased by 99 percent compared with the same period in 2008, and Egypt was ranked 9th among our export destinations. There is no doubt that the Turkey-Egypt Free Trade Agreement (FTA) which came into force on 1 March 2007 played a crucial role in this outstanding performance.

Taking this opportunity, I would like to reiterate the importance of FTAs which ultimately contributed to the development of bilateral trade relations. So far, we have signed 16 Free Trade Agreements, 12 of which are in force, and the ratification process is ongoing for the remaining 4 Agreements. We have not only signed FTAs with regional trade partners but also with geographically remote countries like Chili which bear high trade potential. Besides the FTAs, we have pursued an active trade diplomacy with Iran and Iraq in the last couple of months and signed various agreements to enhance trade.

In these hard times of global crisis, we have worked closely with our exporters and have undertaken more dynamic and aggressive market access studies. Also, we have conducted some technical analysis to find new markets which were not well known in the past but less affected by the global crisis. Thereby, we have aimed twin objectives of protecting export share in our traditional markets and ensuring market access in our potential markets.

An evaluation of all these efforts can be made now. We have witnessed rises of more than 100 percent to a number of relatively new and geographically remote trade partners such as North Korea, Laos, Nepal, El Salvador and Bangladesh in the period of January-October 2009.

Lastly, we have organized trade delegations to several countries like Macedonia, China, Iraq, South Africa, Brazil and Chili, supported our exporters' attendance to international fairs and hosted trade delegations from various countries in order to protect our export share in traditional markets, increase it in potential ones and promote our export products.

4. Turkey and China has friendly relationship for several years. 2000 years ago, Turkey and China engaged in bilateral cultural and commercial relationship via Silk Way. They have close contact beginning from 1971 when the diplomatic relation was established. What are your comments on relation between Turkey and China? What are your acquisitions in recent years? What are the properties on our communication?

Turkey attaches great importance to bilateral relations with China. As you may appreciate, Turkey has deep-rooted ties with the Asian countries including China that have always reflected the will and desire to enhance and further promote its relations.

It is my firm belief that we have to exert every possible effort to reflect the political relations to the other fields, especially to our bilateral trade and economic cooperation.

In this regard, Turkey is trying to accelerate her commercial and economic relations, especially investments, with its trading partners in parallel with her foreign trade policy.

As you may know, the trade volume between our countries stayed under the level of 8 billion dollars before 2005, but in 2006, 2007 and 2008 recorded as 10.4, 14.3, and 17.1 billion USD respectively. It is realized 11.2 billion USD in the period of January-October, 2009.

China has been one of the main trade partners for Turkey by doubling the volume of bilateral trade in last 3 years. In this period, we enforced some export promotional activities to sustain the bilateral trade in a mutually beneficial basis.

When we look at the exports of Turkey to China in 2008, we see that Turkish exports has reached the number of 1.5 billion USD.

We attach great importance to further developing and diversifying our commercial relations and establishing more fruitful economic cooperation with China, in a balanced and mutually beneficial manner. Bilateral political relations between our countries are very conducive to reach this target.

We are waiting for the support of Chinese government to balance the trade deficit of Turkey against China by increasing the number of tourists coming from China to Turkey, organizing buyer's missions, and enhancing Chinese investments in every field.

Nowadays, bilateral trade and economic relations between Turkey and China are growing very fastly. In every fields we have cooperation with China. Investments of China in Turkey is one of the best example for this cooperation.

5. What are your comments on bilateral economic and commercial relationship between Turkey and China with the advantages? What are your expectations on cooperation between Turkey and China in this regard?

Taking this opportunity, I would like to dwell upon the general trade policies of Turkey that will give you a concise picture of Turkey's expanding role as a business partner.

As you may already know, we have been pursuing a continuous economic reform program since the establishment of our Government in 2002.

This reform program has already started to produce positive results, as reflected by the significant improvements in all economic indicators. The world economy is expected to shrink 1.3 percent this year and then to grow just 1.9 percent in 2010, well below the rates before the economic crisis hit.

By any measure, this downturn represents by far the deepest global recession since the Great Depression. This huge economic downturn has also led to a collapse in global demand, which in turn, has drawn exports down. The IMF expects an 11.5 percent fall in world trade, while the WTO economists forecast a 9 percent decrease.

Thus, keeping in mind the past lessons, we should hold on to the G-20 commitments and also keep our faith that the only lasting remedy comes from "continuous open trade". Of course, the conclusion of the Doha Round will be underlined the clear commitment to the open trading system and given a significant message to the world.

As Turkey, we witness that economic activity has especially taken a drastically negative turn for emerging European economies. They have been affected, in particular, due to their heavy reliance on all kinds of capital inflows, principally, their close banking ties with the Western Europe.

In parallel with the emerging market economies, financial crisis has also had some repercussions on Turkey, as it is highly integrated to the world economy and the financial markets. Turkey is particularly influenced from the declining external demand and falling international capital flows.

In this context, Turkish exports are expected to decline by the end of this year to 104 billion dollars from 132 billion dollars in 2008. The most evident reason behind this decrease is, of course, the general decline in external demand.

We observe a similar trend of decline in our imports, even a sharper one, due to the combined effect of weakening domestic demand and falling prices, especially of energy.

Our imports are expected to decrease to 140 billion dollars in 2009, from 200 billion dollars of last year.

Turkey, with 330 billion dollars worth of trade volume in 2008, ranks in the first 20 countries of the world. Foreign trade policies and strategies also have a very significant role in the firm stance Turkey has had during the crises.

We know that China is the second country in exports and third in imports in the world in 2008. We are aware of this significance and attach great importance on China.

On the other hand, I would like to talk about the Trade Development Strategy we have launched towards the Asia Pacific region in 2005.

This strategy incorporates countries of mainly the Far East and Pacific region and integrated within our development strategy implemented towards the neighboring and surrounding countries.

Primarily, the Asia- Pacific is the most dynamic region of the world in terms of social and economic development. We expect this region to become the main driving force and the axis of the global economy in the decades to come.

The Asia Pacific countries took a quarter share of the global output and world merchandise exports last year and the five economies among the top fifteen of the world are located in this region.

These facts alone justify the potential of the growing and flourishing markets of Asia of which Turkey must take advantage.

Secondly, the Asia-Pacific region countries have different and diverse economic and social structures. While some countries are well developed, others remain in the middle to low-income category.

Hence, this diversity possesses important challenges as well as opportunities in terms of enhancing our trade and investment relations with the region countries.

Our new strategy towards the region has not only been designed to enhance exports, but also to further promote business opportunities in different fields such as banking, contracting and consultancy services, defense industries, free zones, transportation and telecommunication, tourism and small and medium sized enterprises.

With this strategy, we give precedence to fact-finding missions and trade promotional activities such as trade delegation programs, buyer's missions, fair participations, and the meetings of business councils.

We also give priority to visits of contractor and investment delegations, with the view to seek opportunities for direct investment and joint venture operations in the region.

I have hope bilateral trade and economic relations between Turkey and China will further increase with this view. Turkey is the strategic country in Europe and China is the strategic country in Asia. We have many complementary issues. We have to be aware of our properties and benefit from our advantages.

6. What do you think about the fields of potentials that China and Turkey can develop? What are your common views on economic and commercial relations? What are your complementaries? Which areas can develop or strengthen? What can be done to develop understandings between Chinese and Turkish societies?

It is noteworthy to say that, investments play an important role in developing permanent and strong relations between the countries. As you know, Turkish foreign investment legislation provides a well-secured environment for foreign investors granting the same rights and obligations as the local investors.

We welcome the recent investment initiatives of the Chinese companies to Turkey and we are ready to welcome more direct investments by state and private companies of China to Turkey especially in the fields of electro-mechanic turbines, energy, automotive industry, machinery, chemicals and IT.

As considering the potential of our respective economies as well as the recent developments recorded in reciprocal investments between the two countries, like Chery, DFM and Gelly in automotive sector, ZTE and Huawei in telecommunication, Chinalight in mining, Sinosteel in steel industry, CMC in consulting and contracting, Yingli Solar in solar energy sector etc, we must further encourage our companies to make investments in each country.

In addition, we are happy to hear the possibility of involvement of the Chinese companies in the infra-structure projects including 3rd bridge over the Bosphorus.

Nowadays, Turkish companies like Arçelik beware of the importance of China as a gate to other regional countries. I am believing that the renewal of Agreement on Reciprocal Protection and Promotion of Investments will also contribute development in bilateral trade and economic relations.

It is obvious that, encouraging our respective enterprises and organizations, to the extent possible, to participate in exhibitions, fairs and other promotional activities organized in two countries, will further increase the bilateral trade and economic relations.

The contracting services also constitute one of the promising fields of cooperation. Turkish contractors, with their internationally admired experience and expertise have been active in more than 72 countries with their total undertakings surpassed more than 140 billion US $ as of the end of 2009.

According to a survey realized by Engineering News Record, Turkey, with its 31 firms, is the second country after China in terms of the number of projects undertaken in the world.

There exist important cooperation opportunities between Turkish and Chinese contractor companies in Middle Asia, Africa, Middle East, the Balkans and Caucasian. We will appreciate if you encourage Chinese contractor companies to cooperate with Turkish companies in the third countries.

I would like to emphasize the importance of tourism activities in the development of our bilateral economic relations.

As you may appreciate, situated at the junction of the three continents, Turkey is the heir to many natural and cultural treasures. In light of these assets, millions of tourists from different countries including China have been visiting Turkey over the years. Last year 63 thousand Chinese people visited Turkey.

Regarding the strategic features of energy, Turkey is located at the epicenter of the "Eurasia", where four regions of the world, namely Europe, the former Soviet Union, Middle East and North Africa intercept, are providing unique business opportunities.

Thus, Turkey's role as a crossroad in its region is best observed not only in trade or transportation corridors, but also in energy issues.

Its geo-strategic position makes Turkey a leading energy corridor and a transit center for the main oil and natural gas producers in the Caspian, Caucasus and Central Asia as well as for consumer markets in Europe.

As a result of the developments observed in its region, Turkey has become a critical player in global energy security and contributed to the emergence of new energy markets in Eurasia through outstanding energy projects during the last decade.

On the other hand, with a view to diversifying energy sources, Turkey has been implementing a strategic national policy in this field including natural gas and oil procurement from existing and under-construction pipelines, concentrating on alternative energy sources and liberalizing its energy market.

Additionally, defense industries, manufacturing industry, transportation, science and technology, electronics, nuclear energy, renewable energy sources, shipbuilding and information technologies constitute the other potential areas for Chinese companies to cooperate with their Turkish counterparts in Turkey as well as in the third countries.

As a result, Turkey and China have to benefit from these opportunities.

7. You have visited China three times. Please give some information about your visits. In each visit, what are your impressions about China?

In the last 6 months, I visited China three times. First one which was really crucial for our diplomatic relations with our President, Abdullah Gül, more than 100 Turkish businessmen joined this visit. It was beneficial for both sides to enhance bilateral trade and economic cooperation. This willingness also occurred in the high-level meetings of our President.

The second visit was at the end of August as a special emissary. I conveyed the oral message of our Prime Minister, Recep Tayyip Erdoğan on the occasion of the incidents that took place in Urumqi, the capital city of Xinjiang Uyghur Autonomous Region.

I feel confident that the last visit of mine, as Minister of State of Turkey, on the occasion of 16th session of Joint Economic Commission (JEC) Meeting and trade delegation on September 24-27, 2009, will lead many new and mutually beneficial business contacts between our countries.

The Turkish-Chinese Joint Economic and Trade Committee between the Government of the Republic of Turkey and the Government of the People's Republic of China held its Sixteenth Session in Beijing between September 24-27, 2009. This committee is one of the platforms to discuss trade issues and contribute to strengthen and further develop bilateral economic and commercial relations.

During JEC Meeting, MOU on Infrastructure Cooperation has been signed and reached a consensus on signing Framework Agreement on Bilateral Cooperation.

Moreover, Third Annual Meeting of the High Level Steering Committee of the consultation and cooperation mechanism on quality and safety of industrial products between Undersecretariat for Foreign Trade (UFT) and General Administration of Quality, Supervision, Inspection and Quarantine of China (AQSIQ) has been realized simultaneously with the JEC Meeting.

In all visits, I am happy to witness that there exists political willingness on both sides to further enhance the overall relations between our countries. Considering the complementary structures of our economies, we believe that we have to exert every possible effort on a long-term vision to diversify and deepen our bilateral trade and economic relations in the future. Therefore, the policies should be designed and implemented in this understanding.

 
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