OBG talks to Zafer Çağlayan, Turkish Minister of Economy

Interview: Zafer Çağlayan

Where do you see the greatest scope for growth in bilateral trade and investment with Africa?

ZAFER ÇAĞLAYAN: Africa is a large target market for Turkish firms, particularly for our small and medium-sized enterprises (SMEs). It is also a vibrant market for Turkish exports and provides key raw materials for domestic Turkish industry. In order to maximise the benefits of this relationship, a Strategy for Enhancing the Economic and Commercial Relations with African Countries was established in 2003. Over the past decade to the end of 2012, the trade volume between Turkey and African economies rose 318%, from $5.5bn to $23bn. By 2023 we are targeting a trade volume of $50bn. Investment by Turkish firms on the continent has increased tremendously since we first implemented the strategy, and reached nearly $6bn by the end of 2012. We are now working towards $20bn by 2023.

In addition, the total cumulative value of contracting and technical consulting projects undertaken by Turkish firms in the region hit $45.5bn as of year-end 2012. In that year alone, the figure was $4.2bn. There is nonetheless further potential in Turkish-African economic relations and we should enhance these numbers.

What factors have helped to cultivate the growth of Turkish SMEs, particularly on a global level?

ÇAĞLAYAN: The significant role of SMEs can be considered as both the cause and the outcome of the recent transition of the Turkish economy. The economic and political crises we experienced in 2001 set off a period of international expansion for firms aiming to survive the turmoil in the national economy. An export-oriented growth strategy adopted after the crisis ensured that government and enterprise moved towards foreign markets in full coordination. Political stability and a subsequent reduction in the role of the state in the economy via privatisation expanded the functions of the private sector. The state reoriented itself to focus on exercising its role in market surveillance, as well as to facilitate access for businesses to foreign markets.

As an example, we had only six commercial counsellors based in Africa in 2003, with this number going up to 23 in 2013. In addition, we have completed the legal framework to further our commercial relations with other African countries in order to help eliminate the obstacles faced by our entrepreneurs looking to expand their business operations into Africa.

At present, Turkey has commercial, economic and technical cooperation agreements with 38 African markets, free trade agreements with four markets, double-taxation agreements with another eight, as well as reciprocal agreements for promoting and protecting investments with an additional 12.

In what way can Egypt or South Africa learn from Turkey’s experience in the textile industry?

ÇAĞLAYAN: The manufacturing industry represents 32.8% of the total value-added production in Turkey, with the textile and apparel sector accounting for 15.2%. The sector also represents 14.4% of total manufactured goods and 6% of GDP, with recorded exports of $25.6bn in 2012. This demonstrates that textiles are not only a strong income earner, but also that value is being added to basic manufacturing and that we are not competing on price with low-wage economies.

The largest importing and exporting countries in the textiles field today are the US, Germany and China. As such, the assessment that the industry is completely shifting to industrialising countries is not fully accurate. Rather, the production of simple products are now left to industrialising countries with low-cost labour, while the production of fashion-brand products with higher added value and technical requirements are still carried out by industrialised countries.

Competition in this area is determined by quality rather than cost, and it has become a segment in which high-quality fashion and information-based products are made. Adopting policies that enhance the global competitiveness of SMEs and lift the capacity of domestic manufacturers can boost employment and exports.