GlobalAtlanta: What do you hope to accomplish here in the U.S.? Will you be promoting Turkish companies coming to America or do you suspect that educating Georgia companies on the benefits of Turkey will be the main thrust of your visit? Both?
Murat Yalcintas: We believe that the Turkish and American businessmen do not know the opportunities their markets offer for each other, due to the lack of information caused by geographical distance. However, at the age of internet that makes every transaction possible online, distances should not pose any obstacle in front of free trade. As the biggest professional organization of Turkey, we are here to build the economic bridge between two historical allies, namely Turkey and the USA, by encouraging the business environments to raise the bilateral trade and investment to a satisfactory and necessary level. Our “Doing Business In Turkey” seminars within the “Expand Your Exports to the USA” Program aim to promote Turkey as an attraction center for investors, like the previous component of the same program pursued the same for the USA through the seminars in Istanbul.
GlobalAtlanta: Who are you meeting with? Who have you worked with when planning your trip to Atlanta?
Murat Yalcintas: This program has taken start with the Memorandum of Understanding signed between Istanbul Chamber of Commerce and US Chambers, and accordingly we run it with the MWW Group. We plan our activities in the US with this company, decide together on the cities that can be the most effective places to tell about Turkey. According to our schedule we will meet mayor of the City of Atlanta, the president of the Metro Chamber of Commerce and of course, with the businessmen.
GlobalAtlanta: Describe Turkey’s economic growth over the past five years.
Murat Yalcintas: We must admit that the motivating factor behind the political stability and economic growth Turkey has realized in last five years is the full membership perspective to the European Union. Effective macroeconomic policies combined with EU reforms resulted in rapid economic growth in Turkey. Political stability made a significant contribution to economic development. This was achieved due to the harmonization process to the EU legislation, public fiscal discipline, structural reforms, private sector experience, long-term liberalization and privatization policies. As the market economy becomes functional with all of its institutions and rules, the public sector’s economic role is limited to that of a regulator and supervisor. In addition, Turkey made significant progress in meeting the Maastricht Criteria—tthe criteria for participation in the Economic and Monetary Union of the EU. The current macroeconomic data indicates that these criteria are expected to be fulfilled in 10 years.
The Turkish economy started a significant process of growth and development in 2001. The economy has a sustainable growth trend with an average rate of 7 percent for the past 5.5 years. The inflation rate decreased from 70 percent to 9.6 percent in 2006, the budget deficit fell to less than 1 percent and interest rates and public borrowing are declining every year.
According to World Bank data, Turkey is currently the 17th largest economy with a gross domestic product of $708 billion, ranks 22nd in exports and 14th in imports in the world. It is expected to climb further if economic stability is maintained. Turkish products are sold everywhere in the world today.
GlobalAtlanta: Has FDI in Turkey been key to the newfound success of the economy? What has caused the drastic increase in FDI from 2005 to 2006?
Murat Yalcintas: Currently, Turkey is ranked as the 15th profitable country in terms of investment. Foreign capital, which was $2.8 billion in 2004, reached $9.8 billion in 2005 and $20.2 billion in 2006.
Of course the role of the political and economic stability, positive effect of the EU membership negotiations on predictability and the consequent atmosphere of confidence has been an indispensable factor for attracting the foreign investors in the last two years.
The decisive work of the government on improving the investment environment should not be forgottenas well. The Coordination Council for the Improvement of the Investment Environment has been implementing a Reform Program for the Improvement of the Investment Environment for Turkey with the conception that increasing all domestic and international investments is only possible by conceiving the needs and the priorities of the private sector and creating appropriate public solutions.
The most important reforms realized within the scope of this program were the new Foreign Direct Investment Law No. 4875 and the new Company Registration Law No. 4884, which came into force in 2003 (besides many other reforms concerning the tax system, product markets, labour market, financial markets, infrastructures, agriculture and fiscal and monetary policies).
Before June 2003, 12-14 standard procedures were required to start a business and the average time needed to complete the process was 38 days in 2002. With the new Company Registration Law, the registration process can now be completed in just one day, and the relevant information and documents are being forwarded by the Trade Registry to most other governmental authorities involved in the registration process.
The new Foreign Direct Investment Law streamlined the legislation with international standards, brought national treatment to foreign companies and abolished all the requirements specific to foreign companies.
Consequently, Turkey became the third country among all the emerging markets after China and Russia that attracted the highest amounts of FDI, with more than $20 billion. In the coming three years, Turkey is expected to attract between $20-25 billion of FDI annually.
If consider the high level of current account deficit of Turkey, FDI inflows have been the key factor in sustaining these levels of current account deficit during the recent years.
GlobalAtlanta: How is what was once a country rampant with unemployment dealing with that problem, and what role do foreign companies play in that?
Murat Yalcintas: Low employment rate accompanied by a high unemployment rate still continues to be one of the most urgent issues of the economy waiting to be solved. But, unemployment rate shows signals of a slight decrease. Furthermore, our economy could be considered as successful in absorbing a large part of huge crowds of unemployed people coming from the rural areas as a result of the rapid contraction in the agricultural sector.
The unemployment rate, that began to rise with the 2001 crisis, exceeded 10 percent in 2002 and maintained its levels between 2002-2005 despite the high growth rates, came out as 9.9 percent as of the end of 2006. In consequence of realized productivity gains, a decline in unemployment rate appears to begin with 2006 as expected.
Some additional amendments in the labor market regulations will help reducing the unemployment rate further by creating a more flexible labor market. Also vocational education plays a very important role in matching the needs of the industrial companies with the supply of workers.
Foreign companies naturally play an important role in creating new job opportunities. Although a large portion of the FDIs that came recently, came for acquisitions and mergers, we believe that in the coming years, the foreign companies will come to Turkey mostly for establishing new companies.
GlobalAtlanta: Tell me about the chamber.
Murat Yalcintas: In Turkey, it is a statutory obligation for the private entities to be a member of a chamber relevant to their activity and region, which makes the chambers powerful semi-public entities.
Since Istanbul is the locomotive of the Turkish economy, realizing 46 percent of its export and 41 percent of import, and generating 43 percent of tax revenues, Istanbul Chamber of Commerce that represents this giant economy stands as the biggest professional organization of Turkey, and one of the five biggest of the world. Founded in 1881, it is also one of the oldest non-governmental organizations of Turkey. For 125 years, we represent the Turkish private sector in various national and international platforms.
We have almost 264.000 members, organized under 87 professional committees, represented by 230 Assembly Members to advocate the interests of their own sectors.
Our chamber also carries out the Trade Registry Services and issues the necessary documents for the commercial activities of its members.
GlobalAtlanta: How much does your chamber focus internationally?
Murat Yalcintas: Our international activities can be summarized under two headings. First, we carry out the duties given by law, and then the projects developed by our own initiative.
Activities given by law: to represent our members in multilateral and international institutions; to build relations with foreign counterparts, sign cooperation agreements and mediate between Turkish and foreign companies for peaceful resolution of conflicts.
We represent Turkish business in the following international institutions:
· Eurochambers
· ECO Chamber of Industry and Commerce
· Islamic Chamber of Commerce and Industry
· Turkish-Arab Chamber of Commerce
· OECD Business and Industry Advisory Committee
· International Chamber of Commerce (ICC) whose General Assembly was hosted by TOBB this year
· Association of Black Sea Zone Chambers of Commerce and Industry
· Association of the Balkan Chambers
· IRU
· GS1
· ASCAME whose presidency is currently run by the Istanbul Chamber of Commerce.
In addition to our internal departments, we sponsor some institutes established specifically for foreign relations, such as:
· DEİK (Foreign Economic Relations Council) consists of bilateral business councils with 75 countries that regulate the economic and commercial relations, try to improve the business opportunities, arrange delegation visits and bilateral meetings, etc.
· İKV (Economic Development Foundation) is founded jointly by Istanbul Chamber of Commerce and Istanbul Chamber of Industry to work specifically on matters related to the European Union. IKV is responsible for conducting research about the impact of the EU membership especially on the business and sharing the results with Turkish public. It also plays an important representative role for Turkish private sector in the EU with its Brussels branch.
Activities by our own initiative: We, with our two departments specified on international relations are one of the most active chambers in international arena.
Fairs and Exhibitions Activities: hosting the foreign delegations visiting our chamber, organizing bilateral meetings bringing them with their Turkish counterparts together, arranging study visits to abroad. It is also responsible for the participation of Turkish companies in international fairs. The biggest fair organization made by our Chamber was Hannover Messe 2007 in which Turkey was the partner country. ICOC also owns the Istanbul World Trade Center, which is the biggest fair ground in the Balkans.
EU and International Cooperation Activities: focused on the EU affairs which is one of the ICOC’s priorities, parallel to the continuing support of Turkish business community to Turkey’s EU membership. Besides informing its members on the developments in this process, ICOC organizes lobbying activities in Europe, especially Brussels, the capital of the EU. During these activities and meetings with high officials of the EU, ICOC representatives promote Turkey’s membership by trying to convince the decision-makers on the positive effects of Turkey in the EU.
Investment and Technology Promotion Office (ITPO): established through an agreement signed by UNIDO and our chamber, it aims at promoting industrial and investment cooperation between Turkey and developing countries and supporting the Turkish small- and medium-sized (SMEs) enterprises entering foreign markets.
GlobalAtlanta: Is inflation, though decreased drastically, still a problem? What caused it before?
Murat Yalcintas: If we look closer, the period between 1980 and 2001 as a whole can be characterized by some specific features which have always been present in the background of the economy due to the inadequate economic policies; namely, chronically high inflation rates, high levels of public debt and steadily increasing trade deficits.
After the 2001 crisis, Turkey initiated a new Structural Reform and Stability Program in accordance with the Stand-by Agreement signed with the IMF. This program was based on comprehensively analyzing the problems and defects of the economy, determining the necessary policies to cure them, adopting the best practices of other countries that went through the same processes and implementing them decisively. In other words, as an urgent necessity, Turkey aimed at establishing macroeconomic stability and confidence both inside the country and abroad among international authorities, institutions and investors.
A tight monetary policy to be implemented by a fully independent Central Bank, the primary objective of which was determined as maintaining price stability has been determined as one of the main components of this Stability Program.
The Central Bank implemented tight monetary policy decisively and successfully, the inflation rate has been pulled down to one-digit levels for the first time after a 30-year period of chronically high inflation rates, and the CB increased its credibility significantly. The Central Bank pulled the inflation rate from 73 percent in February 2002 to 7.5 percent in October 2005. Although annual CPI is 7.7 percent as of October 2007, it is expected to be around 7% and 4% by the end of 2007 and 2008, respectively.
GlobalAtlanta: Will Turkey join the EU, and if so, how will joining the EU impact business in Turkey? Do you think it could scare away some US companies who look at the appreciated value of the Euro compared to the dollar and see high costs?
Murat Yalcintas: Istanbul Chamber of Commerce, parallel to the continuous support from the Turkish business community to the EU membership of our country, has been keeping this issue at the top of its priorities, and carrying on various activities to facilitate the harmonization process from the perspective of both the decision makers in the EU and the Turkish business world that will be most affected by this transformation, because almost 20 of the 33 negotiation chapters will affect the way of doing business. Therefore, we do not refrain from any effort to assist our members for preparing themselves to these changes.
We believe that the reform process that our country has been going through is appreciated by the European decision-makers and Turkey will get the membership status eventually.
About the impact of our EU possible membership on our business with the US, we should first remind that the US officially supports Turkey’s EU membership. We do not believe that it will scare the US companies away, on the contrary the stability and confidence atmosphere brought by the EU membership prospect will attract them even more.
GlobalAtlanta: What is one thing that Turkey offers that no other country does?
Murat Yalcintas: I have already given you the data indicating the improvements of Turkish economy in the last five years, such as growth, foreign investment, declining inflation, etc. Let’s assume that these opportunities are not exclusive for Turkey, but may be offered by some other developing countries, like BRIC countries (Brazil, Russia, India, China). However, the one thing that makes Turkey a unique partner is its location. The predictions about the future shape of the global economic map show that the power is shifting from the developed countries of the West, to the developing countries of the East, which are in an advantageous position regarding population (both working and consuming population), access to energy sources in an environment where energy is a sine qua non for industry and enthusiasm. And in this map, Turkey stands out as an indispensable bridge between the East and the West and the only reliable spot that will bring the American industry closer to the Eastern markets as both supplier and consumer.