Middle East

With a weak lira, Turkey begs for foreign companies

Istanbul: Turkey’s currency crisis and global supply chain crisis have a silvery backing. Turkey is becoming an attractive alternative to foreign companies at the European gates. Turkey is taking advantage of its attractive geography as some European companies are reducing their dependence on Asia due to soaring sea freight and pandemic-related disruptions in their supply chains. President Recep Tayyip Erdogan, whose policies contributed to the plunge in Lira, promoted a new slogan for export, “Made in Turkey,” using the national language instead of the internationally renowned “Made in Turkey.” ..

But his vision must overcome concerns about the complex relationship between Ankara and the European Union, and the independence of judicial and political uncertainties ahead of next year’s elections. Nevertheless, Turkey’s exports reached a record $ 225.4 billion last year, with a target of $ 300 billion by 2023.

“Many international companies are taking action to supply more from Turkey,” Burak Daglioglu, head of the Turkish President’s investment office, told AFP. He said the country provides automakers and textile companies with “competitive talent pools, sophisticated industrial capabilities, well-developed service industries, perfect geography, and state-of-the-art logistic infrastructure.” I said there is.

IKEA announced last year that it would like to move some of its production to Turkey. Italian clothing group Benetton told AFP, “We want to increase production in countries close to Europe, including Turkey.” Peter Walters, Vice Chairman of the Turkish Chamber of Commerce and Industry of the Netherlands, said the business group “requested from the home and garden sector, textile and fashion, and even the yacht manufacturing industry to find new partners in Turkey. I received it. “

Soaring fares

Shipping of goods from Asia has become very expensive. According to the Freightos Baltic Index, freight costs between China and Scandinavia have increased nine-fold since February 2020 as a result of container shortages. It can take several weeks for a cargo ship to travel from Asia to Europe, but Turkey takes only three days by truck.

According to a McKinsey Consulting Group survey released in November, Turkey is the third most likely country to supply textiles by 2025, after Bangladesh and Vietnam, ahead of Indonesia and China. I did. “Apparel companies are also considering changing the country of origin and the composition of countries to secure their supply chains,” the author of the Global Report wrote.

According to the report, Turkey “is cheaper to produce due to the decrease in lira”. Lira has fallen 44% against the dollar since 2021 as the central bank (backed by Prime Minister Erdogan) lowered interest rates despite rising inflation. Turkey’s new net minimum wage is now worth $ 315, slightly higher than Malaysia. According to some observers, Erdogan, who has been in power for 20 years and is aiming for reelection in 2023, is betting on weak lira to boost exports and growth, even if it destroys Turkey’s purchasing power.

Europe, “friends” and “enemy”

The collapse of Lira is also problematic for some industries as the country relies on energy and raw material imports. “For example, unlike Russia, which has abundant raw materials,” said Roger Kelly, leader of the European Bank for Reconstruction and Development, a regional economist covering Turkey and Russia. He said Turkey is also facing competition from countries within the EU.

“I don’t think we should ignore Southeast European countries like Romania and Bulgaria. These countries are actually in the EU and help to some extent. They also have low production costs and strong production bases. “Uncertainty about Turkey’s judiciary and system is also a concern,” said Eldal Jarsin, a professor of international economics at the University of Applied Sciences in Germany. “From a purely economic point of view, Turkey is the best place to bring production closer to Europe, but we haven’t seen a big investment,” said Yalcin. Another problem is Turkey’s difficult relationship with the EU, which Yalcin said in the rhetoric of Turkish leaders: “One day Europe is a friend and another day an enemy.” Stated.

He also noted Volkswagen’s move to postpone the construction of a factory in Turkey after Ankara’s Syrian operation against U.S.-backed Kurdish militia in late 2019, before abandoning the plan during the coronavirus pandemic. did. “As long as people are killed, we haven’t laid the cornerstone next to the battlefield,” VW CEO Herbert Diess said at the time. For Jarsin, before the elections in 2023, and “until this uncertainty about the country’s political future is resolved,” companies will not make a big decision. – AFP

https://www.kuwaittimes.com/with-weak-lira-turkey-woos-foreign-firms/ With a weak lira, Turkey begs for foreign companies

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