Turkey dreams of becoming “the factory of the world”

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Istanbul (AFP) – Turkey recorded a record level of exports in 2021 and dreams of becoming a “factory of the world” at the gates of Europe, driven by a weak currency and the desire of multinationals to bring production closer to their main markets.

The country, which exported $225.4 billion in 2021 and aims to reach 300,000 in 2023, is playing its cards like its proximity to Europe at a time when the rising cost of maritime transport and the problems of supply chains have led European companies to reduce their dependence on Europe. Asia.

But many obstacles stand in the way of “made in Türkiye” (made in Turkey), experts warn.

“Many multinationals are making moves to get more supplies from Turkey,” Burak Daglioglu, chairman of the Turkish Presidency’s Investment Office, told AFP, noting that the country has long attracted automotive giants and textiles and offers a skilled workforce, a “perfect”. geography and “state-of-the-art infrastructure”.

The Swedish Ikea announced at the end of last year that it wanted to relocate part of its production to Turkey, and the Italian fashion group Benetton confirmed to AFP that it wanted to “increase its production volume in several countries closer to Turkey. ‘Europe, including Turkey’.

Peter Wolters, Vice President of the Netherlands-Turkey Chamber of Commerce, said “receiving inquiries from the home and garden, textile and fashion and yacht building industry sectors”, of businessmen who wish to cut supplies from their supply chains.

Transport costs are skyrocketing

Bringing goods from Asia has become extremely expensive: due to container shortages at ports, freight costs have increased more than nine times since February 2020 between China and Northern Europe, according to Freightos Baltic Index.

Turkey is only three days from Western Europe by truck.

Cargo containers stacked at the Turkish port of Haydarpasaa on February 18, 2022 in Istanbul. Ozan KoseAFP

A McKinsey study published in November ranked Turkey as the third-largest country with the greatest textile supply potential by 2025, behind Bangladesh and Vietnam, but ahead of Indonesia and China.

“Garment companies are looking to shift their supply mix” and “get closer” to their markets, write the study’s authors, who also note that Turkey offers “lower production costs due to the pound Turkish cheaper”.

As a consequence of the collapse of the local currency against the dollar (-44% in 2021), the net minimum wage in Turkey is currently equivalent to 315 dollars, a level slightly higher than that of Malaysia.

For some observers, President Erdogan, in power for twenty years and hoping to be re-elected in 2023, is betting on the weakness of the lira to boost exports and growth, despite his stated intention to increase the purchasing power of Turks.

– Europe, “friend” and “enemy” –

The collapse of the Turkish lira is also problematic for industry, due to the country’s dependence on imported energy and certain basic materials.

“It’s not like Russia, for example, which has abundant raw materials,” explains Roger Kelly, economist at the European Bank for Reconstruction and Development (EBRD). More and more companies will bet on Turkey, he says.

A truck stops in front of cargo containers at the Turkish port of Haydarpasaa in Istanbul on February 18, 2022.
A truck stops in front of cargo containers at the Turkish port of Haydarpasaa in Istanbul on February 18, 2022. Ozan KoseAFP

“We still don’t see big investments, even though Turkey is, from a purely economic point of view, the perfect country to bring production closer to Europe,” says Erdal Yalcin, professor of international economics at the University of Konstanz (Germany). .

For him, the fault lies with Turkey’s “institutional and judicial uncertainty” and Ankara’s diplomacy.

In the mouth of the Turkish leaders, “one day Europe is a friendly nation, and the next day it is an enemy nation”, he underlines, and recalls that Volkswagen had postponed – before abandoning definitively – the construction of a factory in Turkey after a Turkish offensive in Syria at the end of 2019.

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