Foreign Trade Policy

  Beginning from 1980, the Turkish Government embarked upon series of reforms which were designed to remove price controls and reduce subsidies, lessen the role of the public sector in the economy, emphasise growth in the industrial and service sectors, encourage private investments and savings, liberalise foreign trade, reduce tariffs and promote exports, ease capital transfer and exchange controls, encourage foreign investments, make the Central Bank more independent and reform the taxation system. Turkey moved towards full convertibility of the Turkish Lira by accepting the IMF agreement's related article in 1990.

Turkey's exchange and trade systems have been liberalised extensively since the 1980s as a part of the economic reforms mentioned previously. Turkey now follows an independently floating exchange rate policy under which the exchange rate is determined daily. Commercial banks, special financial institutions, change offices and the PTT are free to set their exchange rates according to existing market conditions.

Due to the implementation of the liberalisation process the Turkish economy experienced a period of high growth. Foreign trade, both in exports and imports, has grown rapidly and noteworthy changes in the structure of exports have taken place. The dominant role of agricultural products in exports has ended in favour of industrial products. Also export product composition was enriched and the volume of foreign trade increased about three-fold in that decade.

At the beginning of the 1990s, due to unfavourable political and economic conditions both inside and outside the country, Turkey's trade balance suffered. Since the Gulf Crisis with its economic embargo against Iraq, the war in Bosnia and the stagnation in the OECD countries which were the main export markets of Turkey have all impeded exports. In addition, strong domestic demand, lower customs duties and overvaluation of the Turkish lira caused a boom in imports. All these factors caused the large trade deficit of $14.2 billion in 1993.

On April 5^th 1994, the Government introduced an Economic Stabilisation and Structural Adjustment Program. In particular, the program aimed at reducing the rate of inflation, maintain the balance of foreign trade and restore stability in the foreign trade and restore stability in the foreign exchange market. As a result of the implementation of the Stabilisation Program economic activity revitalised and a growth rate of 8.1% was realised.

Foreign Trade Volume/Trade Balance

In 1995, Turkish exports reached $21.6 billion, an increase of 19.5% over 1994. Imports also recorded an annual increase of 53.4% and amounted to $35.7 billion. The increase in exports and imports together brought an increase of 38.6% in foreign trade volume which reached $57.3 billion. The export/import ratio fell from 77.8% in 1994 to 60.6% in 1995. On the other hand, the export/import ratio was 52% in 1993 and 36.8% in 1980. The foreign trade balance gave a deficit of $14.1 billion, registering a sharp increase of 172.4% in 1995 compared to 1994. In 1995 current account deficit widened to $2.3 billion. The main factor behind the increase in the current account deficit was the trade deficit and was largely offset by the traditional surplus on invisibles and transfer accounts. Tourism revenues reached $4.9% billion in 1995.

Source : State Institute of Statistics

  Exports

In the period of 1980-90 Turkey's export figures showed an average annual increase of 33%, and the value of exports increased from $2.9 billion to $12.9 billion. During the 1990-93 period, due to the unfavourable economic conditions both at home and abroad a limited increase in exports was realised. The growth rate of exports for 1992 and 1993 was 8.3% and 4.3% respectively. In 1994, as a result of the Economic Stabilisation Program which was implemented after the second quarter of the year, exports recorded an increase of 18% and reached $18.1 billion.

Since the Gulf crisis with its economic embargo against Iraq, trade relations between the two countries were seriously diminished. While Turkish exports to Iraq were $986 million in 1988, this figure slumped to $122,900 in 1995. Subsequently, Iraq's share in Turkey's exports has dropped from 8.4% to 0.56%. The war in Bosnia also affected Turkish exporters in the field of transport especially due to high freight expenses and bureaucratic difficulties regarding trade with Europe.

Turkey's export figures expanded very significantly from 1980 to 1995. The share of exports in GNP increased from 4.2% to 13%. The product composition of exports changed as well during the same period. In 1980, while the share of agricultural products was 56.7% in general exports, industrial products, and mining and quarrying products made up 36.3% and 6.8% of the total exports respectively.

Major Export Items

Source : Institute of Statistics
 

In 1995, exports of agricultural products decreased by 6.1% as compared to the previous year and their share in total exports declined to 10.7%. In mining and quarrying products, an increase of 49% was observed over 1994 and their share in total exports was registered as 1.9%. As already more than 170 countries in the world. The largest export market for Turkish products is Germany, and Turkish exports to Germany have increased since the unification of East and West Germany. Although the trade with Iraq has been suspended due to the trade embargo, Turkey's exports to other middle-Eastern and North African countries have increased overall since 1990.

Source: State Institute of Statistics

In 1995, in the total exports of Turkey, the OECD countries took a share of 61.1% with a value of $13.2 billion. Among OECD members, exports to the EU were $11.1 billion which is equal to 51.2% of total exports. Among the top ten markets for Turkey, eight of them are from the OECD group and have a share of 51.2% with a value of $11.7 billion. In this group, Germany, with its 23.3% share, is the major market for Turkey. Turkey's second largest export market is the USA with a share of 7%. Islamic countries took a share of 16.3% in 1995 with a value of $3.52 billion. Among the Islamic countries, Saudi Arabia ranks first in the list of top ten markets for Turkey. Russia, with its share of 5.7%, is the fourth largest market for Turkey.

Source: State Institute of Statistics

Imports

The Turkish import regime highlights the liberalisation of Turkish imports in line with its ommitments to complete the Customs Union with the EU, its relationship with EFTA and its obligations under GATT. Turkey laid special emphasis on its engagement to reduce the customs duties to align itself with the Common Customs Tariff. Turkey made necessary modifications in its import regime, and by January 1, 1996 the Customs Union between Turkey and EU became effective.

The basic aims of Turkish import policy since the early 1980s could be summarised as follows:

• Reduction of protectionist measures in conformity with the new GATT rules
• Reduction of bureaucratic procedures
• Securing the supply of raw materials and intermediary goods at suitable prices within certain quality standards.

During the period 1980-95 imports increased from $7.9 billion to $35.7 billion showing an approximately fivefold increase.

In 1995 Turkish imports recorded an increase of 53.5% compared to 1994 value. According to the main commodity groups, the share of investment goods was 29.4% with an increase of 52.1% over 1994, and reached $10.5 billion. The imports of raw materials attained $20.8 billion with an increase of 53% as compared to the previous year. An increase of 58.8% was recorded in the imports of consumption goods at the end of 1995 and their share in total imports was 12.4% with the value of $4.4 billion.

As for the main sectors, agriculture and mining and quarrying products share was 16.5% in 1995. In total imports the share of industrial products imports was 83.4% with an increase of 56% compared to the previous year and valued at $29.8 billion. As for agricultural products, significant increases were observed in the imports of wheat, rice, tobacco and oil seeds. The imports of industrial plants had a significant place in total imports of agricultural products with a share of 1.7%. Animal husbandry products showed an increase of 158.6% and imports of live animals increased significantly.

Among mining and quarrying products the imports of magnesite, asbestos, iron ore and mineral ores also increased significantly. The imports of fuels increased by 14.3% compared to the previous year reaching $3.2 billion. The ratio of fuels imports to total exports was 14.8% in 1995.

Imports of processed agricultural products, such as meat, fish, milk, butter, cheese, animal and vegetable oil and fats, sugar, fruit juices, canned fruit, soy beans grew significantly.

In industrial products, the imports of man-made cloths, iron and steel products, chemical industry products, textile weaving machines, radio, TV sets, electric circuit breakers, communication equipment and electrical cables, motor vehicles and spare parts all increased in 1995.

Major Import Items

Source: State Institute of Statistics

As in past years the OECD countries took the largest share in total imports with a value of $23.6 billion in 1995 which constituted 66.1% of total imports. Imports from EU countries have the largest share in this group. Their share in total imports was 47.2% with a value of $16.9 billion. Six EU members are among the top ten suppliers to the Turkish market. Germany is the first source for Turkish imports. Imports from this country registered an increase of 52.2% compared to the previous year and reached $5.5 billion. Germany's share in total imports was 15.5% in 1995. Apart from the EU, among other OECD members the USA is the second most importance source with 10.4% share. Japan with its 3.9% of share is another important supplier, followed by Saudi Arabia with a share of 3.9%. In 1995 a large increase in imports was observed from Black Sea Economic Cooperation member countries and CIS countries. In these groups Russia and Ukraine are important suppliers to Turkey. The most significant increase in imports between 1994 and 1995 was from Russia at 99.2%. Nevertheless, East European, Asian and North African countries tend to be alternative suppliers to Turkey.

Source: State Institute of Statisitics

Source: State Institute of Statisitics

Source: Undersecretariat of Foreign Trade

Export Promotion Activities

The Undersecretariat for Foreign Trade is the main authority in the determination of foreign trade policies. Attached to the Undersecratariat, İGEME is the only government organisation established with the aim of promoting Turkish exports. Detailed information on the activities of İGEME is given in the first section Below mentioned are the organisations also involved in the promotion of Turkish exports.

TEA-Turkish Exporters Assembly

During the last 50 years, exporters in Turkey were organised on the basis of product and region. Today, in every region that has export potential, and for every product that has export possibility, there are exporters associations and branch offices of these associations.

Despite all these organisations based on region and product, lack of cooperation that would cover the whole country was always felt.

In recent years, there were several attempts to gather all the exporter associations under one umbrella and unite their forces. As a result, a Council of Exporters was established, but the effort was short-lived.

The Turkish Exporters Assembly was born as the fruit of the Turkish exporters insistent demand for unification. The legal framework, prepared by some businessmen and government officers who took special interest in the project, was adopted by the decision of the Council of Ministers dated July 5, 1993, and TEA was founded officially.

By October 26, 1993, 468 members and president of executive boards of 52 exporters unions met and constituted the first assembly members of TEA. At this founding meeting, TEA started to function officially.

TEA represents:

The general secretaries of the 52 exporter unions,

Approximately 25,000 members of exporter unions,

Equivalently all of the exporter associations, since the assembly is constituted by 468 executives of all 52 unions.

Equivalently all of the regions and products since they all have balanced power within the executive committee.

TEA assumed the function of:

Providing resolutions to the common problems of the exporters,

Providing a platform for discussing the problems,

Ensuring coordination between public and private sector institutions, and between exporters and official authorities,

Building policies in order to expand the country's exports,

Representing the exporters within the country and abroad to upper levels in business and government.

Exporters Unions

Exporters Unions are the professional institutions which were established by Law No. 3018 in 1936, later amended in August 1993. Exporters Unions operate under the auspices of the Undersecretariat for Foreign Trade. All those who are exporting similar products are grouped as the members of related Regional Exporters Unions.

Exporters Unions operate in cooperation under the umbrella of three main governing bodies.

The Council of Presidents is a governing organ, established to provide coordination and cooperation among the unions operating in the same province.

The Common Board of Directors is an organ of the unions related with similar products countrywide. This organ works with the aim of developing export and commodity policies and coordinating the work in the common sector for which it is responsible.

TOBB-The Union of Chambers and Commodity Exchanges of Turkey

The Union of Chambers of Commerce, Industry, Maritime Commerce and Commodity Exchanges (TOBB) which was founded in 1952 is the highest legal entity in Turkey representing the private sector.

Today, TOBB has 323 members in the form of local chambers and commodity exchanges through which over 700,000 firms of different sizes are represented.

The General Assembly, the supreme body of the organisation, consists of a maximum 1,000 member individuals elected for a four-year term from the members of the assemblies of local chambers and commodity exchanges. In turn, the General Assembly, through election, form five Councils and the fifteen-member Board of Directors. The Board elects a Board Member as President for a two-year term.

The major objective of TOBB is to observe and protect the interest and rights of its members, as well as to preserve their widely recognised integrity and maintain professional solidarity.

Türk Eximbank

Türk Eximbank, Turkey's official export credit agency, was established in August 1987 and has been in operation since mid-1988. Due to the increasing importance given to export growth in Turkey's development strategy, Turk Eximbank was created to develop and implement innovative programs in accordance with the dictates of competitive markets.

Apart from its various short-term domestic and foreign currency credits, Türk Eximbank has been providing a medium-term Buyers Credit Facility. Within the framework of its Buyers Credit Program, credits are allocated mainly for project finance. Moreover, the bank tries to provide a risk free environment to Turkish exporters, overseas contractors and investors through its insurance programs.

The Customs Union established between Turkey and the European Union at the beginning of 1996, has compelled Turkey to comply with European Union rules and standards in a number of areas including officially supported export credits. Turkey has made the necessary arrangements to harmonise its legislation with that of European Union in this field. In this regard, a communique Export 96/12 was published on January 23, 1996 by the Undersecretariat for Foreign Trade based on the provisions of 93/112/EEC. In accordance with this communique, Turk Eximbank fully complies with the provisions set by the Council Decision 93/112/EEC. This also means full compliance with OECD Consensus.

Türk Eximbank is a full member of the Bern Union which is an international association of export credit insurers. Also, Turkey has been attending the Export Credit Group of OECD as an observer since July 20, 1994. Within 1-2 years, Turkey will become a full member of the Export Credit Group.

DEIK-Foreign Economic Relations Board

DEIK is a non-profit private sector organisation founded in 1986 by the nine principal private sector institutions in Turkey. The wide constituencies of these institutions enable DEIK to have access to the entire Turkish corporate sector. It is also empowered with exclusive rights through its founders. As of January 1996, 785 representatives from 476 companies are members of the 50 Business Councils.

DEIK's objective is to participate in the attempts to improve Turkey's external economic relations and to contribute to the integration of the Turkish economy with the world economy through bilateral Business Councils established with various countries. To date, Business Councils have been established with 50 countries in North America, Europe, North Africa, Central Asia, and the Far East. These Business Councils are formed by member companies who have already undertaken bilateral business relations or who plan to develop such relations with each respective country.

To achieve these objective. DEIK:

• Collects and compiles relevant trade and other economic information and furnishes it to the Business Councils;
• Explores possibilities for international cooperation with respect to various forms of commercial and economic coordination;
• Strives towards creating a suitable political environment to make best use of the international business potential by promoting accurate information.

In order to accomplish its tasks, DEIK collaborates with academic establishments and other research institutions in Turkey, with the counterpart organisations of partner countries, the UN and GATT, various international and regional economic, financial, research institutions and universities in related countries.

KOSGEB-Small And Medium Industry Development Organisation

KOSGEB provides techno-managerial services in order to support and improve Small and Medium Industries (SMIS) through its service centres which are established in different provinces of Turkey.

KOSGEB fulfils the following objectives:

• To increase the market share of the products of SMIs by improving the quality level and decreasing the cost of their products.
• To introduce SMIs to new production techniques, new materials and designs.
• To help SMIs in marketing, by conducting market research, organisation of their participation to domestic and international fairs.
• To promote development of closer links in between large scale industrial firms and SMIs.
• To create an appropriate environment for the entrepreneurs and to support their innovations.
• To guide entrepreneurs to feasible investments, to provide and disseminate the necessary information to SMIs.
• To provide them training programs in order to upgrade their theoretical and practical knowledge and to improve their skills.

KOSGEB has 43 service centres in order to realise their objectives in 28 provinces of Turkey. These are:

• Consultancy and Quality Improvement Centres.
• Sector Specific Development Centres.
• Market Research Centres.
• Common Facility Workshops.
• Training Centres.
• Technology Development Centres.
• Investment Development Centres.

KOSGEB is the focal point of BC-Net Information Network, Euro Info-Centres and BRE in Turkey and through this channel, small and medium industrial firms are linked to European Centres in order to create close links among SMIs.

TICA-Turkish International Cooperation Agency

TICA was established on January 24, 1992 with Law Decree number 480 published on 27 January 1992 in the Official Gazette, No. 21124.

TICA has an autonomous legal status.

Its president is entrusted with the task of coordination between public entities and institutions on topics falling in its terms of reference end is directly responsible to the Minister of Foreign Affairs.

TICA's purpose is to assist progress and growth in developing countries, especially those sharing the Turkish culture and neighbouring Turkey by promoting cooperation in economic, commercial and environmental fields through projects and programs, to organise assistance to developing countries through such means as necessary, to direct Turkish international cooperation in economic, technical, environmental, legal and other field at bilateral, regional and global levels, to provide the analyses, conceptualisation, planning, projects and coordination required for the promotion of these activities.

Source: Prime Ministry Undersecretariat for Foreign Trade
Export Promotion Center publication "Turkey 1996".