Should Turkey Shift Its Production Model to Overcome Widening Deficit Gap?
Economists say Turkey should shift its production model, which is laregly based on imports. Fresh government plans overlap with experts’ suggestions
Turkey’s production must shift toward high value-added goods and focus mainly on the machinery, chemicals and high technology sectors to decrease its dependency on foreign industries and address the high current account gap, economists recently told the Hürriyet Daily News.
“We must produce goods with higher value added, including machinery and high-tech products,” Ozan Acar, an economic policy analyst at the Economic Policy Research Foundation of Turkey, or TEPAV, told the Daily News in a recent interview.
Recalling that Turkey’s present current account deficit problem was rooted back to 2002, when imports of intermediary goods for the growing manufacturing sectors increased substantially, Acar said the country’s new production model had to bring the costs of producing such goods down and thus discourage their imports. “Higher labor productivity and an efficient private sector are also crucial,” Acar said, adding that authorities had to use the cluster analysis approach to get results in the medium term.
Machinery manufacturing is a key sector with high potential in Turkey and one that has a high share in advanced economies, according to Acar. “We cannot achieve Germany’s gross domestic production with India’s production model. We have to shift production to high value-added goods.” The chemicals sector and services are also fields where Turkey should focus, he added. The Turkish government should “simply” focus on the implementation of the Industrialization Strategy 2011-2014, according to Erinç Yeldan, an economics professor at Bilkent University.
The strategy, which was approved in December, defines seven priority sectors, including the automotive, machinery and electronics sectors, to be enhanced in the period between 2011 and 2014. It also sets strategic objectives, such as putting more weight on production and exports of medium and high technology sectors. The latters consist of the production of pharmaceuticals; aircraft, spacecraft and their replacement parts; medical tools and machinery; as well as radio, television and communication appliances.
Transfer from low tech sectors to the manufacture of high value-added goods is another key objective of the strategy. “We must foster creativity and invest more in innovation and information technologies,” Zümrüt İmamoğlu, an economist at Bahçeşehir University’s Center for Economic and Social Research, or BETAM, told the Daily News. Turkey should abandon assembly-line-style production and encourage domestic production of high-tech goods, she said.
Iron and steel
Turkey’s dependence on foreign iron and steel sectors should be reduced considerably to further develop the key machinery and chemicals sectors, according to the Input Production Strategy, prepared by the Economy Ministry’s Economic Research and Assessment General Directorate. The strategy was revealed in a meeting held Saturday on the “Assessment of Export Oriented Production Strategy,” chaired by the Economy Minister Zafer Çağlayan, where representatives from related ministries and bodies were also present. Iron and steel are important inputs in the production chain, thus authorities must encourage domestic production and international competitiveness in the sector, the strategy read, according to a statement by the Economy Ministry on Saturday.
This will also assist in developing at least one globally renowned industrial electronic brand by 2023, one of the current government’s goals for 2023, the 100th anniversary of the Turkish republic.
Authorities will also work to reduce dependence on foreign chemicals sectors and encourage domestic production through integrated investments in refineries and petro-chemistry as well as in recycling facilities, the statement read.
August 29, 2011
SOURCE: HURRIYET DAILY NEWS