Foreign trade deficit narrowing through intermediate goods production

Turkey has begun to shrink its foreign trade deficit thanks to an increase in intermediate goods production, Industry and Trade Minister Zafer Çağlayan told Today's Zaman on Thursday.

Noting that they expect the foreign trade deficit to decrease since Turkey's imports will fall along with its exports in 2009, Çağlayan highlighted the importance of producing intermediate goods. He said it would be wrong to emphasize the decrease in exports, noting that exports are expected to total around $100 billion in 2009.

Çağlayan added that they had extended support to small and medium-sized enterprises (SMEs) producing intermediate goods in Turkey. "We have enacted the necessary regulations to meet the demands of our industrialists regarding this issue. We especially want SMEs to increase their competitive power, and we will make regulations accordingly. Producing intermediate goods in Turkey instead of importing will also affect employment in a positive way. I hope we will close the deficit fast," he stated.

Emphasizing that rising exchange rates will have a positive impact on the results of the support provided to SMEs, Çağlayan continued: "When foreign exchange was low and interest rates were high, we were importing considerable amounts of intermediate goods since it was more profitable to process imported intermediate goods. With the increase of exchange rates, it is no longer profitable. Now, it is more reasonable to produce them in Turkey. We have enacted regulations to make production more attractive. In order to support SMEs, we have decreased the employer's share of Social Security Institution [SGK] premiums. We have decreased corporate income tax rates and, most importantly, let them deduct research and development expenses from their taxable income. All these have helped companies produce intermediate goods instead of importing them. The decline in exports is related to the global economic crisis, but we aim to decrease the negative impact of this decline and shrink the foreign trade deficit with these regulations."

Stating that he understands the problems of companies since he has worked in the private sector, Çağlayan said the economic system of today was stronger than that of 1994, 1999 and 2001, when economic crises occurred. He also noted that it was normal for Turkey to be affected by the economic depression in Europe, which is the destination of more than half of Turkey's exports. "The financial and budgetary discipline and macroeconomic balance of Turkey are incomparably stronger than past periods. Therefore, we say Turkey will be the first country to recover from the economic crisis. We expect markets to return to normal from April on. We hope European markets will also normalize in the third quarter of 2009."

Having faced a 30 percent contraction in exports due to the depression in global markets, the ratio of Turkey exports to imports rose from 69 percent to 99 percent in 2008.

According to recent data released by the Turkish Statistics Institute (TurkStat), Turkey's exports decreased by 24.9 percent in February compared to the same month of 2008. However, imports also fell by 47.6 percent in the same period.

Source: http://www.todayszaman.com/