Kutlu Karavelioğlu

Machinery Exporters' Association (MAİB)

President / Başkan

According to the consolidated data of the machinery manufacturing industry shared by the Machinery Exporters' Association (MAİB), Turkey's total machinery exports, including free zones, increased by 12.8 percent to 6.9 billion dollars at the end of the first quarter. President of the Machinery Exporters' Association Kutlu Karavelioğlu stated that machinery exports to Russia and Ukraine in the first quarter amounted to $676 mln with an increase of $440 mln compared to the same period of the previous year. "We not only send more machinery to Russia in terms of quantity, but we have also increased our export revenue per KG by 1.5 times compared to last year. On the other hand, it is obvious that the developments in the EU and the USA will have negative effects on our exports to this country, which has been our focus for ten years."

Turkey's machinery exports increased by 12.8 percent at the end of the first quarter of the year compared to the same period of the previous year and reached 6.9 billion dollars. In this period, when the highest machinery exports were made to Germany with 847 million dollars, the sector reached 561 million dollars in the Russian market, where it achieved a 230 percent increase. Kutlu Karavelioğlu, President of the Machinery Exporters' Association, pointed out that they achieved a 92 percent increase in the Ukrainian market, which was in the lower ranks in terms of export size in previous years, and said that they expect Ukraine to enter the top 10 in a short time:

"In the first part of the year, we were anticipating that there would not be a significant increase in our total machinery exports due to the slowing investment environment in the EU and the US due to tight monetary policies, but the intense demand from both Russia and Ukraine exceeded our estimates. In the first quarter, our exports to these two countries amounted to $676 mln, an increase of $440 mln compared to the same period last year. Not only did we send more machinery to Russia in terms of quantity, but we also increased our export revenue per KG by 1.5 times compared to last year."

THE RUSSIAN MARKET, WHICH HAS BEEN IN OUR FOCUS FOR TEN YEARS, IS AT RISK

Karavelioğlu stated that the level of sectoral relations with Russia, in which Turkey's Machinery Manufacturers have been intensively active since the annexation of Crimea, has relieved machinery exporters, but that this period is also open to new developments:

"Due to the tension between NATO countries and Russia, the demand and pressure of the US on economic sanctions is increasing. At the same time, European countries are also trying to take more control over indirect exports to Russia. It is likely that the trade control mechanisms initiated by Denmark, i.e. the export of goods to the Russian region through third countries, will spread across the EU. Growing problems in the banking system and an ever-expanding list of banned machines are challenging Russia and Turkey, which has become one of its most important suppliers. It is clear that this two-way development will have a negative impact on our exports to this country, which has been in our focus for ten years."

In this period when the significance of the European market for Turkey will increase even more compared to the first quarter as a result of all the effects, Karavelioğlu evaluated the foreign economic data and stated the following:

"While recession expectations in Europe have been replaced by the possibility of growth, albeit limited, the fact that the region's imports have not slowed down so far shows that we are maintaining our export potential. A number of policies are being feverishly implemented to establish global technological leadership and dominance in the region. But we are also facing hurdles in the form of the Procurement Code and green-digital directives. Therefore, our exporters must take urgent measures in many areas, especially the Sustainability Rating, and not be late in obtaining EU market-compliant norms and certifications."

THE CONSUMER CANNOT BENEFIT FROM CHEAP IMPORT

Karavelioğlu pointed out that in addition to the current sustainability-oriented criteria, competitive price policy is also one of the main factors affecting exports as the main determinant. "No matter how good our technology level is, we have to make price offers that will convince our customers. In doing so, we must be able to maintain our balance sheet quality. However, the overvaluation of the Turkish Lira as a result of the pause in the exchange rate caused foreign currency revenues to be insufficient against domestic costs," he said.

Karavelioğlu underlined that as long as inflation stays ahead of the exchange rate, imports will remain cheap and sectors with high-added value will continue to pay the price of being domestic: "This situation will inevitably cause a shift from production to trade. Manufacturers, who are obliged to maintain their scale, are feeding on the domestic market in order not to lose the foreign market. The complaints about double price practices also show this. While this vicious circle fuels inflation, it also creates a dumping issue. Importers, who make large margins in the domestic market due to rising prices, take advantage of this opportunity, which is not likely to last long, by bringing in more goods. As a result, the effects of cheap imports are not reflected in the markets at the desired rate."

EVER-INCREASING IMPORTS ALSO HINDER TECHNOLOGY DEVELOPMENT

Stating that at a time when the adaptability brought about by the agile, flexible and stable structure of the SME-based industry, which is largely based on equity, should bring domestic manufacturers to the forefront, they are faced with increasing machinery imports, Karavelioğlu concluded his words as follows:

"We closed last year with 26 billion dollars of machinery exports and 38 billion dollars of machinery imports; both increased by 11 percent whereas our deficit rose to 12 billion dollars. This outlook, which points to one of the most important items of the current account deficit, deteriorated further with imports increasing by 23.4 percent in the first two months of the year. Our production capabilities and techno-economic capacities have not yet been jeopardized, but we should not forget that ever-increasing imports are a barrier to technology development. I believe that the ratio of exports to imports in the machinery sector, which has fallen below 70 percent, will approach 80 percent again with the steps that seem to have finally allowed the exchange rates to move."