Based on the construction sector, do you have any incentives and precautions taken?
The investment incentive practices are ongoing within the framework of the principles regulated with the “Decision on State Supports in Investments” No 2012/3305 in our country. Any possible investment activity to be carried out in the specified sectors and amounting higher than the minimum investment amounts/capacities and the investment project should be submitted to our Ministry for evaluation with necessary information and documents requested in order to benefit from supports elements in scope of the said Decision. If the investments projects are found appropriate as a result of the sectoral, financial and technical evaluations to be held by our Ministry, it shall be possible to include these projects in scope of the supports by issuing an incentive document.
The investments orienting to Cement and Ready-Mixed Concrete production only benefit from the Regional Incentive Practices in the 6th Region provided that they meet the minimum fixed investment amount and may just be supported in scope of General Incentive Practices in other regions. The investments orienting to Concrete Products manufacturing may benefit from Regional Incentive Practices throughout the 4th, 5th and 6th regions and only in specified provinces of the 1st, 2nd and 3rd regions provided that they meet the minimum fixed investment amount, they may be supported in scope of General Incentive Practices in the remaining provinces. Following support elements shall be able to be benefited:
• VAT Exemption and Customs Duty Exemption in scope of General Incentive Practices
• Customs Duty Exemption, VAT Exemption, Tax Reduction, Insurance premium employer’s share support, Investment area designation, Interest support (for the investments in the 3rd 4th, 5th and 6th regions), Income tax withholding support (for the investments to be performed in the 6th region) in scope of the Regional Incentive Practices
Do you have any supports or precautions which may decrease the impact of exchange differences due to the differences in the exchange rate stability in the products with greater requirement of raw materials, fuel, equipment etc. based on cement and concrete sector?
Turkey comes 4th in the world cement sector export across followed by China, United Arab Emirates and Thailand across the world in 2015.
Total cement sector exports of our country occurred (including clinker) as amounting to 639.9 million USD and equal to 10.9 tons as quantity in 2014, while it occurred as amounting to 549.4 USD with 14% decrease and equal to 10.6 tons with 2.6% decrease in 2015.
The amount occurred in January-October period of 2016 values 429.6 million dollars with 6.37% decrease and the quantity is 9.8 million tons export with 12.85% increase compare to the same period of previous year.
78% of cement export was performed to Syria and amounted to 87.5 million dollars as of 2015. Syria was followed by Libya with 53.2 million dollars, Israel with 38.7 million dollars, the USA with 29.6 million dollars, Ivory Coasts with 27.2 million dollars and Iraq with 22.4 million dollars. Our sector performed exportation to 18 countries throughout 2015.
We think that the greatest factor that leads to the decline in cement export is the political crisis with the Russian Federation as one of the countries we mostly sell this product and the internal disorder in some countries such as Iraq, Syria and Libya. Moreover, we consider that the tendency towards the domestic market in the sector compare to the foreign market in order to meet the domestic demand which has increased by the impact of developments which directly support the construction sector such as the great infra and superstructure investments, mega projects, new residence and infrastructure projects, transportation and energy investments, urban transformation ongoing in our country during 2016 also led to the decrease in cement export.
Regarding the cement export in 2017, it is estimated that above specified investments shall continue in our country during 2017 but not display a great increase and it shall occur in about 547 million dollars range which was our cement export expectation for 2016 if we consider that the expected recovery and growth will not be achieved in the world economy and the possibilities of political and economic instability in the Middle East and North Africa (MENA) region which is greatly important for Turkey cement industry.
On the other hand, if we consider that the inputs such as raw materials, fuel, equipment etc. in the cement and concrete sector are the operating process requirements, a direct support does not exist in scope of the Incentive Practices orienting to these fields. However, the Investment Incentive Document may be issued for the investments orienting to establishment of facilities which may produce input for the sector. Considering the impact of such incentives in the domestic production, it is believed that they may decrease in influence of exchange rate differences.
What kind of a short term development do you expect in the markets?
Global economy has sought to find its way in an uncertainty environment for a long time. The new developments in global sense keeps increasing the volatility in the markets. In the recent period, the US elections, the declarations of the new President of the USA Donald TRUMP about the economy and the FED Chairman Janet YELLEN’s presentation in the USD Congress have all led to an increase in the exchange rate of dollar. In this sense, we should evaluate the cyclical and speculative developments and the structural reasons in the rise of exchange rates separately and then create our policies in this framework.
On the other hand, one of the most dangerous factors for economies is uncertainty. For this reason, structural reforms are highly important to minimize these uncertainties and to see the future more clearly. As long as we implement our structural reforms rapidly and grow faster than our commercial partners, so do the right things. Economy administration is and will keep doing its best in this sense. As a consequence, one-day market movements must be effective on the policies to be applied. Long term evaluations are more beneficial for our political economies compare to short term evaluations.
What is your evaluation for 2016 and the predictions for 2017?
If we consider the political and economic events in the world conjuncture and our region together, Turkish economy still sustains its sound position. Having proved that being one of the strongest economies particularly after 2008 crisis, Turkey continues the stability in macroeconomic indicators in spite of the stagnancy in the global economy, political problems ongoing just beyond its borders and July 15 failed coup attempt.
Turkish economy has displayed 4.7% growth in the first quarter of 2016, 3.1% in the second quarter and 3.9% during the first half of the year. Turkey has displayed a performance much greater than the EU (1.8%) and the average growth of the Euro Zone that is equal to 1.6% in the second quarter of 2016. Moreover, it has realized a growth faster than 21 of 28 EU members with 3.1% growth rate. We expect some increase in the growth in the last quarter of this year in spite of the shrinking demand and the political events encountered in the world.
However, achieving higher growth rates in direction of our 2023 targets is among our primary economic goals. For this, we aim to overcome the barriers against our economy with some comprehensive policy instruments such as the Assets Fund and Project Based Incentive System, attract high value added investments with advanced technology to our country and enable Turkey to be have existence all over the world in economic sense in order to increase further the growth performance and lay foundations of stable growth.
When we look at the foreign trade data of our country, we have realized 117 billion dollars export and 163.2 billion dollars import during 2016 January-October period. Our country’s export has also declined in parallel with the decline in the global trade.
The developments in the inflation rates as another important macroeconomic indicator proceeds with its course steadily. The inflation rate which was equal to 9.58% at the beginning of 2016 has reduced to 7.16% as of October of 2016. In this sense, the measures taken by the Food and Agricultural Product Markets Monitoring and Evaluation Committee and the fact that the food prices having a significant predominance on the inflation basket have been taken under control became all effective in the regression of the said ratio.
If we look at the labor market, we aim to utilize our labor force to a greater extent and to increase the employment participation rate with the economic growth accompanied by the new investment and incentive policies.
Public finance keeps being one of the fields our country is taken as a model. While Central Administration Budget Deficit/ GDP ratio is specified as 3% in Maastricht Criteria, this ratio has occurred as 1.2% during 2015 in Turkey. Similarly, EU defined Debts/GDP ratio specified as 60% in Maastricht Criteria occurred as 91.2% in average in the Euro zone during he 2nd quarter of 2016 while it was equal to 32.4% during the same period in Turkey. Having satisfied the Maastricht criteria in this sense, our country has the capacity of actualizing a finance policy that would support its economy.
Vulnerability and low growth rates are still ongoing in the global economy. The slowdown in the global trade and investments is becoming evident, the weak course of the global demands is influential leading the world growth to remain lower than the average for a long time. This picture is lowering the growth estimates for the global economy and restricting the increase rate of the global trade volume. For example, the International Money Fund (IMF) predicts that the world economy will grow with a ratio of 3.1% in 2016, this ratio will occur as 1.6% in developed economies and 4.2% in the developing economies. The weak course is still ongoing in the estimates for 2017 and some restricted recoveries are predicted compare to 2016. IMF predicts 3.4% growth rate for the world, 1.8% for developed economies and 4.6% for the developing economies.
This year, both the loss of confidence suffered in the global economy and the latest news about the fight against terrorism at home have led Turkish economy to display a performance below its potential. On the other hand, our Government forced the pace of the reforms in order to achieve a stronger growth for the next year. Therefore, I believe that a performance better than these objectives shall be achieved in terms of growth.
We target more effective figures in our foreign trade performance during 2017 compare to 2016. Particularly, the export target is 153.3 billion dollars and the import target is about 214 billion dollars in the Medium Term Plan objectives. We also predict a stable decline in inflation ratios. We aim to realize the consumer inflation to an extent of 7.5% in this year, then to decrease gradually and realized a reduction to 6.5% for 2017 and to 5% levels for 2018 and 2019. Undoubtedly, the inflation ratio must be decreased below 5% in the long run for a real price stability. Considering the employment issue, we target a positive performance picture in which the investments would increase and our growth would strengthen during 2017 particularly by the impact of the reforms being prepared. I believe that realizing a stronger performance above these targets would not be difficult in 2017 with our new incentive policies and regulations including the policies orienting to all the rings of the investment-production- employment-export value chain.
2017 will be a year in which significant progress would be achieved both in foreign trade and each of the macro- economic indicators by standing shoulder to shoulder with our exporters, industrialists and entrepreneurs. We will further strengthen the sound foundations of our economy with the supports we have acquired in every stage of the investment- production-employment-export value chain and will make our country as one of the most important investment and export bases of not only our region but also the global trade. The decisive steps we will take and the new policies we will apply at this point shall constitute the best examples of the private-public sector collaboration and 2017 shall become a year in which our economy will rear up again.
