Only the dynamic business community keeps Turkey afloat: ‘Production, production, production’

What Turkey needs is toilet bowls. ECE Holding in the city of Çorum makes them and director Ahmet Çenesiz gives a tour of the production line to reinforce his argument. From molds in which the gray raw material is poured into its mould, via ovens that glow red from the heat to the shiny white glazed toilet bowls that are waiting in pallets for transport, mostly abroad.

Exports of toilet bowls and bathroom fixtures comprise 70 percent of the turnover. “Production, production, production,” says Çenesiz, pointing to the pots. ‘Turkey should have it in the first place. We have almost no energy, we are not a financial center. What we do have is a young population, better educated than ever. And technology, just look at our drones.’

It is clear that the Turkish economy is not doing well. The lira is at an all-time low, inflation has risen to 83 percent, life has become increasingly expensive. Ask any Turkish citizen ‘how are you?’ and what follows is a litany of complaints about rent, utility bills and supermarket prices.

At the same time, there is sometimes other news, reports with which the pro-government Turkish press always spreads the word. For example, the Turkish economy grew 11 percent last year (after two miserable years) and exports have been doing quite well so far, with a growth of around 10 percent.

How to explain this apparent contradiction? Two leading Turkish economists, asked for explanations, paint a nuanced picture, which in both cases results in a gloomy outlook for the near future. But one thing stands out in their answers: the positive role of Turkish entrepreneurs.

“Despite high inflation, banks and businesses are not doing badly,” said Güven Sak, director of think tank Tepav in Ankara. There is ‘a lot of dynamism there’, he believes. And Bülent Gültekin, professor at the University of Pennsylvania and former director of the central bank of Turkey: ‘The fact that it is still not that bad is due to the very diversified Turkish economy.’

From dairy to socks and car parts

The epitome of this must be found in Çorum, a city of about 250,000 inhabitants in central Turkey, just below the Black Sea region. From a rustic town full of craftsmen, Çorum grew into a city with – indeed – a lot of dynamism. Everything is made there, from dairy to socks and car parts.

The city fits into the ‘Anatolian Tigers’ list: cities in Central Anatolia where entrepreneurship erupted in the last quarter of the last century and which spawned the new, religious middle class to which Recep Tayyip Erdogan’s AK party owes its rise. . Tiger(little) Çorum has made a leap forward, especially since 2000.

Manufacturer ECE is one of the companies responsible for this. The company, with 1,350 employees, is Turkey’s second largest exporter of sanitary ware and has expanded its wings to equip entire ceramic factories for others, including abroad.

As an exporter, we assume, ECE has benefited greatly from the weak lira. Director Çenesiz, who is also chairman of two employers’ organizations in his sector, dismisses this. ‘Without stability, a weak lira is of no use, not even as an exporter,’ he says. ‘You don’t know what to count on. Getting financing is difficult. And inflation raises all our costs, including wages. The advantage of a weak lira is short-lived.’

Interest rates have just been lowered

The problem is also that the Erdogan government has a very curious approach to inflation. The interest rate has not been raised, as economic science prescribes, but has been lowered a few times, again two weeks ago. Add to that, says economist Sak, the rise in gas prices due to the war in Ukraine and the slump in Europe, which accounts for 45 percent of Turkish exports.

“The Turkish economy did well just after corona,” he says. ‘Turkey even seemed like a kind of Southeast Asian country, I was impressed by the power of business.’ Now, according to Sak, the comparison looms with the crisis of 2001, when drastic action had to be taken to pull the Turkish economy away from the brink. ‘Exports are collapsing. GDP will contract in the last two quarters of this year.’

Those fears are shared by Çaglar Aksu, vice president of the Aksular Group, a orum company that exports tortillas, tacos, nachos and Mexican sauces to 82 countries, mainly in the Middle East. “We are growing more slowly than we would like and are able to,” says Aksu. ‘That is because of the uncertainty about the future. Nobody knows what will happen to the lira. There is no more confidence in the Turkish economy. That’s why foreign investors stay away.’

Since its foundation in 2010, family business Aksular has grown at lightning speed. Aksu proudly talks about his five tortilla lines and about the new machines that were recently ordered in Los Angeles. It will not be the turnover, which increases every year by about 40 percent. Profitability is less good. It was already low last year and will fall further this year, also due to the rise in grain prices, to the lowest level in twelve years.

Textile manufacturer Bilsar employs a remarkable strategy to deal with the problems of the Turkish economy. That approach is: stay as far away from the Turkish economy as possible.

Foreign. Bilsar makes shirts, a typical Turkish product, in the typical Turkish industrial town of Çorum, where two-thirds of voters usually vote for the conservative-nationalist coalition of AKP and MHP. In clean, bright factory halls, hundreds of Turkish workers, mostly women, sit behind sewing machines and cutting tables where every part – collar, back, sleeves, buttons, cuff – has its own department.

‘Shielded from the Turkish problems’

So how come, stay away from the Turkish economy? Director Selman Bilal explains it simply. ‘We buy our fabrics in Europe with euros and dollars. We only export, so we earn in euros and dollars. In this way we are shielded from the Turkish problems.’

Until a few years ago, Bilsar had thirty clothing stores in Turkey, 40 percent of the turnover was made there. The pain of the Turkish economy was therefore felt there. “Before the pandemic, retail trade was already dying,” Bilal says. ‘Corona gave the death blow.’

The de-Turkization of the business operations gave Bilsar the space to build a new factory in Çorum (finished in 2023) and to invest further in sustainability (solar panels, recycling) and art, a passion of director Bilal. Bilsar’s headquarters in Istanbul houses the Bilsart art center.

It will not immediately save the lira, but for Professor Gültekin it is an example of the inventiveness and drive of the Turkish business community. The Erdogan government makes good use of this, not to say abuse, for example by keeping interest rates low and thus in effect subsidizing the provision of credit. ‘They are depleting the reserves of the Turkish economy,’ says Gültekin.

In this election year it will only get worse, the voter will be pacified with presents. How long will the government maintain this policy? At least until the June elections, Gültekin thinks. ‘Then they’ll see. But unfortunately, then the consequences will be even more serious. The longer this policy is continued, the greater the damage.’