According to the consolidated data of the machinery manufacturing industry, at the end of the 11 months of the year, Turkey’s total machinery exports including free zones amounted to 25.8 billion dollars, the same level as the previous year. Exports of the sector, which exported 2.3 billion dollars worth of machinery in November, decreased by 3.7 percent on a monthly basis. Machine manufacturers, whose exports decreased in terms of tonnage in the 11-month period, caught up with the figures of the same period last year with a 4 percent increase in average export prices per KG. In November, when export unit prices rose up to 7.7 dollars, the biggest increases in our top twenty markets were achieved in Morocco with 47.4 percent, Italy with 23.3 percent and Egypt with 22.2 percent. In Germany, Russia and the USA, which constitute the top three largest markets, average unit export prices per KG varied between 10.3 and 12.9 dollars. According to TÜİK data; The highest increase among economic regions was achieved in NAFTA with 17.5 percent and MERCOSUR with 9.1 percent, while the biggest loss occurred in ASEAN with 22.8 percent at the end of the first 10 months. With the 2.6 percent decrease in annualized machinery imports, the machinery foreign trade deficit decreased to 15.9 billion dollars. Tractors and agricultural machinery, whose imports decreased by 21.4 percent in 10 months, joined the sectors with export surplus, while air conditioners and systems, whose imports increased by 15 percent, started to have a deficit.
“Europe is losing power in industrial trends”
Evaluating the new global equation in the field of trade in the shadow of the Ukraine-Russia war that has been going on for two years, the increasing tensions in the Middle East and potential threats such as China-Taiwan, Kutlu Karavelioğlu, Chairman of the Machinery Exporters Association, said the following:
“In this period of uncertainty that has turned geopolitical stability upside down, the USA, where a management approach that has declared that it will not abide by any traditional institutions and rules has come to power, is preparing to fight everyone it sees as a rival. On the other side of the ocean, the European Union seems to have moved further away from budget discipline due to both its energy policies and the bureaucracy’s pro-regulation and directive attitude. Sectoral top organizations frequently emphasize that the era of competition based on rules is coming to an end, but that the EU is late in preparing for it. Another factor that deepens this situation for the EU is the fact that they are deprived of fossil energy due to the green transformation process and the possibility that rapidly decreasing natural gas reserves will start a new energy crisis…
Due to high production costs, the possibility of many factories in Europe having to cut production is increasing. ORGALIM, which represents a turnover of 2.8 trillion euros and 11.7 million jobs in Europe, announced that the losses in the machinery sector in 2024 will reach 5.3 percent in turnover, 3.9 percent in investment and 1 percent in employment. Stating that the decline will continue, he attributed the fundamental problem in the sector, which will have shrunk for 3 consecutive years by 2025, to the continuing erosion of EU competitiveness.”
Karavelioğlu, who drew attention to the fact that this stagnation brought with it an intense concern about deindustrialization, said, “The rising threat perception seems to have even convinced the German federal government to become temporary partners with large enterprises. In Germany, which has a decisive share in our machinery exports, the decline in industrial production in the last 2 years was 8.3 percent. The political uncertainty in Germany and France, the loss of strength in the industrial trends of these countries and the decline in the Euro may continue for a while. This process, which is taking the export climate index in Europe backwards, seems like a serious problem for high-technology sectors such as machinery, but it is a development that can accelerate the spread of the industry to peripheral countries,” he said.
“If Syria can return to normal, it will be the apple of the sector’s eye”
Karavelioğlu, who also addressed the changes beyond developed economies in the triangle of sovereignty fights, protectionism and loss of competitiveness, commented on the agenda in Syria as follows:
“If Syria succeeds and achieves a stable democracy, it is not difficult to predict which services, comfort or production equipment will be prioritized in the machinery sector in the construction, settlement and industrialization processes that will start immediately afterwards. Even the UN’s announcement that 400 billion dollars is needed for the reconstruction of Syria and the perception that it will be better than before provided a tremendous leverage effect for manufacturers of construction materials such as iron and steel, cement etc. The construction and business machinery sector, which Turkey has developed a lot especially in the post-earthquake period, will be one of the fastest to enter the field in Syria. The machinery needed for the rebirth of many types of activities and light industry, some of which have disappeared, will be funded by many countries and institutions, including grants. However, we believe that our social integration, historical ties and close neighborly relations bring more responsibility than opportunity to our sector.
Although it is too early to speculate, it is necessary to think that Syria, which conducts two-thirds of its foreign trade with Turkey today, will be a buyer as important as Iraq and Russia for our competitors, and to devise methods to implement the natural superiority of Turkish machinery in neighboring geographies there as well,” he said.
“Labor and labor peace should be preserved in minimum wage”
Karavelioğlu, who stated that industrialists in the country are focused on minimum wage negotiations and the interest rate reduction cycle that is likely to start in December, evaluated the impact of monetary policy on 2025 expectations as follows:
“The decrease in machinery and equipment investments, which went into negative territory after 18 quarters, was 8.6 percent in the third quarter. We will close 2024 with a decline of around 8 percent in production. While our exports close at around 28 billion dollars with a value very close to last year, we will have gained some ground against imports. Data indicating that the increase in consumption of goods and services is one of the main reasons for inflation shows that an asymmetric balance has formed in the economy against the productive sectors. Although this process increases manufacturers’ expectations for financial relaxation, the prevailing view in the market is that financing costs will remain high for a while, which will reduce investment appetite and continue the stagnation in the domestic market for a while,” he said.
Indicating that the minimum wage increase will be the most critical determinant for many sectors in this period of great importance for disinflation policies, Karavelioğlu concluded his words as follows:
“The rate to be announced is of great importance in terms of preserving labor and labor peace. According to OECD data, our sector, which has a domestic value added rate in exports at the same level as its German competitors and has reached this high rate of 76 percent with its specialized staff under intense competition in knowledge and technology, will be one of the actors that should and will manage the process best. However, the minimum wage increase, which is perceived as a kind of general indicator, creates an effect far beyond its function even in sectors like ours that currently maintain employment with much higher wages. “At a time when regional and sectoral differences are increasing and informality is becoming widespread around the world, we should also discuss the difficulties of determining a single rate with the hope or expectation that it will be applied uniformly.”