Team Leader and Primary Article Contributor- Ernest Tam
Keywords: Turkey, Turkish Politics, Exports, Textiles
Turkey’s Political Climate
Historically, Turkey has been a state with frequent military intervention in domestic politics, with 5 instances in the last 60 years. The most recent being the one on July 15th 2016, where the Peace at Home Council, a small faction within the Turkish Armed Forces, attempted a coup d’etat but failed. The reported reason for the coup was that “the democratic and secular rule of law has been eroded by the current government.” On July 20 2016, President Erdogan announced a three-month state of emergency in response to the coup and on October 3rd 2016, Erdogan announced a 90-day extension to the state of emergency. The state of emergency grants Erdogan the ability to rule by decree, which allows him to bypass Parliament and pass bills contrary to the constitution and the European Convention on Human Rights.
As a result of the state of emergency, the government of Turkey has gone on a mass purge, sacking over 100,000 state officials, teachers, bureaucrats, and academics, arresting over 27,000 people, detaining over 50,000, dismissing over 3500 judiciary workers, including judges and prosecutors and shutting down over 180 media outlets and stations.
The Role of Textiles
Textiles are one of the major sectors of the Turkish economy, as of 2014 it accounts for roughly 10% of Turkish GDP and employs almost 750,000 people, roughly 1% of the total population. Taking into account the closely related clothing sector, the number of people employed increases to around two million, with roughly 56,000 textile and clothing companies operating in the country. In 2013 Turkey exported $27.8b of textile and clothing products, making up 18.3% of the total exports of Turkey. In terms of international trade, Turkey is the 7th largest textile supplier, 8th largest clothing and cotton supplier and the largest global supplier of carpets. Turkey is also the world’s 4th largest consumer of cotton.
The European Union (EU) is Turkey’s number one export and import partner. Textiles and clothing constitute the number one exported section to the EU under the Harmonized System of commodity classification at 23.1%. The European Union remains Turkey’s number one trading partner as of 2015, making up 44.5% of Turkey’s total exports and 38% of total imports. In regards to textiles, the EU makes up over 40% of Turkey’s total textile and clothing exports. Besides the EU, Turkey’s other main textile and clothing export partners are the USA, Iraq and Saudi Arabia, making up 3.8%, 3.46% and 2.67% of total exports.
Strengths and Weaknesses
Turkey has a relatively young workforce, with around 76.34% of its total population under the age of 40. As of June of this year, the unemployment rate of Turkey is 10.2%. The combination of these two factors indicates an able and readily-available workforce. Turkey also holds a geographically advantageous location with its close proximity to Europe, Asia and Africa. By the same token, Turkey is located nearby one of the most unstable regions in the world, sharing borders with Syria, Iraq and Iran to its South-East.
Perhaps one of the most significant weakness’ of Turkey is its high dependence on the EU market, both for imports and exports. Although Turkey is a candidate for full membership in the EU, it seems very unlikely in the near future. Current EU President Jean-Claude Juncker has stated that Turkey would not join the EU under his leadership as it has been “dramatically distancing itself from the EU’s democratic values.” This now seems even more unlikely with the reactionary measures to the July 2016 attempted coup, which may possibly worsen relations between the EU and Turkey. However, for the time being, Turkey’s current role as “Europe’s Gatekeeper” may have greater importance in relations between EU and Turkey.
Turkey and the Future
Overall, the future of Turkey’s textile industry remains uncertain. From 2014-2015, Turkey’s clothing and textile exports have decreased by roughly 11.02% (from $29.04b-$26.08b USD), meanwhile China, the world’s top exporter of clothing and textile only decreased roughly 4.87% (from $287.65b to $273.64b USD). Although Turkey has not been outperforming China in clothing and textile imports, the country has been doing better than the world total. Looking back 10 years, from 2004-2014, Turkey’s exports have increased by 64.95%, while the world’s total exports has increased from 63.37%. This growth is even more obvious when presented with data from the last 5 years, from 2009-2014 Turkey’s exports have increased by 52.12% while the world was only at 42.22%.
Although exports have been growing, investors must also take into account other factors such as: terrorism risk; regional political instability; relations with the EU; ongoing intrastate mass purges; and global cotton supply/demand. As indicated before, Turkey’s textile industry has been seeing massive growth but past performance is not necessarily indicative of future results, especially with the recent events of this year.