Turkish machinery sector can get a bigger share from world trade

24 April 20245 min reading

Emre Gencer
President of the Machinery Manufacturers’ Association (MIB)

Emre Gencer, President of the Machinery Manufacturers’ Association (MIB), stated that the share taken from world trade in the machinery sector has the potential to reach much higher levels and said, “In order to make better use of this potential, we must act faster in the reform areas that we bring up on every occasion.”

Since 1990, S. Emre Gencer, President of the Machinery Manufacturers’ Association (MIB), which has been carrying out its activities in order to protect the interests of domestic machinery manufacturers in the entire machinery sector and to support domestic machinery production, made evaluations about the problems and solution proposals of the machinery sector.

Despite the negative developments, 2023 was a very successful year for the sector. Domestic machinery investments grew by 12 percent, while machinery production increased by 8 percent. The driving force of the strong performance was our exports.

We are hopeful for 2024

Last year, machinery exports increased by 11 per cent and exceeded 28 billion dollars. We can say that the main factor behind this strong increase is the success we have shown in alternative markets other than our main markets. We are also hopeful for 2024. I believe that if the MTP, which envisages a positive contribution of exports to growth, is implemented with determination, we will achieve a strong export growth rate this year as well. Among the risks that may negatively affect such a development, the possibility of a delay in the economic recovery expected in the European region in the second half of the year comes to the fore. To this, we can add the possibility that our exports to Russia and Ukraine may be adversely affected due to increased war-related risks.

In the past two months, exports to Russia, our second largest machinery market, decreased by 20 per cent. It is inevitable that the decline will accelerate if the payment problems still being experienced in this market cannot be resolved.

We must make new investments

According to the Root Cause Analyses conducted by the Turkish Exporters Assembly, we see that 29 items of machinery are at the top of the list of products that we are globally competitive. This data indicates that the share we receive from world trade in the machinery sector has the potential to reach much higher levels. In order to make better use of this potential, we need to move faster in the reform areas that we bring to the agenda on every occasion. We should make new investments to improve our medium-high and high-tech product export capacity with digital transformation projects.

Project-based interest discount model

It will be appreciated that it is not easy to realise such investments in this period of extraordinary increase in financing costs. Our suggestion in this regard is to develop and implement an alternative interest deduction model for investments within the scope of the project-based incentive system. Another request in this regard is to provide YTAK resources to machinery investment projects within the scope of the Hamle Programme through simplified procedures. The importance of the issue will be better understood when I say that according to the current procedures, only three of the 18 machinery projects approved under the Hamle Programme can benefit from the YTAK resource. We can also add to this our request that the projects of companies within the scope of the Turquality programme be given additional Strategy Points within the framework of YTAK procedures.

New regulations should be made for the use of domestic machinery

The legislation on the encouragement of the use of domestic goods needs to be amended in a way that will allow capacity reports to be audited by the public authority. Likewise, it would be beneficial to make new regulations that will make the application of tax deductions for imported machinery in investments with incentive certificates truly exceptional, and that will prioritise the use of domestic machinery in the Public Procurement Law and its exceptions and public-private sector cooperation projects.

The current investment incentive system needs to be more effective based on direct support elements. Investment incentives should be in the form of direct financing support based on grants or 10-year subsidised loans, as in EU countries. There is no doubt that indirect support elements such as tax reductions, holidays and exemptions do not have the expected effect of investment incentives, especially during periods of high inflation.

Anti-dumping investigation should be opened

Another medium-term expectation is to support machinery exports with buyer credit programmes based on international best practices as envisaged in the MTP. Unfair competition and safeguard measures are another main area to be focused on. In the coming days, in line with the demands of our members, we will request the opening of anti-dumping investigations for a large number of machinery and equipment.

Price stability is a sine qua non for quality growth

The problem of access to qualified labour is increasing in the sector. Machinery production should be included among the sectors identified for the programmes to be organised to train qualified labour force within the scope of the MTP.

The sine qua non of qualified growth is price stability and financial stability. I believe that if the new economic programme is implemented with patience and determination, we will achieve success in this regard after a certain period of time. We also know that we cannot achieve qualified growth in foreign markets without increasing productivity, raising added value, turning to high-tech areas and increasing competitiveness. Therefore, the main thing is to achieve success in the production side of the programme in this difficult period, and to prioritise technological and strategic industrial investments in resource allocation and to realise them rapidly.

My biggest goal is to create a Turkish machinery specialised fair brand that stands out among the most globally recognised machinery fairs under the leadership of MIB.

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