ANKARA- Trade problems of Turkey partially originate from weak demand in the midst of the crisis, while another probelm stems from Turkey being the party that undertakes risk both in exports and imports.

The Turkish tier of the World Bank Trade Finance Project carried out by TEPAV was completed and the final report of this tier was prepared by TEPAV Policy Analyst Ozan Acar.

The report reveals that, considering the methods of finance, Turkey is the party that predominantly undertakes the risks of trade transactions. The report notes:

“60 percent of Turkey’s exports in 2008 were financed through cash-against-goods method, which is the riskiest method for the exporters.

In 2008, around 50 percent of Turkey’s imports were financed through the advance payment method, the riskiest form of payment. The share of imports financed through the advance payment method in total imports have increased from 33 percent in 1998 to 50 percent at of the end of the first half of 2009.

Another striking point signals that problems in collection of export receipts have risen. 35% of the surveyed firms have stated that the share of overdue payments in total receipts has increased. The amount of increase has been 13.5 percent in average.”

“The demand shortage and finance problems in world trade”

The TEPAV Report states that apart from the demand shortage, problems in trade finance facilities also have a role in the reduction of world trade. Emphasizing that there are signs that financial institutions tighten criteria for extending trade finance credits, the report says: “This increases the cost of trade operations considerably and in some cases prevent trade transactions. Other factors that push up cost are the increase in the demand for insurance tools due to a lack of mutual trust and the rise in insurance premiums due to the crisis.”

Maintaining that Turkey, which is an important part of the global economy, faces serious problems in international trade considering both demand and finance opportunities, the report added:

“From September 2008, when the impacts of the global crisis became evident, to January 2008 imports and exports contracted on average by 26 and 16 percent per month, respectively. The fall in Turkey’s exports arise from the tightening in foreign demand rather than from trade finance problems. 60 percent of firm managers stated that the decline in the foreign demand for Turkish exports is mainly due to the lack of new orders. The lack of finance on buyer’s part is defined as a factor limiting the rise in exports by 40 percent of the surveyed firms. On the other hand, only 10 percent of the surveyed firms addressed lack of finance on their part as a problem. Interviews with bank managers also supported that the problems foreign importers face in accessing finance is a factor that constrains the export growth of Turkey.

In particular the fall in exports to European Union countries contributed significantly to the steep decline in total exports. While Turkey’s exports to EU countries increased by 23 percent from January 2002 to September 2008, exports declined by 32 percent from October 2008 to January 2009. In the October 2008-January 2009 period, Turkey’s exports to Near and Middle Eastern and North African countries have increased by 11 and 32 percent, respectively. In the light of these data, it is possible to conclude that private sector in Turkey tried to substitute for the slowdown in traditional markets by opening up to new markets.”

New acquisitions do not compensate for losses

According to the report, there exists a market trend of diversification in Turkey’s exports. 62.5 percent of the surveyed firms expressed that they will direct their operations towards new export markets. Among the countries expected to be more important as export markets in 2009 are Azerbaijan, Algeria, China, France, Netherlands, Italy, Qatar, Kazakhstan, Mexico, Egypt, Uzbekistan, Russia, Saudi Arabia, Turkmenistan and Ukraine. Germany, USA, United Arab Emirates, Iraq, United Kingdom, Spain, Israel and Switzerland are among the countries that surveyed firms consider to cut exports to. Nonetheless, new markets do not seem to replace traditional markets. The rise in Turkey’s exports to 10 countries, the share of which in Turkey’s total exports have increased the most in the first five months of 2009 compared to the same period in 2008, can compensate only for 26 percent of the fall in exports to 10 countries the share of which has declined the most in Turkey’s total exports.