The main clients for the emerging industrial centers of Anatolia are the Middle East and North Africa, not Europe.

Turkey as a whole signed the Customs Union (CU) agreement only on paper. In legal terms, Anatolia is under the scope of the CU. In practice, however, Europe is not the main client for the emerging industrial centers of Anatolia. Mustafa Boydak, member of TOBB Executive Board and Chairman of the Kayseri Chamber of Industry, explained why during the Uludağ Economics Summit: because domestic transportation costs are extremely high in Turkey. Since Anatolia is distant from the European market, it is not able to utilize the benefits of the CU to the highest extent possible. Anatolia is outside of the CU not because Europe excludes Anatolia as a center of production. It is because the administrators of Turkey have not introduced the measures needed to ensure that Anatolia benefits from the CU. Let me tell you why the issue is related to the lack of vision across Turkish governments.

Foreign trade figures for Bursa reveal that the top trading partner of the city is Europe. The same applies for Istanbul, Kocaeli and Izmir. These centers, located in the northwest Turkey, constitute two-thirds of the total export volume of the country. All of the cities that trade primarily with Europe are located in the northwest of Turkey, along the road to Europe. So, why is Europe the main trading partner of these cities? Because they are closer to Europe. And now the other cities. After 1980, Turkey succeeded in spreading industry throughout Anatolia. Gaziantep, Konya, Kahramanmaraş and Kayseri emerged as new industrial centers. Europe, however, is not the top trading partner of Gaziantep. Fifty-nine percent of the total exports of Gaziantep go to the Middle East and Northern Africa (MENA). Europe’s share is 20 percent. This is the case for Konya and Maraş, as well. When you move from central to northwestern Turkey, Europe becomes the number one trading partner. Similarly, when you move from the center to the southeast, cities start to break away from the CU. Take the cases of Ankara, the very center of the country, or Kayseri. The shares of Europe and MENA in Kayseri’s total exports are 36 percent and 29 percent, respectively.

Why is that so? Why do central and eastern Anatolia fail to exploit the benefits of the CU to the highest degree possible? Central and eastern Anatolia are not connected fully with the European markets yet, for two reasons. First, 52 percent of the exports of Turkey are transported via ship, which is the cheapest method available. But there are no ports in central and eastern Anatolia. Therefore, it is first necessary to transport goods to a port. Domestic highway transportation is expensive, on the other hand. Primarily because of the primitive fiscal system of Turkey, gas is expensive. So is domestic transportation. Yet, 40 percent of exports are transported via highways. The state of the fiscal administration being primitive destroys Turkey’s competitiveness. Second, only 1 percent of exports are transported via railway. Scheduled container trains do not work between Turkey and Europe. Thus, central and eastern Anatolia are unable to exploit the benefits of the CU. That’s not the end of the story.

I believe that the regional disparities in Turkey stem mainly from the lack of incorporation between cities, and between Turkish cities and the rest of the world. This is the reason why there are only a few production facilities in eastern and southeastern Turkey. This is why these regions cannot produce sophisticated goods. This is why the production facilities in these regions can compete only with their Iranian counterparts. The high degree of resemblance between southeastern Anatolia and Afghanistan must be explained with the fact that the former is not well connected to the rest of Turkey.

The economy always works like combined vessels. If a city is not connected, no production facilities will be available. If it is not connected, the production pattern will not advance sufficiently. If the production pattern is not sophisticated enough, the city will not be habitable or peaceful. Those who cannot identify priorities or differentiate what is important and what is not cannot design the future. Anatolia is not in the CU yet.

This commentary was published in Radikal daily on 20.03.2012