The old industrial centers have started to lose the old sectors. In other words, the old industries have moved to the new industrial centers.

Last weekend, I was in Bursa. The city has blossomed. I was having a look around when somebody approached me and said, “Bursa has lost the textile industry now. It has moved to Gaziantep.” Have you checked the export figures on Turkey? The picture is not exactly like what the man said. Bursa has not lost the textile industry. But a trend does exist: the old industrial centers have started to lose the old sectors. In other words, the old industries have moved to the new industrial centers. This way, industry has moved from the west to the east of Turkey. Let me tell you why. And let me explain how the new rise in fuel prices has affected this trend. If you are interested, please read on.

Let me start with the figures. In 2005, Istanbul and Bursa were responsible for 71 percent of the total textiles exports of Turkey. By 2011, the ratio had decreased to 61 percent. The share of Bursa in total textile exports decreased from 16 percent in 2005 to 13 percent in 2011. Meanwhile, the share of Gaziantep increased from 7 to 12 percent, and that of Kahramanmaraş from 3 to 7 percent. That the clearance is done in Istanbul definitely should disturb the picture and it would be useful to take a closer look at the figures. Yet, the ten-point fall in the cumulative share of Istanbul and Bursa and the nine-point rise in that of Gaziantep and Kahramanmaraş matches the anecdotal evidence. When it comes to the old sectors, industrial activity is shifting from the west to the east of Turkey.

So, is this good? It definitely is not bad. Today, Gaziantep and Kahramanmaraş have some skills that were enjoyed only by Bursa and Istanbul in the past. The number of skilled cities in Turkey has been increasing. It is good that the opportunities sets of Gaziantep and Kahramanmaraş have been improving due to the textile companies. This is the first point. The second one relates to the “proximity to markets,” which I have been occupied with for some time.

There is no database that shows which cities export which goods to which countries, but we have datasets on which goods are exported to which countries and which cities export to which countries. Combining the two datasets, you see that between 2005 and 2011 the countries to which Turkey exports textiles did not change considerably. The textiles industry shifted from the west to the east not in order to increase exports to eastern markets benefiting from geographical proximity. This is the second point the figures reveal.

The third is about an earlier argument of mine in which I said, “When you move from northwestern to southeastern Turkey, the major trading partners of cities move from Europe towards the Middle East.” According to this argument, geographical proximity plays a major role in the advancement of the opportunities set of a city. When it comes to the textiles, however, different dynamics seem to be at work.

So, why is this the case where textiles are concerned? Let me emphasize some ideas. The first is that the issue seems to be connected closely to the economic crisis in Europe. After the crisis, Turkey was faced with severe competition from South Asian countries in labor-intensive sectors. In the face of harsh competition, one way to cut costs is to relocate the given industry. The share of land in costs is definitely different in Gaziantep and Kahramanmaraş from those in Istanbul and Bursa. The recent labor-oriented subsidies also might have contributed to this shift towards the east. Then, we can talk about a meaningful contribution.

Second, both Gaziantep and Kahramanmaraş are located on the only highway along the south-southeast line. The highway that starts at Pozantı and reaches Habur connecting Mersin, Osmaniye, Kahramanmaraş and Gaziantep has had a positive impact on the geography through which it moves, for whatever reason it was built. Let me stress that the same highway also connects Kahramanmaraş and Gaziantep to the Mersin Port. Therefore, it is highly beneficial in lowering transportation costs.

It probably was costs that made the textile industry leave Bursa. The escape from quality influenced by the European crisis also might have affected Bursa negatively. Here is the critical question: when will the hike in oil prices and the inferiority of the Turkish public finance infrastructure reverse the competitive advantage of Kahramanmaraş and Gaziantep?

Do you know how big the size of the hole in the public budget would be if it was not for oil revenues? Please check this.

This commentary was published in Radikal daily on 03.04.2012