We are designing incentive systems so that a few non-professionals can find jobs. They are designing incentive systems to create world champions.

Another question left from my visit to Seoul was “Why has Turkey not been able to create a Hyundai?” Some of you might say, “We are fed up with your memories of the two-day Seoul trip!” And you are right. But what can I do? I was really impressed.

Well-designed sidewalks were not the only thing that grabbed my attention in Seoul. The brands of cars on the streets also caught my attention. Whenever I visit a country for the first time, I take a look at the brands and classes of cars. It is like an income test for me. What are the prevalent brands? Are cars old or new? How is society at driving? What came as a surprise to me in Korea was that I had never seen a large part of the car models before. Yes, I saw a Mercedes now and then, but I never came across a Honda, Ford, or Renault. Instead were all kinds of domestic brands: Hyundai, Kia, SsangYong... And the models were not those I am used to seeing in Turkey. They all were new. The skyscrapers all around Seoul were quite familiar, but the cars were completely unfamiliar. This was highly interesting to me. Then I learned that Hyundai and Kia are different brands of a single company. Hyundai Motor Company is the fourth largest automobile manufacturer in the world. It is a Korean company established in 1967.  So, don’t you wonder how Korea has achieved this success? This is exactly what I did, too.

Did you know that Korea and Turkey started to manufacture cars around the same time? They launched their car industries in 1955 and in 1959, respectively. Both started with assembling auto parts manufactured in other countries. It was the era of import substitution and both Korea and Turkey implemented this policy. Then they did something we did not. They succeeded and we are stuck in the middle of nowhere. So let me tell you what they did and you decide. At the start, Korea was assembling Japanese and American automobiles; Turkey started with Italian and French. Meanwhile, both Korea and Turkey incentivized and supported domestic automobile manufacturers. By the 1990s, Korean companies started to introduce domestic brands. Turkey, on the other hand, continues manufacturing foreign brands. Korea made a leap in the 1990s; Turkey did not. So, what have we done wrong?

There are two types of countries in the world: those that can switch from import substitution to domestic production in the automotive sector and those who cannot. In the first group are countries that have been able to make a leap in the fields of design, performance and technology, and in the second group are those who have not. Korea is in the first group while Turkey is in the second. As the 2011 figures suggest, there are 21 automobile manufacturing countries in the world. Korea is fifth among them, with 4.6 million automobiles manufactured each year. Turkey ranks seventeenth, with 1.1 million cars per year. Our ranking in the global economy is the same as that in automobile manufacturing. Korea went beyond the one-million-barrier in 1988. We are still there, fourteen years behind them. So, don’t you wonder what we have done wrong?

Particularly since 1980, Korea has been providing incentives to supported automobile manufacturers on the basis of performance, mainly export performance. It has been protecting domestic automotive companies provided that they are competitive on the global scale. When designing the incentive system, Korea has paid special attention to making sure that there is competition across the incentivized sectors. China is doing the same. If there is no competition, there are no sector-specific incentives. Companies become world champions only through keen competition.

I think this is what Turkey has done wrong. We are designing incentive systems so that a few non-professionals can find jobs. They are designing incentive systems to create world champions. We are making effort so that a couple of unlicensed businesses can continue production while they are trying to grow small firms into world champions. What has changed in Turkey during the last decades? In the past, we used to name the automobiles we assembled after kinds of birds. Today, we are asking foreign firms that have manufacturing facilities in Turkey to name one of their new models after a Turkish city.

This commentary was published in Radikal daily on 15.05.2012