Stuck in Between: Transforming Turkey’s Manufacturing Industry
It is now a truth universally acknowledged that something very exciting -and a bit terrifying- is happening in manufacturing. After several decades of disregard, the art and science of “making things” seems to be fashionable again. With manufacturing on the rise, it is hardly surprising that industrial policy also is back. As public opinion is turning in favor of industrial policy, the odds of it being taken more seriously by politicians and policymakers are getting higher as well. This is why it is a good idea to take manufacturing strategy documents more seriously these days.
The perils of deindustrialization have been widely discussed and analyzed in the last few years, especially after the shattering performance of the finance sector, leading to our latest global economic crisis. Fortunately, such a danger is not as potent in Turkey as it has been in other places, since Turkey did not completely and properly industrialize its economy in the first place. Its middle-technology industry is neither innovative as Finland, nor productive as Germany. And it is no haven for those looking for cheap labor, either. What Turkey was able to achieve in the last few decades in terms of expanding its market and product variety was not fully taken advantage of. In fact, research shows that Turkey’s successful expansion to the Middle Eastern and African markets is posing a threat to its manufacturing sector’s technological advancement. To sum things up, with an image –and structure- stuck between China and Italy, Turkey’s manufacturing can neither compete with China’s prices, nor Italy’s quality. This may pose serious challenges of survival for its firms in very near future.
The strategy document that will hopefully lay the roadmap of Turkey’s manufacturing; “Transformation in Manufacturing Industry Ad-Hoc Commission Report” will be available to public shortly. TEPAV undertook the rapporteurship of this report, which was written based upon the recommendations of a commission including many stakeholders from state institutions and private sector. The main purpose of this document is to lay out the recommendations that can help Turkey’s manufacturing industry to become smarter, greener and more innovative. The report contains the usual elements of an industrial policy document: Plenty of references on technological advancement and innovation, discussions and suggestions on horizontal areas, some -though fortunately brief- insights on sectoral strategies, and proposals for better use of policy tools to achieve the ambitious targets.
The report also includes four thematic areas that can act as anchors in implementing policies: A more inclusive manufacturing sector for women, green production, internationalization of SME’s and smart urban transformation. These four problematic areas of Turkey’s economy can turn into pillars of strength with timely action. With women’s labor participation rate still as low as 29.5 percent in 2012, a more woman-friendly industry only makes sense. Green manufacturing, which once was a seemingly-extravagant option in growth agenda, is turning into a vying battleground in advanced manufacturing with increasing concerns about energy efficiency and global warming. Recent technological developments such as additive production processes place SME’s in the very center of international competition in advanced manufacturing. The report, differently from its previous counterparts, also recognizes the regional differences[1] in patterns of production and recommends a framework on how to design region-specific industrial policies.
Turkey’s track record when it comes to implementing these lengthy strategy documents is hardly flawless, yet the report is a good starting point for the renewal of the discourse on competitiveness. Will Turkey’s manufacturing industry be able to achieve the transformation it so badly needs and half-heartedly pursues? This question, like many others, boils down to the middle income trap issue. The Ad-Hoc Commission Report can ignite a transformation, if it is used right. It is time for Turkey to stop day-dreaming, make up its mind and take action.
[1] Turkey’s experience in dealing with regional disparities has usually been limited to a developmental approach, yet competitiveness-based regional policies have begun to take shape in the last decade.
