Turkiye’s machinery exports increased by 10% in the first half of the year compared to the same period of 2022 and broke a record with $14.1 billion.
According to the data of the Machinery Exporters’ Association (MAIB), the exports of the machinery manufacturing industry reached $14.1 billion in the January-June period of this year, when the free zones are included.
In the said period, the export unit prices per kilogram of the sector increased to $7.2, while the highest foreign sales were made to Germany with approximately $2 billion. Exports to Russia approached $1.4 billion. Among Turkiye’s top 10 markets, only exports to France decreased.
Despite the Eid al-Adha holiday, the sector’s exports in June increased by 2.7% compared to the same period of the previous year.
“The growth in machinery investments in Europe will continue despite the difficulties”
Kutlu Karavelioglu, Chairman of the Machinery Exporters’ Association, told Anadolu Agency (AA) about the export figures and developments in the sector, that only France among the top 10 markets experienced a decline in the first half, while Germany’s share was 14% and Russia’s approached 10%.
Expressing that industrial demand slowed down in the first half of the last year, which was stagnant on a global scale due to the tightening in monetary policies, Karavelioglu noted that they expect the growth in machinery and equipment investments in Europe, where 60% of Turkiye’s total machinery exports are realized, to be at the level of 2.5% despite all the difficulties.
Karavelioglu stated that the orders fell due to the demand that remained below the global supply capacity, that this situation led to a decrease in profits and that the decreasing profitability turned into reluctance for new investments, and that companies concentrated on pending orders in this period.
Karavelioglu stated that existing investment budgets in developed countries shifted to the R&D side, investments centered on productivity and quality increase in the new period came to the fore, and this investment trend, which will continue for a long time, will also affect the quality and technology class of export products, adding that investments in green transformation, digitalization and automation will have a positive impact on the demand for machinery and equipment.
“Exports and investments should be financed with more affordable costs”
Kutlu Karavelioglu pointed out that the Corporate Sustainability Obligation, whose legislative process continues in the EU, will bring a second filtering in this period when it is difficult for exporting businesses to get new jobs, and said, “In this period when large penalties await companies that do not comply with the rules in terms of sanctions and audit mechanism if they fall under the law as turnover, European companies will be very meticulous in monitoring the development and competence of their value chain partners.”
Referring to the effects of the financial tightening on access to finance, Karavelioglu stated that in this period when machinery prices increased, the need for borrowing and the increase in production costs had a negative impact on sales.
Karavelioglu stated that investment goods are sold with trust and customer financing, and the payments are spread over time in installments, and continued as follows:
“For this reason, the fact that machinery manufacturers can borrow money with low interest rates and find medium and long-term loans for their customers is the main element of competitiveness. We see that our competitors are more advantageous than us in this regard, especially in our country, in all major machinery markets with which we have fierce competition. In the last 1.5 years, on the one hand, our competitor has the highest domestic value added rate in Turkiye, that is, the industrial sector that makes most of its expenses in TL, with the expectation of a horizontal recession, has been affected by the limited prices. As a result, we have seen that we have reached the strength to carry this heavy burden, but we believe that the CBRT, Eximbank and public banks should finance exports and investments at more affordable costs, in a way that does not contradict the principles of returning to rational policies.”
“The increase in imports shows that we are not able to protect our domestic manufacturer”
MAIB President Karavelioglu emphasized that in this period when exporting became difficult, the import boom, which is the main source of the foreign trade deficit, should also be addressed, adding that $42 billion worth of machinery was imported in the last 12 months as a result of the attraction created by the appreciation of the TL in imports.
Noting that machinery imports increased by 28.6% and reached $18.5 billion in the first 5 months of this year, Karavelioglu said, “We are seeing the signals of an import size that will reach $45 billion at the end of the year and a trade deficit of close to $15 billion. The fact that a significant part of this deficit is against Far Eastern goods, shows that we cannot protect our domestic manufacturer as much as our Western competitors, who are gradually tightening their measures.”
“Resetting the additional customs taxes creates a weakness”
Kutlu Karavelioglu stated that the advantages provided by the Investment Incentive System facilitated the import of dumped and low-tech goods, especially from the east, and concluded his words as follows:
“Last year, the amount of machinery whose import was encouraged within the scope of investment incentive certificates was around $19 billion. It is seen that the share of domestic machinery in machinery needs of the general manufacturing industry, which will make 65% of the investments in the first 4 months of this year, in which 5,400 investment incentive certificates amounting to ₺360 billion was issued. However, it is seen that the share of domestic machinery in machinery needs is around 72% in mining investments, 97% in agriculture, and around 89% of domestic machinery in energy investments, which is one of the most technologically advanced branches, to protect our machinery against unfair competition. “We need to underline again that the zeroing of the additional customs duties imposed is a very important weakness. We think that being rational requires quickly closing all the back doors in import mechanisms and protecting machinery manufacturing, which has been declared as a strategic sector in all plans of the public, with a determination that will not fall behind our competitors.”
Source: AA / Prepared by Irem Yildiz