Until a few years back, Turkey was the gladiator that everyone in a economically troubled Europe and politically troubled West Asia looked to for inspiration. But it has faced strong headwinds of late – political instability, soaring debt, widening trade defict, etc. But the setback seems temporary. Burak Akçapar, Ambassador of Turkey to India tells The Dollar Business why the Ottoman Empire’s might isn’t compromised, and how its trade chords with India can be tuned for mutual benefit in foreign trade.

Interview by Vanita Peter D’souza | October 2015 Issue | The Dollar Business

TDB: Lately, Turkey hasn’t really been an oasis of calm with calls for even the imposition of martial law. Tell us a bit about the political situation back home.

Burak Akçapar (BA): Turkey has a well-established, functioning democracy. We will hold national elections on November 1 this year. The situation in Iraq and Syria has left Turkey combating two terrorist organisations simultaneously. Turkish security forces are strong enough to deal with all threats and risks to national security. At the same time, international cooperation is required to defeat the global scourge of terrorism.

TDB: How are political instability and security concerns affecting the Turkish economy?

BA: One would do great disservice to the principles of democracy by defining the functioning of institutions as prescribed by the constitution and the rule of law as “political instability”. Last June, elections were held. No political party had won a majority in the parliament, and political parties could not agree to form a coalition government in the constitutionally prescribed period, and therefore we are having fresh elections on November 1.

Turkey’s economy is the 18th largest economy in the world. The Central Bank of Turkey is closely monitoring global economic developments and the financial system of Turkey. Additionally, regulatory and supervisory authorities in Turkey are established to regulate different types of markets. Some of them are the Banking Regulation and Supervision Authority, The Information and Communication Technologies Authority, Energy Market Regulation Authority, Competition Authority, Accounting and Auditing Standards Authority, etc. With the support of these authorities, Turkey is monitoring and regulating the most important elements of the Turkish economy very carefully and taking necessary precautions.

TDB: How has the loss of almost 50% in value of the Turkish lira during the last one-and-a-half-years been affecting the country’s trade?

BA: The Turkish lira has been depreciating in the overall context of the global economic issues. In all so-called emerging markets the US Fed’s decision on interest rates is awaited and watched very closely.

The Central Bank of Turkey has allowed exchange rates to fluctuate and does not interfere with foreign exchange too much. Besides, The Central Bank chooses not to raise interest rates on Turkish Lira to keep the growth rate at the target level. It chooses macroeconomic growth over an artificial check on inflation in the Turkish economy.

TDB: Turkey has a massive trade deficit, particularly considering the size of its economy. How big a concern is that? What is your government doing to rein in the deficit?

BA: In 2014, Turkey’s foreign trade deficit decreased by 15% owing to the fall in the cost of oil imports and rise in exports to EU. This trend continues in 2015, as well. In the first half of this year, foreign trade coverage ratio increased from 67.9% to 69.5% when compared to the last year.

One of the important instruments used by Turkey to decrease trade deficit has been the Strategic Investment Incentive Scheme within the New Investment Incentive System of Turkey, which was introduced in April 2012. It has been recently launched for supporting production of intermediate and final products with high import dependence with a view to reducing the current account deficit. We aim to increase the domestic production capacity of the imported goods.

On the basis of the “Input Supply Strategy”, this scheme also targets encouraging high-tech and high value added investments with a potential of strengthening Turkey’s international competitiveness.

The second important tool that Turkey has been employing are the Free Trade Agreements. Turkey has signed FTAs with 22 countries and is negotiating with 14 countries. 

TDB: The value of India-Turkey trade has almost doubled in the last five years and is in favour of the former. How satisfied are you with the current trade figures? What do you think should be done to boost it further?

BA: Turkey runs a huge trade deficit with India. This is because Turkey does not enjoy the same benef?ts and access that Indian companies enjoy in entering Turkish market.

Right now, Indian companies enjoy certain market access privileges offered to the Developing Countries by the Generalised System of Preferences of the European Union (EU). We do not expect parity but I have been calling on the Indian authorities to be more responsive to the needs of both countries. Lack of movement in updating the basis of our economic relations, including the trade agreement framework, inhibits further growth of the overall trade exchanges in both directions. Since 2011, we have been hoping and pleading that India should start acting in order to bring our trade relations up to the levels in a way that would benefit both our countries.

The products traded between Turkey and India are complementary in nature. Our bilateral trade adds dynamism to both countries. The signing of a Comprehensive Economic Partnership Agreement (CEPA) between Turkey and India will offer an important opportunity to broaden our economic relations in this respect.

At the tenth meeting of Turkey-India Economic and Technical Cooperation Joint Committee held on 30-31 January 2014 in New Delhi, Turkey has again proposed the start of the negotiations for concluding the CEPA, as quickly as possible. I regret to say that negotiations between Turkey and India have not started although an official Joint Study completed four years ago has strongly recommended the signing of a CEPA.

India has been lagging behind Turkey’s other partners in Asia and the Asia-Pacific in terms of executive action to promote bilateral trade. Turkey and Korea have signed the Deep and Comprehensive FTA which also covers trade in services and investments [on February 26, 2015]. The Turkey-Malaysia FTA was signed on 17th April 2014, and the internal ratification process is about to be concluded very soon. In 2014, Turkey also started the negotiation process for Economic Partnership Agreements with Japan and Singapore.

We know India is negotiating an FTA with EU. As soon as the India-EU FTA enters into force, Indian firms will be unable to make use of GSP privileges in Turkish market. And Preferential Regime will only be possible with an FTA. India shall lose over 6 billion dollars a year of exports overnight.

We’re not satisfied with the trade figures. We think that the trade volume between Turkey and India can reach 22 billion dollars. There is no reason not to attain such figures. The most important thing is that Turkey and India should understand each other better and start acting.

Our Commercial Counsellors tell me that they spend most of their time in finding good and reliable suppliers from India for Turkish importers. We are not concerned about imports from India, but we are concerned about our exports. It is in the nature of trade that when you export, you also try to import from the respective country.

Firstly and mainly, FTA (Free Trade Agreement) should be signed in order to boost these numbers. Secondly, Custom rates are much higher in India. When you want to export your product to India, you come across not only custom taxes but also some other taxes as well. There are some other trade barriers like anti-dumping cases and import quotas which affect Turkey’s export to India.

TDB: In the last few months, several Indian ministers have visited Turkey and vice versa. PM Modi is said to be visiting your country in November. What are you expecting from these high-level visits?

BA: The relations between Turkey and India hold tremendous potential. Turkey and India are both G-20 countries. There are prominent figures in their regions. They have convergent views on several issues and possess complementary capabilities. Yet the level of high-level interaction and consultation until recently was not at a level that our friendly relations merit. Fortunately, momentum has been taking a turn for the positive. The last Prime Minister of India to visit Turkey was Shri A. B. Vajpayee. In the past few years we have had the honour of hosting the Honourable President, Vice President and the Ministers of External Affairs and Finance from India. Turkish Deputy Prime Minister, Minister of Foreign Affairs, Minister of Finance, and Minister of Economy have visited India as well. We have held Secretary level Foreign Office Consultations.

Our gaze is now on the visit of the Honourable Prime Minister of India. We will be honoured to welcome the Prime Minister first on the occasion of the G-20 Summit in November. PM Modi’s leadership is needed to clear the backlog of issues and open new horizons in the agenda of our potentially promising relations.

Haydarpasa Port in Istanbul, Turkey: This container terminal is main trading port in Asian side of the city.

TDB: Apart from traditional commodities that are offered by Turkey to India, what in the field of services can your country offer to India?

BA: When the production and exportation structure of the Turkish economy as well as the consumer habits in India are taken into consideration, there is a considerable potential in the sectors of automotive and auto parts, natural stones, textile machinery, chemical industry, plastic products, jewellery (precious metals and stones), glass and glassware products, leather products, electrical equipment, electronics, and construction materials.

The Turkish construction sector is the second in global rankings in terms of its fulfilled contracts around the world. 42 out of the world’s top 250 contracting companies are from Turkey. Today, Turkish construction and engineering companies are able to design, erect, build and operate all kinds of civil and industrial projects such as dams, hydroelectric and thermal power plants, industrial plants, airports and seaports, large scale petroleum and natural gas pipelines, motorway, tunnels etc.

Turkey can contribute immensely to the Make in India and Smart Cities campaigns of the Indian government. Turkey can also link individual states to Western markets effectively through Turkish Airlines. India can attract Turkish attention by addressing the Turkish business at high-level visits and engagements.

TDB: The Turkey-India FTA was proposed six years back, but till date, the proposal remains just that...a proposal. No negotiations have begun yet. Why so?

BA: Indian authorities did not want to. A joint study conducted by Turkish and Indian officials concluded that an FTA between Turkey and India would be beneficial for both countries. That document was created in 2011 but not signed. Signing that document and starting the negotiations would send a strong message to our business communities that both Turkey and India are for free and fair trade.

Seven billion dollars is not a trade volume worthy of two G20 countries with a combined GDP of $2.6 trillion. The bilateral trade volume with India can increase to over $22 billion in the next decade. This will not happen by itself. The governments must take action and lead.

TDB: Turkey is a Eurasian country – a bridge between Europe and West Asia. Do you think the nation can benefit from the EU-India FTA?

BA: It is up to India and EU to decide whether they agree on an FTA and to negotiate its terms. Turkey and India do not need to wait for that to boost their trade and investment relations. With its customs union agreement with EU, its 14 FTAs covering 18 countries, skilled labour force, advanced communication and transportation networks, and proximity to growing regions, Turkey offers a lucrative production and management base for Indian industries.

TDB: What are the steps taken by the embassy to promote Turkey as a tourist destination in India?

BA: Thanks to measures we have taken in the last two decades, Turkey is today very well placed in global tourism. Hosting more than 30 million tourists annually, Turkey is the 4th most popular tourist destination in Europe and 6th most popular in the world.

What makes our job in India easy is that Indian nationals who have visited Turkey do our advertisement themselves. I believe, in Turkey, they feel at home, and are welcomed with a friendlier fashion compared to most other destinations. Our e-visa facility also helps a lot. One would assume India would try to promote inbound tourism. However, despite all the interest and curiosity towards India in the Turkish public, tourism from Turkey to India remains low. Visa on arrival could help. But also we need to increase air connectivity. Sign the new civil aviation agreement and the comprehensive economic cooperation agreement and the relations would be poised for a historical turn and take off!