Interview

Minister Tüzmen: A Passion for Trade

Kürşad Tüzmen, the minister of state responsible for the Undersecretariat of Foreign Trade, will be no stranger to many of our readers. The minister’s passions are swimming, scuba diving and, above all free trade. In his patriotic efforts to sweep away barriers to the circulation of goods, he spent 486 hours on international flights last year – “more”, he points out, “than the pilots”. When Bernard Kennedy caught up with Tüzmen in Ankara last month, he had just returned from Bulgaria and was about to leave for Istanbul, Bursa and the OECD in Paris. “I don’t have the opportunity to see the growth of my children,” he admitted with characteristic frankness, “But as long as the economy shows this growth rate and exports boom, I think they can forgive me as a father.” The minister answered questions both about his own career and about a wide range of current trade issues…

Q How did you get involved in the foreign trade business to begin with?

A I was in the private sector between 1981 and 1984, and I felt that something was wrong. We were always having to import, there were no supporting industries, and the export figure was very low. And then they came along and said, “We need some talented guys. You know all about customs and that kind of thing. We’ll give you a job with the government on a contract basis.” So although the money wasn’t very good that’s how I started working with people like Yalçın Alaybeyoğlu [former Director-General of Free Zones] and Adnan Kahveci [a former Motherland Party – ANAP – theorist, deputy and government minister]. In 1984 along with five other people I became the founder of the Turkish free zones.

Q You were closely associated with the free zones for a long time…

A Yes, after that I became an expert of the Free Zones General Directorate within the State Planning Organisation. I got a British Council scholarship to visit free zones and study at East Anglia. I also went to the United States. I did a master’s degree. I visited the Shannon Free Zone in Ireland. After being a head of department and deputy director general, I worked as director-general of free zones from 1994 to 1997. During that time the exports of the free zones boomed. We became a member of the World Economic Processing Zones Association (WEPZA). I am now in my second term as WEPZA president after 44 countries unanimously voted me in again.

Q The free zones recently lost some of their tax advantages…

A The IMF wanted the changes. I said that they were doing the wrong thing. On the one hand the IMF would like to have more investments and more foreign capital but on the other we had to change the free zones law, and remove the tax benefits we had offered. I agreed there were problems but I said the free zones were not responsible – it was the inefficient way of doing things in the Finance Ministry and so on. I think it was the wrong decision. I argued about this a lot, but in the end the Prime Minister said we had to do it. The other ministers complained about me a lot on that occasion. I created clusters in the free zones. To have a real competitive advantage you have to have these input and output relationships. The government put only $10m into Antalya and $12m into Mersin. This was the total investment. And we got a volume of trade of $22bn. The free zones are still contributing a lot to the Turkish economy.

Q How did you come to enter politics?

A Next I became deputy undersecretary of free trade and finally undersecretary. During this time I was chosen “bureaucrat of the year” three times in the media. But in spite of this I was kicked out in 2002. At that time I got a lot of offers for CEO positions in the private sector. But I felt it wouldn’t give me enough satisfaction. I had learned from an early age that money wasn’t important, and I believed that this country deserved to fly higher. I wanted to see this happen, because I am a Turk – it’s in my DNA. Five months later I came back to the job as an elected member of parliament and government minister.

Q In these days of free trade, how much can a minister or a government do to increase the growth of exports?

A If you are in a developing country then there is a lot that you can do. Between 1999 and 2002, while I was undersecretary, I tried to implement a certain strategy. But as a bureaucrat you can’t turn your ideas into state policies. It was only when I became minister that I had the opportunity to make my strategy official.  We call it the “neighbouring and surrounding countries strategy”. In 2002, the volume of trade was about $87bn; last year it was $164bn. Exports have risen from US$36bn to US$63bn in the same period. While exports to neighbouring and surrounding countries amounted to only $2bn in 1999, last year they reached $18.5bn. If you use your whole potential – bilateral talks and visits, joint economic committees, fairs, agreements and so on – then there is a lot you can achieve.

Q How long can the trade figures go on rising at this pace?

A This year I think we can increase exports from $71bn to $75bn. It’s not easy with the appreciation of the Turkish lira but I will do my best. I think we can reach $80-85bn in 2006, $90bn in 2007 and $100bn in 2008. Back in 2002 I said that we would reach $100bn worth of exports in 2010, but if we continue at this speed it looks as if we can get there sooner. Of course, it depends on a lot of domestic and international factors. There are a lot of changes going on especially in our region. But I will do my best to achieve it. Our imports are also quite high so I expect we can reach a volume of trade of US$230-240bn in 2008. For 2023, the 100th year of our Republic, I am targeting a volume of trade of $500bn.

Q How does the EU fit in to this?

A The EU is a love affair. I used to admire this lady when I was a child. She was young and beautiful. My family was poor but I was hard-working and handsome. When I was six we were a potential member of the EU, and now I am 47 years old we are still potential members of the EU. Of course she is not so charming now. But at least we have an engagement date. And I am still optimistic that we will have a wedding date. In trade the EU is our number one partner, accounting for more than half of our foreign trade. Of course this will continue. The expansion of the EU to 25 countries gives us more opportunities to sell our goods and presents us with more exporters to buy from.

Q There are a number of trade issues currently affecting relations with the EU. Under the customs union, for example, the EU wants to export meat and used cars to Turkey, and there is a dispute concerning pharmaceuticals. Are we likely to see any progress on these issues soon?

A The relevant ministers are working hard on these issues. I can’t give you definite dates but we are working towards solutions. We have some problems concerning both exports and imports. In exports there is a lot of certification. There are no certification offices in Turkey yet and our exporters have to pay a lot to obtain their CE labels and so on. We also face problems exporting various foodstuffs. I must add that these are small issues; only 2-3% of our total trade is affected.

Q Arranging free trade agreements has also been a large part of your work...

A Without EU derogations, we can’t sign a free trade agreement with any country. However, the EU can freely make free trade agreements without giving us any notice. This creates a lot of unfair competition. For example, the EU has reached a free trade accord with Mexico. As a result, Mexican shoes can freely enter our market but when we want to sell our products to Mexico, high tariffs are imposed on us. I said to Pascal Lamy, “Come on; we have to find a way.” This is why we are making all these free trade agreements. I have devoted a lot of energy to this. I would like to change the whole Mediterranean into a free trade area as I said when the Euromed ministers met in Istanbul in 2004.

Q What are the prospects for further free trade agreements?

A We completed four free trade agreements last year, with Morocco, Palestine, Syria and Tunisia. We already had an agreement with Israel, as well as many European countries. I think if Lebanese Prime Minister Rafik Hariri had lived we would have been signing with Lebanon around this time. He was a good friend of mine. I have been in this business ever since I became deputy undersecretary of foreign trade. So our counterparts have known me for seven or eight years. They trust me. They know that I would like to increase trade in both directions. I know all the heads of state of the neighbouring and surrounding countries personally. The important thing was to clinch a free trade agreement with at least one Arab country, and then the others would follow, since they understand our sincere approach to them. One of the countries we are still talking to is Egypt. In May we expect to complete negotiations on all the issues and I think we will have the free trade agreement in June.

Q Are you worried about the large trade deficit and in particular the tougher world market for textiles and clothing this year following the abolition of quotas?

A Turkey has always imported more than it exported. The ratio of the trade deficit to the total volume of trade is about 20% at the moment. This is a reasonable level. Meanwhile, a huge transformation is taking place in Turkish exports. For example we can now export $11bn in the automotive sector, $9bn in iron and steel, and $6bn in electronics and electrical equipment. One out of every two TV sets in Europe is made by us. As a result the share of textiles and clothing in our exports is coming down from 35% previously towards 25%. This diversification is good for the country. Garment exports will go on increasing substantially but their share in the total will be lower than before. Tunisia and Morocco are complaining that their textiles exports to the EU are running 40% lower than this time last year. But our textiles exports are up by 11%.

Q Turkey has particularly large trade deficits with certain countries including Russia and China. What can be done about this?

A I think we can do something about this that over time. In 1999 our deficit with the United Kingdom was $1.5-2bn. But now we have a surplus of $500m, because we have acquired some competitive advantages and increased our exports. I think this can be repeated with Russia, France and so on. But for Far East countries which are constantly reducing their exchange rates it’s very difficult. Our NGOs are taking up these issues and I try my best within the bounds of customs union and WTO regulations. There is no easy answer.

Q What is the latest situation concerning importers’ unions? Are they intended as a kind of barrier to imports?

A We are going to convert the importers’ unions to foreign trade unions. This may take a little time because it requires a change in the law. At first some people thought that the importers’ unions would create a barrier to trade but that’s not our aim. I have always had a very liberal attitude. I believe you should abolish all barriers. We have just a 3.4% barrier to third countries. The reason for creating these unions is that I want to have the right figures as soon as possible for imports, just like we have for exports. We will have more information and better organisation. It will help us to know what is happening and to set up more institutions, for example in fashion. There may be more high level study centres.

Q Is there any other message you would like to give to our readers?

A This is the right time to invest in Turkey. I think we have enough political stability and our macroeconomic indicators are very good. I am proud and honoured to be able to say that we are a country with a volume of trade of more than $160bn. Definitely we are on the road to success, and there are still some empty seats in our wagon. So join us and be a part of our success.