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The relationship between industrial policy and current account deficit

Last May, I was a panelist in the special session called "The Relationship between Industrial Policy and Current Account Deficit" organized by the TÜSİAD Competition Forum of which I am one of the co-chairs.

Major topics of the meeting, where the ministry of economy, too, delivered a presentation through a representative, were the following:

  • Structural problems that negatively effect the current account balance of Turkey
  • The importance of increasing added value and efficiency in industry,
  • The scope of the recently drafted incentive package...

There were many questions about the content of the incentives, and I tried to share my views on how this issue was perceived by the private sector.

In my observations, I focused particularly on the two main aspects, i.e. increase in added value and efficiency (savings), which are essential to reduce the current account deficit.

Highlights regarding added value


Determining incentives in Technology and R&D in line with sector and competitiveness needs… Assessing R&D incentives together with long-term analyses of the sector and competition.

Identifying new targets and a peg in technology.

In which fields/industries will we aim to apply new technology? Do we stand a chance in competition? At that point, I emphasized the necessity of creating a “peg”, that is, of effectively identifying university/industry collaboration clusters (e.g. nanotechnology).

Achieving increased added value and growth not only in existing business, but also in newly entered businesses.

This is one of the issues we also focus on in the Industry Group of Sabancı Holding. It represents a crucial opportunity to add value that we can seize by developing our competencies of market development, and business model extension (growing from product toward service)…

Highlights regarding efficiency/savings

Profitability rates in Turkish companies are below the global average (mainly because of scale, low added value, and efficiency)… We are producing low-technology products. To change that, we need efficiency as much as innovation. Under this item, I focused mainly on energy and corporate efficiency.

Energy efficiency

Since Turkey imports large amounts of energy, energy investments have to be coupled with comprehensive incentives for energy savings.

Corporate efficiency

In other words, a higher level of maturity in the company's main processes. Attaching importance to reinforcing "strategic planning/market research" processes that are the most important ones when it comes to increasing added value…

In addition, with reference to the Industry Strategy Paper, GİTES – the input supply strategy of Turkey, and the incentive package, I pointed out the importance of a meticulous and detailed planning approach in selecting strategically significant industries. Critical success factors are the following:

"Our localization efforts should be geared toward being globally competitive” (at world quality/at world prices), and our incentives need to be structured accordingly.

We need to “assess competitive conditions in the long term”, i.e. devise strategies based not only on current competitive conditions, but a projection of 10+ years. In other words,

  • global and regional (the Balkans, CIS, MENA) competitive conditions need to be scored according to supply/demand balance, ease of access, size of investment, attractiveness, delivery times, and a current SWOT analysis of that specific industry in a country;
  • and "target areas" need to be selected in line with the total public resources budgeted for the next 5 years.
In summary, it was a constructive and guiding presentation in the panel discussion where we had active participation of "university-private and public sectors". And perhaps most importantly, we all understood the necessity to cooperate as organizations and leaders (with the urgency of a mobilization campaign) for "more competitive and value-added growth in industry" which is vital for Turkey's future success. We are at a very critical and valuable point in time for our country, which is still "young" with regard to a culture of cooperation, to create good examples in this field.

Kind regards,

Mehmet N. Pekarun