Turkey's Transition: A Window of Opportunity

AgExporter, Oct, 2000 by Susan R. Schayes, Russ Nicely, Ibrahim Sirtioglu

For years, Turkey aspired to be a hermit from the hubbub of world trade, producing and buying all of its goods domestically. This commitment to self-sufficiency began to change in the 1980s, when the country made moves to open its markets to the world.

But many restrictions still remain. The state was slow to privatize key commercial sectors, and to a large extent the agriculture sector failed to become efficient. Big Turkish farms remained under government ownership and imports of livestock were periodically banned.

Now, at the start of the millennium, that is all changing too. And, while Turkey's market challenges, it also rewards.

Free Trade's Blessings and Burdens

The road to freer trade is often a bumpy economic ride. On one hand, Turkey's growth surpassed that of many of its fellow developed nations; it stands as one of the world's 20 biggest economies. Two decades of open markets, combined with sustained economic growth, have brought dramatic changes for Turkey's people. They have more income now, but they need more money. Inflation, which ranged between 70 and 100 percent a year, devoured most income growth, forcing more women to move into the workforce. Also, taste preferences and cooking habits are shifting dramatically.

The government isn't standing idle, however. Turkey's Central Bank and Treasury called on the International Monetary Fund and World Bank to help control the rampant inflation.

To revitalize the economy and break the inflationary pattern, the Central Bank and Treasury have just agreed to work with the International Money Fund and the World Bank. The agreement requires the Central Bank to slow exchange-rate depreciation and cool interest rates through less government borrowing and tighter fiscal policies.

One short-term result of this tough prescription, which began last year, is that imported goods may become less expensive relative to domestic goods. As more imported products appear on Turkish retail shelves, consumers are noticing their high quality and have begun to demand more choices. Turkey's efforts to obtain membership in the European Union (EU) have also brought about changes in policies and regulations, which present both challenges and new opportunities.

Government Okays Blended Oils

While opening its market for trade was the biggest change, there have been smaller recent transitions in Turkey that affect U.S. exporters.

One occurred last year when the Turkish Institute of Standards allowed producers of vegetable oil to attempt an innovation-creating their own formulas of blended cooking oils. Previously, oils were branded and marketed according to origin, such as sunflower or soybean. The old policy was an extension of Turkey's efforts to protect its domestic oilseed industry with high tariffs, ranging from 28 to 38 percent. Oil production normally drives the local crushing industry. With 180 plants and a total crushing capacity of more than 4 million metric tons, Turkey is a major processor and regional exporter of vegetable oils and products.

The new policy will primarily benefit the world's soybean and canola producers. It is especially good news for U.S. exporters, whose soybean exports to Turkey reached about 242,000 tons in 1999.

Blended oils would afford price relief to Turkey's beleaguered consumers. The blended brands may surprise their palates at first, but will certainly please pocketbooks.

Meal Also Doing Well

U.S. soybean product exports had a boom year in Turkey thanks to many factors. There were favorable market conditions and attractive prices. The American Soybean Association's marketing programs also helped. Another reason: the availability of FAS' GSM-102 program, which helps finance over half of U.S. agricultural exports to Turkey This program allows importers to maintain or increase U.S. sales in countries where financing may not otherwise be available.

U.S. soy meal exports to Turkey to doubled to 268,000 tons during l999 and increased again in the first six months of the new marketing year. U.S. soymeal alone captured more than 51 percent of the market, surpassing South American imports after many years.

Turkey's dynamic poultry industry, which is by far the major user of soybean products, continues to expand at rates over 10 percent per year. To meet demand for economical and nutritious poultry feed, some producers, traders and oilseed processors are building new soybean crushing plants, an infrastructure improvement that presents obvious benefits for U.S. suppliers.

USDA'S Facility Guarantee Program, which provides financial backing for the building of trade-related infrastructure, is an important financing option.

Increased Opportunities for U.S. Corn

U.S. corn producers recognize that Turkey's poultry industry, and expanded demand and production of high-fructose corn syrups, provides them with opportunities for U.S. corn, even though a variable duty which can range from 30 to 55 percent continues to restrain imports. The Turkish Grain Board recently used the GSM-102 Program to purchase 155,000 tons of corn. At close to 900,000 tons in 1999/2000, U.S. corn sales to Turkey were practically double their 1998/99 level.