(AA) – German exporters project record sales of €1.19 trillion, and Turkish exporters will profit as a large part of Turkish exports are used to produce final products in Germany.
“Turkey is mainly an intermediary goods exporter,” Bora Tamer Yilmaz, an economist with Ziraat Securities in Istanbul, told The Anadolu Agency. “This means items such as auto-parts or die-cast material for machinery are produced in Turkey first and then shipped to Germany for final assembly.”
Since Turkey exports 17 percent of its machinery production to Germany – by far the largest market for Turkish manufacturers – a drop in German exports cuts demand for those from Turkey. Germany exported goods to the value of 89.9 billion euros in January 2015, Germany’s Federal Statistical Office reported on Monday. This represents a decline of 0.6 percent year-on-year, the report said, and a drop of 2.1 percent compared with December 2014.
But, despite fluctuations in German exports, Turkey has had great success with its machinery exports. Turkey’s machinery exports, which were $1.7 billion in 2001, have now reached $12 billion through an average annual growth of 22.8 percent, which is above the annual growth rate of Turkey’s overall exports in the same period, pointed out the Turkish Machinery and Accessories Exporters Union.
“Turkey’s exports are still about 30 percent composed of intermediary goods,” an Istituto Affari Internazionali study on Turkey and Europe said. “But the international pressure on Turkish manufacturers has made them more competitive. And increased foreign direct investment, most of which comes from Europe, has made them more efficient.”
But the share of domestic value-added to technology products still lags in Turkey, meaning that intermediary goods and primary exports still predominate. “The high dependency of exports on intermediate goods and the low domestic value added of exports signal that, while growing its exports, Turkey has become an economy heavily dependent on foreign manufacturing,” the World Bank pointed out in a report published in May 2014.
But there are advantages to this relationship which the report pointed out, using the example of the Turkish automotive industry.
“The regional bias is striking both for exports and imports. Starting with exports, 67 percent and 59 percent of assembled vehicles and of parts and components, respectively, go to the EU-15, while 67 percent of motors (main parts) and 41 percent of flat steel (raw material) are destined to the EU-12. Exports of raw materials are indeed the most diversified, with 35 percent and 17 percent going to the ECA countries and the MENA region, respectively. Even more concentration is observed for imports, where the EU-15 absorbs 72 percent of the Turkish import market for finished vehicles, 66 percent of the motors import market, 62 percent of the market for parts and components and 46 percent of the raw materials. Turkey’s regional integration in intermediate goods is also evident more generally, beyond the automotive sectors.”
As the report shows, regional integration of Turkish exports has given them a powerful position in the market. The report cites the development of Turkish textile exports, which have also achieved a high level of regional integration, so that Turkish firms are even responsible design of major European brands.