Exchange rate statement from İTO President Şekib Avdagiç

Exchange rate statement from İTO President Şekib Avdagiç

Istanbul Chamber of Commerce (ITO) President Şekib Avdagiç made important statements to the İHA reporter regarding the economic agenda. Avdagiç stated that, as the business world, it is important for the exchange rate to progress on a realistic path for Turkey to achieve its export-related targets and said, “The business world has 3 problems that most urgently need solutions to. The most important issue is that Turkey should never get stuck in achieving export-related targets. One of the most important issues for this is that the exchange rate is realistic. I’m not saying the exchange rate should rise or fall here. “In our opinion, the most important indicator of a realistic exchange rate is that the correlation between the inflation increase and the exchange rate increase does not deteriorate,” he said.

Avdagiç emphasized that the sudden movement in foreign currency disrupts the correlation between inflation and exchange rate increase, and emphasized that the business world expects a ‘reasonable and balanced exchange rate course’.

Avdagiç said, “We started 2023 with 19 lira to the dollar, we finished it with approximately 29 lira, but during the year there is roughly an increase of 0.9 lira every month. Arithmetically, but it didn’t happen that way. The dollar remained at 19 liras for 5-6 months, then it rose very quickly to 27-28 liras. There were rapid exits like this in previous periods as well. Therefore, there is still a defense mechanism in our genes against sudden changes in foreign exchange in the business world. It is very important that this expectation is eliminated. Because, accordingly, people will invest more of their savings in TL, they will be able to make more predictions and meet their credit needs in valuable currency. Our current expectation is a reasonable and balanced exchange rate increase. Here, perhaps, if inflation is always 40 percent, when the exchange rate increases by 36 percent, even if not by 40 percent, the correlation is intact. But we do not find it true that if the exchange rate increases by 20 percent where inflation is 40 percent, the exchange rate has no effect on exports. “We are on this line,” he said.

“WE WANT TO HAVE A REALISTIC AND STABLE EXCHANGE EXCHANGE”

Avdagiç stated that it is dangerous to pronounce numbers about the exchange rate and said, “In my opinion, saying “the exchange rate should be this much” is dangerous. Where the exchange rate is 30 lira, saying it should be 40-45 lira means a very serious jump. Both rapid increase and rapid descent will hit you. Therefore, we want an exchange rate that is realistic, stable and correlated with inflation. We never pronounce numbers, and I don’t think that’s right. For example, you would reduce the dollar to 25; Then inflation will decrease and exports will decrease. But imports explode. Then how will you manage the foreign trade deficit? “So then you will deepen the problem that we have not been able to solve for years.” he said.

“WE NEED TO REDUCE INFLATION TO SINGLE DIGITS VERY QUICKLY”

İTO President Avdagiç pointed out that loan costs have increased recently. “Previously, there was a problem with access to loans, now the main issue is the high cost of loans,” said Avdagiç, adding, “As the business world, we know very clearly that, unless a desired downward trend in inflation occurs, the decline in loan interest rates will be a problem for both Turkey and the world.” It has no equivalent in terms of economic realities. We need to reduce inflation to single digits very quickly. Once it drops to single digits, it should be permanent or even lower. “Even 9-9.5 percent is a high rate right now.”

“WE WILL CONTINUE THE PROGRESS WE HAVE MADE IN MANY ISSUES WITH OUR NEW CBRT PRESIDENT”

“We will continue to share the necessary issues for the business world to move forward faster and more effectively with our interlocutors, Ministers, relevant institutions and local governments,” said Şekib Avdagiç, adding: “We do not lose hope. As representatives of the business world, we never have the luxury nor the intention to be hopeless. Even during Ms. Gaye’s short stay, we conveyed many issues to her, both in general and one-on-one meetings, and made clear progress on many issues that we had never disclosed to the public. Therefore, the same process will continue with the new CBRT President, Mr. Fatih Karahan. We see that those in this position take into account the demands of the business world like ours. Our communication channels are open with all Ministries and we can convey our issues. Many issues such as access to the workforce and reviewing the employment policy of our foreign guests are on our agenda in the processes facing the business world. We do not only have inflation, CBRT and access to financing on our radar. “We bring many issues to the authorities in many different areas,” he said.

“THE SECOND ISSUE WE ARE WAITING FOR A SOLUTION; “NOT MAKING IMPORTS ATTRACtive”

Noting that the second issue for which the business world needs an urgent solution is not making imports attractive, Avdagiç said, “If we expect exports to continue to grow in a balanced manner and imports to remain reasonably horizontal or even to decline, we must constantly increase the ratio of exports to imports above 80 percent.” required. We must provide the remaining 20 percent with tourism and service exports and achieve a balance.

Pointing out the effective and correct direction of domestic resources as the third issue awaiting solution, Avdagiç said, “It is very important to direct domestic resources effectively and correctly. Because if you cannot manage the perception and expectation correctly in this regard, people will continue to stay in foreign currency. “Their savings continue to remain in banks but in foreign currency under their pillows,” he said.

“TAX ON WAGE EARNERS HAS BEEN SPREAD TO THE ‘EXCESSIVE BASE’”

Touching on the issue of spreading the tax to the base, Şekib Avdagiç stated that he does not think this will create a new burden on the business world. Avdagiç said, “I agree 100 percent with our Minister of Treasury and Finance, Mehmet Şimşek, on this issue. In addition, the ‘excessive base’ tax on the wage earners needs to be made more rational. Of the 100 lira that comes out of the employer’s pocket annually, 51 lira goes to the employee. Due to the situation in these tax brackets, the employee immediately moves to the second bracket in the second month, and to the fourth bracket in the fourth month. “The employer is also a victim here, and the employee sees that he pays 40 percent of the figure he sees on the payroll as SSI and tax bracket,” he said.

“SERVICE IMPORTS ARE AT THE LEVEL OF 51 BILLION DOLLARS”

Avdagiç, who is also the president of the Service Exporters Association (HIB), reminded that they closed the year 2023 with 100 billion dollars in service exports. Avdagiç pointed out that in addition to service exports, imports should also be quantified and analyzed. Sharing the information that service imports amounted to 51 billion dollars last year, Şekib Avdagiç said, “Why do our exporters have to prefer foreign logistics companies? We must seek answers to these. Export and import of goods are concepts that have been known for a very long time and we follow them closely. Service exports are a new concept, but service imports are not a topic on the public agenda. Just as goods exports and imports are analyzed together, service exports and service imports should also be quantified, presented and broken down in the same way.

“WE SHOULD ATTRACT 1 MILLION YOUNG PEOPLE, NEITHER AT WORK OR IN SCHOOL, TO THE BUSINESS WORLD”

Stating that according to research, the number of young people who are ‘neither at work nor at school’ in Turkey is approaching 3 million, Avdagiç said, “The number of young people who are ‘neither at work nor at school’ in Turkey is 2.5 times that of the EU. Nearly 3 million of our young people are neither at work nor at school. We need to do whatever we can to attract 1 million of the nearly 3 million young people in Turkey who are ‘neither at work nor in school’ to the business world. We need to include the young generation in the business world as entrepreneurs but as employees, as employees in industry and commerce. Our generation also has a great responsibility. We educated these children and raised them in an aquarium. These young people are currently still living their lives with the pocket money given by their parents, without working, producing or entering the business world. We seem to be a bit on the extreme side here, between extreme and extreme. We should not just send a photocopy to a child who comes to another extreme state to do an internship and send it 4 weeks later. “A student should not graduate from the lathe-leveling department without being in charge of a lathe or CNC machine,” he said.

Explaining that they, as İTO, implemented the SoftITO project to train well-equipped people in 6 software branches, Avdagiç said, “We saw this there. In those classes, there are people with a doctorate degree in archeology, there are high school students, there are high school graduates, there are people who study at university but are not satisfied with their department, and there are university graduates. We opened a door for them, the second stage is currently continuing. “All the graduates are scrambling,” he said.

“WHERE WELDERS RECEIVED 100 DOLLARS DAILY IN TUZLA SHIPYARDS AREA, THEY NOW DEMAND 200 DOLLARS”

While ITO President Avdagiç drew attention to the inadequacy in the number of trained employees, he cited the welder shortage in the Tuzla shipyards region as an example. Avdagiç said, “While welders in the Tuzla shipyards area were receiving 100 dollars per day, they are now demanding 200 dollars. Now the process has reached the point of bringing welders from the Far East. But if we cannot educate our children and employ them in these jobs, there is a situation where we need to review the system. Our new minister continues the process through Vocational Education Centers (MESEM). I think we should develop MESEMs quickly, taking into account the positive and negative outcomes of the experiences experienced so far. We need to get a good output from there. “We must revive the journeyman and apprenticeship structure that is in our historical genes,” he said.

“WE SHOULD REVIEW OUR EDUCATION PLANNING”

Stating that the university has an important position in qualified workforce planning, Şekib Avdagiç underlined that the university concept needs to renew itself and said, “We should review our education planning. There is a university in each of our 81 provinces. We need to update this policy and sections. Yes, you need a university to become a doctor, an engineer, or a lawyer. But the software industry no longer requires 4 years of education. Having some certificates and adding new experiences can be more valuable than many things. For example, if you are going to be a chef, training with a good chef after completing reasonable courses is more valuable than being a 4-year university graduate. This trend also exists in the USA and Europe. Therefore, the university concept must definitely renew itself,” he said.



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