Speaking to reporters after meeting with Houston-based Energy Allied International's Chairman and Chief Executive Officer Mike Nassar in Ankara, Çağlayan said the US firm will be producing a number of chemicals as a result of their investment in the country, but that two of its products are of particular importance because Turkey currently imports them in large numbers from overseas.
“The production of these two products -- which Turkey incurs a foreign trade deficit of some $700 million to procure -- will be an important part of our efforts to prevent a further decline of the CAD,” he said. The minister did not, however, name the two products, nor where exactly in Turkey the said investment will be made.
Because its economy grew at an above-world-average rate of 5.4 percent per annum between 2002 and last year, Turkey, which is nearly completely dependent on foreign sources for its energy needs, has a constantly growing foreign trade deficit. Last year this deficit exceeded the $100 billion mark, or 13 percent of its gross domestic product (GDP). The deficit also resulted in a wide CAD which caused the country's foreign reserves to bleed out, bearing the risk of eventually dealing a fatal blow to its balance of payments if the government fails to find a permanent solution to the problem.
In the face of a quickly widening CAD last year, the central bank adopted an unconventional policy mix of lower interest rates and higher required reserve ratios to make Turkey less attractive for highly volatile, short-term international capital inflow while at the same time making it more difficult for consumers to take out loans from banks, in order to tame credit expansion throughout the year. The measures were coupled with government action taken late last year by the executive branch to substantially raise what is called the private consumption tax (ÖTV) on certain -- mostly imported -- products such as cars and cell phones.
The structural issue, however, is that Turkish industries rely heavily on foreign intermediate goods to produce final goods to be exported abroad. To address the issue from that angle as well, the Justice and Development Party (AK Party) government recently introduced a new investment incentive package that offers special incentives to investments in particular fields -- such as the automotive, chemical, textile and machinery sectors -- defined as strategic.
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Source : todayszaman.com
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