Turkey’s increasing trade with Africa hoped to combat CAD

Turkey’s increasing trade ties with Africa may well turn out to be, in the medium and longer term, a significant help in the country’s fight against its troubling current account deficit (CAD), which rose to $65.4 billion in 2013.

Turkey, whose bilateral trade volume with Africa reached $23.4 billion last year, hopes to achieve a trade volume of $50 billion with the continent in 2015. In 2010, the trade volume between the two partners was no more than $16 billion.

As part of efforts to boost trade ties with African countries, more and more joint events focusing on business have been held in both Africa and Turkey in recent years. Most recently, the Turkish Confederation of Businessmen and Industrialists (TUSKON) organized the “Turkey-West Africa Trade Bridge” business event last week, which brought together hundreds of people from Africa with their counterparts in Bursa.

The Istanbul-based Turkish Asian Center for Strategic Studies (TASAM) think tank’s African Institute is organizing the 9th International Turkish-African Congress next week under the theme “Sectorial and Financial Transformation in Africa.” Representatives from 25 leading African institutions will speak at the congress, which will be held in Istanbul on April 24-25. Turkey will probably also host the Second Turkey-Africa Cooperation Summit in November of this year.

“Such efforts will bear fruit in the medium and long term,” Ufuk Tepebaş, an Africa specialist who coordinates the Turkish-African Congress for TASAM, has told Sunday’s Zaman.

Although Tepebaş is hopeful that increasing trade ties with Africa will help significantly in Turkey’s management of its huge CAD in the long run, he finds the target figure for the trade volume between Africa and Turkey for the year 2015 impossible to achieve given the current trade volume.

Turkey’s chronic foreign trade deficit — which is widely attributed to an import dependency on intermediate goods and energy, especially oil and natural gas — is the major factor behind its outsized CAD. The government hopes the 2014 current account deficit will be under $56 billion.

Market experts are concerned that Turkey’s still-high CAD, which leaves an already-fragile Turkish economy especially vulnerable to external shocks as hot money becomes scarcer, will exacerbate the risk of a growth slowdown. The central bank said in December that the country’s huge CAD was holding back economic growth, adding that the bank would remain cautious in its monetary policy until inflation fell in line with its targets. In a bid to rein in CAD growth, the government is trying to control rampant consumer loan growth and raise the domestic savings rate from historic lows.

At the end of last year, Turkey’s membership process in the African Development Bank was finalized, a development which is expected to boost trade in a major way, as Turkish contractors are now able to bid for public tenders in African countries.

Noting that Africa is a rapidly growing market with huge possibilities for companies, Tepebaş said, “Our membership in the African Development Bank will open the way for bigger projects for Turkish contractors in the continent.”

Currently Turkish contractors come, in a rough estimate, after the Chinese, who are the market leader in Africa, and then French and Italian contractors in terms of the volume of business undertaken in the continent. This new membership may put Turkish contractors, who are known to have a good reputation in the continent, before their French and Italian counterparts, believes Tepebaş. “Recently, big Turkish contracting companies have been engaged in market research in Africa,” he added.

In an effort to boost Turkish exports to the continent, Turkey is planning to open commercial centers in certain strategic countries in Africa. Africa is expected to emerge in the not-so-distant future as a significant market and trade partner, with its relatively fast-growing economy. According to the International Monetary Fund (IMF) forecast for the year 2014, while global economic growth will be no more than 3.6 percent and growth for developed countries will remain at 2 percent and for developing countries 5.1 percent, the predicted growth for sub-Saharan Africa is as high as 6 percent.

Numan Hazar, a former ambassador and author of the book “Relations between Africa and Turkey in the Globalization Process,” also strongly believes that Turkey’s Africa initiative will pay. “Efforts to boost trade ties [with Africa] will seriously help to diminish the current account deficit in the medium and long term,” Hazar has told Sunday’s Zaman. “The positive effects of becoming a member of the African Development Bank will be seen in the coming days,” he added.

Together with China and India, Turkey is one of the most important strategic partners in sub-Saharan Africa, with Turkey’s investments totaling $2.6 billion. The three leading countries for Turkish investment in the region are, in descending order, Ethiopia, with investments worth $1.6 billion, South Africa, with $500 million, and Sudan, with $250 million.

The number of Turkish embassies in Africa, which numbered no more than 12 in 2003, has now reached 34. Back in 2002, the number of Turkish embassies in Africa with a commercial counselor was no more than 11, while the figure is now 25, with 17 of these in sub-Saharan Africa. Turkey is also planning to open commercial affairs offices in Gabon, Niger and the Ivory Coast.

In addition, Turkey’s national airline has increased the number of flights to Africa, which has played a major role in boosting the country’s trade and cultural ties with the region. Today, Turkish Airlines (THY) flies to 35 destinations in 24 countries in Africa.