One of Türkiye’s top business associations has issued a call for strategic caution as Türkiye navigates its pivotal role in global logistics, particularly with projects like the Belt and Road Initiative (BRI), China’s modern-day revival of the ancient Silk Road.
Launched more than a decade ago, the $1 trillion project aims to connect Asia with Africa and Europe through land and maritime routes, which could redefine international trade routes – and, by extension, Türkiye’s role in global trade.
Nail Olpak, head of the Foreign Economic Relations Board (DEIK), emphasized the delicate balance Türkiye must strike to benefit from the initiative without losing its competitive edge. He says it should embrace new opportunities but also safeguard its traditional strengths.
Competitive advantage
Addressing a meeting with journalists in his hometown of Burdur, Olpak said China is reported to have spent around $50 billion-$60 billion on the Belt and Road Initiative so far.
He explained that China is trying to quickly and efficiently access wealthy markets, noting that currently, it reaches these markets via sea, with ships traveling from Shanghai to Amsterdam in 40-45 days.
However, he pointed out that a trial conducted two to three years ago through the Middle Corridor, which includes Türkiye, reduced the Shanghai-Amsterdam route to 11 days, with an eventual target to lower this to seven to nine days.
“A truck from one of our top export cities, Gaziantep, can reach Amsterdam in three or four days, but if China manages to reduce shipping times to eight days, we risk losing one of our biggest advantages,” Olpak said.
“Therefore, we need to be fully aware of what we’re applauding when we talk about the Belt and Road Initiative. Trucks coming from there won’t return empty. We need to figure out how to fill them.”
Olpak also warned Türkiye could face a significant loss in Europe, its biggest market. “We must evaluate this project from this perspective.”
“If we act wisely, we can turn this process into an opportunity,” he said and warned about the trade imbalance Türkiye has with China.
“China has become our biggest partner, but with a trade imbalance of around one to 10 against us. We need to close this gap.”
Capitalizing on key location
Türkiye is known for its geographical position between Europe and Asia, which makes it one of the key players in international trade and transport. Its location allows for rapid transit of goods, mainly via land routes, which have traditionally given Turkish exporters a time advantage.
The Belt and Road Initiative, launched by Chinese President Xi Jinping in 2013, seeks to create a modern Silk Road by building a vast network of railways, highways, and ports to connect Asia with Africa and Europe.
The Middle Corridor – a key component of the BRI – passes directly through Türkiye. This route is seen as a more direct and potentially faster alternative to the traditional northern route through Russia.
Olpak stressed that Türkiye must proactively engage with the initiative, not simply as a transit point, but as a player that can capitalize on its strategic location.
“We need to find ways to capitalize on it beyond just collecting a small fee for every passing train.”
Challenges for exporters
During the press event, Olpak also touched on a range of other topics, including Türkiye’s ongoing economic policies, while urging for steps to help maintain the competitiveness of Turkish exporters in the face of challenges abroad and at home.
Türkiye has been grappling with persistently high growth in price gains, a challenge exacerbated by global supply chain disruptions and fluctuating energy prices.
Authorities have been pursuing a more than a year-long policy-tightening effort to rein in inflation and overheated demand.
The central bank has hiked interest rates by 4,150 basis points, to 50%, since June last year and has maintained that it will keep its monetary policy tight until inflation aligns with its targets.
Over time, interest rate hikes increase the cost of borrowing across the economy, including for mortgages, auto loans and credit cards.
Annual inflation dipped below 52% in August annually, compared to its peak of 75% this May. The sharp drop is expected to continue as the tightening campaign brings price relief.
To backstop the rate hikes, authorities have also adjusted regulations to tighten credit conditions, and the government has adopted some fiscal tightening measures to help ease the current account deficit and rebuild reserves.
Olpak said that while the government has made strides to stabilize the economy, there is still room for small yet impactful adjustments.
“The 2% foreign exchange support for exporters could be slightly increased without significantly affecting our budget balance,” he suggested. He also called for the easing of the 2% credit growth cap for small and medium-sized enterprises (SMEs), which he noted could provide much-needed breathing room.
“SMEs have much tighter lifelines,” he said, pointing to their vital role in the economy.
Exporters have been complaining about an overvalued Turkish lira, which makes their goods more expensive, barriers to financing, as well as dwindling orders.
They have sought for more currency depreciation given that, year-to-date, inflation is 32% while the lira has fallen only about 13% to the U.S. dollar.
Authorities, however, have urged lira holdings, helped along by high deposit rates.
Among his recommendations, Olpak emphasized the potential relaxation of the current requirement for exporters to convert 30% of their foreign exchange earnings back into lira.
“We hear daily that the central bank’s reserves are improving. A step could be taken on the 30% conversion requirement. I’m not suggesting its complete removal, but there is room for adjustment,” he noted.
Contractors’ success
While Olpak painted a cautious picture for exports, he was more optimistic about other sectors where Türkiye has proven its mettle.
“One area where we excel is contracting,” he said, highlighting Turkish contractors’ substantial footprint in global markets.
“We are second only to China in terms of the number of projects undertaken,” he noted. In 2022 alone, Turkish contractors secured $31.5 billion in contracts worldwide.
However, Olpak warned that financing challenges threaten to undermine this success.
“Our contractors are daring and fast. We’ve hardly ever had a contractor who caused problems abroad. Our pricing and quality are competitive. The only challenge we face is financing.”
Investment conference
Turning to DEIK’s plans, Olpak shared details of the upcoming 15th Türkiye Investment Conference, which will be held in New York from Sept. 23 to 25.
The event will bring together President Recep Tayyip Erdoğan with prominent U.S. business leaders and Fortune 100 executives, Olpak said.
The conference will coincide with the United Nations General Assembly.
The event will include a series of high-level meetings featuring Treasury and Finance Minister Mehmet Şimşek and Trade Minister Ömer Bolat, who will engage with U.S. investors, according to Olpak.
Energy and Natural Resources Minister Alparslan Bayraktar and Industry and Technology Minister Mehmet Fatih Kacır will also hold meetings organized by Türkiye-U.S. Business Council (TAIK), under DEIK, and Citigroup.
“We believe the outcomes of these meetings will be significant for our country,” Olpak said.
BRICS: A strategic political move
Asked about Türkiye’s potential membership in BRICS, Olpak was measured in his response.
“I view this more as a political playing field than an economic one,” he said, noting that Türkiye had already participated in BRICS meetings as an observer.
Türkiye recently confirmed it had submitted a request to join the alliance. If admitted, it would become the first NATO member in the group, which sees itself as a counterweight to the Western-led global order.
Olpak likened the development to Türkiye’s renewed engagement with the European Union, particularly after the recent resumption of high-level dialogue meetings.
“It’s a delicate balancing act, but I believe Türkiye can manage both relationships effectively,” Olpak said.
Green, digital transformation
Among other pressing issues, Olpak referred to the green transformation, a shift that he says presents both opportunities and threats.
“If we can perform well in certain product groups, there are great opportunities. But if we don’t take action, we will be on the losing side,” he warned.
On digital transformation, he expressed a more hopeful outlook. “Why? Because our infrastructure and rate of progress in the digital sector are more conducive to closing the gap. In this sense, we are more optimistic,” he said.
The DEIK chief remains cautiously optimistic about the future.
He called for patience as the government’s economic program unfolds but acknowledged the difficulties that lie ahead, particularly for sectors like textiles, automotive, and chemicals, which have recently signaled trouble.
“The market isn’t all rosy. There are challenges, but they were expected,” Olpak said. Still, he said he was hopeful about the medium-term program’s success, which could ensure stabilization within a year or so.
