Is Turkey profitable?

Leather producers in Turkey, make 3.3 times less profit than their rivals in other countries.

1.07.2011 00:00:000
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Is Turkey profitable?

In ceramic tiles, the difference is threefold in favour of the foreigners. In very many sectors, such as shoes, furniture, cosmetics, chemicals and insurance, companies in developed countries earn more than Turkish companies. Sectoral sources attribute the reason for this to costs. They say that costs such as electricity, petrol and labour create a disadvantage. Experts cite as a reason the lack of branding and investments in R&D. In brief, Turkey lags behind developed countries when it comes to profitability.

Many sectors in Turkey today lag behind their counterparts in developed countries in profitability. This trend can be seen in industrial sectors. Profits are nearly 2-3 times lower than in developed countries. One of these sectors is timber and forestry products. "In 2004, the net profit rate was between 18 and 33 percent," says Bülent Aymen, the head of the Mediterranean Timber and Forestry Products Exporters' Union, adding that in 2005 the rate fell to 12-18 percent and that today it is 3-10 percent. In developed countries, the rate is 10-15 percent. Doğanlar Group Board Chair Davut Doğan says that the net profit rate in the furniture sector is 5-8 percent. "Even though Turkey has a very important place in manufacturing worldwide, sufficient investments are not made in design and R&D. The shortcomings continue in sub-contracting manufacturing, production technology, international standards and quality" he says.

Textiles and ceramics are two of the industrial sectors in which Turkey is strong. But the net profit margins in these two sectors lag behind the rates in developed countries. The high costs in Turkey are cited as the main reason for this is. High energy and labour costs, and tax burdens create a competitive disadvantage. Ismail Gülle, the head of the Istanbul Textiles and Raw Materials Exporters' Union (İTHİB), says: "The situation is changing, according to many variables, ranging from profitability, marketing from production, local factors and global factors. But it is not enough to lay the foundations for real growth. Our profitability ranges between 5 percent and 10 percent, depending on the product, market and customer. In developed countries, these rates are between 10 and 20 percent."


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