Global Warming, Leather Industry in Turkey

Today's Zaman
17.04.2008
Business
İSMAİL KOCABIYIK

‘Global warming chills leather industry’

As temperatures soar in many parts of the world due to global climate change, the international demand for Turkish leather has recently experienced a dramatic decrease.

Global warming has affected all aspects of our lives, but perhaps one of the most obvious signs of this can be seen in fashion design. As climates get warmer, people prefer lighter clothes, and this is leading to an alarming situation for the leather industry. The Turkish leather industry has been suffering from many problems, including an overvalued YTL, high employment taxes and expensive raw materials, but their biggest enemy is global warming. Turkish Leather Foundation (TÜRDEV) Chairman Mahmut Yeşil emphasizes this fact and explains that some of Turkey's weaknesses have affected the leather industry negatively. Yeşil offers informative commentary about some of the mistakes in policy and practice that are hurting the leather industry and offers solutions to these problems in an interview with Today's Zaman.

How has global warming affected the leather industry and Turkey's exports?

The Turkish leather industry, which is the second biggest in Europe and the fourth largest in the world after Italy, China and India, is one of the sectors that are affected most by global warming. … The leather sector fluctuates with the climate as well as with fashion. In Russia, people mostly buy leather in September and in October, but as the weather gets warmer their need to buy leather decreases. Climate change also affects the kind of products people prefer; for instance, in previous years people used to prefer warmer clothes and furs, but nowadays they prefer lighter apparel.

What is the makeup of exports in the leather business? In which markets are you planning to grow?

Some 28.4 percent of Turkey's total leather exports go to the Russian Federation, whereas Germany follows it with a 10.2 percent share. These are direct sales, but if we count the purchases by Russian visitors in Turkey and the shuttle trade [a kind of business in which individuals travel to Turkey and bring back small numbers of goods to sell in their home countries], the figure jumps to around 70 percent.

The Turkish leather industry was very late in diversifying its products. In the period between 1993 and 1998 the sector experienced a time of high profits, after the dissolution of the Soviet Union, and grew rapidly. However, market demand has been satisfied since then and, meanwhile, the Russians began to buy products from European countries as their income increased. Global warming and fashion trends adversely affected the profitability of the industry, but none of these negative factors helped the Turkish leather industry lose its fascination with the Russian market, and it failed to keep an eye on alternate markets. It is difficult to understand why we did not try to enter these alternate markets. It is certain that we need to export to alternatives like the US and Japan. Our export volume increases over the years, but there is a negative effect from the overvalued YTL.

The overvalued YTL is a problem and what kind of precautions have you taken to minimize its negative effect?

The overvalued YTL has affected all export industries in Turkey, including the leather industry. The producers export their goods without any profits to avoid losing their markets but, on the other hand, importing is encouraged by these currency rates. The leather industry is a sector that exports 90 percent of its products, which means only a small amount is sold in Turkey. More than half of these sales are done as formal trade, or exports, but an important portion is conducted via shuttle trade and sales to tourists.

Employers have to raise their employees' salaries 10 percent every year. Their employment, energy and waste treatment costs increase every year, but the value of the US dollar decreases by the day, so they encounter many problems. Due to these problems, the companies have continued to export their goods at very cheap prices, and this has led them to lose capital. Many companies have been closed for this reason.

As for currency, most of our imports are purchased in euros, but we sell our goods to Russia for US dollars. As the euro-dollar parity has increased from 1.20 to 1.58, our profits have decreased dramatically.

The reasons behind using euros for import purchases and dollars for export is the fact that there is abundant production, but the markets are already saturated, so they cannot sell their products. Also, the demand for leather has decreased due to changes in fashion and global warming. The rules are set by the purchasers, not by the producers. The insane competition among producers lowers prices and closes factories.

What are the import tendencies in the leather industry? What kind of products are imported most, raw materials or final products?

Turkey's leather exports were $1.03 billion in 2003, whereas it was importing $1.01 billion worth of leather from abroad. As of 2007, these figures rose to $1.24 billion and $1.77 billion, respectively, indicating that imports have risen faster than exports. When we look at the details of this import tendency, we see that the biggest numbers in imports are in shoes and shoe materials. The overvalued YTL raised shoe imports dramatically, especially from Far Eastern countries.

Cattle breeding is vital for the leather industry in terms of raw materials, but Turkey has been unable to develop its cattle breeding business as quickly as its rivals. What kind of precautions must be taken for this?

It is very unfortunate that Turkey, which has traditionally been an agricultural country, imports 70 percent the small-cattle leather it requires.

Turkey neglected agriculture and cattle breeding while it was trying to transform itself into an industrialized country. In fact, Turkey failed in industrializing, especially in the agriculture and cattle breeding businesses and in quality and efficiency.

Turkey, which is one of the few countries on earth that can meet all of its agricultural needs, has gradually become a net importer of agricultural products. While cattle are very cheap at the feeding ground, the meat is very expensive at the butcher. Likewise cereals are very cheap in the fields, but they become very expensive in the markets. This is not a good process.

Exporting livestock and importing meat simultaneously has done great harm to the cattle breeding business in Turkey. Turkey needs to take very aggressive steps in cattle breeding and agriculture, but I do not think we can do this due to the European Union accession and integration process that Turkey is currently undergoing.

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