Turkey’s former Minister of Transport, Maritime and Communication Binali Yıldırım, who was named as the new Prime Minister of Turkey on May 22 at a congress of the ruling Justice and Development Party (AK Party), has stated that the shipping industry is a priority investment area for Turkey.
“Turkey, thanks to its commercial fleet, ranks among the 15 countries that shoulder most of the world trade, despite the ongoing global crisis. In view of Turkey’s target of becoming one of the world’s top ten economies by 2023, the marine industry is always one step ahead of Turkey,” Yıldırım said at a recent speech delivered while he was yet the Minister of Transport, Maritime and Communication.
In his latest remarks about the marine industry prior to his appointment as prime minister, Yıldırım said that he had full confidence in Turkey’s shipping industry, adding that he was certainly aware of the difficult times the sector currently faces. He also noted that freight rates are continuing their fall, but said the ministry was committed to help the industry overcome this difficult period.
Ranked 13 among 15 top
seafarer nations
Yıldırım emphasized the significance he attached to the shipping industry during his post as minister, saying “We have taken many steps to ensure that shipping is given a larger place in the ministry from our first day in office. We have exalted the reputation of our commercial fleet by delisting blacklisted vessels carrying Turkish flags. The number of institutions that provide marine industry training has increased significantly over the past ten years. Currently, 30,000 people are employed at Turkish shipyards, which means the industry provides sustenance for 100,000 people including the employees’ families. Turkey is currently ranked 13th among the top 15 countries that shoulder most of the world trade.”
Yıldırım said commercial fleet and port management are the most important pillars of the marine industry. “Turkey, as a peninsular country located in the central passage between Europe, Central Asia and the Middle East, has a huge potential for marine transportation. Turkey is the focal point of a transportation network that stretches from Gibraltar to the Atlantic, and to the Indian Ocean through the Suez Canal and to Eurasia and the Far East through the Turkish straits connecting the Black Sea to the Mediterranean. However, the country is currently not making use of its full potential in sea trade and especially its full potential in the port industry.”
He said that the first direct financial incentive extended by the government to the industry came in 2004, when Special Consumption Tax (ÖTV)-free fuel sales to commercial vessels and fishing boats that perform cabotage activities began. “From Jan. 1, 2004 until today, 3.5 million tonnes of ÖTV-free fuel has been supplied to the industry; which amounts to a TL 4.5 billion support in ÖTV taxes unpaid.”
Yıldırım also spoke about other incentives, including a recent directive that offers financial support for ship scrapping that will help renew the country’s coaster fleet. “ “A new model of financing that provides up to 70 percent of bank loans in return for investing about 10-15 percent of scrapping costs in newbuilds; and adding owners’ own contribution of about 10-15 percent of capital and ship mortgage, has been created. We are also taking into account the views of marine industry companies and agencies regarding this model.”
‘We will build new ships.’
Turkey has achieved a significant level of commercial strength thanks to a large number of smaller tonnage ships built in the 1980s Yıldırım said, adding that the coaster fleet is the backbone of Turkish shipping.
“Developments in the coaster management sector has led to larger tonnage ship operations to grow at a rapid pace in a very short period of time. This has turned our shipping industry to a sector with high added value; an industry that trains qualified personnel, that revives our ports, that brings in foreign currency and a one that creates jobs. However, over time, this fleet has aged and shrunk in size, which has in turn caused its market share to fall. In 2008, there were 465 coasters in the 1000GT – 6000GT range, while this number fell to 347 in 2014. In terms of tonnage, the total fleet size fell to 1.46 million DWT from 1,98 million DWT. Renewing our coaster fleet, whose average age is nearing 30 and which comprises 400 1000-10000 DWT, is highly important for our country. We expect about 100 ships to be renewed over the next few years. With these new environment friendly ships that operate at lower costs with maximum efficiency, our goal is to make the Turkish coaster fleet the top fleet in the Mediterranean Basin.”
Yıldırım said that there are many outside factors that have played a role in the shipping industry’s failure to completely put the crisis behind it. He said that a large number of new projects are being planned to help the Turkish shipping industry get through this difficult period.
The former minister said distortions in the supply-demand balance for vessels have negatively affected the industry in the recent past. He further stated that lower commodity prices and the weakened Chinese markets’ failure to meet the amount of increase in tonnage are keeping markets back from full recovery.
“Commodity prices remain low. For example, the price of iron ore stood at $180/tonne in 2011. The price of iron ore stood at $55/tonne as of the third quarter of 2015. This has led many countries to buy the processed commodity, instead of importing raw commodities,” Yıldırım explained.
Yıldırım said: “The slowdown in the major economies that shape the world economy, primarily the slowdown of growth in China; lower demand in the market, and other factors can be named among the reasons that have fueled the crisis in shipping globally. The situation is also taking its toll on the Turkish shipping industry.”
Turkey’s potential in Central
Asian trade
Yıldırım said the government has been implementing many projects to bring Turkish shipping to the desired level.
“Currently, as a result of talks to make the Baku-Aktau (Kazakhstan) ferry line more efficient, improvements were made to passage fees through Azerbaijan in early 2016. The passage fee has been reduced to $220 dollars from $550. Also thanks to recently introduced regulations, there will be regular ferry runs along the Baku-Aktau line two days a week both ways. Azerbaijani authorities are now issuing 90-day multiple entry visas to professional drivers from our country. It is important that this passage becomes the first choice of route for most transporters, rather than just an alternative or a temporary route to resort to in times of trouble.” Yıldırım said a regular schedule for the Baku-Türkmenbaşı line should also be established. He said the government was also trying to make document-free travel possible in all Azerbaijan-bound transportation. “This would make the Baku-Tbilisi-Kars railway the most cost-efficient and secure option along the Asia-Europe bridge.”
“We have plans to bring the number of vehicles that use the Caspian route to 20,000 from the current 4,000. If the route can be made more efficient, it seems possible for 10,000 vehicles to use this route in 2016; 15,000 vehicles in 2017 and 20,000 in 2018. We are conducting efforts to improve coordination at various international summits such as the Turkish Council and ministerial meetings between the two countries. Yıldırım added that talks with other countries along the Caspian coastline are underway to make this route more efficient.
Yıldırım said that the Baku-Tbilisi-Kars railway will start operations in 2017. “Together with the Marmaray project, which merges Europe with Asia from beneath the sea, the Baku-Tbilisi-Kars railroad will become even more important. The Baku-Tbilisi-Kars line will become the most financially viable and safest option for the Eurasian bridge.”
The former minister also spoke about Turkey’s port industry. He stated that policies adopted in the 1980s in Turkey have led to weaker public control in many sectors, including the port industry. In the 1980s, first government investment in ports was cut, and then most ports were privatized, he recalled. He said that during the process, public operated ports lost blood, while private ports gained strength. Most of the handling in Turkey comes from privatized ports, Yıldırım said, excluding the public port handling of Petroleum Pipeline Company (BOTAŞ) cargo.
“During this period, in accordance with the country’s growing foreign trade figures and economic development, there most certainly have been significant increases in port handling volumes and employment. It is quite obvious that the port industry will work more efficiently if there are port facilities available. We are of the opinion that the smoothest operation of ports could be through a regulatory public authority that oversees the coordination of ports (including master plan preparation and implementation, infrastructure building, permits, port inspections and increasing management efficiency).”
Ports and FDI
Yıldırım also provided Foreign Direct Investment (FDI) figures from the past few years. According to this, as of 2014, the amount of annual contribution of foreign direct investments made between 2004 – 2014 was $84 billion. In the same period, foreign direct investments have created jobs for 2 million people, amounting to 8 percent of all employment in 2013 , which corresponds to 37 percent of the increase posted in employment figures at that time.
Yıldırım said the number of international companies operating in Turkey was 10,000 in 2005; which had reached 40,000 as of 2015. In 2014, the total of FDI was $8.6 billion with most of this amount being directed to financial services and manufacturers. He said although there are no numbers for the shipping sector individually, two sectors that include the shipping industry had benefited significantly from FDI. According to figures provided by the former minister, the amount of foreign direct investment in the transportation vehicles sector rose to $124 million and another $124 million of foreign direct investment went to the transportation and storage sector in 2016.
He also said that the world’s largest operators MSC and Maersk establishing their own ports in Turkey; and PSA and DP, which are the world’s largest port operators, performing operations in Turkey, were a solid indicator of the confidence foreign investors have in the country, which clearly show that foreign direct investment opportunities are ample in the port industry.
Yıldırım predicted that most future foreign direct investment in shipping would possibly be directed at mega yacht construction and ship dismantling; building of chemical tankers and special purpose vehicles — where Turkish yards have extensive know-how and experience — and also to shipowning companies as part of the ongoing efforts to renew Turkey’s coaster fleet.
