APPROXIMATELY two months ago, on September 21, I published a letter from an otolaryngologist about challenges the profession faces. I titled that article, The wonderful cry of a doctor. Dr. Husrev Cetin summarized what doctors went through during the pandemic and how they grew old because of the virus.

Let’s fast forward. On November 10, I wrote about how the two critical changes in economic management sparked a wave of trust. Later on, I received a letter from a reader. “We are trying to contribute to the economy in the industrial sector with a total of 400 employees in our Eskisehir and Cerkezkoy facilities,” Metin Sarac wrote. “We are shouldering a great responsibility.” Referring to an article I article I wrote on November 10 titled Trust, Sarac added: “Trust is important for all aspects of our lives, but when it’s about the economy, it becomes much more important.”

Let’s read together what does Metin Sarac says in his letter, which is the voice of thousands of industrialists, just as Dr. Husrev Cetin was shouting out on behalf of his colleagues:

LESSON 1: NO INVESTMENT AND EMPLOYMENT WITHOUT TRUST

“In our world, both industrialists and traders make investments, create employment, try to grow and mortgage their next ten years. All of this begins with trust. As soon as trust disappears, all sectors withdraw into their shells like turtles and decide to wait. In this case, investment and employment decline.
Our production capacity declined by 20% during March, April and May, when we experienced the first wave of the pandemic. Capacity gradually increased as of June and now we are currently producing with a very high capacity rate, above seasonal norms. As far as I have observed, the wheels are turning except for a few sectors. However, unfortunately, I cannot say the same for our tradesmen.

LESSON 2: UNSTABLE INTEREST RATES AND FOREIGN EXCHANGE ARE HUGE ISSUES

Are we able to see two months ahead? At least I can’t. Unstable interest rates and foreign exchange volatility create huge issues in the economy. Also, the political risks, unfortunately, lead to uncertainty.
We can’t make a profit when we have so many issues. Our expenditures are rising. Electricity, natural gas, financial costs, the impact of rising foreign exchange on amortization… Since we can’t pass these increases
onto our customers, profitability is declining every day.

LESSON 3: THE RISE IN THE EXCHANGE RATE CRUSHES INDUSTRIALISTS

A while ago, there was a good analysis in daily DUNYA. While exports increased by 20% in the last five years, export value per kilogram declined by 15%. Hence, because we are unable to produce value-added products, the TRY’s plummeting value increases customs-based exports but profits decline. Meanwhile, I think I should underline that foreign customers are following the changes in the exchange rate as much as we are and demand discounts per customs. In short, we are working more but earning less. I feel this intensely in investments. When the USD exchange rate was TRY 3 on average in 2015, I used to pay TRY 600,000 for a machine I imported for TRY 200,000. Today, I have to pay TRY 1.6m for that very same machine. I can’t pass this on rise proportionally to my customers. When I want to do it, my competitiveness dies. I have no choice but to spend from capital. Since it’s impossible to make new investments under these circumstances, it’s hard to make investment in new machinery when our machines expire. Thus, my business shrinks. Investing in new technologies is only a dream. This is my predicament, but in it you can see a template of what is happening in our country’s industry.

LESSON 4: WE COULD BREATHE IF WE RENT OUR FACTORIES

Industry has never faced the dilemma where they fight to work but would be better off standing still. I say this very sincerely: the majority of businesses could earn a lot more if they stopped production and rented their factories. But various industrialists and I are trying to do this job for the sake of our country.

No more space left for interest rates

THE POLICY rate currently stands at 15% but the overnight lending rate increased to 16.50%. The late liquidity window rate is at 19.50%. However, unless the “funding the market through weekly repo” decision on November 19 is not changed, it will not exceed 15% until December 24. The foreign exchange rate, which rapidly decreased following the rate hike signal and declined slightly more following the interest rate decision, has begun to increase again. The question is, what will the Central Bank do if the rise in the foreign exchange rate accelerates? If the Central Bank had created some space and margin for itself on November 19, it could’ve avoided this troubled period.