The loss of trust during the coronavirus crisis is not only present in financial markets but also in every sphere of our lives
We started again… The world will never be the same now. The global order, our daily lives and everything else will change a lot. Didn’t we hear the same views after “9/11” and the “2008 financial crisis”? Continuity and change have always been a part of our lives. But recently, the change in world history seems to be more constant. We are listening to futurologists now more than ever. For example, the books of futurologists such as Yuval Harari, who is also a historian, continue to be the best-sellers. His statements are also followed by millions of viewers. The only thing that doesn’t change is really the change itself. However, everyone feels this change in their daily lives recently, maybe by staying in their homes. And every change brings some uncertainties with it. The latest coronavirus outbreak offers us the obscurities of the unknown.
CORONAVIRUS LEADS TO THE LOSS OF TRUST IN ALL AREAS
Coronavirus outbreak maintains its uncertainty for the world economy, just like the global crisis in 2008. These are the crises that most people could not anticipate, that is, they could not consider them in their expectations. But the coronavirus opens the door for bigger uncertain- ties and obscurities compared to the 2008 global crisis. As the 2008 crisis was financial, the world economy quickly recovered when the trust was re-established in financial markets. However, the loss of trust during the coronavirus crisis is not only present in financial markets but also in every sphere of our lives. Countries do not trust each other these days. The airports are closed to the travellers coming from another country, those arriving are kept in quarantine for a long time and are being observed. Global solidarity and trust are replaced with the reactions in which the countries try to solve their own problems. The governments don’t allow mask export and sometimes find sudden solutions such as confiscating masks produced by the private sector. And maybe this trust problem faced by the manufacturers leads to a decrease in production. But nowadays, no one considers this issue in their analyses.
The country that will be affected the most by this trust issue in the medium to long run seems to be China. China’s production in the supply chain is undoubtedly vital for many countries. Many producer/consumer companies experienced the crisis as a supply chain problem due to the products they directly or indirectly buy from China. Then these businesses started to think more and more about the need to diversify their supply sources. However, the crisis on the supply in the beginning turned into a global demand crisis as the coronavirus spread around the world. While some consumers didn’t want products coming from China, big chain stores tried/ try to stop supplying their products from China.
The negative China perception promoted by the Trump Government is now affecting the views of people for the Chinese products in the USA more adversely. When the coronavirus crisis ends, we believe that China will be held responsible for the whole thing. A person in Texas can file a lawsuit, stating that the Chinese Government caused the coronavirus to spread to the world by concealing the pandemic at first. Even if the coronavirus crisis loses its effect after a certain time, the search for a culprit won’t seem to result well for China.
FUTURE PLANS ARE NECESSARY
In these circumstances; making plans for the world economy and global governance, reading and listening to the relevant opinions and attending conferences are very important at this point. However, I believe that thinking about practical solutions and making medium-term plans will especially be very beneficial for our companies. Of course, this global crisis will initially affect our companies adversely. In an environment where all the world economy is expected to downsize, it wouldn’t be reasonable to think that Turkey will not be adversely affected by this process. However, the negativity can be turned into an opportunity in the medium-term. First of all, this crisis showed everyone how important it is to keep our local industrialists available. Nowadays, many Turkish companies are putting their efforts into producing breathing devices. We see that the economies relying solely on the service sector in the international division of labour experience more problems in this process. Turkey has been one of the countries that positively differs with its industrial capacity.
While the country’s economy prospers, the share of services from the national income has increased in Turkey. However, Turkey is still a powerful production base. After the supply and demand negativities against China, when we think to which countries the production may shift, Turkey as a G20 country is one of the first to come to mind. With its fiexible production capacity and closeness to big markets, Turkey is in a more powerful position than ever to be the production base of the neighbouring countries. Its cheap labour force with high human capital makes Turkey one of the most attractive countries for small-scale productions. Instead of the big-scale production in China, the channels with a smaller scale, high-quality, and reliable production/ distribution will become prominent. How many countries can you think about in this area as eligible as Turkey? Turkey’s products are in a good place in the eyes of world consumers. The whole world knows about the quality of the products produced in Turkey. In my opinion, adding the US market to the European and African markets will be an important achievement for our exporters.
SPECIAL SOLUTIONS MUST BE REACHED FOR TURKEY’S PROFIT
But we should not expect that our companies will automatically make a pro t in this period due to trade diversion arising from China and the Far East. Many producer companies in Turkey already became indebted in the 2010s and they still have difficulties in reaching the long-term financing. If we get into new markets, leave the increase in our production and export on its own, we may not be able to sufficiently bene t from the opportunities raised with this crisis. The financial support areas to the private sector with government expenses seem to be limited in a developing Turkey. For this reason, we need to turn to private solutions. When we talk about private sector solutions, we should not only think about increasing production and export. We should also consider increasing international cooperation in production and trade.
Have no doubt. If we make plans in Turkey for the course of the world economy, consider our advantages and dis- advantages; this means that many companies all over the world also make plans with better opportunities. They also try to analyse the advantages and disadvantages of production in Turkey. We should think about the question, “Instead of only making plans to increase our export in this period, can we take strategic partners to our companies in this environment with limited capital?” For example, Chinese companies have started to struggle to get into the certain markets, especially to America as a result of the trade wars in this period, and they can shift a certain part of their production to a country like Turkey and prefer to seem like a company producing in there instead of China. Indeed, we know very well that Chinese companies acquired many companies manufacturing in North Italy after the global crisis in 2008. It is even said that the employees brought by China to Italy are among the reasons for the rapid spread of the virus in Italy. In this new period, Turkey can be an important production base not only for the Chinese companies but for a lot of international companies subcontracting in China as well.
We better look at the trade and production with a win-win strategy. One of the reasons for this negative perception of China is because the country always prioritises its own interests instead of this win-win mindset. And it doesn’t seem easy for the country to change this habit right away. In fact, companies in Turkey are easier to work with in this regard. Wouldn’t it be better to get a bigger share from a large cake instead of having a tiny cake all to ourselves?
Turkey stands out as a powerful partner that needs capital but can make the cake bigger with its successful production and labour. Our companies have been doing this for now, albeit partially. Today, many companies in Turkey carry out productions with their European partners and export to Europe and the third world countries. That’s why, we should ask the question, “Instead of focusing on local production and export, how can we increase our global production and sales networks through international partnerships?” We are entering a period in which we should not only think about exporting to third world countries but also investing in other countries with our financially strong international partners, considering that the local production and production diversity as a global trend will increase. I wish you all to be entrepreneurs that can go beyond the negativity but stays at home of today and seize the opportunities; wish you all good health and peace.
Academician Prof. Dr. Ahmet Faruk Aysan