TÜRKİYE AMID GLOBAL FRACTURES

DEİK President Nail Olpak points out that Türkiye can stand out in global change with its strategic location, strong industry, and regional integration advantages

The global disruptions that began with the pandemic and were then exacerbated by wars, geopolitical tensions, and energy and supply chain crises are creating both new opportunities and risks for the business world. Business Diplomacy Magazine asked DEİK President Nail Olpak about Türkiye’s role in this process, the key issues for the business world, and global trends. We assessed Türkiye’s potential as a regional production and logistics hub in light of recent developments.

WE ARE CURRENTLY EXPERIENCING A PERIOD OF INCREASED UNCERTAINTY IN THE GLOBAL ECONOMY, WITH GEOPOLITICAL TENSIONS DOMINATING THE AGENDA. FROM A BUSINESS PERSPECTIVE, HOW WOULD YOU ASSESS GLOBAL GEOPOLITICAL RISKS?

Starting with the pandemic that entered our lives on a global scale in 2020, followed by Russia-Ukraine war, Israel’s attacks on Gaza, the 12-day Israel-Iran war, and the trade wars between the US and China, which started violently but then attempts were made to settle on a relatively reasonable ground, have had negative effects on the business world’s investments and trade with consequences such as increased costs and growing uncertainties.

All of this has clearly demonstrated that the meaning of certain concepts may change, new concepts may enter our lives, and concepts we consider to be established may be revisited from different perspectives. The pandemic that began in China once again highlighted the importance of supply chains. With the closure of factories in China, manufacturers in many countries around the world began to experience difficulties in securing supplies, and thus we saw the first disruption in supply chains. Subsequent factors such as the temporary closure of ports, container shortages, supply issues in the chip (semiconductor) market, and labor shortages in the transportation sector further exacerbated the disruption in supply chains.

In 2022, with the outbreak of the Russia-Ukraine war, we experienced a new disruption in supply chains, which had begun to show signs of recovery. This time, we began to feel even more deeply the problems affecting critical sectors such as sunflower oil and grain.

Subsequently, hot wars in our neighboring regions and global issues such as climate change have created new challenges for supply chains. Even today, the disruption in supply chains remains one of the major challenges facing global trade.

So, what lessons have we learned from this process in the business world?

Firstly, we all believed in the importance of source diversity, but during this process, we gained a much better understanding of this importance. This is because our companies prefer to work with large suppliers due to competition. As a natural result of producing more products or services to reduce costs, the advantage of economies of scale was utilized. First, the chip crisis that stuck in our minds, followed by the food and energy crisis that came to the fore with the Russia- Ukraine war, taught us the risks of relying on a single or limited source in a very painful way.

The second lesson we learned as a business community was to place greater emphasis on working with our immediate surroundings. We began to talk more about concepts such as near-shoring (sourcing from nearby regions) and friend-shoring (sourcing from friendly countries). We also realized how strategically critical an investment storage is, particularly in critical sectors such as energy and food.

Offshoring, which used to be our favorite, has begun to be replaced by concepts such as nearshoring and friendshoring, along with the growing importance of secure and accessible trade.

While we once defended the inevitability and necessity of globalization, the concept of “glocalization” has now entered our agenda with the understanding that the global and the local must be pursued together. Problems in supply chains have started to force countries to produce certain critical products within their own borders. Finally, the disruption of supply chains, which began with the pandemic and continued with wars and geopolitical risks, has once again taught us the importance of accessibility in logistics, rather than the concept of distance.

HOW DO YOU ASSESS TÜRKİYE’S POTENTIAL TO BECOME A “REGIONAL PRODUCTION AND LOGISTICS HUB” AT A TIME WHEN SUPPLY CHAINS ARE BEING RESTRUCTURED ON A GLOBAL SCALE?

Our country is strategically located at the intersection of east-west and north-south trade corridors. We are situated in a region where important continents such as Europe, Asia, and Africa intersect. We are in a position that provides access to a population of 1.3 billion, 10.3 trillion dollars in global trade, and 32 trillion dollars in economic size within a

4-hour flight radius. Proximity to major markets offers companies both cost advantages and logistical superiority through fast delivery times.

The infrastructure investments made by our country over the past 20-25 years have significantly contributed to the development of our entire infrastructure, particularly in transportation.

Our country’s advanced industrial and production capacity is another key advantage. With a trade volume of 800 billion dollars, including services, our country is the largest production hub between Western Europe and China.

We have significant investment and production potential in almost every field of industry, as well as in service sectors such as education, health, culture, and entertainment, critical sectors such as energy and food, and emerging areas like digital technologies and the green economy.

Our regional integrations also offer a separate attraction for investors. In addition to the Customs Union agreement with the European Union, we provide duty- free access to a population of over 1 billion through free trade agreements with 28 countries. Our country’s young and dynamic population also serves as a good source of employment and offers a good market opportunity.

In conclusion, during this period of restructuring global supply chains, our country has a significant opportunity to become a “regional production and logistics hub” thanks to all the factors mentioned above.

INCREASING ECONOMIC FLUCTUATIONS AND FINANCIAL UNCERTAINTIES ON A GLOBAL SCALE ARE BRINGING RISK MANAGEMENT AND RESILIENCE TO THE FOREFRONT IN THE BUSINESS WORLD. WHAT ARE THE KEY CONSIDERATIONS FOR COMPANIES TO REMAIN STRONG IN THIS ENVIRONMENT?

Our companies must first and foremost analyze risks and opportunities in a balanced manner and closely monitor this process. Focusing solely on risks and becoming pessimistic, or focusing solely on opportunities and adopting an overly optimistic attitude, would not be the right approach.

Today, risks can stem from many different factors. In addition to traditional risks such as economic and financial risks, other risks, such as cybersecurity risks, geopolitical risks, and climate change risks, must be managed by taking into account their integrated interactions with each other. In this context, a proactive approach based on scenario analysis will provide our companies with significant support during this process. Recent developments have taught us the risks of relying on a single source. Based on this lesson, diversifying our supply chain to include different suppliers to prevent disruptions will be an important risk management tool, as will diversifying our markets.

Analyzing the potential damage that risks may cause to the company’s balance sheet and cash flow in advance and establishing a solid financial structure are also critical in terms of eliminating the negative effects of risks on the company’s financial structure.

In addition to these, factors such as the establishment of a corporate culture, the adoption of a transparent management approach, the adoption of an economic management approach that includes environmental and social impacts alongside the traditional approach of maximizing company profits, and the effective use of digital technologies based on experience gained from past crises can also be considered important tools that will support our companies in this process.

FINALLY, WHAT WOULD BE YOUR STRONGEST ADVICE TO THE TURKISH BUSINESS WORLD DURING THIS CHALLENGING BUT OPPORTUNITY-FILLED PERIOD? WHICH THREE CONCEPTS SHOULD OUR BUSINESSPEOPLE EMBRACE MORE IN THE COMING PERIOD?

We are all experiencing a difficult period in which very different processes are simultaneously creating risks and opportunities. The most important gain in this process will be to read and understand the process correctly and position our country and companies in the best possible way in the face of these developments.

We must carry out this monitoring and analysis in a very detailed and accurate manner and take the necessary actions at the right time. We must neither act too early and incur additional costs, nor act too late and miss opportunities. To this end, everyone, from the public sector to business organizations such as DEİK and companies, has a great responsibility. While fulfilling their responsibilities, everyone must act in coordination with other parties.

For our business world, I believe that agile organizations capable of demonstrating both flexibility and resilience, digital transformation strategies that effectively utilize technology, and a strong risk management approach will emerge as key factors in this challenging yet opportunity-rich world.