Interview / Rahmi Koç

Rahmi Koç is Honorary Chairman of Koç Holding, Turkey’s biggest private industrial and trade conglomerate.

Born in 1930, Rahmi Koç played a vital role the industrialization of Turkey. Thus he is one of the key figures of the country’s business world. He is a visionary who knows both Turkey and the world.

Mr. Koç is the businessman and industrialist who comes to mind first as the person who could accurately answer questions, such as how can Turkey develop its potential and how it should proceed. After all, he directed the nation’s leading industrial group for many years. Below, Mr. Koç’s answers our questions.

How does Turkey stand internationally from an economic perspective?

“Turkey comes to mind as a still hungry, big market. Its young population and its strategic and geographic position are also remembered. Turkey’s opportunities are never ending. The Turkish people are, like all Mediterranean people, warm, friendly and hospitable. They are prone to learn foreign languages.

In economies with ups and downs, Turkish businessmen are able to carry out their works on slippery surfaces. Thus they have the ability to adapt quickly to changing conditions. Therefore, I believe, the time has come, for Turks to work abroad, become partners in more ventures or make (international) investments.”

What’s your opinion for Turkey’s positon in global business for the near future?

“As a priority, we need transformation programs the most. We have to produce our products less costly and of a higher quality than our rivals and be able to sell the branded products we create for higher prices.

We need to produce globally sought, high value-added products. Only if we can do this, we can pull our country from the mid income trap and carry it to higher levels. When observed from abroad, our country is still seen as a location for low cost production. We are still in a better situation than the developed countries in terms of total production costs, despite increases in real wages over the past years, with Turkey no longer being a country that offers the advantages of cheap labor.

But we have other advantages like our geographical position. Our young and dynamic 78 million population, additionally, makes our country attractive to foreign investors.

In the coming period, our key priority should be to give our work force the knowledge and skills that are higher than world standards and the best practices with the technical education, training and employment policies.”

What must the focus be in foreign trade policy?

“For many years Turkey tried to sell what it produced. But it should have been manufacturing the products needed in export markets. We came to understand these facts with the painful experiences of the past 10 years. Mistakes are being made.

When comparing, we rejoice when Turkey’s export figures increase. But in reality, we don’t make comparisons with other countries that were equal to Turkey a few generations back and don’t look today at where their exports have soared. Today, Turkey with its labor costs must produce more sophisticated products and sell these abroad with higher profit margins. Now there are (Turkish) businessmen, led by textile producers, moving their factories to other countries with cheaper labor costs. What Turkey needs are foreign capitalists that make completely export oriented greenfield investments. And these investments have to be of an economic size that will allow them to compete.”

If you were to give a school report card on Turkey’s level of its industrial development to date, what grade would you give it on a a scale of 10?

“In our country the industrialization drive began in the 1960s, much later than in the developed economies. On the other hand, due to the lack of political stability and continuity in economic policy, our industrial growth grew in spurts and stalls.

Taking into account the favorable and negative aspects of our geography, the level we have reached in industrialization isn’t bad. But when compared to the countries that started their industrialization moves during the same years as Turkey, our nation has fallen far behind.

South Korea is the best example. There, the government gave incentives to different groups to invest, grow and reach economical sizes in the automotive, electronics, shipbuilding, construction contracting, and in iron and steel industries. One mustn’t also forget that until 1988, when South Korea held the Olympics, the country was (effectively) under martial law. Workers’ rights to strike and lockout were banned. A worker was forced to wear a black arm band to show he was on strike, but he continued production. This is how South Korea reached today and surpassed Japan in many areas. Whether these were democratic are debatable, but in the long run it can be seen that all of these (restrictions) were in the country’s interest.

When we put all of these on top of each other, I think it would be reasonable to give a grade of 7 out of 10 for our industrial development. While giving this grade, it would be correct to take into consideration the difficult periods we encountered, foreign influences that were beyond our control, and opportunities used or unused.

What are the weak and successful points of the school report?

“Of course there are successful points while giving this grade, especially the private sector. It is dynamic, entrepreneurial, and has a resilient character during crises. Its blue and white collar workers at all levels are capable of adapting to the most difficult and complex subjects and have learning abilities, work discipline and continuity in factories, and they give a high performance when it comes to quality supervision.

Despite ups and downs, delays, and hitches, the continuity in incentives given by (Turkish) governments for investments and exports, support for exports and other issues provided by sector trade organizations, the governments’ privatization initiatives and dialogue with the private sector have been the elements triggering success.

The main reasons why the grade is low are the lack of stability in the educational system over the years, and, in particular, failure to give sufficient importance to technical (vocational) education, failure of economic and industrial policies to show long term stability, and failure (of Turkish governments) to given similar incentives for (the production of) value-added and high technology goods that have been given in rival countries.

At the same time, (there have been) deficiencies in the provision of investment and export financing of these products under appropriate conditions. In agricultural policy, the failure to unify small, individual (farm) operators to become stronger and more competitive in financial structure, production capacity, export power, and technological strength slashes the school grade.

The ability to create (capital) resources in the country was thwarted by heavy taxation on earnings at a time when our country was struggling with high inflation and the government’s rejection of allowing inflation accounting practices. A key source of distress was the inability of the country to attract the amount of foreign direct investment it deserved because of the insufficient savings of the nation.”

What are the economic actions the government must emphasize?

“Actually, it is a truth that many countries that have rapidly risen from low income to mid-income levels have not been able to make the next leap forward. Economists describe this as the mid income trap.

Therefore, in my opinion, the first thing government must do in future is to prepare the roadmap that will help pull Turkey out of the mid-income trap and bring us closer to the (economic) targets of 2023, and share this with the business world and the public and carry it out rapidly.

The transformation programs the government has provide the right diagnosis, and give the pertinent solutions, and have a ready prescription. We hope that the government, which already has prepared such a reform program and shared it with the public, can carry it out with speed and decisiveness.”

What do you think about the employment of women?

“A country’s development depends on the importance it gives to human resources. At the present time when our country is facing the mid-income trap, I believe we don’t have the luxury not to employ the capable (people) we have in our possession.

According to statistics, 68% of women who are of working age don’t join the workforce. The return on every attempt to bring these able persons (women) into business life is big for our economy.

In this context, we give priority to keeping women employment at the highest level in the sectors of our activities, despite all the difficulties. We see this as an important component of our success.

To employ more women in quality jobs depends on more women getting quality education. The business world needs to take up this issue not privately but from a multiple point of view. It is very important that policies supporting women’s employment need to be put into practice, especially those support mechanisms that will allow women to remain in the workforce. Just think about it. It would be sad and a big loss to the country If a women with a good education doesn’t transfer her experience and knowledge to the economy but is forced to remain at home.”