İKMİB Encourages Domestic Production, Curbs Imports

The umbrella organization of Turkey's chemical industry, Istanbul Chemical Substances and Products Exporters Association (İKMİB), has released an important sector report that will curb imports in chemicals and play an active role in reducing the current account deficit. With the "Turkish Chemical Sector Investment Priority Products Report," İKMİB has examined the 157 most-imported product categories in chemicals and identified 103 strategic product areas awaiting domestic production initiatives. Presenting a new investment projection that will significantly reduce the 70% external dependency in raw materials and intermediate products in chemicals, İKMİB forecasts that domestic production of priority products to strengthen Turkish chemical industry will prevent imports totaling 20.7 billion dollars. Chemistry, Turkey's second-largest exporting sector, aims to increase export value per kilogram through high value-added products and reduce the current account deficit.

As the global economy and international trade left behind a challenging year under the shadow of the Covid-19 pandemic, the chemical sector completed 2020 with exports of 18.3 billion dollars, becoming Turkey's second-largest exporting sector. The chemical sector, which maintains 70% import dependency on raw materials and intermediate products, recorded imports valued at 57.54 billion dollars during January-November 2020. According to Turkish Statistical Institute data, total imports in the chemical sector during January-November 2020 reached 57.54 billion dollars, while the export-to-import ratio was 36.2%.

The sector's umbrella platform İKMİB, in light of all these figures, has signed a strategic study examining the raw materials and intermediate products most imported by the Turkish chemical sector and prepared the "Turkish Chemical Sector Investment Priority Products Report." Aiming to help the chemical sector gain competitive advantage in international trade and analyzing that the foreign trade deficit in this field will be overcome through a new domestic production investment drive, İKMİB identified 157 most-imported product categories in chemicals and 103 priority strategic product areas awaiting domestic production initiatives. In the Turkish Chemical Sector Investment Priority Products Report, 157 chemical product groups with import values exceeding 50 million dollars in 2019 stand out, while the total exports of these product groups in 2019 reached 13.01 billion dollars, total imports 62.21 billion dollars, and the foreign trade deficit amounted to 49.2 billion dollars. Based on evaluations conducted and views obtained from leading sector representatives, it was noted that 103 of these 157 product groups should be prioritized for investment, while drawing attention to 53 product groups listed on the V list in the Import Regime. With new strategic production investments in these 103 product groups, which represent a significant import burden for both the sector and the current account, the goal is to prevent total imports of 20.7 billion dollars. Regarding the sector's general import figures for the first 11 months of 2020, when separated from the mineral oils and fuels product group, imports totaled 31.37 billion dollars, while the export-to-import ratio rose to 53%. Therefore, it is vital to prioritize new and rational investments that would reduce imports and support closing the current account deficit in the sector. Increasing incentives in chemicals will also serve as a driving force for sector development and growth.  

"Through domestic production, we can provide approximately 21 billion dollars in added value to the economy"

İKMİB Chairman Adil Pelister, stating that they have prepared a comprehensive sector report examining the most-imported raw materials and intermediate products for production in the chemical sector and the effects of exports in this field on foreign trade and the economy, said: "In our chemical sector, which is 70% dependent on imports for raw materials, we have prepared a critical report that will curb imports, provide approximately 21 billion dollars in added value to the economy, and contribute to reducing the current account deficit, which is our country's common problem. In our Turkish Chemical Sector Investment Priority Products report, we examined chemical products imported over 50 million dollars in 2019. We examined 157 product categories and identified 103 strategic product areas awaiting domestic production initiatives.

In the plastics and plastic products sector we have 41, in the organic chemicals sector 22, in the mineral fuels, mineral oils and products sector 20, in the pharmaceutical products sector 14, in the miscellaneous chemical substances sector 11, in the paints, varnishes, inks and preparations sector 10, in the essential oils, cosmetics and soap sector 10, in the rubber and rubber goods sector 8, in the fertilizers sector 7, in the inorganic chemicals sector 5, in the washing preparations sector 5, in the adhesives, glues and enzymes sector 3, and in photography and cinematography products sector 1, for a total of 157 product groups.

Based on evaluations conducted by our Association and views obtained from our Board of Directors, sub-committee members and leading sector representatives, 103 of these 157 product groups were assessed to be suitable and necessary for investment. Additionally, 53 products within this group are listed on the V list in the import regime, provided that certain conditions are met. In other words, these types of products, which are produced little or not at all in both Turkey and the 28 EU member states, have customs duties applied at "up to 0%." We believe that with investments by our Turkish chemical sector and industry in these products, we will increase our competitive strength in exports," he said.

"We aim to raise the bar in exports through qualified and high value-added production"

Noting that according to 2019 data, the import value of the 103 product groups was 20 billion 715 million dollars while the export value was 3 billion 29 million dollars and resulted in a foreign trade deficit of 17 billion 685 million dollars, Pelister stated: "The 103 product groups we recommend investing in represent 28.47% of our chemical sector's imports and constitute 9.85% of Turkey's general imports.

In the priority products we examined in our report, a significant portion appears as raw materials and intermediate product inputs for our sector. Among the first 10 product groups with the highest import values from these 103 groups are polypropylene, metered-packaged medicines and immunological products, terephthalic acid, urea, polyethylene, PVC polyvinyl chloride, light oils subject to special processing and preparations, blood products and varieties of these products—raw materials and intermediate products with quite high import costs. Consequently, domestic production of these products in Turkey will significantly reduce the external dependency ratio of our chemical sector. With strategic investments in priority products suitable for industrial investment, exports from our chemical sector and export value per kilogram will increase further. Thus, our sector will increase its share of global chemical exports through high value-added chemical products," he said.

"During the pandemic period, we prioritized Turkey's needs"

Evaluating the chemical sector's 2020 performance, İKMİB Board Chairman Adil Pelister said: "The Turkish chemical sector, with its 16 sub-sectors, is a locomotive sector that provides raw materials or semi-finished products to all production areas guiding the country's industry. Following the emergence of the Covid-19 pandemic affecting the entire world from March 2020 in our country as well, we experienced unexpected changes.

The Covid-19 global outbreak negatively affected the entire economic chain from production to consumption. In the early months of the pandemic, restrictions were placed on exports of certain medical, cosmetic and chemical products to meet urgent needs in our country. As İKMİB, we made an important contribution to lifting these restrictions. Additionally, with the emergence of coronavirus in our country, the intense demand for cologne and disinfectant products created a shortage of ethyl alcohol in the production of these products. Again, through discussions and initiatives we conducted as İKMİB with our relevant state institutions, we resolved this problem in a short time. Under the production mobilization of Turkey Exporters Council, we delivered 100 thousand liters of disinfectant on behalf of TİM to our Ministry of Health and hospitals. As İKMİB, we also provided disinfectant support to Çapa Hospital, Cerrahpaşa Hospital and Turkish Red Crescent. Additionally, to meet the health protective visor needs that would reduce the risk of exposure to the virus for our healthcare workers, in cooperation with the Plastics Manufacturers Association (PAGDER), we delivered 100 thousand health visors to our Ministry of Health, 3 thousand health visors to Gebze State Hospital and 10 thousand health visors to the Turkish Red Crescent," he said.

Pelister: "We pioneered firsts in chemistry through digital transformation"

Stating that as İKMİB they have pioneered digital transformation and achieved several firsts, Pelister said: "We held Turkey's first sector-wide virtual trade delegation in digital exports and the first digital awards ceremony in exports. While all sectors experienced significant export decline in April, we ranked first as the sector with the most exports among all sectors. While some sub-sectors in our chemical sector experienced declining demand, some of our sectors containing medical, pharmaceutical, disinfectant, cologne and soap products experienced increased demand. Particularly our sub-sectors producing hygiene and cleaning products, medical products, single-use plastics and packaging did not stop production. Consequently, this situation enabled our sector to be less affected.

We became hopeful at the beginning of summer. Cases had decreased. But with autumn, cases began rising again. Despite all difficult conditions, our sector managed to maintain its position as Turkey's second-largest exporting sector with 18.3 billion dollars in exports in 2020. Compared to 2019, we experienced an 11.32% decline in exports. However, considering the contraction in global economy and trade due to the pandemic, we view this decline as normal. According to the first three quarters of 2020 data, while chemical sector exports worldwide declined by 23.1%, Turkish chemical sector exports declined by only 4.6%. Our sector's share in global exports increased to 0.7%. Although our sector experienced export declines in petrochemistry due to reduced global energy demand, it recorded relative growth in other sub-sectors, particularly plastics and plastic products, cosmetics, pharmaceuticals, medical and cleaning products. Our most-exporting sub-sector was plastics and plastic products. Our sector with the most growth was miscellaneous chemical substances with a 46.61% increase rate. Our top ten most-exporting countries were Iraq, Germany, Netherlands, USA, Italy, United Kingdom, Spain, Israel, Romania and Belgium. Despite the pandemic, our chemical exports to the USA increased by 12.73%, to the United Kingdom and Belgium by over 20%, to Germany by 5.50%, and to Israel and Romania by over 14%," he said.

"Our chemical sector export target for 2021 is 20.6 billion dollars"

Stating that they expect economies to gradually recover with vaccinations in 2021, Pelister said: "However, pandemic uncertainty still persists. In particular, the pandemic fight by EU countries and other countries, especially from an export perspective, will affect the course of our exports. To minimize risk here, we need to increase market diversification. Our chemical sector ranks first among 27 sectors with its monthly exports to the most countries and regions. In 2021, we will also prioritize 17 target countries identified by our Ministry of Commerce, beginning with the USA, China, Russia, India and Mexico. On the other hand, reforms our government will make in economy and law and improvements in the investment climate are very important for both domestic and foreign investors coming to us. We believe that new investments in our chemical sector, which is also prioritized in the Technology-Focused Industry Initiative program, will increase.

Additionally, our Association's efforts to establish a "Chemistry Technology Center" (KTM) continue to support R&D work needed for our technology, capital and resource-intensive sector to transition to value-added production structure. Having completed the needs analysis for the KTM, we will begin feasibility studies in the coming period. We plan to take the center's establishment steps by year-end. As İKMİB, in 2021 we will continue working with all our efforts to exceed 20.6 billion dollars in exports, in addition to fair national participation organizations, virtual trade delegation and procurement delegation activities and competitions, other issues on our agenda regarding our chemical sector include the Chemistry Industry Congress, the European Green Deal project, compliance with the Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) implemented in our country in line with EU REACH, separate compliance with UK-REACH as a result of BREXIT, and the Turkish cosmetics sector entry into China's e-commerce market project.