The largest business organization in Turkey has launched a two-phase study on securing and sustaining business in violence-hit Iraq as Turkish companies have started withdrawing from the $12 billion market.
The Union of Chambers and Commodity Exchanges of Turkey (TOBB) has started to coordinate with the Foreign Ministry on the plan, which initially seeks to evacuate Turkish business representatives and employees who are currently in danger zones. The second phase focuses on problems faced by exporters, carriers and logistics firms.
Some 49 Turkish citizens, including three consuls general in Mosul and several members of the Turkish Special Forces, were taken hostage by the Islamic State of Iraq and the Levant (ISIL) and transferred to an undisclosed location on June 11. The government is expending efforts to save a sum of around 80 citizens, when others, mostly drivers, held in other places are included.
TOBB Chairman Rifat Hisarcıklıoğlu said the business organization would do all it can in close cooperation with the ministry’s crisis desk.
The TOBB’s newly founded working group has been collecting information about the situation in its southeastern neighbor, sharing it with officials to help generate solutions.
Turkish investments and projects in the country, mainly in housing, power stations, infrastructure works and shopping malls, have already been halted.
Turkey, with the highest number of foreign employees in the country, was taking a role in the reconstruction of the war-hit country before the clashes between ISIL and state security forces heated up.
According to Foreign Ministry data, Turkish contractors undertook 495 projects worth $7.5 billion in Iraq between 2003 and 2009.
Some 300 Turkish companies across the country employ 10,000 people, according to official figures.
Iraq is the second biggest export market for Turkey, accounting for 8 percent of Turkey’s overall exports. When exports conducted via Iraq are taken into consideration, the overall effect of the crisis on exports rises to 15 percent.
Workers from India, China, Jordan, Italy and Jordan have also withdrawn from the country, Anadolu Agency reported July 1.
Still, projects in the autonomous Kurdistan Regional Government (KRG) territories are continuing, it said.
Moody’s cautious over crisis
Meanwhile, the crisis in Iraq will constitute a downward risk to Turkey in its current account deficit, growth and inflation, Moody’s said in a press release June 30.
The rating agency said that if the crisis continues, 15 percent of Turkey’s exports, which roughly equates to 3 percent of its overall GDP, would be affected negatively.
Moody’s statement noted the increase in oil prices would be an additional negative factor, citing a possible strain on the current account balance.
“A more permanent oil price shock will strain the rebalancing trend in Turkey’s current account balance that began earlier this year. The Central Bank of Turkey estimates that with every $10 increase in oil prices, the current account deficit raises by $4 billion to $5 billion (or 0.5 percent of GDP),” Moody’s said.
The statement also pointed out that the increase in oil prices will impact inflation which was 9.7 percent in May, well above the Central Bank’s 5 percent target.
“The Central Bank’s recent rate cuts are predicated on the expectation that inflation will decline from this month onwards, based on the reduced effect of depreciation on core inflation. However, there is still significant risk associated with higher energy inflation from higher global prices and regulated price adjustments,” Moody’s said.
Despite considering all the possible negative effects of the crisis in Iraq, Moody’s said the growing export performance of Turkey on the back of European economic recovery suggested the year-end current account deficit would narrow to $46 billion, 5.8 percent of GDP.