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Turkish small and medium business: A valuable lesson for Ukraine

Author : Oleksandr Okhrymenko

The share of Turkish small and medium-sized businesses in exports is very significant. Maybe that is why Turkey's exports significantly exceed export of Ukraine?
23:15, 20 February 2018

Read the original text at 112.ua.

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When people describe the business in Turkey, they usually laud its small and medium business. Definitely, about 96% of all Turkish enterprises belong to small and medium businesses. At the same time, the share of small and medium-sized businesses in Turkey's exports is 55%. It is great, but let us look at the details.

Turkey has a large number of small and medium-sized enterprises, but if we compare the economic performance of these enterprises, we can say that the Ukrainian small and medium business is very similar to Turkish. Judge for yourself. A share of workers in small and medium-sized enterprises in Turkey is 73%. 63% of all employees are involved in small and medium-sized enterprises in Ukraine.

About 54% of wages in Turkey are paid to workers in small and medium businesses. In Ukraine, this figure is 62%. The share of small and medium businesses in Turkey's GDP is 54%, in Ukraine, this figure reaches 61%. Turkish small and medium-sized businesses are engaged in trade, just like in Ukraine.

Related: Ukraine, Turkey and Azerbaijan to create regional alliance

In Turkey and Ukraine, small and medium-sized businesses do not like to pay taxes and is the main source of "illicit economy", although it is formally believed that there is less "illicit economy" in Turkey than in Ukraine (45% in Ukraine, 38% in Turkey). In general, the economy of Ukraine, and especially the economy of small and medium business is very close to the economy of Turkey. But there are also a number of significant differences, for example, in Turkey in 2016 (this is their latest data), the average salary was about 1,000 US dollars, and in Ukraine - only about 220 US dollars.

In Ukraine, there is no data on how much exports small and medium-sized businesses do. Most likely, the share is small. In Turkey, the share of small and medium-sized businesses in exports is very significant. Maybe that is why Turkey's exports exceed Ukraine’s export by several times? Indeed, if Ukrainian small and medium business also joined the export sphere of Ukraine, then it would be possible to actually increase exports from Ukraine. And here is useful Turkish experience.

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The main buyer of products of Turkish small and medium enterprises is the EU. In 2016, the EU share in the export of small and medium-sized enterprises from Turkey was 55%. What does the Turkish business export to the EU? First of all, these are the products of machine building and light industry (chemical and food industry). Basically, these are products that are produced in Turkey under tolling schemes from EU countries.

Ukraine’s "Motor Sich" and "Antonov" are competative enterprises, but they have no place on the EU market. They are competitors for that market rather than their business partners. And that is why European businessmen do not want to deal with them. Moreover, any businessman understands that for an industrial cooperation it is easier to build a small workshop or plant with new equipment and logistics than to use an old Soviet inefficient equipment that remains at large enterprises. Therefore German, English, and even Chinese businesses conclude contracts with the Turkish small enterprises. In this case, Turkish companies receive a guaranteed sale, which always has problems in the modern world economy. At the same time, Turkish companies do not only sew panties and bras for Italian fashion designers but have long made high-tech equipment in a form of various components for European and global TNCs. "Mercedes" and "Boeing" companies use spare parts produced by Turkish small and medium business. As well new developments are used very often.

Related: Turkey closes ports for trade vessels coming from annexed Crimea

About 16% of small and medium-sized businesses in Turkey are high-tech enterprises, which not only twist the wires but also make sophisticated electronic equipment. Of course, it was a very long process, and at first, European companies placed orders for low-technology work in Turkey. And now many small and medium-sized Turkish enterprises perform such work for European companies, but there are also small Turkish manufactures that are in no way inferior to the leading European ones.

That is how we need to develop small and medium-sized businesses. And for this, we need to talk less about the growing investment attractiveness of Ukraine and create freer economic zones in Ukraine, as Turkey did. This is how the new technologies and investments will come to Ukraine.

Related: Ukraine, Turkey sign a number of agreements

Most of the small and medium-sized businesses that cooperate with the EU work in free economic zones. Since it is very important to remove the effect of double VAT payment, to make conditions for imports and exports under a simplified scheme, and not to interfere with inspections and quibbles, then even an enterprise employing ten people will be able to export products for millions of dollars. While Ukraine is dealing with smug complacency, our small and medium-sized business will stay "illicit", thinking how to earn more money rather than about development or new technologies.

As for the small and medium business trade in Turkey, it is clear that trade in Turkey is very dependent on tourists. In addition, very many small and medium-sized companies operate in the tourism sector. This is also a good support for the development of real small and medium businesses. But a powerful tourist area, it is, first of all, the world's networks of famous hotels and good transport infrastructure. This is how it works.

Related: Turkey to supply Ukrainian army tactical communications in 2018

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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