MINISTRY OF TRADE IN ITS FIRST YEAR

Rıza Mehmet KORKMAZ
UGM General Manager

From the foundation of the Republic of Turkey to the present day, there have been changes in the structure of public administration from time to time according to the needs and dynamics of the period. In this context, the last radical change was experienced with the Presidential Government System.

According to the provisions of the Constitution that came into force as a result of the Turkish Grand National Assembly and Presidential elections held on June 24, 2018, the Prime Ministry and the Council of Ministers were abolished; the executive duty was given to the President; and the ministries were also connected to the President. Vice Presidents and ministers are appointed and dismissed by the President from among those who are eligible to be elected as MPs. Vice Presidents and ministers take office by taking an oath in the TBMM as written in Article 81 of the Constitution; if the TBMM members are appointed as Vice Presidents or ministers, their memberships end.

In the Presidential Government System; The establishment, removal, duties, and authorities of ministries, organizational structure, and the establishment of central and provincial organizations are regulated by the Presidential Decree. In this context, with Presidential Decree No. 1, which was published in the Official Gazette dated 30474/10.07.2018 and entered into force, the Presidential Organization chart was established as follows.

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The Minister is the highest authority in the ministry organization, responsible for the ministry's operations and the activities and transactions of those under his command, and is authorized and tasked with auditing the activities, transactions, and accounts of the ministry's central, provincial and overseas organization and affiliated, related and related organizations. Ministers are responsible to the President and to carry out the ministry's services through legislation, the President's general policy, the President's decisions and instructions, development plans, and annual programs, and to ensure cooperation and coordination with other ministries on issues within the ministry's field of activity, to use public resources effectively, economically and efficiently.

1. STRUCTURE AND DUTIES OF THE MINISTRY OF TRADE

With articles 441-473 of the Presidential Decree No. 1; the Ministry of Trade, consisting of a total of 14 general directorates, was established with the participation of the General Directorates that previously operated under the Ministry of Economy, except for the General Directorate of Incentive Implementation and Foreign Capital and the General Directorate of Economic Research and Evaluation, and 9 general directorates that previously operated under the Ministry of Customs and Trade. Then, with the Presidential Decree No. 27 published in the Official Gazette dated 30651/10.01.2019, some general directorates in the Ministry were merged (General Directorate of Liquidation Services with General Directorate of Risk Management and Control, General Directorate of Cooperatives with General Directorate of Tradesmen and Craftsmen, General Directorate of EU and Foreign Relations with General Directorate of Agreements), 4 new General Directorates (General Directorate of Personnel, General Directorate of Legal Services, General Directorate of Foreign Representatives and International Activities, General Directorate of Trade Research) were established.

Thus, the main service units in this new structure of the Ministry of Trade were formed as follows.

a) General Directorate of Exports,

b) General Directorate of Imports,

c) General Directorate of Domestic Trade,

ç) General Directorate of Customs,

d) General Directorate of International Agreements and the European Union,

e) General Directorate of Foreign Representatives and International Activities,

f) General Directorate of Free Zones, Foreign Investment and Services,

g) General Directorate of Customs Protection,

ğ) General Directorate of Consumer Protection and Market Surveillance,

h) General Directorate of Tradesmen, Craftsmen and Cooperatives,

ı) General Directorate of Trade Research,

i) General Directorate of Product Safety and Inspection,

j) General Directorate of Risk Management, Liquidation and Revolving Fund,

k) General Directorate of Personnel,

l) General Directorate of Legal Services,

m) Directorate of Guidance and Inspection,

n) Directorate of Strategy Development,

o) Directorate of Information Processing,

ö) Department of Support Services,

p) Press and Public Relations Consultancy,

r) Private Secretary Directorate,

The provincial organization of the Ministry of Trade is also structured in 3 main legs:

1. Responsible for services related to units related to domestic trade, Provincial Trade Directorates established in 81 provinces,
2. Responsible for foreign trade and customs transactions, Customs and Foreign Trade Regional Directorates established in 18 regions,
3. Responsible for transactions in free zones, Free Zone Directorates established in 18 places.

The institutions affiliated and related to the Ministry are determined as the Competition Authority, Turkish Eximbank, and Halal Accreditation Agency.

2. REASONS FOR THE ESTABLISHMENT OF THE MINISTRY OF TRADE AND POINTS OF SUCCESS

In the discussions held while switching to the Presidential Government System, the most important deficiencies of the Parliamentary System were;

• It leads to political instability,
• Since the principle of separation of powers is not clearly defined, the system is blocked due to the incompatibility between the legislative and executive bodies, and balance and supervision cannot be sufficiently established,
• It leads to a dual-headed administration in the executive; since the President elected by the people shares the executive authority with the prime minister and ministers, confusion of authority arises,
• In the parliamentary system, where governments that are dependent on parliamentary balances have difficulty in dominating the bureaucracy, decision-making mechanisms operate slowly; Some reasons such as this situation fueling bureaucratic oligarchy,
• The work and transactions in the state result in heavy processes, a lack of efficiency,
• The country's competitive power decreasing due to the cumbersome structure,
• Lack of accountability,
• Rising costs due to duplications and numerous titles and hierarchical levels,

were expressed and the Presidential Government System was put forward as a solution to overcome such problems.

The main reason for merging the Ministry of Economy and the Ministries of Customs and Trade under a single ministry was to bring together the decision-making units (Ministry of Economy) in domestic/foreign trade with the implementing units (Customs) and thus to increase the country's exports significantly by ensuring efficiency, speed, and effectiveness in transactions, to prevent foreign trade deficit, to develop domestic/foreign trade, to increase competitiveness and to ensure sustainable growth.

One of the main driving forces of the goal of our country to be among the world's largest economies with a GNP of 2 trillion dollars and a foreign trade volume of 1 trillion dollars on the 100th anniversary of the foundation of the Republic of Turkey, which our President Recep Tayyip Erdoğan shared with the public in 2011, was undoubtedly exports with the target of 500 billion dollars.

Within the export-based growth model, the new structure of the Ministry of Trade was born as a result of the search for effectiveness in state organization to bring our country's exports to the desired levels. Implementing and decision-making units were brought together to ensure that new decisions, measures, and established systems aimed at developing exports can be implemented correctly in customs, which are their application areas, and that necessary measures can be taken to identify and solve problems, if any, at the earliest.

With the duties given at the establishment of the Ministry of Trade;

• Increasing our country's share in world trade,
• Developing exports of goods and services,
• Taking necessary measures to expand the market and product diversity of exports to ensure sustainable export growth and developing and implementing support methods for this,
• Taking necessary measures to ensure that imports are realized for the benefit of the country's economy and to protect the domestic industry and implementing trade policy defense tools,
• Taking necessary measures to ensure and direct the contributions expected from foreign capital in the country's development,
• Transforming Turkey into a center of attraction for trade and investment in its region,
• Reducing costs in foreign trade transactions,
• Increasing the competitive power of our country,
• Facilitating trade and facilitating and accelerating the processes of transactions in this context,
• Reducing waiting times at customs,
• Ensuring that customs services are carried out quickly, effectively, efficiently, and by the determined standards,
• Increasing transparency and accountability, effectively combating corruption and smuggling,
• Ensuring supply chain security,
• Effective and universal acceptance of consumer rights to be protected in the standards seen,
• Supporting small and medium-sized enterprises and ensuring that they become exporters,
• Ensuring that the safety of our products subject to foreign trade complies with legislation and standards; preventing technical barriers in trade,
• Increasing the effectiveness of our country's main policies regarding trade and customs services and structuring economic activities towards foreign trade, cooperating with public institutions and organizations, universities, private sector, and civil society organizations in the field of technology and entrepreneurship-oriented projects, scientific studies, and education,

A series of goals were set forth as follows. What has been done in the last year to achieve these goals? How much success has been achieved in the goals? It is possible to examine this issue in the following outline.

Reducing Foreign Trade Costs and Waiting Times: The most objective and sound data on how the performance in reducing transaction costs in foreign trade transactions has been achieved in the last year can be found in the Doing Business (Business Environment) Reports published by the World Bank every year, which measure the ease of doing business in countries.

According to the World Bank Doing Business 2019 Report;

- While the document preparation time in exports in our country was 5 hours the previous year, it was 4 hours in 2019 (an average of 2.4 hours in OECD countries).

- Customs clearance time was 16 hours on average, the same as the previous year (an average of 12.5 hours in OECD countries).

- While documentation expenses (document preparation cost) in exports were $ 87 in 2018, it was made for $ 55 in 2019 (an average of $ 35.2 in OECD countries).

-Foreign trade/customs clearance transactions at the border, while costing $387 in 2018, became $358 on average in 2019 (an average of $139.1 in OECD countries; an average of $157.7 in European and Central Asian countries).

-As a result, there was a cost of $413 per export transaction as of 2019.

The report also includes the breakdown of these expenses. It is seen that only $48 of the $413 expense consists of customs clearance expenses, while $290 consists of other expenses at the port/border (loading, unloading, storage, weighing, duties, etc.).

In imports;

- Document preparation time decreased from 11 hours in 2018 to an average of 3 hours in 2019.

- Customs clearance time decreased from 41 hours in 2018 to an average of 11 hours.

- The average cost of documentation expenses in imports decreased from $142 in 2018 to $80 in 2019.

- The cost of customs clearance transactions was $655 in 2018 to an average of $46 in 2019[1].

Thus, Turkey ranked 71st in terms of customs clearance transactions in imports and exports with a score of 79.71 in 2018; in 2019, it made a big leap forward and ranked 42nd among 190 countries with a score of 90.27[2]. Our neighbor Bulgaria ranks 21st with a score of 97.41.

The underlying reason for Turkey’s success in customs clearance procedures is the significant projects and facilitation implemented in customs procedures recently. In this context, to digitalize customs and facilitate trade, the “Single Window System” has enabled all information and documents required for goods subject to foreign trade to be presented at a single point of application; As of 2019, 126 documents issued by 17 institutions have been included in the Single Window System. Great progress has been made in making port procedures simpler, paperless, faster, and more secure with the Container and Port Tracking System and the Port Single Window System. The GET-APP Program, which provides foreign traders with instant information on the stage of import and export procedures, has also brought great convenience to the procedures and the ability to follow the processes. Again, implemented in Customs; Pre-Arrival Customs Clearance Project, One Stop Project, Electronic Preparation of Proof of Origin and Circulation Documents, Electronic Tracking of Reconciliation Transactions, Automation of Acceptance Transactions to TIR System, Implementation of Customs Declaration System in Postal Transactions, Electronicization of Special Invoice Customs Transactions, Electronicization of Duty-Free Sales Store Transactions, Electronic Confirmation and Tracking of Letters of Guarantee, Project for Preventing Duplicate Analyses in Public Laboratories, Integration to NCTS System, Vehicle Pre-Declaration System, Risk-Based Control Application in Foreign Trade (TAREKS), Authorized Customs Consultancy System, Cash Control Program, Ship Tracking Program, Delay Interest Calculation Program, Free Zones Information System (SEBIS), Binding Tariff Information E-Application System, Obligor Registration and Tracking System, E-Application System for the Protection of Intellectual and Industrial Property Rights in Customs, GÜVAS (Customs Data Warehouse System), Compensatory Tax Program, Inward Processing Regime DIR-TCGB Tracking Program and many other modern applications and projects have been important steps taken in digitalization to date.

All these applications and projects have borne fruit and thanks to the developments in customs, our country has ranked 43rd in the 2019 Doing Business (Business Environment Report) - Ease of Doing Business Index with a score of 74.33, advancing 17 places compared to the previous year. Nevertheless, it is clear that we are behind in the rankings and need to show better performance.

Developing Exports and Preventing Foreign Trade Deficit: When export performances are examined, it is seen that Turkey's exports increased by 7 percent compared to the previous year in 2018, reaching 168 billion 23 million dollars, while imports decreased by 4.6 percent to 223 billion 39 million dollars; and the foreign trade deficit decreased by 28.4 percent in 2018, reaching 55 billion 16 million dollars.

As of August 2019, exports in the first 8 months reached 117.3 billion dollars with an increase of 2.9 percent according to the General Trade System (GTS); and in the last 12 months, exports reached 180.1 billion dollars, bringing the New Economic Program 2019 target even closer. In terms of quantity, exports reached 95.6 million tons in the first 8 months of 2019.

In the first 8 months of 2019, imports decreased by .92 to 136.9 billion dollars, and thus the foreign trade balance decreased by .30 compared to the previous year and was realized as 19.6 billion dollars. The export-import coverage ratio increased from 69.2% to 85.6%. It is seen that the large decrease in imports rather than the increase in exports is effective in the foreign trade balance.

Therefore; Although there is a relative increase in exports, it is not possible to talk about a sufficient increase.

Increasing Competitiveness: Data on our country's competitiveness can be accessed from IMD's World Competitiveness Index. Accordingly, while Turkey ranked 46th in the world in 2018, it is seen that it fell five places to 51st in 2019. [1] However, it should not be forgotten that developments in 2019 will only be reflected in the data in 2020.

Share in World Trade: As can be seen from the table below, our country's share in world trade (based on exports) is currently below 1%. It would not be wrong to say that with the current growth rate of world trade and our country's foreign trade, it will not exceed 1% in the next few years.

While Turkey's share in world goods imports was 1.3% in 2017, it decreased to 1.1% in 2018 with 223 billion dollars and ranked 25th.

Fighting Corruption: Our country’s performance in this regard can be assessed through the indexes of Transparency International. The 2019 report of the institution has not yet been published. According to the 2018 index, Turkey ranks 78th among 180 countries with 41 points.[1]

Simplification of Procedures: In the assessment of the level of simplification that can be achieved specifically in customs procedures, it is useful to look at the number of documents used. In the examination conducted within this scope, it is seen that 187 documents are currently used in imports and 126 documents in exports[2]. Considering that over 300 documents were previously used in imports, the point reached is positive. Nevertheless, further reduction of the number of documents in the coming period will shorten the processes and reduce costs.

Simplification of Business Start-up Procedures: It is possible to examine our country’s performance in this regard in the Doing Business Report. In terms of business start-up procedures, Turkey ranks 78th in the Doing Business 2019 Report with a score of 88.21. Although Turkey ranked 80th in this field with a score of 87.59 in 2018 and moved up two places in the list in 2019, it is a fact that we are still far behind in the list in general[3].

Foreign Capital Inflow: According to Article 441/1-t of Presidential Decree No. 1, one of the duties of the Ministry is; “To take the necessary measures to ensure and direct the contributions expected from foreign capital in the development of the country”. When we look at the recent developments in this regard; [4] The investments coming to our country increased by approximately 188 million dollars in the first half of 2019 compared to the same period of the previous year, reaching 3.1 billion dollars; 19.4 percent of this investment came from Qatar, 18.7 percent from the UK and 17.5 percent from Azerbaijan. Compared to last year, the share of the top three countries in total incoming investments increased from 34.3 percent to 55.6 percent this year.

In the 2002-2019 period, 15.8 percent of the approximately 157.9 billion dollars of direct investment made by residents abroad came from the Netherlands, 7.6 percent from the US, 6.9 percent from the UK, 6.7 percent from Austria, and 6.2 percent from Germany. When we look at the distribution of these investments by sectors, it is seen that 61.9 percent of the approximately 157.9 billion dollars of investment was in services, 37.7 percent in industry, and 0.4 percent in agriculture.

3. ISSUES THAT NEED TO BE FOCUSED ON MORE IN THE NEW MINISTRY STRUCTURE

Considering the reasons for the establishment of the Ministry of Trade, it is thought that more effort should be spent on the following points.

Reducing foreign trade costs: One of the main reasons for the establishment of the Ministry of Trade is efficiency in foreign trade transactions. Achieving efficiency, increasing the competitive power of our country's foreign traders, and reducing the costs they are exposed to will also be possible. It has been revealed by research that a 10% decrease in export costs in a country provides a 4.7% increase in the country's total exports. According to the Organization for Economic Cooperation and Development, customs transactions constitute approximately 15% of the costs in world trade. A 1% decrease at this rate contributes approximately 40 billion dollars to the world economy. According to another study conducted by the same organization, waiting an extra 1 day for import and export transactions of goods reduces trade by 4%.

In addition, a study conducted by the International Land Transport Association reveals that approximately 40% of the total time spent on transportation is due to waiting at border gates. According to the Logistics Performance Index Report prepared by the World Bank, it is estimated that if the speed of customs transactions is increased by half, it will lead to a growth of 33 billion dollars worldwide. Therefore, customs have great importance and potential, especially in increasing logistics efficiency. The impact of border crossings and customs transactions on logistics processes makes customs a critical actor in the logistics chain.

In this context; Although the additional costs and expenses incurred through foreign trade transactions are a subject that the Ministry has put on its agenda and even organized a Workshop with the relevant parties on this issue, it is surprising and saddening that no regulation has been made so far regarding the unfair and additional expenses incurred by agencies, especially at ports.

The costs of foreign trade transactions, especially those carried out by sea, increase even more due to additional and exorbitant expenses paid to agencies (bill of lading arrangement fee, container entry and exit fee, container weighing fee, terminal fee, security fee, loading fee, etc.) and can reach $567-632 per container[1]. When the financial size of the aforementioned expenses requested by agencies from exporters and importers without being bound to any fee schedule is evaluated; considering that 7,132,805 containers (including import-export-transit and cabotage) were handled in a total of 20 ports in Turkey as of 2018, a cost of up to $1.5 billion emerges, even if it is considered as $200 for each container. When it is evaluated that 2.5 million containers were handled in export transactions in 2018; it is possible to say that $500 million-1.2 billion emerged as additional costs for the exporter. In this respect, it is essential to eliminate the unfair and additional expenses taken by agencies to reduce export costs. It is thought that the Ministry of Trade, which is now the only address in the fields of customs, domestic trade, foreign trade, competition, and protection of consumer rights in the Presidential Government System, should take the necessary steps urgently in this regard.

Supply Chain Concept: The Ministry of Trade is at the intersection of logistics activities in the supply chain extending from the producer to the consumer, as it is the institution where customs procedures and domestic/foreign trade policies are managed and consumer rights are protected. The security of the supply chain, facilitation of trade, and protection of consumer rights should be among the most important priorities of the Ministry.

One of the most important advantages of the Ministry of Trade in theory is the power to exercise authority regarding all links in the supply chain from the producer to the consumer. However, unfortunately, a holistic approach has not been demonstrated in this regard to date, and as has been tested in the periodic increases in fruit and vegetable prices, it has been observed that the regular and healthy operation of the supply chain in our country has not been ensured. Although the Ministry of Trade has the authority regarding retail/wholesale trade and market halls, regular mechanisms that operate in the delivery of products to the final consumer have not been produced; our consumers have been left at the mercy of intermediaries. On the other hand, while it is possible to solve the increasing trade of fruit, vegetables, and other products in the country with measures to be taken regarding foreign trade, healthy policies have not been produced in this regard; The market regulating function of foreign trade policy instruments has been ignored.

Logistics Centers: In article 441/1-g of the Presidential Decree No. 1 regarding the duties of the Ministry of Trade; the duty of “To permit, operate, have operated and supervise the opening and operation of temporary storage areas, warehouses, storehouses, logistics centers, liquidation goods depots, stores and sales sections…”; in article 451/1-a; the duty of “To conduct studies on the determination of principles and policies regarding the establishment, management and operation of free zones, logistics free zones, specialized free zones, special zones, foreign trade centers and logistics centers at home and abroad within the framework of development plans and annual programs, and to carry out research, planning and coordination activities”; and in articles 451, subparagraphs /1-c and ç; “c) To determine the production, purchase-sale, storage, rental, assembly-disassembly, maintenance-repair, coastal banking, banking, insurance, financial leasing and other activity subjects that can be carried out in free zones and logistics centers, ç) To grant operating licenses or cancel the issued documents to real and legal persons operating in free zones and logistics centers” have been assigned the duties.

In this context, although the Ministry of Trade is responsible for establishing, operating, and managing logistics centers in Turkey, determining the activities in these centers, granting operating licenses, determining policies, and ensuring coordination regarding logistics centers, unfortunately, no concrete steps have been taken in this regard to date; the studies previously carried out within the General Directorate of Liquidation Services have remained on a project basis and have not been implemented.

However, our country has very important advantages for logistics centers that can provide global service. To the west of Turkey is Europe, where 40% of world trade is carried out and 11% of the world population lives; to the east is Asia, where 25% of world trade is carried out and 61% of the world population lives. Turkey has easy access to 1.6 billion potential customers and a $28 trillion market in Europe, Eurasia, the Middle East, and North Africa with a 4-hour flight. Turkey, which is a natural transfer center due to its geographical location, has significant potential in terms of logistics as it is a strategic bridge between Asia and Europe and is located on the main transportation corridors.

On the other hand, the “One Belt, One Road Project” initiated by the People’s Republic of China, which aims to revive the historical Silk Road, covers 65 countries and envisages a 1 trillion dollar investment, offers important opportunities for Turkey, which is located in the Middle Corridor.

However, unfortunately, it is not possible to say that these advantages are being used sufficiently. There are currently no legal regulations regarding logistics centers in our country and functioning logistics centers and a system has not been established. At this point, expectations are high from the Ministry of Trade, which is also responsible for the inspection of more than 1000 temporary storage areas and warehouses currently operating in our country.

Expansion of simplified procedures at customs: The Turkish Customs Administration has recently taken important steps in simplification, especially with modern applications such as authorized liability, pre-arrival notification, and the single window system. Despite this, physical control rates are still very high, especially in imports, compared to modern countries. Physical control rates in exports are still around 4%. The solution lies in further simplification and reducing unnecessary bureaucratic procedures. However, another essential condition is to change the understanding of law enforcement officers. All modern practices are ultimately confined to the framework that their practitioners can understand.

For this reason, a paradigm shift in enforcement units regarding foreign trade and the internalization of legal trade facilitation are also essential.

Another important point is to ensure that authorized liable practices are mutually recognized with AEO practices in other countries, thus paving the way for our country's exporters to ease transactions in entering target markets. Unfortunately, the only concrete development in this regard is the mutual recognition agreement (MRA) made with South Korea.

4. THE FUTURE OF THE MINISTRY OF TRADE

The Ministry of Trade has put digitalization on its agenda for the upcoming period. Although this is a correct approach in general, it is insufficient. In our opinion, focusing on imports rather than exports, especially in studies carried out within the framework of blockchain, would be a more appropriate choice for our country. One of the greatest benefits that blockchain will provide will be facilitating legal trade, as well as ensuring that public authorities receive accurate data and effective inspections in problematic areas such as double invoices, origin, and tariff fraud in foreign trade transactions.

As mentioned above, the Ministry of Trade is a Ministry that plays and should play an active role in the entire supply chain from producer to consumer. However, it is seen that this issue is not sufficiently evaluated in the Ministry's work and that it focuses only on foreign trade. The Ministry must play an active role in the entire chain from production to consumption, monitor product and service trade, establish competition correctly, contribute to and supervise the increase in product/service quality, protect consumer rights at all levels, and increase the awareness and brand value of Turkish products. This is possible by addressing the issue with a holistic supply chain approach.

It is seen that our country, which should be one of the natural logistics centers of the world with its geographical location, cannot get enough share from the world logistics distribution network. At this point, it is thought that our country needs a solid logistics center master plan, legal regulations regarding logistics centers, and a public authority that will deal exclusively with this issue or that the Ministry of Trade needs to take the initiative in this regard. The problem has long exceeded the dimension that can be corrected with the studies of the Logistics Coordination Board and time is being lost.

Unfortunately, there does not seem to be another worthwhile project for Turkey to create world brands after the Turquality study. Concrete projects and more support are needed in this area.

In the world of the future, new generation customs administrations will emerge with concepts such as industry 4.0, blockchain, and the Internet of Things. In these new-generation customs administrations, perhaps we will be talking about a system where the human factor is completely out of the picture and the goods declare themselves to customs. Digitalization in customs should be accelerated with this basic vision.

If the Ministry of Trade sets out with the right targets and a holistic approach, in cooperation with all stakeholders, and with competent staff, success will come automatically. Otherwise, discussions on re-dividing the ministries may arise and our country will lose time and energy.

[1] https://www.transparency.org/cpi2018

[2] http://www.gebzeto.org.tr/upload/duyuruekler/web/duyurular/EK-2%20Ithalat%20Belgeleri.pdf

[3] https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2018-Full-Report.pdf

[4] https://www.aa.com.tr/tr/ekonomi/yabanci-yatirimcinin-turkiye-ilgisi-artiyor/1560540

[1] https://www.imd.org/contentassets/6b85960f0d1b42a0a07ba59c49e828fb/one-year-change-vertical.pdf