Turkey’s smaller firms look to external markets in risky 2010

    Although SMEs may not seem like much in the face of Turkey’s corporate giants, who can afford to plaster their advertisements throughout the country while making multi-billion dollar investments that easily trump anything SMEs can hope to whip together, SMEs are not nearly as insignificant, “small” or “medium” as they may seem. In fact, 99.9 percent of enterprises in Turkey are SMEs -- defined as enterprises with less than 250 employees -- and employ a surprising 71 percent of the workforce. As if that was not enough, their output also accounts for 59 percent of all production in Turkey, according to data from the Turkish Statistics Institute (TurkStat).

Whether enterprises are planning drastic game-changing measures for this year of recovery is uncertain, though a change in strategy is needed according to Nurettin Özgenç, president of the Small and Medium-Sized Enterprises Association (KOBİDER): “[After this crisis] SMEs witnessed firsthand that they will not be able to continue with their strategies of previous years. They realized that production according to inventory levels and an introverted attitude with respect to external markets became a great handicap for them.” Özgenç added that SMEs should make external markets their top priority.

Hasan Sert, president of the All Industrialists and Businessmen’s Association (TÜMSİAD), is working with SMEs to help them take their first steps in these markets. “We’re currently working to increase the efficiency of SMEs and improve their export strategies,” he stated, adding that his organization is working to bring together SMEs to investigate opportunities not only within Turkey but also outside the nation. “A few months ago, we set off with 107 businessmen from various SMEs to Saudi Arabia and met with the civil society there to evaluate investment opportunities. SMEs need these sorts of activities to open up to the rest of the world,” Sert highlighted.

Süleyman Yılmaz, general manager of KOBİ Venture Capital Investment Trust, a venture capital firm that provides alternative financing sources and investments for SMEs, stated that although growth is expected for this year, these enterprises are not doing much to prepare for it: “This crisis, however, has helped to tidy their business up and re-evaluate their costs and production processes as well as develop the competitive aspects of their business.” He added that the firms that have “learned a lesson” from this crisis are now taking precautions and are realizing that the only way they can protect their share of the market -- and expand it -- is by diversifying their products and becoming more competitive. When asked what opportunities exist for SMEs in 2010, Yılmaz stated that opportunities will arise by themselves if SMEs take this time to repair the damage of 2008 and 2009 and open up to external markets.

A risky recovery

According to Yılmaz, one of the biggest risks for SMEs in 2010 will be their inability to find financing, especially after the economically turbulent year of 2009. He mentioned that many SMEs found themselves unable to meet payments for loans from banks and thus, along with dwindling resources, lost the creditworthiness needed to obtain more loans. “We think that SMEs will experience great difficulty in accessing financing, and they may miss opportunities because of this,” stated Yılmaz. He added, however, that firms that managed to overcome 2009 without much difficultly and stood tall in the face of adversity without falling into financial problems will be blessed with a world of opportunities this year.

SMEs felt a serious credit crunch in 2009, with the amount of loans given to SMEs by private banks decreasing during a time when credit was needed most. According to data from the Banking Regulation and Supervision Agency (BDDK), the amount of credit available for SMEs decreased by 1 percent to reach TL 83.8 million. Compared to the 10.6 percent increase in 2008 and the 28 percent increase in 2007, this was a worrying reversal. The number of bank customers classified as SMEs decreased from 1.3 million to 1.2 million, along with a 72.2 percent increase in the number of SMEs defaulting on their payments, or more than 203,000 businesses; the monetary value of these non-performing loans increased by a similar 62 percent to reach TL 6.9 million in 2009.

As Yılmaz stated, a serious credit crunch may be on its way for SMEs in 2010 as risk-averse banks implement stricter measures to collect defaulted loans.

Aside from this, political instability could create even bigger risks than a global financial crisis could muster, according to Sert. “We can handle the global crises, but we cannot handle an internal political crisis right now,” Sert stressed, stating that what is needed for SMEs is a political environment that is ripe for development and economic prosperity. Özgenç summarized this clearly: “If politicians inject a positive attitude into the markets, then SMEs will be motivated to barge through 2010 successfully.” İstanbul Today’s Zaman