Despite a year of turbulence due to rising energy costs, a global economic recession and the shaky political atmosphere of a thorny general elections process, Turkey's largest companies yielded higher profits last year while decreasing costs, the survey has revealed. Of the largest companies, 450 ended the year with pre-tax profits of YTL 19.2 billion in total. Considering that this number was YTL 15.6 billion in 2006, the rise in profits was 23.1 percent. In 2007, 143 companies among the top 500 were either owned by foreign capital or had a foreign entity as a partner. Among the top 50, 19 had foreign capital in their ownership structure.
Before evaluating the results, let me note some guidelines for the method in conducting such research. Obviously, survey-type research comes with many limitations. First of all, replying to the survey questions is voluntary. There is no way to make any cross checks to determine whether questions have been answered truthfully. Second, especially in Turkey, where businesspeople conceal many details of their firms from the authorities such as the Finance Ministry, results should be considered with serious reservations.
Returning to the İSO research, the survey shows that Turkey's largest companies continued to grow in 2007. Their overall growth rate in terms of production-based sales was 10.6 percent in current prices and 4.4 percent in real prices.
If the final value-added is broken down, we can observe that the share of wages and salaries in net value-added created by the private enterprises in the largest 500 companies was 49.8 percent; the share of interest was 9.1 percent and the share of corporate surplus (profit) was 41.1 percent. We must note here that the share of profit was at the lowest level in recent years. This means that surplus value was divided more equally; however, the potential for it to be used for equity investment was in a process of decline. Yet results from recent years have been quite satisfactory in comparison to the year of crisis, when there was simply no wealth creation at all.
The findings for 2007 show that there is a serious concentration (oligopolistic structure) of production-based sales in the top 500, and even more so in the top 50 companies.
First, the largest 500 companies enjoyed 49.8 percent of all of Turkey's production-based sales. In addition, their share in total gross value-added created during the year was 58.1 percent.
Second, of the 500 giants, the top 50 showed exceptional performance, almost equal to the sum of the remaining 450. To illustrate, their share in the total production-based sales of the top 500 companies was 49.8 percent -- the same share the 500 largest firms had of Turkey's total production-based sales.
Third, the top 50's contribution to gross value-added of the top 500 companies saw an increase with respect to 2006, from 56.4 percent to 58.1 percent. However, their share in profits suffered a 2.9 percentage point drop last year compared to the year before -- from 46.8 percent to 43.9 percent.
Fourth, the share of these 50 companies in total exports of the top 500 also slightly decreased from 56.1 percent to 54.9 percent from the beginning to the end of 2007. Among the top 500 companies, 451 were exporters while the remaining 49 dealt only in the domestic market.
Fifth, the results are not satisfactory from the view point of employment priorities. The largest 50 companies accounted for 33.5 percent of all employment by Turkey's top 500 companies. These 50 companies created 5.4 percent of Turkey's total annual gross national product (GNP) and made 27.9 percent of the country's total exports. These figures are nothing to boast about, however, since in 2006 the largest 50 had contributed 7.4 percent of GNP and 28.8 percent of exports.
Sixth, among the top 10 companies, five are controlled by a single family. This situation is not desirable in terms of a competitive economy. Turkish private sector monopolies must be properly regulated so as to motivate further competition by attracting more foreign direct investment (FDI).
To sum up, Turkey should be able to attract more FDI so as to close the current account deficit by motivating further competition and by encouraging an innovation-oriented economy. It seems that in addition to the second generation reforms, the government must also increase the quality of regulation so as to break up private sector monopolies.
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