Aegean exporters are in favor of accelerating free trade agreement (STA) negotiations with the Southeast Asian Nations Union (ASEAN), which includes 10 Southeast Asian countries, to facilitate mutual trade with a strong supply chain and the Asia Pacific region.
Kuala Lumpur Commercial Consultant Elif Haliloğlu Güngüneş, Manila Trade Consultant Serhan Ortaç, Jakarta Trade Consultant Mustafa Murat Taşkın with the developments in foreign trade of Indonesia, Philippines and Malaysia, in the tenth leg of the webinar series organized by the Aegean Exporters' Associations. made a related presentation, answered the questions of exporters.
Aegean Exporters' Associations Coordinator Chairman Jak Eskinazi said that Asia-Pacific countries cover 60 percent of the global economic growth and 30 percent of global trade volume.
“With a customer of over 3 billion, this geography extending from Australia to Pakistan, from Indonesia to the Philippines is rapidly progressing to become the world's largest global market and trade center. The economies of Indonesia, Philippines and Malaysia are expected to make major leaps in economic growth by 2050. In order to take advantage of this potential, we must expand our export range and take a strong position in these markets by creating a new trade axis to cover all geographies of the world. It is important for us that Malaysia, Indonesia and the Philippines are included in ASEAN, which covers a population of 650 million. The sectoral dialogue partner of ASEAN in 2017 entered the list of Turkey, thanks to the good relations in the region to increase the effectiveness day by day. Our trade volume with ASEAN member countries reached $ 2019 billion in 9. ”
Stating that the tendencies of protectionism and trade wars, which were on the rise before the pandemic, have now accelerated, Eskinazi says that STAs will be the milestone in the trade relations in the new period for the trade to continue and increase without interruption.
“Our FTA with Malaysia came into force in 2015. We anticipate that the negotiations that have been going on with Indonesia for 3 years will end in 2021. We are very close to signing an STA covering our potential sectors. Negotiations with the Philippines should come up as soon as possible. We have a customs tax disadvantage. In our export plan, we put ASEAN in our focus. STA will definitely have an impact on our trade. In order to fully reveal our potential, we will intensify our sectoral trade delegations to these countries in the coming period. We must eliminate all the challenging elements in our bilateral trade relations and take the necessary measures to reach a much higher volume. In the first 6 months, we exported $ 161 million to Malaysia, $ 120 million to Indonesia and $ 42 million to the Philippines. Defense and aerospace industry, chemicals and products, machinery and components in Indonesia, steel, chemicals and chemicals, pulses and oil seeds in Malaysia, chemicals and chemicals, machinery and equipment, electrical and electronics in Philippines our sectors stand out. ”
Recommendations for the Malaysia market are as follows;
-The raw material is rich. The world's largest producer of palm oil. It has rich oil resources. It also meets the palm oil and rubber needs of the world to a large extent. There is a high rate of gloves export. Although its population is 32 million, it is seen as a gateway to 650 million ASEAN.
In the January-May 2020 period, electricity and electronic products, palm oil and derivatives and LNG exports decreased by 15-20 percent, while the rubber and nitrile gloves sector was profitable as a result of the increase in demand. (Export increase 20,5 percent)
Malaysia's number one electrical electronics exporter. Palm oil and its derivatives are in the second place in export. In 5 months, it exported an average of 20 percent in all of them. Malaysia meets 70 percent of the supply of rubber gloves. Glove prices of $ 3 per box increased to $ 7.
- Made with the first STA Malaysia in the Southeast Asian region. It came into force in 2015. With the agreement, which is the second STA in the Asia-Pacific Region of our country, and the first STA in the South Asian Region, our country has gained preferential entry into the Malaysian market before the EU. At the end of the 8-year transition period, in 2023, 99 percent of our exports and 86 percent of our imports will be exempt from customs duties in terms of tariff lines.
Iron and steel products made up 28 percent of our total exports last year. The second place is mineral fuels and oils. Motor vehicles, tractors and bicycles, boilers, machinery, mechanical devices and tools, inorganic chemicals, precious metal and radioactive elements are among the other prominent products.
- Palm oil is number one in our imports. Electric machinery and devices, electronic circuits, synthetic and artificial flaments, strips, rubber and rubber goods, plastics and products, aluminum and aluminum articles, gloves are also prominent in our imports.
2023 percent of the products in our exports will be tax-free in 99. There is no VAT. Malaysia is therefore advantageous. The perception of quality is high for Turkish products. They are positioning Turkey in Europe. For example, they compare German products in machinery trade. Taxes have been reset for many products. There are offices of Malaysia Foreign Trade Development Agency in Istanbul. Companies that want to establish partnership can meet with the authorities or send an e-mail.
- Due to the strategic location of Malaysia in the region, the sympathy of the people of the two countries and the desire to trade with our country, it is a country that has the potential for cooperation and export potential in many sectors for Turkish companies.
- It is important to increase our export of fresh vegetables, fruits and food products to Malaysia, which imports 70 percent of the total food consumption. (Citrus, pomegranate, apricot, cherry, peach, chocolate, biscuit, flour, pasta, nuts) Turkish supermarket needs. Turkish olive oil has potential in the market. Packaged products are sold from Spain and Italy. Olive oils are also brought from the Aegean. It was packaged in Malaysia and started to be sold to the countries in the region. Customs tax is zero. There is a very expat population in Kuala Lumpur. It is possible to find olives in the markets. Olive sales can be evaluated in Kuala Lumpur.
- Export permit is required for milk and dairy meat and meat products. It is done by applying to the veterinary services department of the Ministry of Agriculture. If you claim to be halal, you have to get a certificate. Meat and dairy products come to Turkey delegation in Malaysia examines facilities of the company. The period of giving permission for 2 years can be extended.
-Digital shopping started to be used more effectively as it is all over the world. They started selling fresh fruits and vegetables over the internet. Started online sales in supermarkets.
-We have good relations in the field of defense industry. Diplomatic relations are good. We have many years of friendship. There is a demand for ammunition. Sectors where we can be advantageous; textiles, home textiles and ready-made clothing. The fairs with the most demand for participation are the international halal fair MIHAS. It was to be held on September 1-4, it was postponed. There are Food and Hotel Malaysia Horeka fair, Beauty Expo & Cosmobeautue Malaysia beauty fair, MIFB Malaysia food and beverage fairs.
Recommendations for the Indonesian market are as follows;
- The world's 16th largest economy and the world's fourth largest population. It also has 42 percent of the ASEAN geography. Half of the ASEAN population lives in Indonesia. In 2017, GYSİH rose above 1 trillion dollars. It is predicted that it will grow at very high rates by 2045. There is great potential in its economy. 2019 exports are 160 billion dollars and imports are 170 billion dollars. Its population is 300 million. There is a total foreign trade volume of $ 330 billion.
- A very rich country with underground resources and products grown above ground. The world's largest coal exporter and producer. So is the tin nickel bauxite. Nickel production is very strategic when it comes to the production of batteries in electric vehicles. It has great potential in gold and copper. The world's largest gold mine copper mine is here. The world's number one in geothermal field. It is also the world's number one palm oil producer. It is the world's fourth producer of coffee and cocoa, and the world's third producer of rubber. It is both a serious manufacturer and an exporter.
Since it is a conservative foreign trade structure, it has a structure that does not favor import. A country that has opened itself to commerce with little trade and tries to be self-sufficient. It makes import difficult by seeking the permission of not only the Ministry of Commerce but also other Ministries. You must have an import permit from the Ministry of Trade in bilateral trade. When you come to invest, you are provided with a list that shows that foreign investors can not enter or at what rate. For example, they want 33 percent local partners to open some places. This prevents further investments. It can make progress on these issues.
- The free trade area with ASEAN is the biggest commercial move. They now look at STAs positively. Because it is similar to Malaysia, Singapore, Thailand and Vietnam, where it competes as a supplier in the same geography, its competitiveness decreases in the supply of products. So he restarted the STAs he had abandoned. Apart from ASEAN, they have STAs with China, Japan, Korea, India, New Zealand and Australia. Negotiations with Chile and the EU continue.
It began with the start of negotiations with Turkey -EU. EU STA is interrupted nowadays due to measures in palm oil, but negotiations are progressing. FTA negotiations with Turkey began in 2018. The process continues. A total of 4 negotiations were made. Negotiations can continue until 2021.
- A very large textile manufacturer. It accounts for two-thirds of imports. Palm oil, rubber and textile products, automobile equipment, machinery, paper industry, where foreign investments are importers, are among the products we buy shoes, especially sports shoes originating from foreign capital investments. We sell carpets, rugs, prayer rugs, marbles, tobacco, boron minerals, machinery equipment, food machinery, textile and agricultural machinery.
There is huge competition in imports in Indonesia. It is a very open market with ASEAN countries. It is also with Asian countries. Tax disadvantage due to the absence of STA. People from Singapore, India to Indonesia live as merchants for business. Therefore, commercial relations are progressing well. It is important that people are citizens or live in these countries. Even if we include the USA in all the surrounding countries, companies entering the struggle are entering. The manufacturer from Turkey should enter in both price and conditions favorable to Indonesia in terms of quality. It is not possible to find a place due to the competition.
- Construction equipment infrastructure investments are important. It is moving from the capital Jakarta to an island where it has a common area with Malaysia. There is an investment project of 34 billion dollars. It is very important for both construction equipment and infrastructure companies. The fact that it is built on the Green City and Smart City concept is advantageous for technology companies.
Infrastructure investment country due to its geographical structure. There is an investment of 2019 billion dollars between 2024-400. There is potential. There is an opportunity in agricultural products. When we experience a lot of problems in the supply of agricultural products from Turkey we can sell. Our products are much cheaper. There are some problems in agricultural legislation. Palm oil is popular. However, olive oil has potential. Currently, we can export 21 products. If cooperation with Indonesia is possible, we are likely to sell it. Import permits need to be obtained. Pre-shipment inspection documents spanning an important product line.
-They applied non-tariff barriers including textiles, garments and carpets. There are some problems with fresh fruit. Halal certification is important. It will be mandatory in the coming period. Indonesia only accepts its own documents. There are problems with animal products due to screed. It is the largest country in the world with 173 shopping malls in Jakarta. Turkish firms have very few presence. There is potential in kitchenware, textile, apparel and home textile products.
- In the next 20 years, the income level of the consumer will increase, which will be reflected in imports. Turkey, they have to give up seeing the legislation does not deal with Indonesia or not they come and go. Indonesia has its own rules. Firms must complete the documents requested by Indonesia. E-commerce is common.
Recommendations for the Philippines market are as follows;
Despite the pandemic in 2020, 0,6 growth is still expected by the IMF. 2021 percent growth is expected in 7,6. In 2019, 70 billion dollars of exports and 113 billion dollars for imports.
- In the first place in important items in export; There are also integrated circuits in the import of integrated circuits. There are many South Korean and Chinese electrical and electronic manufacturers in the country. Integrated circuits are also the raw material of electrical electronics production. Semiconductors from other materials, automatic data processing and storage devices, connection sets used in vehicles, electrical electronic devices, wet or dried banana (export volume of $ 1,9 billion), parts and components of storage devices, refined copper cathodes, static converters resulting export items. The investments of China, South Korea and Japan have an impact on the vast majority of these products. This figure is the export made by 15-20 companies.
- Products that stand out in the import of the Philippines; Other fittings, components, accessories and consumables of semiconductors, other oils and preparations, electronic integrated circuits, processor and controller, petroleum oils, other oils, components and parts, integrated circuits, flour and bakery products. In 2016, we were exporting 25 million dollars of flour. The Philippines economy is overprotective, and when a country's exports grow under the government's policies, protection measures are put in place and additional taxes are applied. Currently 5 year period is applied to anti-dumping duties for flour imported from Turkey. It decreased from $ 25 million to $ 5 million. Negotiations continue for its abolition.
- Top 5 countries in export; USA, Japan, China, Hong Kong, Singapore. In imports, China, Japan, South Korea, USA, Thailand. Our imports were at the level of 2018 million dollars in 122, and it increased to 2019 million dollars in 134. Our exports were $ 2018 million in 177, reaching $ 2019 million in 117. Our defense industry exports are important.
- The top 10 products in our export are medicines and pharmaceutical raw materials, pistols revolvers, wheat flour, pastas and couscous, construction materials such as carbonate and ammonium carbonate chemical cleaning materials, motor vehicles, jewelery and accessories, electrical transformers, static converters, bulldozers, graders. machinery parts for sorting tools, soil, stone, metal, ore etc.
In our import, electronic integrated circuits, printing machines, coconut (54% of imports are from the Philippines with 11,5 million dollars), automatic computing machines, yarn from synthetic staple fiber, diodes, electric motors and generators, vegetable sap and extracts, pectic substances, optical fibers, bundles and cables, parts and components. Italy, Spain, Belgium, Germany, Greece export olive oil. Turkish olive oil is of higher quality compared to these, but we do not export. The market is open, opportunities should be evaluated.
Until the end of 2022, 170 large infrastructure projects with a size of approximately 75 billion dollars are planned. The government attaches great importance to the program and ensures its financing. The construction and construction industry is very important for our exports. There is significant competition, including China, Japan, Singapore and South Korea.
- The organization of the contracting and construction materials sectoral trade delegation, which will include public institutions in the future, may be beneficial. It is important for our companies to participate in the WORLDBEX fair in 2021, especially the companies operating in building materials.
There is 110 million workforce in the population of -73 million. It ranks first in the Asia Pacific region in terms of e-commerce use. 110 million e-commerce accounts have been opened in 230 million countries. In the Philippines, daily sales are made almost every day, one for each person. These sites are taken by Chinese capital. We may have a competitive advantage in the automotive and supply industry, personal care products and cosmetics industries. Ease of transportation and professionalism in customs.
-Weaknesses; There is a heavy bureaucracy. Those who want to start a business have to find a 60 percent Filipino partner, or they need to invest more than $ 2,5 million to have 100 percent capital. There are restrictions on money outflow from the country. The culture of doing business is not practical. The government has a protective economic policy. They seem to be protecting domestic capital, but for Japan, Singapore and China, we cannot see it. European Union countries are applying protectionist policies and to Turkey's product. One of the weaknesses of the commercial law rules is that notary public institutions are not reliable.
- An import-based economy. Fixed exchange rate is an advantage, convenience in banking transactions. Its geographical location in terms of logistics costs, Asian Pacific countries have dominance in the market, customs tax disadvantage. There is no Free Trade Agreement. The Philippines has made STA with China, Japan, Singapore, Brazil, Australia, especially ASEAN countries. He did not leave the EU and Turkey. There is no such process.
- They attach great importance to reference jobs. Integration in defense and aviation between the two countries. It is important to develop. In order to become a supplier in the construction industry dominated by China Japan and Singapore, communication with the contractors who take the projects is important. Shopping mall and supermarket culture is common.