The Syrian turmoil is bad for business

The Syrian turmoil is bad for business

Turkey was one of the earliest countries to abide by the economic sanctions against Syria, and the country’s only neighbor to do so. Jordan, Iraq and Lebanon chose to stay neutral. These three are important trading partners of Syria, but then again, so is Turkey.

Therein lies the basis of the local discontent with the Erdoğan government’s decision to implement sanctions: many provinces in Turkey exporting to Syria feel serious economic pain. Gaziantep and Hatay are the two most affected. Are sanctions against Syria bad for the Syrian economy? Yes. But they are also bad for Turkey’s economy. So it is not only the strength of the Syrian economy on a stress test here, but also the patience and endurance of the Turkish business community.

Turkey’s largest trading partner is the EU and we are the only accession country with an EU customs union agreement signed before membership. Turkey’s exports to the EU took a hard hit at the beginning of the 2008 crisis. Flight from quality in Europe tends to have a negative impact on Turkey’s export performance. That led to a further increase in the already growing share of Middle East and North Africa (MENA) as export destinations for Turkey. While MENA accounted for only 9 percent of Turkey’s exports in the 1980s, it has grown to 27 percent today, with a commensurate decline in the share of the EU as an export destination. This increase started with the U.S. invasion of Iraq, which brought in foreign money and caused a boom in demand, opening the door for Turkish goods. Now the turmoil in Syria is threatening to close that door, for a while at least.

Why the discontent in Turkey on the Syria decision? A look at the pace of job creation in Turkey’s provinces following the global crisis can provide the answer. Job creation is positive in central Anatolian and southeastern provinces, but negative on the western shoreline. The provinces with a higher MENA destination in their exports had a positive job creation record. Our shift of axis in export destinations towards the MENA region has been imperative in strengthening the output recovery process in Turkey. With Europe’s crisis still waiting for a solution, the Arab Awakening in limbo and possible long-term turmoil in Syria, Turkey’s economy is sailing into choppy waters.

I am not just talking about the direct impact of the Syrian crisis on Turkey’s economy. That is the decline in direct bilateral trade and the number of Syrian tourists to Gaziantep and Hatay. A Jordanian merchant has been explaining the indirect effect on television. Remember that Jordan is a land-locked country for which transportation corridors are of utmost importance. “I had been importing Turkish textiles through Syria in the past,” I heard him saying, “that took me a few days to get the goods. Now I have to ship goods over Aqaba. That takes about a month.” Amman is about a four-hour drive away from Antakya. Now it takes about a month to ship goods from Antakya to Amman. If you are a businessman with a distribution network in Jordan, how would you feel? 

The zero problem policy told us that Turkey was becoming a trading nation in the region. In a world of non-market economies, you have to be in good terms with foreign capitals to penetrate their markets. That comes with a price at the time of political transformation. A bloody political transition process is going on, and it’s definitely bad for business.