Turkish textile companies hit worst amidst Devaluation of Iranian rial

 Turkey imports oil and natural gas whereas it exports products such as steel, iron, textile products, fridges, washing machines, air conditioners and automotive products, as well as forestry products. However, Turkish companies often do not receive full payment for the goods they export to Iran. Many textile companies exporting to Iran are currently suffering from a lack of due payment by the importers. The exporting companies expect direct payment but experience problems in receiving their money. Speaking on condition of anonymity, representatives of these companies told Sunday’s Zaman that they wish to see measures by Turkish authorities to resolve the problem.

Celal Sönmez, Chair of Bursa’s Chamber of Commerce and Industry (BTSO), notes that they have been experiencing problems in trade relations with Iran; he recommends that companies find alternative markets.

Ali Fuat Er, Chair of the Bursa Entrepreneurs and Businessmen Association (BUGİAD), says that the biggest problem with Iran is the currency issue. Noting that the Turkish firms sell their products to Iran is US dollars, Er says that the changes in the exchange rate of Iranian and US currency lead to serious losses for Iranians. Er further says that the Iranian companies delay their payments or never make any payment at all relying on this pretext.

Customs rates much higher

Hüsnü Çayhan from Çayhan Giyim Tekstil, which has sold $2 million in goods to Iran every year since 2008, and Mehmet Atınç, owner of Belvü-Atınç Tekstil, note that the greatest problem is that the money transfers are not made via official channels. Serkan Can from Essa Tekstil complains about devaluation whereas Mustafa Koç from Ziyaoğlu Tekstil says the difference in exchange rates is the main problem.

Hüsnü Çayhan from Çayhan Giyim says the biggest problem is that money is not transferred via official means. “We receive our payments through private currency dealers. They have a bank in İstanbul. Last year, we received the payments via that bank; they used to make the payments through İş Bankası. But now, they do not use banks. It appears that Halk Bankası is involved in the money transfers, but there are some problems.” He says the money is kept at the bank for 15-20 days, and large deductions are applied. “We do business based on mutual trust. But it is a problem for us to receive the money through unofficial means. Iranian customs rates are 150 percent higher than ours. For this reason, textile exports are done through illegal means. Almost nobody makes legal exports.”

Serkan Can from Essa Tekstil says: “We do business based on mutual trust. But the real problem in exports is the devaluation of currency in Iran. We cannot possibly predict the losses that we could suffer in case of a problem over there. When there is devaluation in Iran, the Turkish companies suffer from extensive losses. We cannot do business there in Turkish currency. We cannot receive our payments through banks; instead, we have to rely on private dealers and commissioners.” He says Turkish companies suffer extensively due to losses in the Iranian rial against the US dollar.

Mehmet Atınç from Belvü-Atınç Tekstil says the greatest problem is that the money transfers are not made through official means. “Iranian firms cannot use banking facilities due to the American embargo. For this reason, they make the payments through unofficial means. They come over here and make the payments to the banks as transfers to us. And we cannot make official exports due to high customs rates. For this reason, Turkish companies rely on illegal methods and means for exports.” Iranians also complain about this situation; they do not prefer the official method of importing from Turkey either, he adds. But this poses serious risks including difficulties in the collection of payments, according to Atınç. “For me, Iran is the largest market for Turkey because there is no serious textile production over there. For this reason, those who want quality products buy them from Turkey.”

Mustafa Koç from Ziyaoğlu Tekstil says they been doing business with Iran for one-and-a-half years. “The debts of our Iranian customers increased dramatically when the rial lost value. Because of this, they stopped making payments.”

Elif Şahin from Özbeşler Tekstil Konfeksiyon says they have been doing business with Iran for about eight years. “Over the last three years, our trade volume has declined by 90 percent. About 80 percent of our collectables still remains unpaid. We do not know what to do; right now, we are not doing anything with respect to this situation.”

Likewise, Necla Yeşilbahçe from Selinay Moda Tasarım Tekstil says her company started doing business with Iran in 2007 but due to the economic crisis that started in the US in 2008 and then affected the whole European continent, our existing customer portfolio failed to meet our expectations. Back then, the Middle East seemed to be a growing market. The problems in other regions shifted our focus to this region. We did not experience any problems in the delivery of the products.” However, she continues, due to devaluation of the Iranian rial, the size of orders we received declined.

Alternative markets should be sought

BTSO Chairman Celal Sönmez says that Iran is not a safe place for Turkish firms. He recommends those who do business with this country find alternative markets. Sönmez says: “Right now, I recommend that businesspeople who do business with Iran reduce the size of their trade. Iran is having some troubles with the sanctions imposed by the UN due to Iranian nuclear ambitions. Turkey is obligated to honor some of these sanctions. Businesspeople should remain cautious in doing business with Iran. They need to find alternative markets. In the end, this is not going to last forever.”

Oil and natural gas are the main exports in the bilateral trade between Turkey and Iran; however, last year, the number of Iranian companies in Turkey has increased 41 percent from 418 in 2010 to 590 in 2011. This is viewed as an Iranian attempt to address the embargo by Western states upon the Iranian central bank through increasing business in Turkey.

BUGİAD Chairman Er says: “Official transactions matter in exports. However, a substantial portion of the trade with Iran is unregistered. From this perspective, it could be said that the amount of exports to Iran is greater than recorded. There are serious problems with lack of confidence. Because Iranian banks are not used, transactions are made through private dealers. There are serious problems with collection. The majority of the firms cannot fully collect their receivables.”

Iran purchases Turkish gold worth $1.2 billion

In April, Turkey’s gold sales to Iran increased fourfold compared to the same period last year. According to figures from the Turkish Statistics Institute (TurkStat), $1.2 billion in gold was sold to Iran in April. The total amount of gold sold to Iran last year was 300 kilograms whereas in March 2012, it was more than 11 tons. In April, it exceeded 26 tons. This means that gold sales have increased by 440 percent. Gold has emerged as a safe tool of investment due to growing political tension and the economic embargo imposed upon Iran. On the other hand, it is also noted that the devaluation in April provoked greater demand for gold; Iranian people shifted focus to gold in an attempt to preserve the value of their money.