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Ünal Seven

Ünal Seven is an Economist at the CBRT.

Merve Artman

Merve Artman is a Deputy Executive Director at the CBRT.

Kadir Gürci

Kadir Gürci is a Central Bank Assistant Specialist at the CBRT.

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As a major factor driving development and economic growth, exports are supported by many incentive packages and policies in emerging economies such as Turkey. Among these policies, encouraging firms that do not export to start doing so is an important target as well as increasing the exports of already exporting firms. State subsidies to promote exports (through the Ministry of Trade, KOSGEB and Eximbank) are implemented at various stages, chiefly in preparation to export, marketing and branding[1]. In order that these policies can contribute more to the wealth of the country, and that resources can be used effectively and efficiently, it is important to design the support schemes for non-exporting firms with high potential in view of sector, size and province-based dynamics.

In this study, we summarize our findings regarding the exporting potential of firms included in the Central Bank of the Republic of Turkey Sectoral Balance Sheet data-set, and the sector, size and provincial breakdown of non-exporting firms with high potential. The main objective of our study is to calculate the exporting potentials of firms without using any export parameters and to detect those non-exporting firms with high potential[2]. In the econometric model built to this end, the province in which the firm operates and the NACE classification code at a 4-digit level is kept unchanged, and the variables determining the exporting potential of firms were calculated by the stepwise regression forward selection method based on the Akaike information criterion. We estimated the exporting potential of each firm by building a logistic regression model with selected[3] variables[4].

Despite the low number of firms found to have a high potential among exporting firms according to the model, these companies carried out 87% of total exports in 2019 (Chart 1). This result indicates that there is a strong relationship between the export potential obtained without using any parameters regarding export performance and actual export performance. Meanwhile, 33% of the 55,246 firms classified as firms with high export potential among 730,291 samplings did not export in 2019 (Chart 2).

Firms with high potential yet not exporting are shown in Table 1. Among subsectors, wholesale trade stands out with respect to the number of such firms, while manufacture of machinery-equipment not classified elsewhere stands out with respect to the ratio to total number of firms in the subsector, travel agencies, tour operators and other reservation services and related activities stands out for a high ratio of non-exporters to exporting firms. Meanwhile, the majority[5] of firms with potential yet not exporting are operating in the manufacturing and trade sectors, which have a significant place within the country’s exports.

To emphasize the importance of the firms with high potential yet not exporting, Charts 3 and 4 show the ratio of such firms to exporting firms in each sector and size group as well the total of exports in each group. The sectors with the highest ratio of non-exporting firms with high potential to exporting firms are the tourism and manufacturing sectors, and their sizes are medium and large. However, given the total of exports of the current firms, large-size firms operating in the manufacturing sector stand out with their exporting potential.

 

A breakdown of firms with high potential yet not exporting across provinces suggests that consistent with the economic breakdown, Istanbul, Izmir and Bursa come to the fore, and such firms congregate in coastal cities, border zones and large cities (Chart 5).

 

In sum, using firm-level data obtained from administrative records, we analyzed firms in terms of their potential to export (classified as low/high) and in terms of their sector, size and location. The findings of this study can be considered the first step towards the design of incentive schemes for non-exporting firms with high potential. On the other hand, it is also possible to produce firm-level export scores using the exporting potential we calculate with many indicators such as the sum of firms’ exports, export growth, exporting partners and the number of products. Considering non-exporting firms with high potential across sector, size and province in the formulation of policies to bolster economic growth, development and current account surplus is significant to the increase in the efficiency and effectiveness of these policies. Moreover, close monitoring of firms with high potential but not exporting and removing the reasons for their decisions to not export will contribute to the development targets of our country.

 

[1] For details on state incentives for exports, please refer to https://ihracat.ticaret.gov.tr/yayinlar/Devlet_Yardimlari_Rehberi.pdf.

[2] Accordingly, firms with overseas sales totaling 1,000 TL and above (deflated by 2019 prices) and with overseas accounting for a minimum of 0.1% of total sales in the balance sheet year are defined as exporting firms. This requirement was kept low to focus on the exporting potential of the firm rather than the sum of exports the firms have.

[3] Variables determining the exporting potential of the firm based on the selected model: sector, province of operation, number of supplier firms, exporting/non-exporting status of the sector, liquidity ratio, productivity ratio, presence of foreign associates, R&D ratio, supplier dependence, factoring risk and firm size.

[4] Under the scope of our study, we used financial table data (balance sheet and income statement table) and credit data (TBA Risk Center) of the firms for the last five years (2014-2019) as well as firm-to-firm trade data (Declared Purchase-Sales Forms). Considering 0.477 as the threshold, which is calculated as the best breaking point separating firms based on their exporting potential with 91% accuracy according to the model, we classified firms according to their exporting potentials as high (above the threshold level) and low (below the threshold level).

[5] In the first 15 sectors illustrated on Table 1, 69% of non-exporting firms with high potential operate in the manufacturing and trade sectors in numerical terms, while this ratio goes up to 80% when non-exporting firms with high potential under the “Other” sub-sectors are considered.

Ünal Seven

Ünal Seven is an Economist at the CBRT.

Merve Artman

Merve Artman is a Deputy Executive Director at the CBRT.

Kadir Gürci

Kadir Gürci is a Central Bank Assistant Specialist at the CBRT.

Note To Editor
For views, suggestions
and comments:
Email Us

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* The views expressed here are those of the authors. They do not necessarily reflect the official views of the Central Bank of the Republic of Turkey.