< Previous20 OCTOBER 2022 Foreign direct investments in the manufac- turing industry totaled $1.8 billion. Foreign direct investments (FDI), which declined in 2020 due to the pandemic, rose back up in 2021 and amounted to $1.8 billion, albeit remaining below the pre-pandemic le- vels seen in 2018 and 2019. While new investments are limited in numbers, FDIs into the manufacturing industry are largely in the form of acqu- isitions. Therefore, the main determining factor for FDI is the conditions for acquisition. Despite a high supply-side demand from Türkiye in 2021, foreign capital investments into the manufacturing in- dustry remained relatively low. Türkiye's economic and financial fragility limited foreign capital investments. Incentivized investments into the manufac- turing industry amounted to TL 202.6 billion. The Turkish Ministry of Industry and Technology updated the statistics regarding investments within the scope of investment incentives provided. Accordingly, evaluations are based on the updated data. Manufacturing investment incentives in 2021 amounted to TL 202.6 billion, pointing to an increase by 2.3 percent YoY. In 2020, the significant support provided to investments improved the investment appetite. This investment appeti- te was carried over to 2021. Furthermore, additional capa- city investment decisions targeting exports were material agenda items in 2021. Accordingly, the manufacturing in- dustry garnered a high investment volume in 2021 as well. Of the incentivized manufacturing industry investments, 56.2 percent was new, 35.5 percent was for capacity ex- pansion and the rest were other investments. Based on the size of investments, 42.5 percent of the investments were in the first zone, 20.7 percent in the second zone and 18.5 percent in the third zone. 76.4 percent of the investments benefited from regional support, 21.9 percent from gene- ral incentives and 1.7 percent from strategic investment incentives. SHARE OF MANUFACTURING IN GDP (%) Source: TurkStat. 2014 16.8 17.6 2017 16.7 2015 19.0 22.2 2018 2021 2013 16.3 2016 16.6 2019 18.3 2020 19.1 4,800 4,200 3,600 3,000 2,400 1,800 1,200 600 0 FOREIGN DIRECT INVESTMENTS INTO MANUFACTURING ($ MILLION) Source: Ministry of Industry and Technology. 2014201520162017201820192020202120132012 2,843 2,742 4,237 2,241 1,934 1,933 1,172 1,799 1,202 4,519 INVESTMENT INCENTIVE CERTIFICATES FOR THE MANUFACTURING INDUSTRY (TL MILLION) Source: Ministry of Industry and Technology. 2017 2018 2019 2020 2021 70.0 110.7 104.8 198.1 202.6OCTOBER 2022 21 TL COMMERCIAL LOAN INTEREST RATES (YEAR-END, %) Source: Central Bank of the Republic of Türkiye. 21.1 2021 Mar 12.7 2019 19.6 2020 21.6 2021 Jun 21.2 2021 Sep 24.4 2021 Dec The lira continued to depreciate sharply. Foreign exchange and interest rates are important vari- ables that affect the financial structures and profitability of industrial enterprises. The Turkish lira has seen a series of severe depreciations, especially in recent years. This trend continued in 2021. With shifts in monetary policy that started in September the Turkish lira depreciated heavily in December. Despite the new measures taken to support the Turkish lira in December, the USD/TRY rate closed 2021 at 13.35, indicating a YoY increase of nearly 80 percent. The rate ave- raged 8.98 in the full-year 2021, corresponding a 21.6-per- cent depreciation in the Turkish lira. The fluctuations caused by the high exchange rate incre- ases in the final months of 2021 and by the sharp decline which the measures announced at the end of December entailed also affected the industrial sector and led to predi- ctability problems. Most of the measures that were announced on December 20 and expanded for different segments of the economy in the following period also concerned industrial enterprises. The numerical data-based reflections of the new policies that industrial enterprises are trying to adapt themselves to will materialize in 2022 to a considerable extent. Financial conditions worsened towards the year-end. The financial conditions in 2021 can be categorized under two periods. Firstly, the initial months of the year was rela- tively stable. Although there was a certain degree of uncer- tainty for a while due to the changes in the central bank’s organization in March, the stable outlook in the Turkish lira and the values of TL assets continued until the end of the summer. As of September, financial conditions began to deteriora- te as a result of the Central Bank's interest rate cuts. The Turkish lira depreciated rapidly, the market saw significant hikes in TL interest rates and Türkiye's credit default swap (CDS) risk premium went up. USD/TL EXCHANGE RATE (YEAR-END) Source: Central Bank of the Republic of Türkiye. 2018 5.29 2019 5.95 2020 7.43 2021 13.35 As a result, the financial conditions for the industrial sector remained favorable for most of the year, but deteriorated in the last four months of the year. Loan interest rates rose in the last quarter. Commercial loan interest rates remained stagnant for most of 2021. During this period, the CBRT's monetary policy ensured relative stability for loan interest rates. The Central Bank hiked the policy interest rate by 200 points to 19 percent in March, up from 17.0 percent. In parallel, commercial loan interest rates jumped by near- ly 2 points to 21.43 percent at the end of March. The Cent- ral Bank kept the policy rate at 19 percent until September, which was an effective move to keep the commercial loan interest rates stable. As the industrial sector faced real inte- rest rates to a limited extent, uncertainties were assuaged. The CBRT introduced its interest rate cuts in September 2021 and lowered the policy rate by 500 basis points to 14.0 percent by year-end. Risks increased due to interest rate cuts, and the Turkish lira started to lose value, with interest rates rising. Accordingly, TL commercial loan interest rates also went up and closed the year at 24.36 percent. Source: Banking Regulation and Supervision Agency. DOMESTIC BANK LOANS USED BY THE INDUSTRIAL SECTOR (TL BILLION) 2020 Year-end 2021 Year-end Change (%) Manufacturing755.41,060.035.7 Energy, Water, Natural Gas257.6395.124.3 Mining & Quarrying46.172.238.0 Total1,059.11,527.332.922 OCTOBER 2022 With a history of over 50 years, the Türkiye's Top 500 In- dustrial Enterprises (ISO 500) survey is a major reference point and a treasure trove of information for the develop- ment of the Turkish industry. Focused exclusively on industrial enterprises, the ISO 500 survey provides a ranking of companies based on their production-based (net) sales figures. As such, the level of industrial activity serves as the only criterion for enterp- rise scale. These industrial activities covered in the report include the sectors of mining and quarrying, manufactu- ring, and electricity, gas, steam, and air conditioning. The main objective of the ISO 500 survey is to determine the largest enterprises, with cumulative balance sheets and income statements of the companies ranked, al- lowing for comparative analysis and evaluation. Analyses and assessments are performed in terms of basic econo- mic indicators, financial ratios, profitability, value-added and efficiency as well as technological activities. THE ISO 500 RESULTS MIRROR THE RAPID POST- PANDEMIC RECOVERY IN THE WORLD AND TURKISH ECONOMY, AND THE EFFECTS OF THE SUPPORT PROVIDED. The Istanbul Chamber of Industry has been compiling and presenting to the public its survey of Türkiye’s largest industrial enterprises for the last 54 years. Originally covering the top 100 enterprises, the scope of the survey was subsequently expanded to 300 in later years, and to 500 from 1980 onwards.OCTOBER 2022 23 The 2021 results of the "Türkiye's Top 500 Industrial En- terprises" survey, prepared with the same painstaking effort put in the survey each year, were published in May, as in previous years. In 2021, 492 private enterprises and 8 public entities were included in the ISO 500. On a YoY basis, the number of private enterprises increased by 1, while the number of public entities decreased by 1. The decrease in the num- ber of public enterprises was due to the fact that a pub- lic enterprise that had been listed in the ISO 500 in 2020 dropped in ranking to the ISO Second Top 500 in 2021. The number of new entries to the ISO 500 list in 2021 was 64, which was 50 last year. In 2021, the ISO 500 survey saw a larger scale change in its public-private make-up. In 2021, the number of new entries to the ISO 500 survey was 64. 39 of these were on the ISO Second Top 500 list of last year, while the remaining 25 made it directly to the list from outside the ISO 1000. 436 companies were listed in the ISO 500 in both 2020 and 2021. The 2021 results of the ISO 500 survey reveal, with stri- king data and detailed analyses, the effects of the rapid recovery in the world and Türkiye’s economy, as well as the additional supply-side demand from Türkiye, export growth and capacity expansion, and the ongoing support in the economy and sectors. TOP THREE TÜPRAŞ maintains its dominating leadership. According to the ISO 500 Industrial Enterprises 2021 sur- vey, the largest enterprise according to production-ba- sed sales was "TÜPRAŞ-Türkiye Petrol Rafinerileri A.Ş.". TÜPRAŞ maintained its long-standing leadership positi- on this year as well. The gap between TÜPRAŞ and the runners-up in the production-based sales widened once more in 2021. In 2021, TÜPRAŞ accounted for 6.7 percent of the total production-based sales of the ISO 500. This rate was 8.6 percent in 2019 and 5 percent in 2020. In 2021, “Ford Otomotiv Sanayi A.Ş.” came second for its production-based sales figures, also maintaining its posi- tion from last year. This time, the second runner-up was "Star Rafineri A.Ş.", which moved up from sixth place to the third. “Toyota Otomotiv Sanayi Türkiye A.Ş.” maintained its po- sition YoY. “İskenderun Demir ve Çelik A.Ş.” rose to fifth place. This enterprise, which had ranked tenth in the pre- vious year, made a significant leap. The sixth largest enterprise preferred to remain anon- ymous. In 2021, “Ereğli Demir ve Çelik Fabrikaları A.Ş.” moved up two places to rank seventh. Down one place, “Arçelik A.Ş.” ranked eighth in 2021. Having been placed third in the previous year, “Oyak-Re- nault Otomobil Fabrikaları A.Ş.” ranked ninth. “TOFAŞ Türk Otomobil Fabrikası A.Ş.” dropped to 10th place in 2021 af- ter ranking eighth in 2020. As can be seen, while the enterprises that were among the top 10 in 2021 did not change YoY, there were diffe- rences in their ranking. The automotive industry’s global scale issues adversely affected the rankings of automoti- ve industry enterprises in Türkiye. There were no publicly traded enterprises among the top 10 in 2021. In 2017, the private sector grabbed all the top 10 places for the first time, a trend that carried over into the 4 years that followed. Two of the top three by value-added gene- rated remained unchanged. İThe ISO 500 also ranks companies by value-added ge- nerated. The survey uses producers’ prices to calculate gross value-added. The enterprise that generated the highest value-added at producers’ prices in 2021 preferred to remain anon- ymous. The second enterprise in terms of value-added was “JTI Tütün Ürünleri Sanayi A.Ş.”, which ranked third in 2020. “İskenderun Demir ve Çelik A.Ş.” rose to third place. All the top three enterprises with the highest value-added generated in 2021 were private. The enterprise with the highest value-added generated accounted for 7.2 percent TOP THREE ENTERPRISES BY PRODUCTION-BASED SALES Production-Based Sales (Net, Excluding Sales Taxes) FORD OTOMOTİV TL 67,305,202,746 2 STAR RAFİNERİ TL 55,187,004,901 3 TÜPRAŞ TL 136,793,346,358 124 OCTOBER 2022 The top three exporters included one petro- chemical and two automotive companies. Another important ranking in the ISO 500 survey is the list of top exporters. This ranking is based on the US dol- lar equivalent (Fob) of exports according to the General Trade System (GTS). According to the GTS, goods that are moved abroad from the free zones, customs warehouses and the free circula- tion area are considered as exports. As in the previous year, the top two exporters in 2021 were “Ford Otomotiv Sanayi A.Ş.” and “Toyota Otomotiv Sanayi Türkiye A.Ş.”. In the third place was “Tüpraş-Türki- ye Petrol Rafinerileri A.Ş.”. While the top three exporters had consisted of automoti- ve industry enterprises in 2016-2020, this ranking chan- ged in 2021. In 2021, an organization from the refined pet- roleum products industry was in the top three, sharing the podium with automotive industry enterprises. In 2021, the total exports of the top three exporters amounted to $13.5 billion, up from the previous year’s figure of $11.6 billion due to the negative effects of the pandemic. of the total gross value-added generated of the ISO 500 in 2021. Last year, this rate was higher with 9.5 percent. The top three profit-makers leveraged the increase in commodity prices. The ISO 500 survey also ranks companies by pre-tax pro- fits. The most profitable enterprise in 2021 was “Ereğli Demir ve Çelik Fabrikaları A.Ş.”. In the second place was "İskenderun Demir ve Çelik A.Ş.", which had been at the very top in the previous year, and “Eti Bakır A.Ş.” ranked third. As in 2020, the top three profit-makers were private in 2021. Two of the top three most profitable enterprises of 2021 were iron and steel companies. The third place belonged to an enterprise from the mining and metallurgy industry. The total profit for the period of the top three enterprises that made the most profit in 2021 constituted 18.4 percent of the ISO 500. This figure was 16.6 percent in 2019 and was recorded lower in 2020 with 12 percent. TOP THREE PROFIT-MAKERS Profit/Loss for the Period (Before Tax) EREĞLİ DEMİR VE ÇELİK TL 22,709,503,172 1 İSKENDERUN DEMİR VE ÇELİK TL 17,751,102,067 2 ETİ BAKIR TL 12,514,926,456 3 TOP THREE EXPORTERS Exports ($ Thousand) 5,868,2373,839,9493,787,554 TÜPRAŞTOYOTA OTOMOTİV FORD OTOMOTİV TOP THREE ENTERPRISES BY VALUE-ADDED GENERATED Gross Value-Added (at Producers' Prices) - - İSKENDERUN DEMİR VE ÇELİK TL 17,643,659,529 JTI TÜTÜN TL 20,855,693,303 123MAIN INDICATORS The performance of ISO 500 both affects and indicates the growth and development of the Turkish industry.OCTOBER 2022 27 ECONOMIC AGGREGATES The share of the ISO 500 in the economy increased. The ISO 500 has a significant weight in Türkiye’s industrial sector. In this respect, the ISO 500’s share in total industrial value-added and GDP serve as important indicators. Due to the Turkish Statistical Institute’s (TurkStat) revisions on its national income calculations, the share of value-added generated by the ISO 500 in overall industrial value-added and GDP may show changes, albeit slight. The share of the ISO 500’s gross value-added at basic prices in overall industry value-added increased after 2018. The share enjoyed a jump from 16.1 percent in 2018 to 18.2 percent in 2019 and to 19 percent in 2020. In 2021, it increased by 1.7 points to 20.7 percent. Likewise, the share of the ISO 500’s gross value-added at producers’ prices in GDP also followed an upward trend. Recorded at 6.1 percent in 2018, this share rose to 6.5 percent in 2019 and to 6.9 percent in 2020. In 2021, it increased further by 0.1 points to 7 percent. These figures show that the ISO 500 was able to deliver a performance above the general economy and industry in an economic and industrial landscape of fast-paced growth in 2021. As a result, the ISO 500 better managed the conditions entailed by the rapid economic and industrial growth period in 2021 and succeeded in increasing its share in both the industrial value-added and GDP. SHARE IN THE INDUSTRIAL SECTOR (GROSS VALUE-ADDED AT BASIC PRICES)(GROSS VALUE-ADDED AT PRODUCERS’ PRICES) SHARE IN THE GDP SHARE IN INDUSTRY AND GDP (%) 18.2 6.5 2019 19.0 6.9 2020 20.7 7.0 202128 OCTOBER 2022 Continued on next page Main Indicators (TL) A 500 Top Industrial Enterprises B 492 Private Enterprises C 8 Public Enterprises B/A (%) C/A (%) Production-based Sales (Net)2,048,052,702,3201,999,902,663,05848,150,039,26297.62.4 Net Sales2,312,973,466,4452,241,593,199,68871,380,266,75796.93.1 Exports (According to GTS, $ Thousand)85,847,80784,914,588933,21998.91.1 Profit for the Period (Before Tax)287,770,791,543278,170,283,0469,600,508,49796.73.3 Loss for the Period68,324,823,52557,512,282,18110,812,541,34484.215.8 Total Profit and Loss for the Period (Before Tax)219,445,968,018220,658,000,865-1,212,032,847100.6-0.6 EBITDA405,286,853,107403,513,230,4261,773,622,68199.60.4 Total Debts1,507,359,556,5161,437,364,456,05569,995,100,46195.44.6 --Short-term Debts959,137,418,668921,909,523,43437,227,895,23396.13.9 > Financial Debts341,010,156,143324,252,843,83916,757,312,30495.14.9 > Other Debts618,127,262,525597,656,679,59520,470,582,92996.73.3 --Long-term Debts548,222,137,848515,454,932,62132,767,205,22894.06.0 > Financial Debts454,905,265,387426,704,521,14028,200,744,24793.86.2 > Other Debts93,316,872,46188,750,411,4814,566,460,98195.14.9 Equity Capital624,068,846,500568,963,164,86055,105,681,64091.28.8 --Paid-up Capital217,120,283,988172,804,770,80244,315,513,18679.620.4 --Capital Reserves80,440,696,27079,866,673,871574,022,39999.30.7 --Profit Reserves239,353,407,894214,646,329,45724,707,078,43889.710.3 --Net Period Profit249,772,105,616242,358,573,9787,413,531,63897.03.0 --Accumulated Loss162,617,647,267140,713,183,24721,904,464,02186.513.5 Total Assets2,131,428,403,0172,006,327,620,916125,100,782,10194.15.9 --Current Assets1,425,265,871,5521,374,220,111,88051,045,759,67196.43.6 --Fixed Assets706,162,531,465632,107,509,03674,055,022,43089.510.5 > Tangible Fixed Assets461,741,174,645432,847,299,36028,893,875,28593.76.3 > Other Fixed Assets244,421,356,820199,260,209,67645,161,147,14481.518.5 --Accumulated Depreciation467,062,428,080430,877,041,79336,185,386,28792.37.7OCTOBER 2022 29 Main Indicators (TL) A 500 Top Industrial Enterprises B 492 Private Enterprises C 8 Public Enterprises B/A (%) C/A (%) Wage Employees757,024720,49036,53495.24.8 Salaries and Wages Paid104,466,377,46098,158,819,6066,307,557,85494.06.0 Interest Paid91,188,236,83488,266,123,1312,922,113,70396.83.2 Profit as National Income128,959,978,133132,175,728,785-3,215,750,652102.5-2.5 Net Value-Added (at Factors' Prices)324,614,592,427318,600,671,5226,013,920,90598.11.9 Amortization63,449,064,56361,507,519,3521,941,545,21196.93.1 Other Indirect Taxes2,249,187,3271,891,030,785358,156,54284.115.9 Gross Value-Added (at Basic Prices)390,312,844,317381,999,221,6598,313,622,65897.92.1 VAT + Special Consumption Tax Paid117,381,511,140115,044,756,9752,336,754,16598.02.0 Subsidies403,941,264206,672,111197,269,15351.248.8 Gross Value-Added (at Producers' Prices)507,290,414,193496,837,306,52310,453,107,67097.92.1 Continued from previous page MAIN INDICATORSNext >