The future of Türkiye's tannery zones

Populist policies and a genuine demand from Russia (the beginning of the suitcase trade) prompted plans for 12 or 15 zones. Available land and bureaucratic promises were the sole infrastructure. Only Tuzla had functioning waste treatment facilities and planned economies of scale. The collapse of the Russian rouble in 1998, which took the Turkish doubleface market with it, emptied the sector of pseudo tanners but left many fledgling zones operating at only 10 or 20% of capacity. The one advantage was that leather business was left to Omurtak, Yesiller, Tanatar, Gunduz, and hundreds more third and fourth generation, family-owned leather professionals, who now shape the future of the industry. Of the eleven leather zones remaining, about six will actually come on stream, some not for six or seven years. So, why have under-performing units scattered around Türkiye when a single efficient tannery could attract capital and labour and work cost effectively? These are difficult concepts to explain purely in economic terms because Turkish politics, job creation and social considerations often interact with profit or efficiency motives. The state is established in business and everyday life. As are many local and state taxes, which consume almost half of profits, enough to spawn evasive tactics and, by extension, the lucrative, but illegal, suitcase trade. The top three leather zones are working overall to around 30-35% of capacity. This is up from 20% about eighteen months ago, in part due to renewed activity for the current doubleface season. Doubleface production is Turkish leather's raison d'être and, of the 400 or so tanneries in the country, 300 process lambskins. This is a seasonal phenomenon, with the majority of tanneries working round the clock shifts for only three or four months and then closing. Dependence on the Russian market is the biggest danger. Firms who have moved into selling finished lambskins to Europe or, increasingly, to the Far East, are less dependent on stop-start 'pronto' production. 'Even if some months we don't make a profit, it is more economical to keep the drums rolling continuously', explained Mahmut Yesiller, chairman of Yesiller Deri Sanayi ve Ticaret Ltd Sirketi in Corlu. Another problem is lack of profits. True, suitcase trade transactions are mostly traceless anyway, but sporadic production also contributes to market inefficiencies and dilutes profits for many companies. A number of producers concur with Turgut Kosar, president of the Turkish Leather Industrialists Association, when he says: 'Turnover for many tanneries seems healthy and the market is buoyant but nobody is making any money.' A closer look at the main tannery zones highlights their future potential: Tuzla The initial infusion of state money means this zone is more micro-managed than others. But this is the core tannery zone of Türkiye. The original tanners who came here have stayed and the zone has attracted dynamic new talent, such as Bursa-based acid and direct dye specialist, Burboya. A new administrative centre is in operation and fresh lakelets have been constructed to augment existing water capacity. Founding firms, Kosar Deri, to name one, are investing in new tannery equipment and technology. Snug, traditional firms such as Uyguner (shoe upper specialists) are diversifying into garment leathers. Although working at 35% capacity, this will rise to 45% or so during the upcoming doubleface season. This was the first zone to implement eco-acceptable waste treatment facilities. Tuzla also prospers as a free trade zone and is here to stay. Menemen (Izmir) Izmir's serious attitude to global trade extends to this zone as well. Spokeswoman, Ms Z Pinar Erbutun, confirmed that Menemen is working at about 35% of capacity. The zone's position is enhanced by being a general free trade zone offering many financial and transport advantages to firms. Bureaucracy is minimal here and the sector has performed steadily and reliably for many years. Negotiations recently began with Danish water treatment firm, Kruger for a second effluent plant. Corlu The Corlu leather processing zone is a star pupil. Founding firms, some from the 1970s, used their own start-up capital. Water is plentiful and naturally available without man-made aquatic schemes. Some of Turkïye's most innovative and successful tanneries are located here: 'a science park' would not be a misnomer. New factory units and upgrading are much in evidence. A third effluent treatment facility, subcontracted to the Thames Water Authority, begins in early 2003. 'It will be out in the front, so everyone will see that the Corlu leather zone is eco-motivated', Mahmut Yesil of Yesiller Deri Sanayi ve Ticaret Ltd Sirketi boasted. Output at Corlu is 65% of capacity and will increase as the doubleface season picks up. Bursa, Gerede and Usak The tannery zones of Bursa and Gerede have only recently become commercially viable. Usak has hopes for 446 factories and jobs for 15,000 people, but the infrastructure construction is in the early stages. Conclusion Clearly, doubleface production is the 'sectoral plasma' for Türkiye's leather industry and 75% of the tannery sector works to this end. This means fashion leather and, as such, exposure to the whims of change. Without the windfall of the Russian market, the sector might be on less firm ground. A few tanneries such as Desa Deri, Yesiller and Tanatar, have diversified the trading routes, to Europe, the Far East and the USA. Researching and harnessing new markets, technological research and innovation are pre-requisites for the future of tanneries. Tannery zones of the future will be techno-parks, education centres and part of a global supply chain, not just leather processors working for one market. Each of the prominent leather zones has tanneries for whom higher education, language skills and a global perspective are already as important as uniform quality and certified management standards.