Israeli business people whose hopes for increased trade and investment with Turkey were lifted just three weeks ago by the rapprochement between the two countries insisted they remain bullish after the failed coup over the weekend.
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Although doubts are growing about Turkey’s ability to maintain its high level of economic growth, Israeli business people said the main factor that would dictate trade and investment was the political climate.
“When the reconciliation between Israel and Turkey begins to take effect there will be more trade missions and more joint investment, which is important for the long term,” said Menashe Carmon, president of the Israel-Turkish Chamber of Commerce and an importer of textiles and chemicals from Turkey.
They key thing, he said, was for the two countries to build on the agreement they reached in June to normalize ties after a six-year rupture caused principally by the Israeli commando raid on the Turkish vessel Mavi Marmara, which left 10 Turks dead.
Although bilateral trade held steady during the following years, the hostility to Israel projected by Turkish leader Recep Tayyip Erdogan deterred business people. “It seeped in – people in Turkey said they didn’t like Israel and so they wouldn’t do business with it but with others.”
But Vered Mozafi, the head of business development of Moshe Mozafi Food Marketing, an Israeli importer, said she maintained good business relations throughout the period of tensions.
“I never felt unwelcome,” she said. “The dogs bark but the caravan moves on. Even during the era of the Marmara affair not one container was canceled.”
On Sunday, Prime Minister Benjamin Netanyahu said he didn’t expect the reconciliation to be affected by the coup.
“Israel and Turkey recently agreed on a reconciliation process,” he told the cabinet. “It is our assumption that this process will continue regardless of the dramatic events in Turkey over the weekend.”
More recently, however, bilateral trade has suffered a sharp decline. The Israel Export Institute said two-way trade, not counting diamonds, dropped 24% last year to $4.1 billion, mainly because of a 40% drop in Israeli exports to Turkey. In the first five months of this year, two-way trade declined another 17% to $1.2 billion, with Israeli exports down 37%. Imports from Turkey held steady.
But Shauli Katznelson, the institute’s chief economist, said the decline was due to the heavy weighting of chemicals and petrochemicals among Israeli exports to Turkey. All the growth in the years up to 2014 were due to the two sectors, which tripled from 2010 to 2014 while other sectors saw trade shrink.
The central bank said it would offer unlimited liquidity to banks, while Deputy Prime Minister Mehmet Simsek sought to assure business. “Our country’s macroeconomic fundamentals remain solid. We are taking all the necessary measures,” he said on Twitter.
Nevertheless, news of the failed coup caused the lira to plummet 5%, its biggest fall since 2008. That could push inflation higher and add further pressure to Turkey’s yawning current accounts deficit, while terrorism and worries about political instability deter foreign investment and tourism.
But Carmon, for one, said he wasn’t put off by the depreciation. “The drop wasn’t that big, although we’ll have to see what happens tomorrow [Monday}.”
Even if Turkey’s economy slows in the post-coup era, he added, the country remains an important bridge to other markets in the Middle East that Israel can’t export to directly.
Before 2010, Turkey was a favored sun-and-fun destination for Israelis. That business dried up after the Mavi Marmara, but Istanbul has in recent years emerged as a popular connecting airport to flights to Europe, North America and the Far East.
When the coup broke out over the weekend, just 6,000 Israelis were in Turkey, according to the Israeli Foreign Ministry.
“As destinations go, it’s dead,” said Ronen Carasso, vice president for marketing at the tour packager ISSTA, who said terror attacks, including one at Istanbul’s main airport, were the main factor keeping Israelis away. “Today’s prices for Turkish vacation packages are rock bottom, prices are down 40% from a year ago and there’s still no demand.”
However, for the first time the connecting flights business was also down after the coup, he said, estimating reservations had fallen 10% over the weekend.