| Abstract |
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This study explores the factors behind the increase in the import content of domestic production in the Turkish manufacturing industry. We have conducted a survey on 145 large-scale manufacturing firms to analyze the reasons encouraging the use of imported intermediate and investment goods in production. Two major channels are identified: (i) Increase in the import content of production in most of the sectors, and (ii) change in the sectoral composition of output in favor of sectors having higher import content. Regarding the first channel, the survey results indicate that insufficient amount of domestic production of some basic intermediate and investments goods, supply of low-cost inputs by countries such as China, India, etc., foreign trade regime (inward processing regime and Custom Union), developments in the exchange rate, the need for high quality intermediate and investment goods, organizational structure of global supply chains (vertical integration) and foreign direct investments, and credits supplied from abroad are the main factors affecting import decision of firms. For the second channel, the study finds that output of high-growth sectors (transport equipments, electrical machinery, basic metals, etc.) have higher import content compared to traditional labour-intensive sectors, and hence, change in the sectoral composition of output has led to an increase in import content of output in overall manufacturing industry. |
