Operational Disruptions Ease as
COVID-19 Outbreak in Turkey Improves

Operational Disruptions Ease as
COVID-19 Outbreak in Turkey Improves

Executive Summary

  • Complexities in the operating environment in Turkey are currently showing signs of easing as daily COVID-19 diagnoses have been improving since mid-April. According to the World Health Organization (WHO), new daily cases peaked at roughly 5,000 on April 12, then dropped for weeks to 20 percent of the peak. A spike in new daily cases has been observed since June 12.  
  • Among the top three risks to watch out for in Turkey’s operating environment are new production stoppages by manufacturers due to safety concerns or low demand; new border controls due to a spike in cases in Turkey or its neighboring countries; and additional curfews due to local COVID-19 hotspots that may restrict the movement of people from and to operational facilities. 
  • Curfew measures intended to encourage social distancing on weekends and during holidays have affected some operations in key industrial regions. However, an official authorization to impose curfews expired on June 1 and no new curfews have been imposed since. 
  • Due to the challenges posed by COVID-19, overall manufacturing capacity utilization dropped from 75 percent in March to 62 percent in April. The automotive and textile industries have been most severely affected, but production lines have gradually resumed activity since the beginning of May.
  • Among logistics activities, truck transportation faced the biggest challenges due to an entry ban on foreign truck drivers and a 14-day quarantine requirement for returning Turkish truck drivers, leading to border congestion, capacity shortages, and freight rate spikes. 
  • Restrictions on international cargo movement have been limited to export controls on medical equipment and protective products such as masks, goggles, and sterile gloves, and special requirements for importers and exporters of COVID-19 testing kits. 
  • International passenger flights were suspended over the second half of March and began to gradually resume in early June. This has caused air freight capacity from and to Turkey to remain constrained until mid-June, even as the freighter market operated normally and logistics companies used more charters than usual to add cargo capacity. 

Top risks to watch as Turkey ends curfew measures

Ongoing efforts to curb the spread of the COVID-19 outbreak in Turkey have resulted in a dynamic and complex operating environment for shippers and manufacturers since March 2020. Measures implemented on the regional, national, and individual company level developed concurrently within the context of a particularly rapid spread of the novel coronavirus within Turkey. Since infection rates peaked in mid-April, the operating environment for logistics and manufacturing activities in the country has been trending in a positive direction, with most of the severe regulatory restrictions having been lifted. 

Nevertheless, in light of the possibility of new spikes in COVID-19 infections (as has been observed since June 12) and the swift action taken by authorities in March, organizations should keep abreast of three main risks to supply chains that have the potential to disrupt production and logistics operations from, to, and within Turkey. 

New production halts: Manufacturers in Turkey have demonstrated a willingness to implement shutdown measures that go beyond government requirements. This may be done in order to protect the safety of workers, to mitigate losses due to unfavorable market conditions, or to conduct necessary maintenance work. While supplier-specific shutdown activity appears to be decreasing in conjunction with decreasing COVID-19 cases and easing of government regulations, a national or regional spike in COVID-19 cases may see this trend return.    

Logistics capacity shortages: To date, only the trucking industry in Turkey has recorded significant capacity and freight rate disruptions as a result of the COVID-19 pandemic. Between March 17 and April 27, the government imposed an entry ban on foreign national truck drivers and a 14-day quarantine requirement for returning Turkish-national truck drivers. As COVID-19 case trends in Turkey remain stable, there is no indication that such a measure will be reinstated in the near future. However, shippers should establish or maintain contingency plans, particularly for trucking. 

New lockdown measures: As a critical public health tool against the spread of the COVID-19 virus, lockdown measures gradually expanded from target regions to the entire country over the course of May. After an initial government authorization to impose curfews that expired on June 1, curfew measures were renewed and announced for June 6-7. However, Turkish President Recep Tayyip Erdogan canceled the curfew at the last minute, citing economic interests. As Turkey struggles, along with other nations, to balance between prioritizing public health and regaining economic stability, future lockdown measures are likely to remain highly influenced by trends in new COVID-19 cases. 

Supply chains significantly affected between March and May 2020

The first COVID-19 case was identified in Turkey on March 11, and the first death was registered on March 17. By mid-March, authorities began to close land borders with Iraq, Iran, Bulgaria, and Greece for passenger travel. On March 30, reports began to emerge of targeted quarantine measures on 41 towns, villages, and neighborhoods across at least 18 provinces. However, by that point, Turkey was already recorded as having one of the highest national rates of infection in the world, and by April 1, there were confirmed COVID-19 cases in all 81 provinces of Turkey. 

With COVID-19 cases rapidly increasing, the country began to impose intermittent weekend curfews on 31 cities and provinces (see Table 1 below) as an additional measure to encourage the population to adhere to social distancing efforts. Subsequent weekend lockdown curfews were imposed on April 18-19, April 23-26, May 1-3, May 9-10, May 16-19, and May 23-26, during which manufacturing operations were affected. The May 23-26 lockdown affected the entire nation and barred most people from leaving home during the major Eid Al-Fitr holiday period. However, official authorization to impose curfews expired on June 1, and another curfew that was planned to go into effect on June 6-7 was canceled by Turkey’s President Recep Tayyip Erdogan at the last minute to avoid further damage to the economy.

More recently, the spread of the COVID-19 coronavirus has slowed in the country. According to the WHO, new daily cases peaked in Turkey at roughly 5,000 on April 12 before dropping to approximately 20 percent of the peak and remaining there from May 20 to June 11. As a result, President Erdogan stated that the country will start easing measures gradually over the course of May, June, and July. Containment-easing measures officially began on May 11 as movement restrictions for working-age groups were loosened, and some non-essential businesses were permitted to reopen. On May 20, Turkey continued to ease restrictions with the lifting of a mandatory 14-day quarantine for citizens arriving from abroad. By June 10, the government had lifted most of the stay-at-home orders for people aged over 65 and children as well as most restrictions on inter-city travel after the last provincial travel restrictions on 15 Turkish regions expired on June 4. President Erdogan also confirmed government plans to boost employment and support Turkey’s industrial sector in maintaining export and production-oriented growth to revive the country’s economy, but did not disclose details. 

AdanaAnkaraAntalyaAydin
BalikesirBursaDenizliDiyarbakir
ErzurumEskisehirGaziantepHatay
IstanbulIzmirKahramanmarasKayseri
KocaeliKonyaMalatyaManisa
MardinMersinMuglaOrdu
SakaryaSamsunSanliurfaTekirdag
TrabzonVanZonguldak 
Table 01: Known cities and provinces subjected to weekend lockdowns from March to May 2020. Source: Everstream Analytics

Automotive and textile among the most affected sectors 

Impacts of cargo disruptions, company-level closures, and government lockdowns on trade and manufacturing activity in the month of April were significant. Relative to 2019, export volumes in April dropped by 41 percent while imports dropped by 28 percent, the lowest figures on record since at least 2007. From March to April, data from the Central Bank of the Republic of Turkey indicates that overall manufacturing capacity dropped from 75 percent to 62 percent, with an overall increase of 1 percent in May. Notably, in a bid to mitigate the impacts of the COVID-19 impact on the economy, the government ratified a 3-month ban on layoffs in mid-April. On June 5, it was reported that the government planned to extend the ban and enhance incentives for companies that maintain employment or hire.  

Among the industries that have been affected most significantly by COVID-19 related measures are Turkey’s automotive and textile sectors. Both are key industries in the country’s manufacturing economy, with Turkey being the 15th largest maker of cars and the 5th largest exporter of garments and textile products in the world.   

The automotive industry experienced a considerable drop in capacity utilization from 80 percent in March to 43 percent in April, before rebounding to 66 percent in May. In terms of assembled passenger vehicles, the automotive industry dropped from 72,000 units in March to 10,000 units in April, before rebounding to 43,000 units in May. A Everstream Analytics analysis of original event data on the duration of production stoppages of major automotive plants in Turkey found that factories on average remained shut for 30 days. Toyota’s plant in Turkey was the last one to reopen on May 12, making Turkey the country with the third shortest downtime of major car plants in Europe, only trailing behind Russia and Sweden.

However, in some cases, automotive suppliers such as piston manufacturer Federal Mogul and steel manufacturer Koc Metalurji have elected to extend production halts to as late as July 1 due to a combination of worker safety concerns and poor market conditions, highlighting the persisting challenges to manufacturing despite the gradual normalization.

In the textile industry, reports indicated that garment factory closures peaked at approximately 80 percent in the initial weeks of lockdown measures in April, but approximately 60 percent of factories were again operating in some capacity as of May 18. As an example of the precautionary measures that manufacturing firms have been taking independently, major Turkish industrial conglomerate and garment producer Bilici Yatirim Sanayi Ve Ticaret A.S. scheduled maintenance at facilities between May 13 and June 1 before gradually resuming production. 

Other export-oriented sectors which experienced a significant decrease in capacity utilization from March to April 2020, mainly driven by low demand from abroad, include furniture making (-41 percent), machinery (-27 percent), and electrical equipment (-22 percent).

Impacts on Logistics Operations

Logistics operations have been severely disrupted by strict nationality-based restrictions on truck drivers that were in place between March 17 and April 27. The following section details specific impacts on cargo movement such as export restrictions or import tariffs, mode-specific delays in transportation, and disruptions to critical services like postal delivery. 

Export restrictions and import tariffs

Special restrictions and measures affecting cargo types were initially focused on medical needs, but were expanded in late April due to economic concerns. On March 4, authorities published new regulations that included export controls on medical equipment and protective products such as masks, goggles, and sterile gloves. At the beginning of April, export restrictions for COVID-19 medical test kits were introduced (under the tariff subheadings 3822.00 and 3002.15) along with approval certificates from the Ministry of Health for COVID-19 medical test kit importers. On April 21, additional temporary import taxes ranging from 2.3 percent to 45 percent were imposed on items such as chemicals, paper products, machinery, plastic products, cars, electronics, cosmetics, textile products, wood, glass, furniture, shoes, and kitchenware. The measure has been interpreted as an attempt to shield Turkey’s industrial producers from imports due to stronger competition amid COVID-19, and are currently scheduled to remain in place through September 30. 

Ground Transportation 

While rail traffic in and out of Turkey has been permitted to operate normally amid COVID-19, road transportation from and to Turkey faced significant disruption in the months of March and April. To combat the spread of the virus, authorities in Turkey introduced strict nationality-based restrictions on truck driver movements in the country since mid-March. All truck drivers except Turkish nationals were banned from entering the country from March 17. In addition, Turkish drivers were required to enter a 14-day self-quarantine upon return. As a result, border congestion due to identity and health checks, severe truck driver shortages, and significant freight rate increases affecting all industries moving cargo to and from Turkey have been reported. In one instance, a group of 400 Turkish truck drivers that had been utilizing Georgia and Azerbaijan to circumvent the Iranian border closure became stranded in Iran as regional border controls intensified. The group attempted to reenter Turkey but was denied and subsequently faced assaults and theft of cargo in Iran.

On April 27, authorities removed quarantine-upon-return restrictions for Turkish drivers and allowed Turkish drivers – provided they do not show any COVID-19 symptoms – to resume cargo transportation in all countries except Iraq and Iran, where Turkish borders had been closed to civilians and cargo since late February. On June 4, the Turkish government confirmed that borders with Iran and Iraq have also been reopened but may still face restrictions for essential cargo only.

Additionally, truck driver entry bans for non-Turkish nationals were lifted on April 27 and replaced with a requirement that non-nationals show no COVID-19 symptoms and only remain in Turkey for less than 72 hours. Some bilateral exceptions to the 72-hour limit have been negotiated, such as for drivers of Russian nationality. These relaxation measures have allowed the truck freight market to largely return to normal. However, some congestion reportedly persists at border crossings due to health checks, with prioritization being given to essential medical supplies and foodstuffs. 

Air freight

After having halted all international flights to and from Turkey since the end of March, the government announced that flight schedules were expected to resume throughout June as part of the country’s reopening process. Turkey’s flag carrier Turkish Airlines restarted domestic operations on June 4 and international flights from June 10. In the initial phase of a five-stage approach, international flights will resume throughout June to approximately 40 countries including Greece, Germany, South Korea, Norway, and Austria.

Flight restrictions did not apply to cargo flights. Some carriers elected to operate additional cargo flights using passenger aircraft, mitigating supply chain disruptions and addressing critical medical freight needs during the restriction period.

As of June 17, air freight capacity from and to Turkey remains constrained, however, due to reduced availability of belly capacity on passenger flights. While the freighter market remains normal and a higher-than-usual amount of charters continue to operate, the additional capacity has not made up for the drop in belly capacity. Shortages are likely to persist in the coming weeks and months depending on how soon passenger flight schedules may return to normal. 

Postal Disruptions 

Turkey’s main postal operator, Turkish PTT Corporation, declared force majeure on March 19 after the government imposed COVID-19 restrictions, including an enforced nationwide reduction of its workforce. This significantly compromised its ability to maintain universal quality of service standards for all types of inbound mail items. As of June 16, Turkish PTT Corporation was still unable to send any mail items to at least 57 countries and territories across the world (see Table 2 below). No updates on service availability have been provided by the operator since March 30, and further disruptions may continue until flight, business, and movement restrictions are fully lifted in Turkey. 

Latin America & CaribbeanEuropeAfricaAsia & the Pacific
ArgentinaAlbaniaCôte d’Ivoire (Rep.)Afghanistan
ArubaBulgariaDjiboutiAustralia
BarbadosBosnia and HerzegovinaDem. Rep. of the CongoAzerbaijan
ChileGreeceEritreaBrunei Darussalam
Costa RicaIcelandLesothoChina
Panama (Rep.)IrelandLibyaIndia
ParaguayLatviaMaliIndonesia
PeruMontenegroMozambiqueIran (Islamic Rep.)
UruguayMaltaRwandaJapan
Venezuela (Bolivarian Rep.)MoldovaSouth AfricaKuwait
 North MacedoniaTanzania (United Rep.)Macao
 SlovakiaTunisiaMaldives
   Mongolia
   Nepal
   New Caledonia
   New Zealand
   Papua New Guinea
   Singapore
   Sri Lanka
   Syrian Arab Rep.
   Tajikistan
   Thailand
   United Arab Emirates
   Yemen
Table 02: Countries and territories with suspended postal service by Turkish PTT Corporation. Source: Everstream Analytics

Recommendations 

In light of the current circumstances, manufacturers and shippers with business involving Turkey are advised to consider the following recommendations:

  1. Contact suppliers and verify the details of their COVID-19 operating environment. Suppliers in Turkey may be independently implementing production halts or restrictive safety protocols as preventive measures against the spread of COVID-19 in their facilities. For suppliers that are operating, seek information and visibility into their production schedule and supply availability to mitigate any material shortages.
  1. Consider rail or short-sea shipping as alternative modes of transportation. While truck driver restrictions in Turkey have eased, the potential for new spikes in COVID-19 cases in Turkey or neighboring countries persists. Truck drivers remain at an elevated risk of being subjected to unexpected border closures, delays, transit-time limitations, and other complexities. Depending on the destination, using rail and/or short-sea shipping for shipments that are not time-sensitive may be viable alternatives that are less prone to border disruption in the current environment. 
  1. Keep abreast of daily confirmed COVID-19 cases in Turkey and its neighboring countries. Like other countries, uninterrupted manufacturing and logistics activity in Turkey remains highly dependent on positive trends in new daily COVID-19 confirmed cases. A spike in confirmed cases in Turkey or a neighboring country may lead to the rapid reintroduction of border closures affecting ground transportation, or regional lockdown measures which could disrupt manufacturing activities in affected regions on short notice. 
  1. Closely monitor regional and national regulatory developments in Turkey. As of June 2020, COVID-19 restrictions have remained largely under the control of the national government. If Turkey follows the example of many European countries, the power to adjust restrictions may be transferred to regional authorities, making it imperative for supply chain managers to pay closer attention to local authorities in the areas hosting their most critical suppliers. 

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