Turk shipyards fast-growing, but hazardous

By Thomas Grove

TUZLA, Turkey (Reuters) - Turkey is jockeying to be Europe's biggest shipbuilder, but a spate of deaths shows the need for sector reform and the cost of spectacular growth on the fringe of the European Union.

Court moves to ban the governing AK Party, speculation of coup plots and resistance among key powers to eventual Turkish EU membership may have hit financial markets but at the Tuzla yards, in the 'real economy', business is brisk.

Turkey's shipbuilding industry has boosted its exports by 30 percent in the past year by focusing on high value, made-to-order ships that are not available from larger-scale builders in China and Korea. Exports are expected to make up 80 percent of total revenue in 2008 from 60 percent last year.

Capacity has grown 400 percent over five years.

"Turkey is similar to Spain, Poland, Croatia and other European shipbuilding countries, but Turkey is surpassing these countries," said Vidar Smines, a shipbuilding consultant for Ulstein Group. "Here the value per vessel is higher so Turkey is more important in international shipbuilding than statistics reveal."

However, with 25 deaths in the last 11 months at Tuzla, on the northern shore of the Sea of Marmara, the sector has become emblematic of the mixed blessing of rapid growth in trade ties brought on by Turkey's EU candidacy.

"Most of these accidents happened because the sector was caught unaware by this growth," said H. Erkan Selah, owner of Selah Shipyards, which was closed down earlier this year after two workers at his yards were killed in the same week -- one crushed by a two-tonne metal plate.

Selah says he takes the appropriate measures to educate and train his workers, but like other yards, he relies on informal subcontractor labor which accounts for 83 percent of all manpower in Turkish shipyards.

Economists say Turkey's unique position of having started EU negotiations while depending on a thriving informal sector to make itself internationally competitive creates a deadly mixture.

"The accession process to the European Union is a double-edged sword because it means there are increased opportunities for trade; and things look to be thriving in Turkey," said Surhan Cam, an expert on the Turkish labor market at Cardiff University.

"But the formal employment sector is not growing proportionally, and for now in some sectors things are getting worse before they get better," he said.

REFORM REGARDLESS

Turkey faces a number of legislative as well as political hurdles in its bid for EU membership, which itself has been sidetracked by legal challenges to the ruling AK Party. The AKP started entry negotiations in 2005.

Still, experts say the path to reform embarked on as part of that process -- which includes the implementation of new labor laws -- will not be stopped in the long term regardless of the current political climate.

"There may be hiccups along the way, but the path the country has chosen is one of reform," said Nick Kennedy of 4Cast financial advisors in London, who follows Turkey.