Turkey could “lose its industry” unless structural problems, high borrowing costs and persistent inflation are tackled.

That’s the warning from Burhan Ozdemir, head of the Independent Industrialists and Businessmen’s Association (MUSIAD).

Inflation, added Ozdemir, in an interview with Nefes daily published on February 16, could no longer be reduced with tight monetary policy alone. Broader reforms are necessary, he said.

“Inflation in goods has fallen to around 17%,” Ozdemir said. “But if you cannot bring down rent and food prices, there is little you can achieve. We need structural solutions.”

“I travel across Turkey visiting factories. Production lines are empty. Where 300 people should be working, production continues with 100,” he was further reported as saying, adding: “There is no need to build new factories while existing ones are underused.”

Ozdemir said industry’s share of Turkish GDP has fallen from 25% in 1996 to around 17% today.

Turkish industry, he warned, was in mortal danger from growing Chinese competition in automotive, steel and electronics, among other sectors.

bne IntelliNews has repeatedly drawn attention to the critical decline that is devastating Turkey’s textile and garment industry, with lower-cost producers in countries including China, Egypt and Bangladesh increasingly winning contracts that previously went to Turkish factories. The industry has become known for its rising number of "zombie" producers that are dead on paper but are kept alive thanks to regulatory forbearance shown towards debt.

Turkey’s annual consumer inflation was officially measured at 30.65% in January. But the official inflation data is widely rejected by Turks as inaccurate. Independent economists at the Inflation Research Group (ENAG) estimate consumer price inflation in the past 12 months amounted to 53.4% in reality.

Ozdemir also took aim at high financing costs, which he said are Turkish manufacturers’ biggest challenge.

“You can access loans, but the cost is very high,” he said.