| COUNTRY PERSPECTIVES
-
TURKEY |
|
Business opportunities and territorial marketing |
|
|
Classified as the 20th biggest economy in the world by the World Bank in terms of income, with a population of 72 million and a geographic location that provides access to a market of almost 1 billion consumers, Turkey has many advantages thanks to a solid industrial base and prospects for growth in many fields. |
|
| Latest
News -
Turkey |
| Latest
Investments -
Turkey |
 |
Documents |
 |
|
|
 |
|
| |
|
Introduction |
Classified as the 20th biggest economy in the world by the World Bank in terms of income, with a population of 72 million and a geographic location that provides access to a market of almost 1 billion consumers, Turkey has many advantages thanks to a solid industrial base and prospects for growth in many fields. Its geographic location makes it a country of transit and an export platform for international trade in oil and gas, making the country an “energy hub”. Thanks to the many plans for construction of oil and gas pipelines with neighbouring countries, Turkey could become the fourth largest source of energy in Europe, after Norway, Russia and Afghanistan.
Several sectors have been liberalised (transport, electricity, telecommunications), independent regulation authorities have been created, and these reforms have helped the in-depth economic modernisation process. Banking and financial reform is under way, with restructuring of the main establishments (788 subsidiaries of public banks were closed), recapitalisation of the two largest public banks and some private banks, and adoption of international prudential standards. Although State intervention has been reduced considerably since 1985, public companies still control five percent of the non-agricultural sector.
Turkey is committed to its privatisation plan for the public sector, but privatisation efforts proceeded slowly, mainly due to the multiple economic crises and adverse international conditions. Between 1986 and October 2003, revenue from privatisation came to about US$ 11.2 billion, including US$ 1.3 billion from foreign investors. The breakthrough in privatisation finally came in 2005, when implementation generated US$ 8.2 billion. With hydroelectric power plant deals and the sale of companies managed by SDIF (the Savings Deposit Insurance Fund), the government raised US$ 29.8 billion from the sale of state assets in 2005. Foreign investors showed their interest in the Turkish market by participating in key privatisations such as the Tüpras oil refinery and the Erdemir iron and steelworks. The Saudi group Oger Telecom acquired 55 percent of Türk Telekom with a US$ 6.5 billion bid, one of the largest deals in 2005. Another important deal was the Galataport tender and Iskenderun port tender secured by the PSA-Akfen consortium with an US$ 80 million bid. The same consortium was also awarded the tender to manage the port of Mersin, Turkey's largest, with a bid of US$ 755 million. A public offering of 34.5 per cent of Petkim shares was completed in mid-April 2005, raising US$ 288 million. |
|
| |
|
Tourism |
The tourism sector plays an increasingly important role in the economy. From 1990 to 2004, the number of tourists increased by 280 percent to 17.5 million. Tourism revenue increased by 380 percent to US$ 12.12 billion, making the country the eighth most popular tourist destination in the world, after China. The target is to welcome 50 million tourists annually by 2010.
Nearly 5 percent of GDI is currently generated by this sector, which represents nearly 15 percent of employment and total investments of US$ 35 billion for accommodation capacity of 450,000 beds meeting international standards and nearly 1 million beds in the guestroom category. Tourism is well developed, in particular along the Mediterranean coast, in Istanbul and in the central portion of the country (Cappadoce). Thanks to its natural resources and historical vestiges, the country has strong potential for further development. With exceptional coastlines as well as archaeological and cultural sites, Turkey can exploit two categories of tourism: mass tourism interested in a seaside holiday and cultural tourism focused on sightseeing. Business tourism is also on the rise in Turkey, with six major conference centres in Istanbul hosting many international events every year. |
|
| |
|
Construction and public works |
After several lean years because of tight fiscal policies, the sector expanded anew in 2005 (+21.5 percent vs. +4.6 percent in 2004), driven by growing real estate and residential development thanks to relatively low interest rates and policy that promotes housing loans. Investment came to US$ 32.8 billion in 2005, 60 percent of overall investments. Growth and investments were led by the private sector, up from US$ 8.9 billion in 1998 to US$ 21.2 billion in 2005. Public expenditure in the sector rose from US$ 8.6 billion in 2004 to US$ 11.5 billion in 2005. The government has projected that in the next five years the national housing gap will reach 1.5 million. With an economy in full expansion and rapid urbanisation, there is a considerable need for construction of new factories, commercial buildings and offices, shopping centres, malls and shops. Development of tourism continues to generate new construction projects. |
|
| |
|
Retailing and modern distribution |
The modern retail sector has a bright future in Turkey. AT Kearney’s Global Retail Development Index ranks Turkey as the eighth largest developing market in the world in 2006 and sixth in the world in terms of the sector’s attractiveness, with a score of 59 on a scale of 100 to 0.
There has been sustained growth in retail trade since 1990 and future growth is expected to grow at a higher rate than the economy as a whole. According to research carried out by Tansas regarding food distribution channels (valuated at US$ 24 billion), modern forms of retailing accounted for 31 percent in 2003, representing turnover of US$ 7.4 billion, approximately 3.1 percent of GDP. According to the same source, the market is expected to increase to US$ 28 billion in 2010, with a 41 percent share for organised distribution channels. |
|
| |
|
Agriculture and agrifood |
Agricultural output has increased over the decades, ranging between US$ 40 and 43 billion in recent years. According to the Food and Agriculture Organisation, Turkey ranks among the top 10 countries in terms of per capita fruit and vegetable production. Though a net exporter of fruits and vegetables, Turkey’s imports have grown steadily since the 80s, amounting to 5 percent of overall imports in 2004. Production is currently equal to about 40 per cent of EU-25 fruit production and 20 per cent of vegetable production. The sector has also become an important resource base for many export-oriented industries and the share of agro industrial products in total exports is around 6 per cent. Since 2001, Turkey has been reshaping its agricultural sector in preparation for EU membership and in line with its commitments to the IMF. |
|
| |
|
Health and pharmaceutical products |
The health sector is slated for privatisation, but a substantial portion of health care services is still provided by the public sector and 80 percent of total capacity is still held by public agencies. Turkey is pursuing the objective of improving health care in terms of both coverage and quality, through greater reliance on private sector funding and an increase in the efficiency of the public system. Investment incentives and the introduction of private health insurance in 1990 played an important role in accelerating progress in the sector.
The market for medical equipment is estimated to be growing at 12-14 percent annually, reaching some US$ 3 billion in 2005. Growth has been fuelled mainly by increased imports rather than production, which exceeded US$ 500 million in 2003. Turkey relies on imports to meet a large portion of its sophisticated medical equipment needs and the general trend is for an increase in both imports and exports. |
|
| |
|
Textile and clothing industries |
The textiles industry was one of the first industries established in Turkey. The export oriented economic policies of the mid-1980s have been the main impetus for development. Low labour costs, a skilled and highly flexible workforce, cheap raw materials (including home grown cotton) have been other factors contributing to the Turkish textile and clothing industry’s solid performance. Turkey figures prominently in global trade in textiles, accounting for 3 percent of world exports of textiles/clothing and a local industry that is the fourth largest clothing supplier and tenth largest textile supplier in the world and second largest clothing supplier and fifth largest textile supplier to the EU region, according to WTO sources. Two segments dominate Turkey’s textile and clothing industry: the spinners and weavers that use high quality domestic raw materials to produce textiles. |
|
| |
|
Electronics and information technology sector |
2005 posted a record high level of foreign investment in telecommunications, with three major deals worth US$ 14.4 billion. Several private firms have obtained licenses for the introduction of new telecommunication services and over 40 Turkish private sector companies have obtained various licenses, including 44 long distance telephony service provider licenses. Others are in the process of signing an interconnection agreement with Turk Telekom. The demand for telecom equipment from these companies and from Turkcell, Telsim and Aria will be growing significantly. This is still an attractive market, with a mobile penetration rate of only 55 percent at this time; expected extension of 3G services represents considerable business potential. |
|
| |
|
Energy market |
Turkish hydrocarbon production is low and the country’s proven reserves limited. There is a major deficit in the balance of energy for hydrocarbons, with a dependency rate of 91.6 percent for oil and 98 percent for natural gas. Energy consumption is growing rapidly in the wake of demographic growth and economic development. The Turkish government estimates that electricity production will reach more than 160,000 billion kWh, 500 million kWh to be imported and 2152 million kWh exported. Total demand is expected to reach more than 240,000 billion kWh by 2010. The country thus needs an additional generating capacity of 54,000 MW by 2020. |
|
| |
|
Water and environment |
Turkey is currently undergoing high demographic growth (1.6 percent per annum) in the wake of vigorous urbanisation, 68 percent of the population living in urban environments vs. 22.5 percent in 1955. More people and greater industrial production mean increasing pollution, particularly in the largest cities (Istanbul, Ankara, Izmir) and in light of soaring needs for urban, tourist and energy infrastructure.
The demand for water has increased proportionally.
Although there are reasonably good fresh water resources (110 billion m3 per annum that could be tapped, although only 38 percent is actually being exploited), the country suffers from unequal distribution. |
|
| |
|
Transportation |
Turkey is a rapidly developing country and its transportation sector has grown significantly over the past few decades. Turkey is currently implementing several large-scale infrastructure projects: urban transport, interurban transit systems, highways, airports, ports, dams and water sewage networks, and urban transit systems. |
|
|
|
|
