The Turkish Economy: 2014 and Beyond www.americanturkic.org Orhan K. Osman President & CEO American Turkic Business Council DBA Texas Turkish American Chamber of Commerce
OUTLINE Turkish Economic History Why Invest in Turkey Leading Sectors in Turkish Economy and Key Cooperation Areas US-Turkish Economic Partnership
Brief Economic History State Controlled Closed Economy Turgut Özal: Liberal Policies, Open Economy Lost Decade: High Inflation, Unstable Coalitions, Weak Leadership Three Crisis: 1994, 1999, 2001 2002: Whole Collapse of Political Parties Reemergence of A Conservative Business Friendly Government
Population Turkey has a population of approximately 76.7 million. Largest youth population compared with the EU. Half the population under the age 30.4. Young, well-educated and multi-cultural population.
Demographic Profile Comparison* (2013)
Turkish Population Prospects: (Million People)
Booming Economy More than tripling its GDP, reaching USD 820 billion in 2013, up from USD 231 billion in 2002. Promising economy with a bright future as it is expected to become the fastest growing economy among the OECD members during 2012-2017 with an average annual real GDP growth rate of 5.2 percent. A mature private sector with USD 152 billion worth of exports and an increase of 245 percent between 2004 and 2013. 16th largest economy in the world and 6th largest economy compared with the EU in 2013.
Centrally Located
Turkey in the Region
Istanbul (Turkey) is becoming a very international business hub Microsoft s headquarters in Istanbul serves more than 80 countries Intel s Istanbul office reaches out to more than 67 countries Coca-Cola s regional headquarters in Istanbul takes care of 94 countries including the whole continent of Africa, Russia, Eastern Europe, Central Asia, Middle East and all the way to India.
Business Capital for Regional HQs Multinational Companies (MNCs) MNCs Number of Countries Managed from Turkey Coca Cola 94 GE Healthcare 80 Microsoft 80 Intel 67 Unilever 36 Verifone 30 GlaxoSmithKline 30 BSH 30 Schneider Electric 27 Alstom 26 Ericsson 22 Cargill 20 Pfizer 20 Volvo 18 BASF 18 PepsiCo 14
Why Turkey? From Istanbul, only with Turkish Airlines you can fly to 104 countries and there is no other airline in the world which flies to that many countries. Turkey is a unique country that land in two continents: Asia and Europe. The city of Istanbul is located in between both continents. Turkey is a country in the Middle East. Turkey is a country in Balkans. Turkey is a country in Caucasus. Turkey is a Mediterranean country. Turkey is a Black Sea country. Turkey is a country with Caspian Sea basin.
Why Turkey? A natural bridge between both East-West and North-South axes, thus creating an efficient and cost effective outlet to major markets. Easy access to 1.5 billion customers in Europe, Eurasia, the Middle East and North Africa. Access to multiple markets worth USD 25 trillion of GDP.
ople; $25 trillion Market GDP; $8 Access trillion trade EUROPE GDP: $19 trillion Import: $6,5 trillion Population: 670 million RUSSIA GDP $2 trillion Import: $335 billion Population: 142 million MENA GDP: $3,8 trillion Import: $995 billion Population: 675million CENTRAL ASIA & CAUCA GDP: $390 billion Import: $97 billion Population: 82 million
Highly developed technological infrastructure in transportation, telecommunications and energy. Well-developed and low-cost sea transport facilities. Infrastructure Railway transport advantage to Central and Eastern Europe. Well-established transportation routes and direct delivery mechanism to most of the EU countries. New rail connection to Georgia, Azerbaijan will connect Turkey to all the way to Eastern Pacific Shores by 2015
Why Turkey? Turkey has links with many countries and regions through multinational agreements. Member of NATO, allies with the U.S. Member of OSCE; Organization for Security and Cooperation of Europe. Member of Council of Europe. Candidate country for European Union. A strategic partner to African Union.
Why Turkey? Special link with Arab countries, with Gulf Cooperation Council, Founding partner of Black Sea Economic Cooperation Organization. Founding member of South European Cooperation Process, South European Countries. Shanghai Cooperation Organization. All these international linkages give Turkey a huge opportunity of trade and also political access.
EFTA Population: 13 million GDP: 955.8 billion TURKEY S FTA S in EUROPE and AFRICA Albania Population: 3.2 million GDP: 11.8 billion Bosnia-Herzegovina Population: 4.6 million GDP: 16.9 billion Macedonia Population: 2 million GDP: 9.1 billion EU Population: 502.1 million GDP: 15.3 trillion* Croatia Population: 4.4 million GDP: 61 billion Georgia Population: 6.8 million GDP:24.3 billion Morocco Population: 32 million GDP: 91.2 billion Tunisia Population: 10.5 million GDP: 42.2 billion Syria Population: 20.4 million Palestine Population: 4.1 million GDP: 4 billion Egypt Population: 81 million GDP: 219 billion Israel Population: 7.6 million GDP: 217.3 billion
EU (Customs Union) Population: 502.1 m GDP: 14,609 b $ Exports: 1.481 b $ Imports: 1.919 b $ TURKEY S FTAs İsviçre Countries with Ongoing FTA Negotiations Population : 76,4 m GDP : 934,4 b $ Exports : 461 b $ Imports : 249 b $ FTA Partners Countries with Ongoing Negotiations Turkey s FTA Partners Population : 210,5 m GDP : 1.361 b $ Exports : 430 b $ Imports : 442 b $ Turkey s FTA s In Comparison to World (%) Population : %49 GDP : %47 Exports : %47 Countries with which negotiations are initiated Population : 2,5 b GDP : 5.706 b $ Exports : 1.833 b $ Imports : 1.77319 b $
GDP Growth Rate of Turkey: (Annual Average)
Growth Rate Projections (%)
Per Capita GDP of Turkey: (USD)
Comparison of Turkey and Europe Real GDP Growth : (2001=100)
Average Inflation in Periods (%) Sources: TURKSTAT
Annual Exports: (Billions USD) Sources: TURKSTAT, 2014
Annual Imports: (Billions USD) Sources: TURKSTAT, 2014
Foreign Direct Investment: (Billions USD)
FDI by Countries 800 700 600 500 400 300 200 100 0 Million Dollars 617 718 589 501 497 498 209 260 2009 2010 371 318 France Netherlands Germany Gulf Countries USA Source: ISPAT US Ranks 4 th in 2009 and 5 th in 2010, accounting for 5% of FDI in 2009 and 4% of FDI in 2010.
Gross Debt: (% of GDP, 2013)
General Government Debt: (% of GDP, 2014)
LEADING SECTORS IN TURKEY
Cement The biggest exporter in the world 3 rd biggest producer in Europe Natural Stones Highest exports earning from processed marbles in the world, second highest exports earning from block marbles 33
Ceramic Products 5 th in the world and 3 rd in Europe in the production of ceramic tiles. 2 nd in Europe and 4 th in the world in the production of ceramic sanitary ware. Jewellery (precious metals and stones) One of the top 5 jewel producers and exporters in the world. 34
Textiles and Clothing Industry 4 th biggest exporter of carpets in the world 6 th biggest exporter of leather and clothing in the world World leader in the production and exporting of socks 2 nd biggest textiles supplier in the EU The biggest home textiles exporter in the world 6 th largest synthetics capacity in the world Furniture Industry 3rd in world exports of seats convertible into beds. 35
Other Major Industries Leather Articles Industry Exporting to more than 140 countries Exporting original collections with own brand names Iron and Steel Turkey became the 11th largest steel producing country in the world by the end of 2008 1st in the exports of construction iron in the world 10th in the production of raw steel in the world 2nd in the production of raw steel in Europe Agriculture and Agro-Industry: 1 st in the exports of hazelnut, raisin, dried apricot and fig in the world Glass and Glassware Production: 2 nd in Europe and 3 rd in the world for glass and glassware exports to more than 180 countries
Electrical Equipments and Electronics In the world Turkey is the 3 rd biggest exporter of refrigerators 5 th in the exports of dishwashing machines 7 th in the exports of washing machines; In Europe Turkey is the 1st in the exports of refrigerators, 4th in the exports of dishwashing machines and washing machines Automotive and Auto-parts Industry 3 rd largest truck market in the EU 7 th biggest exporter of commercial vehicles and 6 th biggest exporter of bus, midibus, minibus in the world
Contracting Services 31 out of the world s top 225 contracting companies are Turkish. Turkey ranks as the 2nd country (following China) in terms of the number of top contracting companies.
TURKISH CONSTRUCTION SECTOR: 2 nd in WORLD 94 Countries 6406 Projects 206.8 Billion USD Europe (7,2%) CIS (48,2%) North America (0,6%) North Africa (20,9%) Middle East (23,8%) Sub- Saharan Africa (0,3%)
Logistics Europe s biggest truck fleet (45 thousands trucks and 1,420 companies) Almost 1.1 million flights in 2012 (2.4 million tonnes freight and 130 million passengers) 25. biggest fleet in the world 48 airports and 76 ports Total length of divided highways will reach 15 thousand kilometers. High-speed railway projects are carried out rapidly. 40
Tourism 41
Turkey ranks as the 7th in the world and the 5th in Europe among the most favourite tourism destinations Number of Revenue (Billions Tourists USD) 2002 15.214. 514 12.420 2009 32.006.149 25.064 2010 33.070.943 24.930 2011 36.151.328 28.115 2012 36.776.645 29.351
TURKEY S STRATEGIC POSITION IN ENERGY SECTOR TURKEY IS AN ENERGY CORRIDOR BETWEEN SUPPLIERS AND CONSUMERS Turkey s geographic position makes it an important energy and logistics corridor, linking Europe with the Middle East, the Caucasus and Central Asia. 130 billion $ of investment is anticipated in this sector until 2023
Considered a natural energy bridge between major oil producing areas in the Middle East and Caspian Sea regions, and consumer markets in Europe on the other. Located at a close proximity of more than 70 percent of the world s proven primary energy reserves, while the largest energy consumer, which is Europe, is located right to the west of Turkey, thus making the country a linchpin in energy transit and an energy terminal in the region. Major Transit Point for seaborne-treaded oil and is becoming more important for pipeline-treaded oil and natural gas
Turkey's port of Ceyhan is an important outlet both for current Iraqi oil exports as well as Caspian oil exports. Major shipping check point between the Black and Mediterranean Seas. Growing volumes of Russian and Caspian oil are being sent by tanker via Turkey s bosporus straits to western market ( App. 3.0 million barrels per day (bbi/d ).
REGIONAL HUB FOR ENERGY Turkey is a regional hub for the export of gas to central and southern Europe, both from the Caspian Sea and, via the Black Sea, from Russia, as well as from the oil-rich Kurdistan region in Iraq $8bn contract with Azerbaijan to build TANAP, the trans Anatolian pipeline connecting the vast Shah Deniz gas field off the coast of Baku to Europe via Bulgaria and Turkey. Stretching 2,400 miles (3,850km), the link will transport a whopping 16bn cubic meters (bcm) of gas a year
Trans Anatolian Natural Gas Pipeline Project (TANAP) TANAP satisfies the gas needs of Europe and Turkey. This important project provides different types of gas which has been emerged with the cooperation of two brother countries, Turkey and Azerbaijan. TANAP is expected to carry 16 billion cubic meters of capacity through the pipeline. Will provide $8 billion in investments to local companies in Turkey.
Turkey would gain not only from the additional transit revenues a pipeline from the Eastern Mediterranean to Europe would provide, but would also be able eventually to import even larger quantities of gas from Lebanon, Syria, Gaza and, possibly Turkish Cyprus, as well as Israel, thereby ensuring its own long-term energy supplies for its rapidly growing industries. The expansion of Turkey s role as a truly intercontinental energy hub would also cement its role as the future center of a vast web of petrochemical complexes, refineries, export terminals, storage facilities, power plants and industrial zones ready to serve both Europe and the Middle East, as well as Central Asia and the Caucasus (www.themiddleeastmagazine.com)
Oil and Gas
FLOW OF THE RESOURCES Existing Natural Gas Pipelines Existing Oil Pipelines Natural Gas Pipelines under Construction Natural Gas Pipelines Underway Proposed Natural Gas Pipelines Oil Pipelines under Construction
Turkey Natural Gas Supply 2012
Turkey s Crude Oil Supply 2012
Turkey is revamping its Energy related and foreign investment policies. This effort will create excellent opportunity for Service companies in energy sector, (wind, exploration, upstream & downstream, production, pipeline & pipeline construction), Power Generation, (Turbines).
Starting Business: Number of Procedures
Starting Business: Duration, Days Sources: World Bank Doing Business, 2012
Turkey in a nutshell 65 millions of GSM Subscribers Among the top 6 destinations in the World in Tourism 2 nd largest manufacturer of Flat glass 5 th largest jewelry manufacturer 1 st textile manufacturer in Europe 1 st TV manufacturer in Europe 6 th largest cement and cotton producer 7 th largest iron and steel manufacturer
Dual Carriageway Network (January 1, 2003) 1,714 Km Total of Motorways 4,387 Km Total of State and Provincial Dual Carriageways Total: 6,101 Km Dual Carriageway Network (March 15, 2012) Before 2003, only 6 cities were connected to each other via dual carriageway. Now, we have 74 cities. 2,236 Km Total of Motorways 18,991 Km Total of State and Provincial Dual Carriageways Total: 21,227 Km Dual carriageways put into service Dual carriageways under construction Dual-carriageways to be put out to tender Total 21,227 Km 3,125 Km 3,061 Km 27,413 Km
Dynamics of Transformation Mass Urbanization: Reversal of Urban-Rural Population: 75%=> 25%. Functioning Number of OIZ s increased: 12=> 120. Transformation in Service Sector: Retail Modernization, Shopping Malls, New Urban Life. Political Transformation and More Stable Atmosphere in Ruling Elite. New Production Centers like Kayseri, Denizli, Gaziantep, Maras vs Old Centers Istanbul, Izmir, Ankara, Bursa. Free Market Capitalism Enacted and Success in Easing Business Making Culture.
Spread of Organized Industrial Zones
An Industrial Zone in Bursa
Trade Relations between US and Turkey Turkey is the 42 nd Import Source of USA with 6.7 billion dollars of Imports in 2013. This was 6.28 billions in 2012. US Share on Turkish Exports: 0.4% The total volume of US Exports to Turkey was 12 billion Dollars in 2013 and 12.56 billion dollars in 2012, 14.6 billion in 2011. Turkey is the 21st Trading Partner of the US. Turkish Share on US Exports: 0.8%
Trade Relations between US and Turkey U.S.-Turkish trade peaked at nearly $20 billion in 2011, $19 billion in 2013.First Quarter 2014, U.S.- Turkey trade stood at $4.5 billion. Ongoing U.S.-European Union negotiations to conclude the Transatlantic Trade and Investment Partnership (TTIP) are watched closely by Turkey, given its Customs Union with the EU. Turkey remains committed to joining the European Union, however this process has been slow and difficult. While a U.S-Turkey Free Trade Agreement is not being considered at this time, the U.S. has committed to keep Turkey informed of TTIP progress through a joint High Level Committee.
Trade Relations between US and Turkey In 2014, Sikorsky announced a major 30-year coproduction partnership for the Turkish Utility Helicopter Program, worth up to $8 billion over its life cycle. Boeing continues its strategic partnership with Turkish. Pratt and Whitney opened a new engine parts facility in Izmir that will supply the Joint Strike Fighter, in which Turkey has partnered. General Electric announced a $900 million investment in Turkey across several of its business lines.
Trade Relations between US and Turkey In General; American firms are pursuing energy, aerospace, defense and health care projects throughout the country. Since 2011, over 50 American firms, mostly small and medium-size companies, have brought their campaigns to the Turkish market Turkey is considered a commercial hub of the region, and U.S. companies should consider using Turkish partners to access business opportunities throughout Central Asia, the Caucasus, the Middle East and even Africa. Turkish partners know these neighboring markets well.
Top US Exports to Turkey (in Million Dollars) 2010 2011 2012 Aircraft and Spacecraft 2.320 2.900 1560 Iron and Steel 1.611 2.500 2620 Oil and related products 835 2.100 1354 Cotton 860 1.200 600 Machines, Engines and Pumps 854 952 854 Electronic Equipment 287 479 345 Medical and Technical Equipment 345 396 354 Organic Chemicals 255 382 312 Plastics 315 376 384 Hot Cereals 295 286 475
Top US Imports from Turkey In Million USD 2010 2011 2012 Vehicles 303.22 684.2 820.2 Machines, Engines, Pumps 400 556.6 590 Iron and Steel 330.2 424.2 720 Stone, Cement, Mica 191.62 318.6 354 Iron or Steel Products 21.58 236.0 390 Other Textiles, Worn Clothing 160.89 219.9 248.5 Textile Floor Coverings 124 163.9 198.3 Oil 12 160.7 165 Aircraft, Spacecraft 124 154.6 175
WHY INVEST IN TURKEY The second biggest reformer among OECD countries in terms of its restrictions on FDI since 1997 (OECD FDI Regulatory Restrictiveness Index 1997-2012). Business-friendly environment with average of 6 days to set up a company, while the average in OECD members is more than 11 days (World Bank Doing Business Report 2014). Extremely competitive investment conditions. Strong industrial and service culture. Equal treatment for all investors. Around 36,950 companies with international capital in 2013 (Ministry of Economy). Its close proximity to markets in Europe, the Middle East, and Central Asia, Turkey serves as a regional hub for many of these firms.
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