TURKEY – THE WORLD’S 15TH LARGEST ECONOMY – Straddling the MENA and the EU

In Articles by CECAdmin

I moved from Turkey to Canada a year and a half ago to do my MBA at Simon Fraser University. Following this program, my Canadian work experience at the Canada Export Centre made me reflect on what opportunities exist for Canadian companies in Turkey. I would like to share my views on how Turkey could be a profitable destination for you.
I hope you see value in this information.

Kind regards,
Zeynep Arslan

There is tremendous untapped potential to further expand our bilateral trade and investment relations between Canada and Turkey.
– Canada’s former Ambassador to Turkey, Mr. Michael Leir.

At the crossroads of east and west, Istanbul, which brought together Ottoman and European merchants centuries ago, still maintains its unique place as one of the most important trade centres in the region in the 21st century taking on 55% of import and export volume of the whole Turkish economy.

A few quick stats:

  • World’s 15th largest economy
  • GDP in 2003 – $305 billion, GDP in 2008 – $742 billion
  • Third most populous nation in Europe (72 million)
  • 61% of population under 35 years of age
  • Young, well educated workforce
  • Major shipping hub for Europe, Middle East and Asia
  • Ranked 15th most attractive destination FDI – 2008-2010 (UNCTAD)

Turkey has 12 free trade agreements (FTA) – Albania, Bosnia Herzegovina, Croatia, EFTA member countries (Switzerland, Norway, Iceland and Lichtenstein), Egypt, Georgia, Israel, Macedonia, Morocco, Palestine, Tunisia, and Syria with 11 more FTAs underway.

Looking to join the European Union, the Turkish government is committed to developing political, economic, social and judicial reforms to align with European Union standards, which will bring the country closer to the Western economies eliminating cumbersome and unfamiliar governmental procedures for Western businessmen. 

OPPORTUNITIES

Massive opportunities exist for Canadian investors, particularly in the following sectors:

  • Energy
  • Information and communication technologies
  • Construction
  • Mining
  • Environmental Technologies
  • Agriculture/Food

The government encourages foreign investments through tax benefits and incentives as well as through privatization programs particularly in the above mentioned sectors. Value added tax incentives in vehicles, oil exploration, incentive certified investments, and income and corporate tax incentives in technology developing zones are just a few examples of those incentives.

Turkey’s booming economy (from 305 billion USD in 2003 to 742 billion USD GDP in 2008) and sustainable economic growth (7% annual average real GDP increase between 2002 and 2008) illustrates its economic success in the past 6 years. While good news for investors, infrastructure gaps in remote rural areas and the country’s vulnerable economy to the global environment are the main challenges to face.

Low energy prices (ranging from USD 0.0364 to USD 0.1097 kWh) and low labour cost (590 USD$ per month) present the country as an excellent investment opportunity to foreign investors. Capitalizing on cost effective business opportunities, the giant automobile and software companies including Google, Microsoft, Hyundai, Toyota and Mercedes have their established facilities in the country. Not surprisingly, competition for the opportunities is getting steeper with companies from Russia, Germany, China, and Italy hoping to expand their slice of this emerging market.

Turkey ranks 1st in the world in terms of highest growth rate in wind energy plants and only 15 percent of its potential has been utilized up until now. Turkish government provides feed-in tariff incentives for the renewable energy investments.  The sector is now valued at $2 billion and estimated to create $900 billion market for environmental technologies and infrastructure in approximately 15 years. So, there are tremendous untapped investment potentials for Canadian companies who can bring their expertise into the market in the forms of:

  • Technological know-how
  • Machinery transport equipment

Turkey’s geographic, physical and corporate infrastructure is one of the key attractions for investors. Turkey has new and developing technological infrastructure in transportation, telecommunications and energy. The country has the world’s 26th largest maritime fleet in terms of the number of ships and one of the largest land transportation fleets in Europe, with close to 1,500 companies engaged in international transportation. According to IMD World Competitiveness Yearbook 2009, Turkey is more efficient in the distribution infrastructure of goods and services than several European countries including Italy, Poland, Russian Federation and Ukraine.

Turkey and the surrounding region offer tremendous potential across a variety of industries, but is a region not without its challenges for foreign companies. These challenges include language, culture, distance and poor understanding of market parameters. 

Approaching Turkey in a methodical and comprehensive manner will give you the opportunity to maximize on the opportunities while minimizing the risks associated with entry. The Canada Export Centre can work with you to develop an effective strategy to help you realize the tremendous opportunities that Turkey represents.