COUNTRY VIEW

Turkey: ambitious targets on the way to the century mark

In just ten short years, Turkey has undergone a true economic metamorphosis. Now it is important to keep up the pace and modernise further. People outside of Turkey do not always realise the huge potential Turkey offers, nor how much it aspires to be a link between the continents of Europe, Asia and Africa. Read the vision of two ambassadors and a banker about the opportunities Turkey offers, its image and the future of the Turkish economy.

A reflection of the vision of two ambassadors and a banker about the opportunities Turkey offers, its image and the future of the Turkish economy.

Opportunities

While most European countries were still licking the wounds of the economic crisis, Turkey recovered relatively quickly. The economy grew by an average of 5 percent for years. Growth is expected to remain substantial, at an estimated 3% this year and picking up to 4% in 2015.

According to the Dutch ambassador to Turkey, Ron Keller, you see the economic pickup across the entire country. “Wherever you go, you feel the entrepreneurial spirit. Business parks, new neighbourhoods and modern roads are being built everywhere. This creates huge confidence and fuels the drive to achieve even more. Turkey has set itself ambitious targets for 2023, the year in which it celebrates the centenary of the nation. For instance, the Turkish ambition is to develop Istanbul to one of the 10 largest harbours in the world. Likewise, Turkish Airlines is striving to become the world’s largest air carrier. This kind of ambition is actually necessary: the youth population is growing and these people will all need employment.”

Gerlach Jacobs, Head of Commercial Banking at ING Bank Turkey has respect for the successes. He calls the Turkish a “proud” people with much love for their one nation. “In the years after the Turkish banking crisis of 2001, this country learned its lessons, strengthening the professional supervision, and building an effective central bank. This partly explains why the subsequent global financial crisis barely got a foothold in Turkey. In the years after 2008, while other countries were hard hit by the economic crisis, Turkey continued to grow. “Provided the political climate remains stable, Turkey will continue that growth,” expects Jacobs. 

“Turkey invested heavily in education and infrastructure.” He points to investments in ports, high-speed trains, a new third cross continental bridge over the Bosporus, a new public transport project for the city of Izmir and a 25 billion dollar new airport in Istanbul, the home of Turkish Airlines. “These types of projects provide opportunities for foreign companies. As a financier of exports to and investments in Turkey, ING is involved in many of these investment opportunities,” adds Jacobs.

The drive to modernise the economy is a key motivator for Turkey to attract investment. Turkey still relies too much on its domestic market and wants to develop its export capabilities - it has set a target of exporting 500 billion euros a year by 2023. Turkish leading manufacturers, such as Şişecam, Ulker, Kastamonu are increasingly spreading their wings internationally, says Jacobs. In order to create more export potential, the government is encouraging investment in high-tech manufacturing and supporting key export sectors machinery, iron and steel, automotive, textile, electronics and chemicals.

The Turkish ambassador to the Netherlands, Sadik Arslan, says they are doing everything to make his country as attractive as possible for foreign companies. “We treat them, for example in terms of taxes, exactly as our own businesses. Moreover, we offer good incentives, for example, to companies that set up R&D centres. We also offer extra incentives to companies that establish themselves in the less-favoured regions in the east or southeast. In addition, we also encourage activity in certain sectors, such as the production of renewable energy.

Opportunities manifest themselves in many fields such as port development and management, transport and logistics, food industry and aviation, according to Arslan. The country has special investment zones to promote technology, industry and export. For example, Fokker Elmo, a company that designs and produces electrical wiring interconnection systems for aerospace industry, made use of incentives to establish its factory in Izmir says Keller.

The Turkish authorities are, according to the ambassador aware they need to diversify further. “The current growth is still too much within construction and infrastructure. In order to compete with China, for example, in the African market, it is important to cover as many sectors as possible in order to deliver maximum added value.”

To increase interest in investing in Turkey, the country’s image needs to improve. Too few people in Western Europe know it as an ultramodern country that wants to move forward. There are plenty of examples, says Jacobs, pointing to one - a smart-class project in which 42,000 Turkish schools will go fully digital. Again he emphasises the modernisation drive of the Turkish government.

“For example there are rules that require certain industries to use electronic invoicing. That not only created opportunities for us as a bank, ING was first to market, but also eliminates bureaucracy,” says Jacobs.

The best way to get businesses to change their outdated image of Turkey is to take them to the various provinces, says Keller. With his colleagues at the embassy he shows entrepreneurs how much Turkey has been modernised. In his eyes, the emergence of Turkey is insufficiently reflected in its image.

According to the Dutch ambassador in Ankara there are several reasons for the gap. “The country has had the misfortune to not be mentioned in the same breath with other emerging economies, the so-called BRIC countries. Another stereotype that plays a part is the perception that Turkey is a strict Islamic country. That stereotype is incorrect, because Turkey for the most part is emancipated. Minorities, women and people from the centre and east regions have been given more opportunities. Jacobs confirms the high level of emancipation in Turkish society. “I was positively surprised to also see a high degree of emancipation reflected within ING, with 57% of staff being female”.

“Turkey welcomes an increasing number of tourists from abroad. Every year 4.5 million Russians celebrate holidays there,” says Arslan. He believes tourism will also contribute to a more balanced picture of modern Turkey. Foreigners are still lacking information on the merits of his country in trade and business, but this can be overcome, he says. Especially since countries like the Netherlands and Turkey share more values than is understood. Another catalyst, according to the Turkish ambassador in The Hague, is that countries such as the Netherlands and Germany have large Turkish communities. “These people have dual bonds with both nations, so they can act as bridge builders.”

Concern over the risk of political volatility remains an issue, says Jacobs. In the competition with other economies that remains a point of attention. Despite this volatility business has continued to grow un-interrupted. “This demonstrates confidence for the long term”.

Future

In these turbulent political times regions around Turkey the question arises: where will the future growth of the country come from? Turkey looks at many directions: to the Middle East, Asia, Russia and Europe. Until now the scales have balanced in favour of Europe. Turkey joined the EU Customs Union in 1996 (Ankara Agreement) and is a negotiation candidate with the European Union. But it still hasn’t been admitted. Arslan would like more focus on that issue. “Europe is the backbone of our economic relations. A sizeable volume of our trade, 38 percent, is still with the European Union. The Turkish economy is already highly integrated with the EU. Our legal and economic systems are harmonised with those of other European countries. That has helped the economy move forward. And investments from Europe increased sharply.

The Turkish government aims to integrate further. “We need to keep up the pace of EU integration on our way to an eventual membership, which is a strategic goal for us,” says Arslan.

“To not be part of the European Union is disadvantageous,” Arslan states. This is clearly seen in the proposed free trade area between the European Union and the United States. “The proposed treaty - the Transatlantic Trade and Investment Partnership or TTIP - harms the economic interests of Turkey.”

Jacobs expects Turkey to remain focused on Europe. “In the past year, the European share of total Turkish exports increased again. Turkey has traditionally had a special relationship with both the western and the eastern parts of Europe. They are natural partners. And in the longer term, Turkey - with its young population in an aging Europe - can be valuable, especially as a manufacturing country.”

Keller: “Turkey has a lot to offer Europe with further integration. It is therefore not only that Turkey needs Europe. The country has a wide choice of partners, also on other continents. Europe also needs Turkey. The country has the potential to be a real hub for trade with emerging markets globally.”

Arslan points to the long tradition Turkey has with overland trade between Europe, Asia and Africa. “Our strategic geopolitical location also embodies a huge advantage for foreign investors in a wider region. For instance, Istanbul is becoming a giant international business hub. Many multinational countries choose this city also for their business in other countries.

We will certainly continue our development as a link between the three continents, for example, in the distribution of energy. Thus, we transport more and more oil and gas from various regions, making Europe less dependent on supplies from Russia.”

Jacobs: “The plan for the huge new airport shows that Turkey is serious about its goal of being the hub between the three continents. Other European countries can learn from such high ambition levels.”

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The View is the online magazine of ING Wholesale Banking