Turkey - A Center for the Growth of the Global Corporations

Turkeytoday is remarkably different from what it was several years ago. From the perspective of potential investors, there are ten key features that have catapulted Turkeyto position no. 8 in Investor Optimism Index, ahead of the CzechRepublicand Baltic states.

1.     GDP growth at 7.4% in 2005 and 6.1% in 2006, to US$ 400 billion – makes it one of the fastest growing economies in OECD and EU countries. GDP/Capita increased 2.5 times in four years to $5,500.

      PPPbased GDP (US$ 680 billion): 5th ranking in Europe, after Germany, U.K., France, Italy & Spain. Followed by Netherlands, Poland, Belgium, Austria, Sweden, Greeceand Portugal

 2.   Successful Fiscal Management

  1. Fiscal Consolidation through a tight monetary policy and structural reforms: Budget Deficit of 16% in 2001 - down to 1% in 2006.(likely to stabilize at Euro-zone average of 3% in 2007)
  2. Public Debt: 100% of GDPin 2001, down to 65% in 2006 -likely to stabilize at Maastrichtcriterion of 60%. IMF Debt down from $23.5 billion to 10.5 billion Result of an Independent central bank
  3. Inflation reduced from about 30% in 2002 to 9.65% in 2006.

  4. Interest rates down from 62% in 2002 to 22% in 2006. (19% in 2007 - still high) 

  5. Foreign Exchange Reserves improved to +$20 billion.

  6. Turkey’s credit rating has continuously improved. Moody’s raised it to “BA3” from “B1”

3.   streamlined Taxation

     Corporate Income Tax reduced from 30% to 20% in 2006

     Individual Income Tax varies from 15% to 35% max. (reduced from 40%)

     Full convertibility for over 2 decades

     VAT is 18%. (Special Reduced rates between 1% and 8%)

4.     FDI has accelerated- from less than $2 billion in 2003 to + $ 20 billion in 2006. 3,000 new foreign firms were formed. Europeaccounts for 87% of FDI. Integration with global economy is rapid: Foreign Ownership in the banking sector went up from 3% in 1995 to 26% today.

5.     Why Turkey?  Turkey is a preferred Regional hub that caters to:

  1. Turkey’s population of 72 million, 98 million by 2040, when it will be the largest country in Europe.

  2. 66% of population is below 35

  3. Average age is 28

  4. Middle East and North Africamarket (311 million population.) and Central Asian and Caucasian countries (75 million population) – more than half a billion people. Together with the EU, a billion-person potential market is at investors’ doorstep.
  5. Turkey has 7 bordering countries: Greece, Bulgaria, Georgia, Armenia, Iran, Iraq and Syria.

  6. Customs Union with the EU-27, since 1996, and free trade agreements with 14 other countries. 11 more agreements under dialogue. Import regime follows EU norms.

6.     Exports jumped from $47 billion in 2003, to $86 billion in 2006, 21% of GDP. (Imports $139 billion). Exports in 2007 shall exceed 100billion. Destinations:

a.     Europe: 52%

b.     Asia:18%

c.      America: 8%

Top 6  segments comprise 70% of exports

  • Automotive sector tops: $2.5 billion in 2000 to $15.4 billion in 2006
  • Ready-Made Ggarments sector follows at 14billion - 16% of all exports
  • Chemicals sector $8.8 billion - 10 %
  • Iron and Steel $8.7 billion - 10 %
  • Electronic Goods $8.1 billion -  9 %
  • Textile and Apparel  $5.6 billion -  7 %
  • In 1996 there were 23,581 exporting firms

  • In 2006 there were 42,437 exporting firms (+80%)  

7.     Structural Strengths are evident- Analysis identifies 3 focus areas for Investors

a.     Star Sectors –with more than 2 % of the world market share

  • Apparel                           (+5% world market share)
  • Fruits and Vegetables       (+4%)
  • Textiles                           (near 4%)
  • Iron and Steel                  (near 3%)

b.     Emerging Sectors- with less than 2% of the world market share, but export growth of over 20% per year

  • Automotive
  • Petroleum Products
  • TV and Telecom
  • Metals
  • Electrical Machinery

c.      Other Sectors with similar high-growth export potential

  • Non-metallic & plastic materials
  • Transportation Equipment
  • Machinery

8.     Safe Place to invest - FDI Law in June 2003 was a mılestone. All companieswith foreign capital are treated as Turkish companies, with equal rights and responsibilities according to constitution. This includes rights to own and use land.

9.    Favourable Soft Factors  

  1. Fairly well-developed infrastructure

  2. Young, motivated, relatively cheap labour force

  3. unemployment rate - 9.5%

  4. Superb life-style attracts multi-cultural and multi-ethnic develoment

  5. Tax benefits and special grants in Technology Development Zones, Industrial Zones and Free Zones. These could include total or partial exemption of corporate income tax, up to 80% grant on employer’s social security share, energy subsidy and allocation of land free of charge.

  6. Extensive transportation routes

  7. Strong qualified Supplier Network

  8. Service Providers such as IT-support, logistics, and call centers showing rapid improvement and growth

10.    Investors are welcome- Turkeyis stable and reliable. For the first time since 1987, Turkeyhas a single-party government with clear dominance in the parliament, and with a strong ccommitment to EU-Membership and economic reforms.