International Trade in Turkey

News Related to International Trade in Turkey

Business outline for Turkey

Main Industry Sectors

Agriculture in Turkey, which contributes nearly 10% of the GDP and employs practically a third of the population, still suffers from low productivity because of its management system (small farms). Wheat is the main crop. The country is the third biggest exporter of tobacco in the world, the leading producer of hazelnuts (70% of world production). Mineral resources are abundant but under-exploited.

The manufacturing industry, the main industrial activity of the country, makes up nearly 30% of the GDP and commands almost 18% of the workforce, the textile and automobile sectors being the main activities. The Turkish government gives special priority to large infrastructure projects, particularly in the transport sector, which mostly function under the BOT model (build, operate, transfer).

The tertiary sector contributes slightly less than two-thirds to the GDP. Tourism represents 4% of the GDP with about 13 million tourists a year and almost 22milions in profits, thus making it one of the key sources of foreign currency for the country. 

Economic Overview

Turkey, a country of 74 million inhabitants, has an economy in transition, a relatively high degree of dependence on agriculture (11% of its territory is cultivated) and heavy industry (large mining sector and vast reserves of boron representing 60% of global reserves), and a tertiary sector in full expansion (hotel and catering business). After going through a serious economic and political crisis in 2001, Turkey has made a spectacular recovery thanks to a more favorable political climate but also to monetary, fiscal and structural reforms inspired by the World Bank and the IMF. Turkish economy is also based on manufacturing (country's number one industrial activity). Since the 1980s, tourism has also been a significant source of income: Turkey is one of the ten most visited countries in the world. The financial crisis of course had an effect on the growth of Turkish economy; nevertheless the latter recovered relatively quickly and has grown by 3.5% in 2010. For 2011, the government foresees one point increase, thus bringing the growth rate to 4.3%. Indeed, the government has undertaken large economic reforms: adoption of a floating currency regime, giving total independence to the Central Bank, budgetary discipline and inflation control.

However, the Turkish economy remains vulnerable due to its high dependence on exports and foreign investment. With the current economic crisis, the unemployment rate has soared to around 15%. Turkey is also affected by its large informal sector.

FDI in Figures

Following the economic and political crisis of 2001, which led to the collapse of its banking system, Turkey concluded a significant macro-economic stabilization plan with the IMF, in 2002. Within this stable political context, also characterized by a gradual improvement of the country's economic results, FDI influx to the country was enormous. However, due to the global financial crisis and the suffocation of the privatization process, the trend has been reversed: since September 2008, the FDI influx into Turkey has been decreasing.

In 2009, Turkey, with 6 billion of FDI, has been demoted to 32nd place in world's destinations, i.e. 12 places dowtn from 2008.

The effects of the crisis can still be felt. In the first half of 2010, FDI flux totalled 3.2 billion USD, or a quarter less than on September 1st 2009. The estimate for 2011 is 7.5 billion USD. In this way, the influx should not return to their earlier lever before two years from now. The state has undertaken many legislative reforms in order to attract FDI (tax exemptions and other incentives), such as creating the Prime Ministry €śInvestment Support and Promotion Agency of Turkey€?, showcasing the efforts made to attract foreign operators.

FDI Government Measures

Since 2003, investors are no longer obliged to acquire a minimum interest.
Nevertheless, the government encourages investments in the form of Build Operate Transfer (BOT) (law n° 4283 of 16 July 1997). It favors investments in the High Tech, textiles, services (health, education, transport), telecommunications, shipbuilding, electronics and biotechnologies sectors. Export-oriented projects are also promoted.
Decree n° 24 810 of 9 July 2002 defines public aid for investment.

Country Strong Points

- A geographical strategic location;
- A well developed industrial basin;
- A country whose calling is to join the EU club by 2015-2020;
- A rapidly developing consumer middle class;
- A Flexible labor law, which favors investment and low labor costs;
- A sustained growth influenced by a modern and dynamic private sector;
- A strong increase in productivity in recent years;
- A legal framework close to European standards and favorable to investment.

Country Weak Points

- The slowing down of economic and political reforms observed since the end of 2005;
- A strong dependenc on hydrocarbon imports and on exports;
- An uncertainty regarding the exchange rate;
- A disturbing deficit of the balance of current payments;
- Insufficient and sometimes obsolete, infrastructures;
- An informal sector difficult to reduce.

Foreign Trade Overview

The spearheads of Turkish foreign trade are the automobile and textile industries (the latter employing 18% of the workforce), followed by the food industry (raw and processed products), machinery and equipment and electronic equipment, steel and chemical sectors respectively. The European Union is by far Turkey's leading customer (56.4% of Turkish exports), followed by the United States, China and Iraq. Yet the country shows a high trade deficit level because of its high energy dependency on Russia and its Middle Eastern neighbors. In addition, like the household appliance sector, which paradoxically is a high export industry, many components (about 80%) are imported to subsequently be assembled in Turkey. Despite government efforts to promote innovation (namely with the development of competitiveness centers and the establishment of tax credits in favor of Research and Development), Turkish exports have relatively low added value. Similarly, Turkish exports are still not very present on markets with high development potential (China or Eastern Europe) and suffer from being compared to German ones.