The Turkish Perspective 1 Contents

YOUR COMPLIMENTARY COPY EXCLUSIVE INTERVIEW The President of the Republic of Turkey Prime Ministry Investment Support and Promotion Agency expresses his views on the investment climate in Turkey.

SEPTEMBER-OCTOBER 2013 ISSUE 18 ECONOMY BUSINESS FOREIGN TRADE ANALYSIS

ATTRACTION Through stable politics and successfully implemented economic policies, Turkey has become a star in its region. This success draws in×ows of money and investors to Turkey.

The Turkish Perspective 1 Contents

12 PANORAMA 34 COVER WHY IS TURKEY ATTRACTIVE TO INVESTORS? ATTRACTION :ith its disciplined oscal Through stable politics and successfully implemented administration, Turkey economic policies, Turkey has become a star in its stands out among the world’s region. This success draws inpows of money and developing countries as investors to Turkey. a very attractive draw for 05 international investors. 14 BRIEFING

14 | A LAND ILLUMINATED BY MUSEUMS 24 | TURKEY: A REGIONAL HUB Museums are among the top tourist IN CHOCOLATE attractions in any country. Besides Per capita consumption of chocolate and 26 displaying items of cultural and historical confectionery in Turkey has been on the value relating to the peoples who lived in rise for the past several years. the past, they also contribute to the host country’s economy. 26 | EUROPE’S BEST SCORES A HAT TRICK 17 | THE EXPORT OF WOOD AND Turkish Airlines once again obtained FORESTRY PRODUCTS Skytrax’s title for Best Airline in Europe, Turkey’s wood and forestry product winning for the third year in a row. export in 2012 was worth $4.3 billion. Between January and June 2013, the 28 | A SEASON OF OPPORTUNITIES IN 14 cumulative sum for the year to date was TURKEY: PRIORITY INDUSTRIES FOR announced as $2.3 billion. INVESTORS 19 19 | AN INDUSTRY WITH A PROMISING As a booming economy with global FUTURE: TOYS inpuence, Turkey offers international 28 The toy market in Turkey exhibited companies a multitude of investment growth of over 6%, with that for branded opportunities in a variety of industries. toys growing by more than 10%. 31 | CENTENNIAL CELEBRATION FOR 22 | TURKEY CLIMBS UP IN VITICULTURE THE FOUNDATION OF THE REPUBLIC OF According to a report issued by the US TURKEY Department of Agriculture, Turkey ranks Turkey has ambitious targets for 2023. as the world’s second most important To this end, ISPAT is working to increase producer of fresh grapes—after China— foreign participation in domestic and as the fourth-largest exporter. investment projects. 2 Content

MANAGEMENT PUBLISHER ON BEHALF OF TURKISH EXPORTERS ASSEMBLY/ CHAIRMAN OF THE TURKISH EXPORTERS ASSEMBLY 42 IN DEPTH MEHMET BÜYÜKEKŞİ 42 | ON DOING BUSINESS IN MANAGER IN CHARGE TURKEY MUSTAFA MENTE PUBLICATION BOARD Turkey has set ambitious goals M. İLKER AYCI, BÜLENT AYMEN, in a large number of oelds for 42 İBRAHİM BURKAY, MUSTAFA ÇIKRIKÇIOĞLU 2023. Investment Support and PhD, ALİ NEDİM GÜRELİ, AHMET KELEŞ, TEMEL KOTİL PhD, ŞAHİN OKTAY, Promotion Agency President ülker 48 TAHSİN ÖZTİRYAKİ, METİN TABALU Ayc is conodent that the country PUBLICATION MANAGEMENT will emerge as a strong global PRESIDENT player. Ayc provided his evaluation SERKAN ÜNAL of the investing climate in Turkey GROUP COORDINATOR to The Turkish Perspective. MEHMET MÜCAHİD DEMİR FINANCE COORDINATOR 48 | THE REGION’S ENERGY FLOWS SELİM KARA THROUGH TURKEY EDITORIAL With its growing energy market EDITOR IN CHIEF and its status as an energy transit 54 SERDAR TURAN country, Turkey is a prime choice EDITORS AYNUR ŞENOL ALTUN, CAN GÜRSU, among investors’ favorite markets. NESRİN KOÇASLAN, ALTAN ORHON 54 | BOSCH GOES BEYOND THE NEEDS OF THE TURKISH MARKET DESIGN Bosch has invested over ø100 DESIGN DIRECTOR ÖZKAN ORAL million and employs more than DEPUTY DESIGN DIRECTOR 300 engineers and staff solely for AHMET ÇELİK R&D activity. Bosch’s R&D not PINAR GÜVEN only beneots the company’s local PHOTO EDITOR activities but is also exported from ŞEREF YILMAZ Turkey to Germany. CONTRIBUTORS 60 63 SÜLEYMAN YAŞAR PhD, GİZEM GÜZEY, 60 BRAND GÜZİN GÜZEY, CAN CENGİZ, Castell Anadolu in Russia, through 68 AGENDA BARAN KARAKUZU, MEHMET ERDOĞAN ELGİN, 60 | HAMAM OPENS THE TURKISH which it hopes to accelerate its FAIRS, EXHIBITIONS, SUMMITS, AND MELEK CEVAHİROĞLU ÖMÜR BATH FOR THE WORLD growth in the world’s largest MEETINGS IN THE NEXT TWO MONTHS Hamam expanded its retail country. PRINTING network from 45 to 200 over the BİLNET MATBAACILIK BİLTUR 65 | INNOVATION IN CHEESE: 70 FIGURES BASIM YAYIN VE HİZMET A.Ş. past ove years. We had a chat with DUDULLU ORGANİZE SANAYİ BÖLGESİ 1. CADDE NO: Eke Tekstil CEO Haluk Eke on MURATBEY 16, ESENKENT – ÜMRANİYE 34476 - İSTANBUL TIM EXPORTER TENDENCY SURVEY TEL: (0216) 444 44 03cwww.bilnet.net.tr how the Hamam brand was born, Muratbey is one of the orst brands RESULTS FOR Q2 2013 the success it Tuickly attained, and to come to mind in Turkey on plans for the future. mention of cheese. We had a talk with CEO Necmi Erol on the 63 | A HANDWRITTEN BRAND change undergone by the industry STORY: ADEL in recent times and the process of ADE/ has achieved rapid turning companies into brands in growth both domestically and CONTACT Turkey. [email protected] internationally. In 2011, ADE/ www.infomagyayincilik.com founded the company )aber- Neither text nor photographs from this publication may be reproduced in full or part without acknowledging the source and securing prior permission from the publisher.

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 03 Editorial MEHMET BÜYÜKEKŞİ PRESIDENT (TIM)

DESPITE REGIONAL UPHEAVALS, TURKEY CONTINUES TO CREATE VALUE The economies of the US, Japan, and the EU, having grown 1.7%, 0.9%, and 0.3% respectiveer in J+ +013, are showing the Örst signs that a graduae recoverr in the world’s economies has begun. We believe that the recovery in the EU economy, which is predicted to grow after a siq&juarter&long recession that has slowed for the very Örst time, will have a positive impact on Turkey’s exports.

EVELOPMENTS ON THE US Federal Partnership. The negotiation process is We are pinpointing the possible inpu- D Reserve front especially strengthen expected to reach an end in 2014 and ences that a Turkey–US FTA could have the likelihood that the American econ- lead to the signing of a tremendous trade on our economy over the next decade, omy’s recovery might happen sooner agreement that could yield a trade volume whether in the goods and services sectors, than expected. In light of these develop- of up to $650 billion. and we are developing policy suggestions ments, the possibility that the Fed could Turkey, meanwhile increasing its share that might be of use in upcoming nego- start to draw away from its expansionary in world trade each day, is pursuing new tiations. This soon-to-be-released study monetary policy grows. Following the efforts toward securing an FTA with the will draw a path for an FTA that would be Fed’s announcements, the search for a US so as not be left out of the dynamic signed between Turkey and the US. new center of balance was seen in all process mentioned above. As TIM, With increases in industrial produc- the world’s economies. After the Fed which represents Turkey’s 57,000 active tion and diminishing unemployment declared that it could cut down on bond exporters, we are evaluating a proposed ogures in the single digits, Turkey’s purchases starting in 2014, interest rates Turkey–US FTA that would be signed economy is holding on to the momen- shot up worldwide, as did onancing simultaneously with the EU–US FTA tum of its growth. Turkey is now giving expenses. We thank the Central Bank of through a comprehensive effect analysis. more focus to an export-based growth Turkey for doubling the rediscounting model through which it aims to attain credit volume for exporters and believe it even higher growth. Turkey’s economy is will continue to practice proactive mon- creating more value. Through the giant etary policies to minimize puctuations in steps it routinely takes, Turkey continues the exchange rate. to compete in every area with the aim of On the trade front, the downward revi- creating value. sion of predicted growth in the worldwide For our part, we, as TIM, see innova- exchange of goods to 3% remains valid. tion as the most important element in the Global exports exhibited 1.4% growth in equation of competitiveness. To this end, the orst half of the year, but discounting we will be holding Innovation Week Tur- China’s contribution, they actually shrank key November 28–30 (last year’s edition 0.2%. We believe a limited increase in took place December 6–8) with a much global export quantity will signal a recov- broader scope of activities than before. We ery near year-end. believe that Turkey, which ranks 43rd out Last month, after two years of technical of 144 countries on the Global Competi- preparations, the US and EU completed tiveness Index, must invest more human initial negotiations on their proposed and material capital in innovation to Transatlantic Trade and Investment climb to ever-higher levels in all oelds.

05 Content: 22% Increase in Olive Oil Exports P6 Turkey–Guinea Partnership P6 Hyundai Turkey’s Capacity Rises to 200,000 P7 Possible Record in Employment P8 70% of Home Appliance Production Export Bound P9 Capacity Utilization Rate Increases P10 .otil Reelected to IATA Board of Governors P11 Editor: Can GËrsu

First EXPORTS, CONFERENCES, AGREEMENTS, AVIATION, CONSTRUCTION, TOURISM, DEVELOPMENT, FILM, INDUSTRY

Certain data suggests a perception that the second quarter of 2013 followed a “stationary” progression with regard to exporters.

EXPORTERS OPTIMISTIC FOR THE FUTURE OF TURKEY’S ECONOMY Reduced overall prootability relative to the previous year was reported for 42 2013 by 40.4% of exporter companies.overall prootability for 40.4% of exporter companies and export prootability for 37.4% were lower than last year’s levels in the corresponding quarter.

NNOUNCING the results is follows lated as 3.2 percent. Cstationary’ progression by 40.4 percent of A results of TIM’s kIncreased produc- Examined in terms of with regard to exporters. exporters, and 37 per- quarterly Exporter Ten- tion was reported by capacity utilization, the Meanwhile, 61.5 cent reported reduced dency Survey for 42 37.7 percent of exporter data shows that export- percent of exporters in- export prootability 2013, TIM Chairman companies during ers reporting increased dicate increased input levels. It is believed that Mehmet BËyËkekûi the last three months capacity utilization rates expenditures. Another the aforementioned said overall prootability >April–June 2012@ as represent 32.5 percent onding that supports developments are for 40.4% of exporter compared to the cor- of the whole, while 36.5 this general perception rooted in the Turkish companies and export responding period of percent reported no is seen in overall proot- lira’s recent devaluation prootability for 37.4% the year before. In the change compared to the ability and export prof- against the US dollar were lower than last same period, in terms corresponding period itability levels. Reduced and British pound. year’s levels in the cor- of revenue items, the last year. Certain data overall prootability However, one sees that responding quarter. number of companies suggests a perception levels relative to the this change has not BËyËkekûi’s assess- reporting increased that the second quarter corresponding period affected production or ment of the survey’s exports was calcu- of 2013 followed a last year were reported export (sales) data.y 06 First

OLIVE OIL AGREEMENT INCENTIVES Turkey–Guinea ALLURING INCENTIVES Partnership The investment A bilateral agreement is expected to lead to incentives increased investments between the two countries. issued within the scope of the 22% INCREASE new incentive IN OLIVE OIL system, which was put into EXPORTS effect in June The Aegean Exporters’ 2013, add up to Associations reported TRY 79 billion a 22% increase in to date. olive oil exports for July 2013. In July 2012, exports totaled Over 5,000 invest- $8.46 million by value ment incentive bills compared to $24.51 were issued since the million this year. The start of the program. Aegean Olive and Olive Domestic companies Oil Exporters’ Associa- received 4,845 of these tion was the associa- bills (worth TR< 68.5 tion that gained the billion) and foreign- largest export increases funded companies in 2013 nationwide, received 281 (worth and the industry over- TR< 10.6 billion). It all maintained its title is predicted that these of being the industry incentives have created with the highest export N AGREEMENT for the mining will be made in Guinea (or will create) 187,478 increase, with 10% A mutual promotion and over the next ove years, and we new jobs. The total growth. protection of investments be- don’t have the infrastructure oxed investment can tween Turkey and Guinea was necessary to extract the minerals. be broken down by signed on July 18, 2013, with the This is why Turkish companies sector into manu- CHEMICAL attendance of Economy Minister should secure positions for them- facturing with TR< =afer ®aþlayan. Speaking at the selves.y The agreement is expected 37.1 billion, energy CHEMICAL ceremony, Ramatoulaye Bah, the to lead to increased investments with TR< 18.4 billion, Guinean Minister of Industry between the two countries and services with TR< 17.3 EXPORTS and SMEs, said, kFifteen billion deeper commercial and economic billion, and mining SURGE dollars’ worth of investment in relations. with TR< 6.3 billion. Turkey’s chemical export over the past seven months was AVIATION reportedly worth $10.12 billion. The chemicals URKISH AIRLINES free of charge. The cost-free industry—one of the Free Tours T has signed a protocol of tours, which will be coordi- keystones of the econo- cooperation with the Turkish nated with Turkish Airlines my—attained an export of the Parliament to promote Tur- passengers whose waiting value of $1.56 billion key’s cultural heritage. Under periods permit, will offer in July 2013 (growing National the protocol, Turkish Airlines’ opportunities to visit such 20.2% over July 2012) transit passengers will now historical sites as the Dolma- and ranked third among be able to visit Istanbul’s bah¹e Palace and the <ldz Turkey’s leading export Palaces Parliament-managed palaces, Tile and Porcelain Factory. industries. pavilions, and hunting lodges

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 07

CONSTRUCTION AVIATION MASSIVE AIMING EXPO SKY HIGH With the 16.7% CENTER growth rate Turkey obtained FOR last year in civil aviation, the ANKARA country ranked An expo center third worldwide being established in terms of near Esenboúa passenger volume Airport will be growth. fourth-largest such venue in the world. AUTOMOTIVE URKEY’S AVIA- T TION industry is growing at a faster rate HE EXPO CENTER Hyundai Turkey’s ever year, stated Binali T to be established in <ldrm, Minister of the Akyurt development Capacity Rises to 200,000 Transport, Maritime area near Esenboþa Air- The company’s $609 million investment will fund Affairs, and Communi- port will have 100,000 production of the new i20, which is targeted mostly cations. <ldrm said, square meters of indoor toward Europe. Production will start in September. kIn just ten years, we exhibition space and a increased the num- 50,000-square-meter ber of active airports event area. A connection from 25 to 52. Our will be built from the YUNDAI ANNOUNCED that it completed its investment in its passenger numbers, center to the third run- H factory in Turkey, yielding the result of an annual production og- meanwhile, went from way being planned for ure in Europe of more than 500,000 automobiles. The $60 million 32.5 million to over 131 the airport. Additionally, investment is bringing not only new suppliers but also more than 2,800 million. And this year, a separate exhibition new jobs. The Hyundai Assan üzmit factory, which entered operations we will exceed pas- area will be built for the in 17, is the longest-running factory to remain in production since senger numbers of 140 use of aviation fairs. Hyundai expanded beyond the borders of South .orea. million.y

TOURISM 22 MILLION TOURISTS The number of international tourists visiting Turkey from January through July was more than 22 million.

CCORDING TO a visitors to Turkey in the A written release from January–July period was the R&D department 22 million. of the Mediterranean One of the most popular Touristic Hotels and Op- cities Antalya also exhib- erators Association, the ited a 7.7% increase with number of international 6.06 million tourists. PHOTOGRAPH BY AA (BOTTOM) PHOTOGRAPH 0608 First

ECONOMY INCENTIVES POSSIBLE RECORD IN EMPLOYMENT Turkey will be one of the three countries in the OECD that realized the highest growth in employment next year.

MPLOYMENT in ment, with an expecta- E Turkey will grow tion of 2.7% for both by 2.2% next year. Ac- of them. Turkey ranks cording to the OECD, third, and it is fol- Mexico and Israel are lowed by the US and the countries with Luxembourg, which the highest projected expect 2% growth. growth in employ- TRY 50,000 PROMOTION AND MARKETING SUBSIDY FOR ENTREPRENEURS Nihat Ergün, the Minister of Science, Industry, and Technology, announced a grant program providing up to TRY 50,000 of support to entrepreneurs wishing to promote and market locally developed technological products both in Turkey and abroad.

HE MINISTRY designed to take into up to TR< 50,000 for T declared that account the budgetary participating in any applications will be means of the candi- number of interna- accepted on a monthly dates. For applications tional promotional schedule and evalu- deemed acceptable, and marketing events ated within a month. the ministry will and up to TR< 25,000 The incentives are provide subsidies of for domestic events.

FINANCE Banking Sector Beats 157 Countries Turkey’s banking sector surpassed 157 countries in terms of total assets at the end of June.

ccording to the June 2012, reaching TR< A Banking Regula- 1.53 trillion. tion and Supervision Based on the Central Agency of Turkey Bank’s exchange rate for and World Bank data the US dollar on June compiled from ogures 157 28, 2013, the total assets TURKISH BANKS’ on economic size in TOTAL ASSETS were worth the equivalent 2012, Turkish banks’ EXHIBITED AN of $72.5 billion, sur- total assets exhibited an INCREASE passing last year’s ogures increase of TR< 157 bil- as well as 157 countries lion in June 2013 over that rank below Turkey. PHOTOGRAPH BY AA (TOP) PHOTOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 0709

EXPORTS EXPORTS EXPORST 70% of Home Appliance SAKARYA PROVINCE Production Export Bound LEADS THE In the Örst half of the year, the home appliances industry manufactured 10.6 million appliances, PACK IN 7.4 million were exported. EXPORT GROWTH According to ogures 15% INCREASE released by TIM, the IN LEATHER province of Sakarya generated $224 EXPORTS million in exports The Leather Outot- in July. This ogure ters’ Association of corresponds to an Turkey announced that increase of 55% over Turkey’s leather ex- July 2012. Russia ports over the orst six was Sakarya’s top months of 2013 grew customer, accounting 15.4%, reaching $846 for $66.74 million of million. Russia was export value. Motor reported as the largest vehicles and parts and most important was the leading market for the indus- industry, generat- try, whose stated 2023 ing $13 million in export target is $10 bil- HE HOME appliances industry exported roughly 70% of the 10.6 mil- exports. Sakarya, the lion. With total exports T lion appliances it manufactured from January through June. Accord- ninth-largest exporter of $1.6 billion in 2012, ing to data from the White Goods Suppliers Association of Turkey, in the among Turkey’s leather ranked second industry’s six main product categories (fridges, freezers, washing machines, provinces, has its auto out of all industries in dryers, dishwashers, and ovens), production rose from 10.3 million to 10.65 factories to thank for export value growth. million units and exports rose from 7.43 million to 7.5 million units. this growth.

INDUSTRY FILM DEFENSE INDUSTRY Turkish Film EXPORTS RISE 567 2,093 Industry Worth THEATERS SCREENING HALLS 25.6% IN JULY $2 Billion The companies engaged in exporting Roughly 70 movies are shot every defense and aerospace year in Turkey, whose Ölm industry is industry products constantly growing. secured an export value increase to $.21 million in July. The he olm industry in Turkey is growing rap- industry accounted for T idly. The industry is valued at more than $2 0.8% of Turkey’s overall billion, including box ofoce income. Movie the- exports in July. The aters are proliferating in response. As of last year, US, Italy, and Germany Turkey had 567 theater complexes with 2,03 were the top recipients. individual screening halls and 268,000 seats. 10 First

CONSTRUCTION DEVELOPMENT EXPORTS Capacity Utilization FORESTRY PRODUCT Rate Increases EXPORTS The capacity utilization rate in the manufacturing industry as a whole increased by 0.7% in July compared to July GROW 21.8% TURKISH 2012, coming in at 75.5%. The export of the wood and forestry CONSTRUCTION products industry INDUSTRY IN in July exhibited a 21.8% increase over $2.3 BILLION July 2012, adding BOOM up to a value of $31 million, according to Minister of Economy data from TIM. The =afer ®aþlayan said industry accounts for a Turkish contractors 3.1% share of Turkey’s took on 40 projects in overall exports. The 27 countries, worth leading recipients of $2.3 billion, in the the industry’s exports month of July. Among in July were Iraq, these projects, noted AzerbaijanNakhiche- ®aþlayan, are two power van, and Iran, which plants in Turkmeni- imported $74.23 mil- stan ($545 million), HE CENTRAL Bank of Turkey examination revealed a 75.5% rate lion, $31.77 million, two HES projects in T announced the results of its for July 2013, exhibiting an increase and $30.78 million’s Albania ($256 million), capacity utilization study in the of 0.7% over the same month last worth respectively. a housing project in manufacturing industry of 2,242 year. Relative to June, the capacity .azakhstan ($370 mil- participating companies. utilization rate increased by 0.2% lion), and three highway The rate in July 2012 was 74.8%. The from 75.3%. projects in Azerbaijan and .azakhstan ($217 million combined). AVIATION 2007 2008 2009 2010 2011 2012 2013 AWARD FROM AIRLINE BUSINESS EXPORT Turkish Airlines took the award for Marketing at the Airline Strategy 4.3% Increase Awards 2013, staged by Airline Business maga- in Metal Exports zine. The award was presented to Turkish he export of fer- export of ferrous and Airlines President and T rous and non- nonferrous metals CEO Temel .otil, PhD ferrous metals over occupies a 4.4% share at a ceremony in Lon- the orst six months of Turkey’s overall don on July 14. Airline of 2013 exhibited a exports. African Business is among the 4.3% increase over and Middle Eastern leading magazines in the corresponding countries are among the commercial airline period in 2012, total- the industry’s chief industry. ing $3.3 billion. The markets. PHOTOGRAPH BYLOREM IPSUM PHOTOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 11

AGREEMENT AVIATION AVIATION AGREEMENT CIP LOUNGE OF GOOD RENOVATED INTENTIONS Turkish Airlines’ WITH Milas-Bodrum Airport Domestic Terminal ARGENTINA CIP Lounge has been An agreement of good opened for service to intentions has been offer passengers a more signed between Turk- comfortable and qual- ish Airlines and the ity environment. Pas- Argentine Tourism sengers with Business, Ministry. The signing Elite Plus and Elite, ceremony took place Classic Plus, and Star with Turkish Airlines Alliance Gold Cards President Temel .otil, who are traveling PhD, and the Argen- Kotil Reelected domestically or abroad tine Tourism Minister as transit passengers Enrique Meyer in to IATA Board of may now enjoy the CIP attendance. lounge privilege. The Under the agree- Governors new lounge, which can ment, the Argentine handle 160 passengers Tourism Ministry will per hour, welcomes cover Turkish Airlines’ HE WORLD AIR TRANS- governments to make more use guests in a comfortable services and pight des- T PORT Summit and 6th of the airline industry. In atten- environment equipped tinations and publicity Annual Meeting of the Interna- dance was IATA Board Member with ofoces and tional Air Transport Association and Turkish Airlines President Internet connectivity about Turkey in its (IATA) took place in South Af- and CEO Temel .otil, PhD, who as well as a rich array promotional activities, rica, Cape Town. An appeal was was reelected for an additional of refreshments. The and Turkish Airlines made at the meeting for African three-year IATA board term. capacity of the Ataturk will also promote Ar- Airport International gentina in its in-pight CIP Lounge is slated media. for an increase from CONFERENCE 520 to 1,100 in an LOREM expansion to be completed by the end of the Rapid Access for year. In Moscow, too, POLO the orst CIP lounge Turkish Airlines will RETURNS TO All in 2023 operate abroad is ex- The 11th Transport, Maritime Affairs and AZERBAIJAN pected to be completed Communications Conference will bring together by year’s end. The 1st Azerbaijan experts from Turkey and abroad. Arena Polo World Cup will be held in Baku, OMMUNICATIONS tech- the 11th Transport, Maritime September 6 to 8. The C nologies are developing Affairs and Communications tournament, which rapidly all over the world. The Conference, which will bring Turkish Airlines is one Ministry of Transport, Mari- together a large number of ex- of the sponsors, aims time Affairs, and Communica- perts from Turkey and abroad, to make polo more tions, which provides the latest will take place at the Istanbul widespread in Azer- in such technologies in Turkey, Congress Center from Sep- baijan, homeland of is holding meetings aimed at tember 5 to 7. Prime Minister the traditional sport of outlining industry-categorized Recep Tayyip Erdoþan and kchovgany, which is strategies for 2023. Based ministers of the guest countries known as the forerun- on the slogan kTransport and will attend the opening of the ner of polo. Rapid Access for All in 2013y, meeting. PHOTOGRAPH BYLOREM IPSUM PHOTOGRAPH 12 Panorama Panorama BY SÜLEYMAN YAŞAR PhD

WHY IS TURKEY ATTRACTIVE TO INVESTORS? With its disciplined Öscal administration, sizable investments in transportation infrastructure, privatization policy, EU Customs Union membership, and diverse manufacturing industry independent of natural resources, Turkey stands out among the world’s developing countries as a very attractive draw for international investors.

FTER THE GLOBAL FINANCIAL CRISIS, devel- long canal opened in 114 is being deepened from 26 meters oped countries were forced to halt large-scale to 41.2 meters and widened from 33.5 meters to 210 meters. infrastructure investments. Because of austerity The canal is thus being made suitable for the passage of large policies implemented after the 2008 crisis, the container ships from the Pacioc and Atlantic. The expansion AEU will be unable to allocate much funding for infrastruc- project began in 2006 and it is scheduled to open in 2015. ture projects until 2020. Likewise in the US, complaints are The second project is Marmaray, a subterranean (and mounting of scant budgeting for the large infrastructure pro- partially underwater) rail tunnel here in Turkey. It is a high- jects of tomorrow. As infrastructure projects in rich countries quality rail pass with a total length of 76.3 kilometers, 13.5 face abandonment in rich countries, large-scale infrastruc- of which go under the Bosphorus, the strait in Istanbul that ture projects in developing countries are breathing life into divides Europe and Asia. Marmaray, a global project that the world’s economy. connects the two continents, came at a cost of almost $5 bil- To follow this brief introduction, let us have a look at the lion. Its opening will be held on October 2, 2013 (the 0th world’s three most striking large infrastructure projects. The anniversary of the declaration of the Republic of Turkey). orst is one to expand the Panama Canal. The 77.1-kilometer- Once it is opened for service, it will go down in history as the ILLUSTRATION BY SEDAT GİRGİN BY SEDAT ILLUSTRATION SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 1313

world’s deepest undersea immersed-tube tunnel. This project limitations to service pricing for this reason, a reasonable proot is expected to increase the rate of passenger rail travel in margin (relative to investing conditions) is a required attribute. Istanbul from 3.6% to a total of 27.7%. Besides infrastructure projects, Turkey’s credibility has been At last, we have come to third of the most striking projects in boosted by privatization activity, too. Over the past decade, the world—it, too, is in Istanbul, Turkey, where it is known as the Turkey’s privatizations have yielded $48.4 billion. Hence, while new (or third) airport project. The new airport in Beijing, with a budgetary expenses were equivalent to 42.8% of internal revenue previously announced passenger capacity of 130 million per year, in 2002, the rate fell to 26% in 2013. Additionally, with increased will enter construction in 2014 and service in 2017. The Istanbul focus on growth led by the private sector, per capita income airport, if completed as planned with a capacity of 150 million tripled over the past decade, reaching $10,673 in 2012. passengers per year, will launch in 2018 and surpass the Beijing Which projects in the state’s portfolio are slated for privatiza- airport in capacity. tion in the near future" For now, one could speak of the National Now, to move on to two other projects worth noting—the Lottery and other games of chance, power plants, highways orst is a new passage from the Pacioc to the Atlantic, in Nicara- and the Bosphorus bridges, Halkbank, sugar factories, and the gua. The capacity of this passage will be higher than that of the .alamûFenerbah¹e

Briefing MUSEUMS, FORESTRY, TOYS, VITICULTURE, CHOCOLATE, AVIATION, INVESTMENT...

Dolmabahce Palace was built between 1843 and 1856.

TOURISM ILLUMINATED BY MUSEUMS Museums are among the top tourist attractions in any country. Besides displaying items of cultural and historical value relating to the peoples who lived in the past, they also contribute to the host country’s economy.

BY E. MELEK CEVAHIROĞLU ÖMÜR

HE HITTITES, Urartians, able pieces that survive today past and showing them the that open their doors every T Galatians, Lycians, are kept in museums under cultural wealth accumulated day for the sake of promoting Lydians, Ionians, Ancient careful protection. Those over the centuries, museums Turkish culture; nationwide, Greeks, Romans, Seljuks, and who want to experience this also constitute an important there are 363 museums. Both Ottomans, all among history’s part of history visit these branch of tourism with their their temporary exhibits and great civilizations, each lived museums. Foreign tourists considerable contributions to permanent collections draw in Turkey at one time. Turkey are especially drawn to our the nation’s economy. heavy attention from tourists. has been home to countless museums, which serve a cru- Turkey’s three most visited The categories covered by these cultures from prehistory to cial mission in promoting our museums are the Hagia Sophia museums include archaeology, today, and they continue history, although the scope of Museum, the Topkap Palace art, science, and military his- to live on with the cultural their mission is even broader Museum, and the Museum of tory. Several notable boutique treasures and values they left than that—besides giving Mevlana (Jalal al-Din Rumi) in museums exist as well. In behind. The rarest, most valu- people connections to the Konya. There are many more all countries, museums are

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 15

leading tourist attractions. Museum of Mevlana MUSEUMS RAKE IN THE AWARDS Besides displaying culturally (Jalal al-Din Rumi) The increase in the number in Konya is one of the and historically valuable items most visited museums activities and investments in relating to the peoples of the in Turkey. Turkish museums, together past, they also contribute to with the spread of best prac- the host country’s economy. In tices, is being appreciated by Turkey, museums constitute prominent international orga- one of the foremost branches of nizations for culture and the tourism, drawing increasingly arts. The European Museum higher numbers of visitors. Forum (EMF) granted the Historically, museums have Health Museum of the Uni- been one of the highlights of versity of Trakya the Council travel. Visitors come from all of Europe Museum Prize in over the world to see the vari- 2004. Likewise, the Istanbul ous objects being displayed. In Museum of Modern Art was a way, museums represent the the category “Most Successful built in the village of Tevokiye given a special prize by the highbrow element of the tour- Cultural Tourism Investment.” in Çanakkale. There are many European Museum Forum istic experience. Of Turkey’s Çanakkale Province stood out more investments being made in 2009. Users of the travel 363 museums, 174 are pri- as having the most promising in museum-focused tourism— website TripAdvisor for Busi- vately owned while 189 are run investments toward the future. the ministry’s concerted efforts ness voted to give the site’s by the state. (Archaeological Archaeological items recovered are bringing back several “Certiocation of Excellency” to sites and other historical land- from the ruins of Troy, which valuable pieces taken from the Zeugma Mosaic Museum, marks are not counted in these is located on the UNESCO Turkey years ago, for instance. Anatolian Civilizations Mu- numbers.) As of 2013, there World Heritage List and has Recently, 23 Roman-era coins seum, Antalya Museum, Side are nearly 350,000 pieces on a history of roughly ove mil- from the orst and second cen- Museum, Istanbul Archaeol- display in the country’s private lennia, will be put on display turies BC were returned to our ogy Museum, and Göreme museums and more than 3.1 at the Museum of Troy to be country from Australia. National Park and the Rock million in its state museums. Sites of Cappadocia. In 2013, the Hagia Sophia Museum in MUSEUMS AND TOURISM ARE MUSEUM-FOCUSED TOURISM Istanbul was named one of CODEPENDENT the world’s top ten museums. Tourism needs tourists. GROWING CONSTANTLY In 2012, the Zeugma Mosaic Museums need visitors. MILLION VISITORS Museum received the Grand This codependence fuels the Between 2002 and 2012, the number of visitors to 28.78 Award in Culture and Arts, development of museum- museums and archaeological sites multiplied by 3.8, 28.46 and it ranked orst among the focused tourism in Turkey corresponding to an increase of 283.4%. most successful culture and and accounts for its potential 283.4% tourism investments accord- to generate a sizeable por- 7.42 TRY MILLION ing to studies published by tion of tourism revenues. In the magazine Ekonomist in Between 2002 and 2012, the touristic revenue 280 2012, roughly 28.8 million obtained via museums and archaeological sites 254 2011 and 2012. people visited museums and multiplied by 9.7, corresponding to an increase of Furthermore, a ranking of archaeological sites, bringing 876.9% the world’s top 50 museums in touristic revenues of around 876.9% 26 by the Times of London placed TRY 280 million. the Topkap Palace Museum The investments recently MORE PRIVATE MUSEUMS EVERY YEAR MUSEUMS in Istanbul as seventh and the Between 2002 and 2012, an 174 made by the Ministry of increase of 68.8% was observed in 157 Zeugma Museum in Gazian- Tourism in museum-focused the number of private museums. tep as 39th. The accompany- 93 tourism have resulted in visible 68.8% ing article highlighted the progress in the industry. In a Prophet Muhammad’s cloak study of Turkey’s most success- 2002‘11 ‘12 at the Topkap Palace Museum ful tourism investments, span- and the “Gypsy Girl” mosaic at MILLION 2012 EXPORT, IMPORT, AND TOURISM RATIOS ning 11 categories, which was THE FOUR VISITORS The ratio of exports to tourism income in the Zeugma Mosaic Museum MOST POPULAR organized by Eurobank Tekfen HAGIA SOPHIA 2012 was announced as 19.2%. as prime attractions. The MUSEUMS 3.35 in collaboration with the local The four MUSEUM BILLION TRY Zeugma Museum also received magazines Capital and Ekono- museums in TOPKAPI PALACE EXPORTS TOURISM the Grand Prize for Culture Turkey that MUSEUM 3.33 152.48 INCOME 29.35 mist with contributions by the and Art, which is awarded by drew the MEVLANA The ratio of imports to tourism expenditures Turkish Tourism Investors As- most visitors MUSEUM, KONYA 1.57 was announced as 1.9% the Presidency of the Republic as of 2012: sociation, the Zeugma Mosaic ST. NICHOLAS’S IMPORTS 236.55 TOURISM 4.59 of Turkey ever year, and it is a Museum earned orst place in MUSEUM, ANTALYA 0.5 EXPENDITURES candidate for the 2013 Grand 16 Briefing

Prize for Europe’s Museum of amount demonstrates the in Hatay. Construction on in Van, the Ottoman Nations the Year. The onal decision is a growing priority of muse- these museums is planned to Museum in Istanbul, and matter of great excitement. ums in accordance with the end soon to allow them to be the Edessa Archaeological ministry’s cultural policies, opened this year. Museum and Haleplibahçe NEW DIRECTIONS IN MUSEUMS especially in comparison to Museum in úanlurfa by Currently, there are 188 mu- last year’s budget of TRY “A NATION OF MUSEUMS” 2023. Additionally, “national seums and 133 archaeological 18 million. Comprehensive The government has included museum complexes” will be sites subject to the authority projects to construct new museums in its targets for established in large cities for of the Ministry of Culture and museums all over the country 2023, the centennial of the the public display of pieces Tourism. As a result of the are under way; the most Republic’s declaration. With that were kept in warehouses, ministry’s efforts, since 2002, remarkable among these the objective of providing ac- awaiting exhibition. Private more than 175 million tour- are the Museum of Troy cess to cultural and artistic ac- museums are being incentiv- ists have visited these sites, in Çanakkale, the Denizli tivities to all, the government ized as well, and in yet-to- with a remarkable increase of Archaeology Museum, the aims to establish what will be be-selected cities, thematic 288% in visitor volume. Sales Archaeology Museum and the Museum of the Civiliza- museums focusing on such of the Museum Card, which Haleplibahçe Mosaic Muse- tions of Turkey in Ankara, the topics as the nation’s natural the ministry made available umArchaeopark in úanlurfa, Museum of Aegean Civiliza- history, contemporary arts, to the public in 2008 and the Urartu Museum in Van, tions in üzmir, the Museum of fossils, agriculture, Islamic which provides unlimited and St. Peter’s Museum and Mediterranean Civilizations in arts, and traditional attire will access to over 300 museums the Archaeology Museum Antalya, the Urartu Museum be built. and archaeological sites, have already surpassed four million. In order to modern- ize the facilities and enhance service quality in the museums, TÜRSAB-MTM has un- dertaken the modernization of ticket booths and tollgates, as well as the operational responsibility of 48 museums ÖZGÜN ÖZASLAN YUSUF BENLİ ASSOC. PROF. BÜLENT ARI, PHD and archaeological sites. This Undersecretary, Ministry of Tourism Director, Museums of Konya Province; President, Museum Management collaboration has resulted Director, Mevlana Museum and Promotion Unit, Department of National Palaces in modern technology for Museums have gained more importance over the years, making Museums represent the center A tourist who comes to a country museums and the prevention “museum tourism” has become an of attraction and high point of wants to see the city’s important of unauthorized entry. These individual area of interest within cultural tourism. You could go museums. The things they modern methods and practic- cultural tourism. The growing role to the Neolithic in an instant; read or hear spark the curiosity es improve the tourist experi- of museums as part of cultural a step later, you could see Roman culture or, in front of a to go to these museums. State ence, too. Additionally, the heritage, and of tourism, spurred increased efforts on the part display, establish visual contact museums have access to large management and operation of the Ministry of Culture and with the cultural output of budgets to preserve their exhibits of points of sale and commer- Tourism for the development, the Seljuk civilization. The and collections. Visitors get cial product development for restoration, innovation, and Karatay Madrassa, Chinaware the means to see objects they cannot always see. Some objects museums and archaeological diversiocation of museums Museum, Fine Minaret, and starting in the early 2000s. On Ethnography Museum in Konya in palaces brimming with sites were transferred to the this point, we have organized are all important museums historical objects, with walls and Bilkent Culture Initiative. many projects like the “Child- that display special objects of ceilings adorned in decoration, The effects of modernization Friendly Museum” project— high cultural value. Meanwhile, such as the Dolmabahçe and and renovation are visible in which includes kids’ workshops, new regulations and exhibition Beylerbeyi palaces, can escape visitor attention. But, overall, our the museum shops and their performing arts shows, seminars, plans are being implemented to and so on—in order to realize supply visitors with the requisite true mission can be described as products alike. the communicative function of information. Great progress was the effort to preserve the entire In order to establish new museums and raise awareness made in museum management collection. Since the National museums and renovate the among children and young and item preservation in Palaces are tied to the Grand existing ones, the ministry is adults. Also, the Law on the Turkey, such as the effort to put National Parliament of Turkey, Çatalhöyük in the World Heritage they work differently from the investing considerable sums. Encouragement of the Cultural Investments and Initiatives has List. Again, the ministry has ministry. The National Palaces The ministry allocates around encouraged the establishment many new projects for museums have a relatively high budget, and TRY 50 million annually for of cultural complexes as well as and museum management, and because restoration is carried out the maintenance, renovation, private museums. Accordingly, each is gradually being brought by their own personnel, it is done and restoration of the existing over the years, local authorities to life. All of these efforts are with greater care and precision have become more and more important steps for cultural As far as I know, the ministry is museums. More than TRY 30 enthusiastic to establish museums tourism and the preservation of not yet making progress at the million was allocated for new in their own areas of expertise. cultural holdings. desired level. establishments in 2013. This

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 17

WOOD AND FORESTRY A Crucial Component of Sustainable Growth: THE EXPORT OF WOOD AND FORESTRY PRODUCTS Turkey’s wood and forestry product export in 2012 was worth $4.3 billion. Between January and June 2013, the cumulative sum for the year to date was announced as $2.3 billion.

BY GÜZİN GÜZEY

and China, says Aymen. Tur- key is the world’s 29th largest exporter in this category. In furniture exports, China, Germany, and Italy lead the pack, with Turkey ranking 16th. In wood, the top three are China, Canada, and the US, and Turkey’s rank in that category is 37th. Finally, in secondary forestry products, Turkey ranks 22nd, with the top three being India, China, and the US.

TURKEY’S EXPORTS RISE Accoriding to Ahmet Kahraman, Chairman of the Central Anatolia Wood and Forestry Products Export- ers’ Association, the local industry employs roughly 300,000 people and has a volume of $19 billion. “In 2002, the industry’s export was worth 800 million dollars. In ten years, by ORESTS PLAY A signio- TURKEY’S POSITION IN THE 2012 that is, it grew to 4.3 F cant role in determin- INDUSTRY EXPORT VALUE OF billion dollars,” he states, ing a country’s quality of Bülent Aymen, Chairman of WOOD AND FORESTRY pointing out the striking life. Forests are home to the Mediterranean Wood and PRODUCTS expansion of the industry. three-fourths of terrestrial Forestry Products Exporters’ By value, the industry’s biodiversity, and they are of Association, breaks down the export from January to June considerable value to manu- industry into four funda- 2012 2013 totaled $2.3 billion, facturing, ecotourism, the mental groups, namely paper $4.3 according to Kahraman. In BILLION environment, and the overall and cardboard products, fur- light of last year’s ogures, it ecosystem. These factors niture, wood products, and can therefore be said that demonstrate the importance secondary forestry products. 2002 Turkey’s exports gained of the wood and forestry The top three countries in $800 momentum in the orst six products industry to sustain- paper and cardboard product MILLION months of 2013, and this able growth. exports are Germany, the US, momentum is expected to 18 Briefing

“We could be even more successful with a little more support to the furniture industry for R&D, design, and branding efforts.”

continue through the second Nurettin Tarakçoþlu, for half of the year. However, his part, says, “The produc- Nurettin Tarakçoþlu, Chair- tion of forestry products as man of the Aegean Anatolia practiced under state control Wood and Forestry Products urgently needs to diversify, Exporters’ Association, cau- and economical produc- tions that falling demand in tion of the tree varieties in Europe has the potential to highest demand must be hinder this momentum. AHMET KAHRAMAN BÜLENT AYMEN NURETTİN TARAKÇIOĞLU pursued,” highlighting the Chairman, Central Chairman, Chairman, Aegean importance of cooperation BOLSTERING EXPORTS Anatolia Wood and Mediterranean Wood Anatolia Wood and with the state and being Forestry Products and Forestry Products Forestry Products It is vital to the industry Exporters’ Association Exporters’ Association Exporters’ Association capable of producing quality that raw material prices goods consistently. By the centennial of We have set an export Thanks to the be brought down to world the founding of our target for 2023 of infrastructure averages in order to curtail Republic, in the year $16 billion for our in- already in place, the FURNITURE LEADS THE PACK import dependency, which 2023, our country’s dustry. Our target for industry actually According to Nurettin poses a challenge to indus- wood and forestry the furniture group has the potential to Tarakçoþlu, Turkey stands export much more. try’s ability to compete in products industry alone is $10 billion. out in bay leaf and thyme aims to increase pro- To guarantee results, Our industrialists the export markets. Ahmet duction capacity by we—exporters and are gradually exports, though its overall Kahraman believes that 50% and exports by industry representa- earning a reputation share in the export market international promotional 500%. This would tives—are trying to in the global trade may be low compared to other activities and one-on-one bring production accelerate the process for their competitive countries. In furniture, how- nature. business meetings would volume to 32 mil- through various proj- ever, Turkey ranks among the lion meters cubed ects. We have several I believe increased be effective in making the and exports value to R&D projects and state support for top ten exporters, which is of industry a stronger player $16 billion. Within furniture R&D proj- foreign trade and supreme importance, he says. in exports. Kahraman also this target, $6 bil- ect market plans to export-based He concludes, “I believe we lion is the individual help guide our pro- growth policies emphasizes that organiz- would clear a path could be even more success- ing industry trade delega- export target for the ducers and exporters ful with a little more support furniture industry, toward being able to for our industry in tions is the most powerful and $7 billion is the sell products in great- this area. to the furniture industry for way there is to guide local target for the paper er quantities and at R&D, design, and branding companies toward exports. industry. higher prices. efforts.” PHOTOGRAPH BY AAPHOTOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 19

According to the International Council of Toy Industries, the toy industry had a volume of $90 billion in 2012.

TOYS AN INDUSTRY WITH A PROMISING FUTURE: TOYS The toy market in Turkey exhibited growth of over 6%, with that for branded toys growing by more than 10%.

BY GÜZİN GÜZEY

E’VE ALL BEEN chil- toy industry can be traced industry was worth roughly Wdren. The ability for back far into the past, but $120 billion in 2012, and av- toys to capture the imagi- it took until the early 1990s erage toy spending per child nation of children and en- for it to be an exporter. Toy worldwide was $175. The chant them is hard to deny, exports started pourishing Turkish toy industry, whose and they are universally, with the sudden deluge of top export customer is Ger- indispensably popular with demand after the collapse many, is worth around TRY 1 children across the globe, of the Eastern Bloc. Today, billion. Domestic production no matter their language, Turkey exports a range of accounts for a volume of TRY race, or creed. Once toys toys to a wide set of coun- 100 million, with imports started to augment—or tries across the world. being responsible for the even replace—traditional remaining TRY 900 million. The Turkish toy games after the industrial EXPORT OPPORTUNITIES ABOUND The industry’s export was revolution, an industry took Plastic toys make up the ma- industry, whose top worth around $30 million. form and developed to jority of Turkey’s toy exports. export customer is In 2013, to date, Turkey’s toy accommodate the ever- According to data provided Germany, is worth exports total $98.44 million, increasing demand for a by the International Council around TRY 1 a ogure that represents an diverse set of toys. Turkey’s of Toy Industries, the toy billion. increase over 2012. The toy 20 Briefing

industry is a dynamic one for Turkey. Authorities in the oeld are of the view that the industry could yield a great opportunity for exports with some work. Ahmet Alioþlu, Chairman of the Toy Mak- ers’ Association (OYDER), believes R&D especially deserves investment priority. According to Alioþlu, so long as new products continue being developed and that world-class quality and aesthetic appeal is retained, exports can be expected to grow indeonitely. Manufac- turers should identify gaps in the market and invest in products to address them, states Alioþlu. Not only would this enable manufacturers to reap the proots of their investments more swiftly, but it would also help them build up a stronger, more attractive collection of products for export. According to Designnobis founder Hakan Gürsu, PhD, Educational toys the toy industry is not to be 1 USA 6 GERMANY dismissed as a plaything, and play important TOP TEN 2 JAPAN 7 BRAZIL to do so would demonstrate roles in many areas The top ten a profound lack of under- throughout childhood countries in the 3 CHINA 8 INDIA standing of the industry. development. industry hold 68% 4 UK 9 AUSTRALIA of the toy market. Toys today comprise a dy- 5 FRANCE 10 CANADA namic, R&D-based industry, states Gürsu, who is of the view that Turkey, with large domestic and international market potential, is highly attractive to the toy industry. Should Turkey be able to reach a certain level in patented products, branding, and originality in design, its potential export capabil- ity would correspondingly increase, he declares. The experts unanimously agree that the establishment of brands in the toy industry is of high necessity, and they await the arrival of investors who believe in the strength of the manufacturing base and can make use of the incentives the state makes available in this area. PHOTOGRAPH BY AAPHOTOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 21

OPPORTUNITY IN NUMBERS There are 6.2 million children aged 0–4 and 6 million aged 5–9 in Turkey. $30 Average toy spending per child in Turkey is $30 annually. $175 Average toy spending per child worldwide is $175 annually.

$2 BILLION Annual toy spending totals $2 billion.

Data: OYDER

AIMING FOR $50 MILLION IN THE WOODEN TOY MARKET Changing awareness of health and the accompanying lifestyle transformations it brings is changing the land- scape for all oelds of commercial activity. Heightened AN EXPERT OVERVIEW OF THE INDUSTRY consumer consciousness is The experts believe 2013 will turn out as a productive year for entering new markets. affecting purchase decisions in toys, too. Wooden toys have enjoyed increased market shares worldwide because of this, says Neva Toys Gen- eral Manager Sertaç Ercan. “Interest in high-quality, AHMET ALİOĞLU HAKAN GÜRSU SERTAÇ ERCAN MURAT ÜSTÜNBAŞ healthy toys, in contrast to Chairman, Toy Makers’ CEO, Designnobis General Manager, Neva Toys Product Manager, Pal Games Association (OYDER) and Toys cheap Chinese-made toys, is As is the case for many The size of the toy market increasing. By a very rough The higher valuation of The selection of toys for industries in our country, in Turkey has surpassed estimation, the wooden toy foreign currency proved children who are in the positive developments $1 billion. Toys are one beneocial for Turkish toy play stage affects both market in Turkey has grown are occurring in the of the most dynamic exporters in the orst half their educational lives to a size of ten million dol- toy industry, too. markets in Europe and of 2013. We could call and how they develop. lars. We expect this market to Additionally, we have the US. In Turkey, the 2013 a more productive Experts point out that many highly successful industry accounts for grow beyond 50 million dol- year in terms of entering design companies toys bought for children lars in the next ove years. As more than $500 million should have the quality new markets, too. R&D that continue to bring in imports, compared to of supporting mental, society becomes more aware is a priority matter for worldwide awards in investment. Another $24 million in exports. physical, psychosocial, of the issues, a shift toward the oeld of toys back to of the most important Local makers have an and emotional Turkey. The appetite of the natural—to the past—is factors is that we must estimated $100 million development while also the market in Turkey, taking place in all areas.” develop the toy-related share in the market. By informing children which has a young The emergence of consumer auxiliary industries, a very rough estimation, about their native population, is at the level which support toy the wooden toy market cultures. During the consciousness regarding toys, where it could support manufacturing. After in Turkey has grown to a play stage, the parents which play a considerable the toy industry, but this, once we raise size of ten million dollars. are responsible for role both educationally and we have not yet been capable designers, we We expect this market to providing the requisite in mental development, has able to attain the same grow beyond $50 million could ond the chance environment and become an opportunity for to further develop the success we have shown in the next ove years. Per equipment according to toy industry in the years in design in the oeld of capita annual toy spend- the child’s developmental production and investment ahead. manufacturing. ing in Turkey is $110. qualities. in this area. 22 Briefing

The EU and Russia are the largest buyers in the market.

IDEAL FOR GRAPES The makeup of Turkey’s land is ideal for viticulture. Grapes are an important product of Turkish culture, and the inhabitants of Anatolia have been practicing viticulture for thousands of years. Viticul- tural acreage in Turkey is concentrated in the country’s Aegean region. With sound production planning that takes the varied ecosystems in the country into consideration, subsidies for cultivation geared toward both immediate consumption and raw materials used by agriculture-based industries GRAPES can be expected to contribute to a signiocant increase in momentum. Mustafa Türkmenoþlu, Board Chair- TURKEY CLIMBING HIGHER man of the Aegean Fresh Fruit and Vegetable Export- ers’ Association and General IN VITICULTURE Manager of Türkmenoþlu According to a report issued by the US Department of Foreign Trade, says the momentum of fresh grape Agriculture, Turkey ranks as the world’s second most important exports is tied to planned, producer of fresh grapes—after China—and as the fourth-largest systematized, modern, goal- exporter. In 2013, with a projected 7% increase in production, oriented cultivation that mea- Turkey is determined to continue its growth. sure up to global standards. In terms of climate diversity, BY BARAN KARAKUZU too, Turkey enjoys a position enviable worldwide when it NATOLIA IS LOCATED Turkey, 40% are consumed comes to agriculture. “With A in what is considered to as-is, while 35% are used the added support of the ad- be the homeland of grapes. to make raisins and 25% vantage provided by climate The peninsula boasts both become inputs for other conditions, our country has an abundance of variety and products. Fresh grape ex- signiocant potential in the expansive vineyards. More ports accounted for roughly viticulture industry, and ef- than 1,200 grape varieties 210,000 tons, or 10.5%, of forts to secure improvements are grown in Turkey, one of Turkey’s three-million-ton in areas where grapes are the world’s most important fresh fruit and vegetable widely cultivated continue at hubs for grape cultivation. export in 2012. Around 77% Russia is the top buyer full throttle,” says Latif Ünal, According to a report issued of fresh grape exports are of of the Turkey’s grape Chairman of the Istanbul by the Ministry of Food, the seedless sultana variety. Fresh Fruit and Vegetable Ex- Agriculture, and Livestock, Russia is the top buyer of the exports, accounting porters’ Association. “I have viticulture was practiced on country’s exports, accounting for a share of 65%; full faith that the industry will 4,623 square kilometers of for a share of 65%; it is fol- it is followed by the attain the position it deserves land nationwide in 2012. Of lowed by the Ukraine, Ger- Ukraine, Germany, in the world market if the is- the fresh grapes produced in many, Bulgaria, and Belarus. Bulgaria, and Belarus. sues at present are resolved.” PHOTOGRAPH BY AAPHOTOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 23

DIVERSIFICATION AND INGE- the ranks in cultivation tech- NUITY TO YIELD A NEW AGE IN niques that leave no traces of VITICULTURE chemicals and do not use arti- Ingenious efforts to increase ocially augmented fertilizers. exports (which can be broken “Paralleling the demand from down into production, European countries and Rus- processing, and marketing) sia—our largest buyer—for through organic agricultural world-class produce with no practices and product diver- chemical residue, especially in sity are on the rise in Turkey. recent years, many exporters Cultivation of seedless early- Fresh grape exports accounted for roughly are pursuing production that yielding and seed-bearing can be monitored within the temporal varieties on a mass 210,000 tons, or 10.5%, of Turkey’s three- framework of agricultural best scale has been taking place million-ton fresh fruit and vegetable export practices,” says Türkmenoþlu. for ove years now. These in 2012. In connection to this, Turkey efforts are expected to result must intensify its monitor- in not only increased yields ing of producers for pesticide but also the lengthening of levels. By combining the the production season to advantage of its geographic six or seven months within position with innovation in the next year or two. These production, Turkey is secur- factors, together with prod- ing a better place in the global uct diversity, could elevate hierarchy. Turkey to the status of the world’s dominant supplier, says Türkmenoþlu. He cau- tions that it is not possible MUSTAFA TÜRKMENOĞLU LATİF ÜNAL ABDULLAH BULUT to make signiocant progress Chairman, Aegean Fresh Chairman, Istanbul Fresh General Manager, Adalya Fruit and Vegetable 2.2MILLION TONS and expect gains from tradi- Fruit and Vegetable Foreign Trade Exporters’ Association; Exporters’ Association; tional cultivation techniques. General Manager, General Manager, Ege TURKEY’S FRESH Türkmenoúlu Foreign Tropical Fruits, Tourism, Many of the GRAPE PRODUCTION Turkey must work on Trade and Trade companies that are IN 2012 improving its potential and engaged in exports promoting its image. Once With the Although Turkey is in need to compete not reinforcement of Turkey expands its com- good shape in terms with exporters from cooperation within of planted viticultural mercially signiocant port- our own country the industry, a long acreage, grape yields, but with those from 7 folio of varieties beyond the view of the issues at and grape produc- countries in Europe EXPECTED INCREASE sultana—a sweet, yellow- hand, and a shared IN GRAPE PRODUC- tion, the vast major- and America, as well TION FOR 2013 ish, seedless variety with a sense of duty, I believe ity of production is of as Chile. We must viticulture in our short shelf life—and reaps low value-added table change our approach country will rise to a grapes bound for im- to exports from a low- the beneots of the unique signiocant position. mediate consump- cost value proposition Turkey is highly pavors that the sun and soil tion. Turkey should to providing the can provide, it will be able to suitable for viticulture MILLION3 TONS focus on the produc- highest quality and when assessed in compete against its rivals on tion of high value- healthiest produce. terms of the factors TURKEY’S TOTAL FRESH added wine grapes, Additionally, FRUIT AND VEGETABLE the basis of pavor and thereby that affect success in and for this, it must fragmented vineyard EXPORTS IN 2012 secure signiocant increases in production. Careful shift emphasis from consideration of the land must be market share. Turkey—espe- planting table grapes consolidated and cially the Aegean region—is various ecosystems in the country through toward planting wine strict limitations expected to become the sound planning grapes. Cultivation of have to be imposed primary supplier in several of production on seedless early-yield- on the subdivision 210THOUSAND TONS varieties intended for imme- a macroscopic ing and seed-bearing of all land on which temporal varieties fruit is cultivated. Our TURKEY’S GRAPE diate consumption. level and subsidies EXPORTS IN 2012 for cultivation on a mass scale has producers must be geared toward been started in recent careful with regard FOCUS ON ORGANIC both immediate years. Since this will to agrochemical AGRICULTURE consumption and yield its results in the residue. Due to the Organic produce has become raw materials used years ahead, there is patent limitations increasingly important in by agriculture- nothing to stand in on new varieties, it 77 the way of the country takes a long time for every oeld of agriculture reliant industries are SHARE HELD BY SEEDLESS expected to add great rising to the rank of a cultivation of those SULTANAS IN EXPORTED worldwide, including viticul- momentum to our signiocant supplier in varieties to spread to GRAPE VARIETIES ture. Turkey is also rising in exports. the coming years. the underlying base. PHOTOGRAPH BY AAPHOTOGRAPH (TOP) 24 Briefing

CHOCOLATE nate the global chocolate industry. According to the Turkish Ministry of Economy’s 2013 report on TURKEY: A REGIONAL HUB confectionery and chocolate products, it is estimated that six orms are responsible IN CHOCOLATE for roughly 45% of global Per capita consumption of chocolate and confectionery production. The majority of trade within the industry is in Turkey has been on the rise for the past several years. conducted between devel- Considering the young population, consumption has ample oped countries; however, room for growth, suggesting steady increase in demand consumption is increasing over the coming years. constantly worldwide, and these increases are expected BY NESRİN KOÇARSLAN to continue into the future. Zekeriya Mete, Chairman of the Istanbul Cereals, Pulses, and Oil-Bearing Seeds and Products Exporters’ Associa- tion, emphasizes the need for Turkish companies to focus on branding, noting the role of the state-supported Turquality branding program in this: “With the Turquality program, we are creating Turkish brands that compete against their own brands in the global competition. Our commercial consultancies and attachés located almost all over the world, together with our exporters, play an important role in new target markets especially.” He continues, “Our industrialists are enter- prising and able to respond ARTICULARLY SINCE ing rapidly by the year. By to demand immediately P 1993, Turkey’s export of country, exports to Iraq, the via pexible production, and chocolate products to the CIS leading recipient of Turkey’s province-based regional and Arab countries rose rapidly, chocolate exports last year, incentives brought by the bearing the result of many new has grown by 7%, reaching new incentive system, with investments in the industry. a volume of $96 million. the eventual goal of helping The highest growth was us reach our 2023 targets, CENTRAL ASIAN AND ARAB observed in Libya, with an are opening paths for our COUNTRIES THE TOP RECIPIENTS 88% increase over last year exporters in an ongoing OF CHOCOLATE EXPORTS to $34 million. Overall, effort.” According to TurkStat, Turkey’s confectionery and Turkey’s 2012 chocolate chocolate export exhibited COMPETITION ON PRICE THE export was record-breaking, growth of 15.6% relative to MOST PROMISING ROUTE totaling 157,224 tons worth the previous year, totaling The chocolate industry is one roughly $479 million. The 302,665 tons in weight and that is necessarily imports- values for 2011, 2010, and Six companies are $881.62 million by value. dependent by the nature of 2009 were $434 mil- responsible for an its chief raw material, cocoa. lion, $364.4 million, and estimated 45% of TURQUALITY PROGRAM IGNITES As Turkey’s chocolate exports $0.33 million respectively. global chocolate COMPETITION increase, so do its cocoa Chocolate exports are grow- production. Multinational giants domi- imports. In 2012, chocolate-

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related imports totaled Investment pools $364 million, for example. will be established The new incentive system is aimed partly at reducing in Turkey with the dependence on intermediate 157 303 aim of reducing THOUSAND TONS 478.7MILLION USD THOUSAND TONS goods by helping to establish TURKEY’S CHOCOLATE VALUE OF TURKEY’S TURKEY’S CHOCOLATE dependency investment pools. Turkish EXPORT IN 2012 CHOCOLATE EXPORT AND CONFECTIONERY IN 2012 EXPORT IN 2012 on imported companies measure up to their global rivals in quality, intermediate but they must focus more goods. on price competition, says Elvan Gda Board Chairman 15.6 68 45 Hidayet Kadiroþlu. “The fact GROWTH IN CHOCOLATE NO. OF CHOCOLATE JUST SIX COMPANIES that products which enhance AND CONFECTIONARY AND CONFECTIONERY ACCOUNT FOR 45% OF EXPORTS COMPARED TO FACTORIES IN WORLDWIDE CHOCOLATE chocolate, such as hazelnuts THE PREVIOUS YEAR KANDIRA PRODUCTION. and pistachios, are produced in Turkey is to our advantage, but high sugar costs pose a challenge to producers,” he continues, “Our aim is to says. increase value by weight by at least 50 percent through FOOD INDUSTRY ZONE TO BE ES- innovative value-added TABLISHED IN KOCAELI PROVINCE products. Therefore, by In Kocaeli Province, located way of innovative products, in the Marmara region, the even if our export volume Kandra Food-Specialized remains the same, our Organized Industrial income and revenue would Zone—the orst of its kind multiply with the increase in Turkey—is being estab- in value added.” lished with the purpose of increasing the domestic in- TURKEY’S CHOCOLATE EXPORTS BY DESTINATION dustry’s ability to compete COUNTRY globally, under the leader- BILLION USD ship of Hidayet Kadiroþlu. IRAQ The aggregation of food 98.812 producers in one place enables pricing beneots to LIBYA 34.003 exporter companies in orga- ALGERIA nized industrial zones. This ZEKERİYA METE HİDAYET KADİROĞLU 28.563 industrial zone, which is ex- Chairman, Istanbul Cereals, Pulses, Board Chairman, Elvan Gída SAUDI pected to enter operation in and Oil-Bearing Seeds and Products ARABIA Exporters’ Association 20.193 2015, is planned to host 68 We are currently engaged in setting up the Kandra Food- chocolate and confectionery With the Turquality program, UAE Specialized Organized Industrial 18.924 we are creating Turkish brands factories, and it will double Zone. We, as the Elvan Group, that compete with our own as a convention space for established the orst R&D YEMEN brands in the global arena. Our 17.319 center here in the confectionery welcoming groups of buy- exports in the chocolate and industry. The Evaluation and ers. Another matter Turkey confectionery industry grew by EGYPT Oversight Commission of the 14.273 around 10% in 2012 relative to must focus on in order Ministry of Science, Industry, the previous year, and I expect to remain competitive in and Technology saw it ot to AZERBAIJAN an increase of around 10% to 13.173 chocolate and confectionery grant our company ofocial R&D 15% in 2013. The high capacity center documentation. Turkey is the value-add supplied for developing new products, TAJIKISTAN has reached world-class levels 12.038 by innovation, according to the availability of pexible in chocolate production. That production in the industry, the Kadiroþlu. “If the confec- the local industry, which was an spread of distribution channels, ISRAEL 11.834 tionery industry’s 2023 importer until not too long ago, and proximity to Russia, the exports nearly $1 billion worth target is 13.7 billion dollars, EU, the CIS, and the Middle TURKMENISTAN of chocolate to the whole world 9.591 this must be achieved not Eastern market can be listed is proof of this. Elvan Group is as our main advantages in the TOTAL only by increased volume now working to increase current (INC. OTHERS) competition. 9.591 but also through increased revenues of roughly $150 million value added,” he says, and to $1 billion by 2023. 26

AVIATION Europe’s Best Scores a Hat Trick With higher service quality and a larger ×eet every year, Turkish Airlines once again obtained Skytrax’s title for Best Airline in Europe, winning for the third year in a row.

ITH A CONSTANTLY W expanding peet and pight network, Turkish Airlines is the airline that pies to the most countries in the world—103 today, to be exact. Skytrax, a highly respected institution in aviation for its “Flying Chef” service, which by 24% over the same period research in the oeld, named is offered to Business Class in 2012, with this number Turkish Airlines “Best Airline passengers on long-haul rising from 21.6 million to in Europe” at an award Turkish Airlines pights, an 26.9 million. This laudable ceremony held at the Paris Air attribute that distinguishes increase is a quantitative Show. This is Turkish Airlines’ it from its rivals in the in- manifestation of the effects third time winning this prize. dustry. This unique practice of high-quality service and Turkish Airlines, which joined brought Turkish Airlines professional aviation prac- Star Alliance—considered the world award for “Best tices. Domestically, passenger the world’s largest airline alli- Business Class Catering” at numbers increased by 22%; ance—in 2008, increased not the Paris Air Show. As the internationally, this ogure only its prootability but also 21.6 results of passenger praise, rose by an impressive 26%. A its service quality, having also million these awards also served closer look at the growth in earned the sole four-star dis- TOTAL PASSENGERS IN to certify Turkish Airlines’ international routes reveals a tinction among all European JANUARY–JULY 2012 near-universal acclaim. These 16% increase in the num- airlines in last year’s Skytrax achievements directly inpu- ber of passengers choosing evaluation, which was based enced the company’s results to py Business or Comfort on feedback from 18.8 million 26.9 over the orst six months of Class, again compared to passengers. 2013, too. the orst six months of 2012. Another success to mention million Turkish Airlines continues This growth is connected to TOTAL PASSENGERS IN is that of Turkish DO&CO, JANUARY–JULY 2013 to expand its capacity with overall increases in tour- founded as a joint venture the investments it makes and ism indicators—very much between Turkish Airlines and its growth rate. The most like Turkish Airlines with DO&CO in 2007. Today, it recent ogures indicate that its admirable results for the provides catering services 24% Turkish Airlines increased its orst half of the year, Turkey’s to around 60 airlines. The INCREASE IN PASSENGERS total number of passengers tourism industry exhibited company is renowned for its carried in January–July 2013 28.4% growth relative to the The Turkish Perspective 27

Domestically, passenger numbers increased by 22%; internationally, this ogure rose by an impressive 26%.

two countries are still rather unfamiliar. A memorandum of goodwill expected to play a large role in addressing precisely this unfamiliarity was signed by Turkish Airlines and Argentina’s Ministry of Tourism. According to the agreement, the ministry will feature Turkish Airlines and Turkey in its promotional activities. Turkish Airlines, for its part, will feature Argentina in its in-pight media. Regard- ing the issue of direct pights, Temel Kotil, PhD, President and CEO of Turkish Airlines recently announced that direct pights between the two countries would be launched within two years. Naturally, this development will bolster Turkish exporters’ mobil- ity in the South American markets. Touristically, the countries are starting to grow same period the year before. closer. Tourists from Turkey Tourism income exceeded are showing more and more $13 billion at the end of the interest in Argentina—En- orst six months of the year, rique Meyer, Argentina’s bolstering expectations for Minister of Tourism and the coming six months. The President of the National increase in passenger numbers Institute of Tourism Promo- also parallels the expansion of tion (INPROTUR), stated the pight network. In Janu- that the number of visitors ary–July 2012, destinations from Turkey increased by 9% numbered 199; by the end of and pights between Turkey the corresponding period in and Argentina increased by 2013, this ogure was brought 25%, demonstrating this to 237. germinating closeness in nu- As it runs constant pights meric terms. In a similar vein, to 237 locations worldwide, always steadfast in its mission Turkish Airlines continues trade between one another Turkish Airlines to expand and improve, to expand its pight network every year. Though Turkey was chosen “Best Turkish Airlines provides through new contracts. The exports tobacco, olive oil, and Airline in Europe” by connecting pights via Singa- constant growth in Turkey’s refrigerators to Argentina Skytrax for the third pore to passengers traveling exports also exhibits clear (among other items), the vol- to destinations not covered by parallelism with Turkish ume of trade can grow much consecutive time. its pight network in Australia, Airlines’ success. Turkey more. The challenge Turkish Currently, Turkish New Zealand, and East Asia and Argentina, for example, businesspeople face in ond- Airlines is the only through a private partner- despite being geographically ing direct pights to Argentina airline in the world ship agreement it signed with distant, are seeing continual plays a signiocant role in this, that ×ies to 10, the Australian airline Jetstar progress in the international but the main factor is the countries. Airways. 28 Briefing

INVESTMENT A SEASON OF OPPORTUNITIES IN TURKEY: PRIORITY SECTORS FOR INVESTORS A booming economy with an increasingly global influence, Turkey presents international companies a multitude of investment opportunities in a variety of sectors.

HE GLOBAL ECONOMY crucial to the country’s other T is undergoing a profound strategically important sectors. transformation; the center of More than one third of the the world economy is shifting R&D personnel in Turkey is towards emerging economies working in automotive sector. like Turkey. And Turkey is dif- That is why Turkish govern- ferentiating itself with its rich ment has published an ofocial resources, stable economic automotive sector strategy in growth and liberal economic February 2011 that will shape policies, embracing investors the future of the industry in from around the world. With Turkey. “Increasing Turk- a robustly growing economy ish Automotive Industry’s and a young, dynamic popula- Global Competitiveness and tion, Turkey offers lucrative Transforming the Industry investment opportunities for into a Tech-Intensive, High global investors. This is the Added-Value Establishment” right time to invest in Turkey ments, Turkey’s automotive is designated as the general to seize the opportunities in sector is one of the main pillars objective in the document. the automotive, energy, ma- of the manufacturing industry The certiocate also deones the chinery, mining and tourism and a key driver of growth for actions to ensure the achieve- sectors, as well as in other the country’s thriving economy. ment of this general objective. industries. More than 400,000 people One of the key goals of this are directly or indirectly em- ofocial strategy document is TURKISH AUTOMOTIVE ployed by the industry, making the design and production of a it one of the leading sectors passenger vehicle by complete- INDUSTRY: PROVEN in job creation. Repeating ly local means to be marketed EXCELLENCE IN the same level of success in under a Turkish brand. MANUFACTURING exports, the industry took the The product portfolio of Reaching half a century of lion’s share in the country’s automotive manufacturers in experience as of this year, the export total of USD 153 bil- Turkey covers a range of motor automotive industry in Turkeyy lion last year with three of the vehicles from sedans to heavy has its roots in a modest as- Top 5 exporters being auto trucks. Using the advantages sembly operation set up in thee makers. of its low-cost/highly skilled early 1960s. After Öve decadess In addition to its obvious workforce, dynamic local mar- of continuous progress, Tur- contribution in exports and ket and strategically important key’s auto industry has not employment, the automotive location Turkey has been able only become a production sector is playing a key role in to increase its vehicle produc- base of many well-known Strongong performanceperformanc transferring vital know-how tion from 374,000 in 2002 brands but also a leading de- and high-tech production to over 1,073,000 vehicles in sign and engineering center of the automotive capabilities to the country. 2012. With a Compound An- in its region. industry has made 50 out of 137 R&D centers nual Growth Rate (CAGR) of Creating high added-value Turkey the 16th belong to the companies in 7,92% in production between and employment, along with largest motor vehicle automotive industry. The 2000 and 2012, Turkey out- the contribution to the tax manufacturer in trained labor force it employs performed the its competitors revenues and balance of pay- world. to utilize the technology is in Eastern Europe which has

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a CAGR of 6, 56% in produc- ation the security of supply, Europe after Germany and Energy investments are tion during the same period. we need to ensure that this France. The total amount to prioritized in order to reduce Strong performance of the growth will take place in a sus- be invested in the generation, Turkey’s import dependency industry has made Turkey tainable and environmentally- transmission and distribution and account deocit. The the 16th largest motor vehicle friendly way. For this reason, in order to achieve this target introduction of nuclear power manufacturer in world. very important changes have is estimated to be more than into the generation mix and By the end of 2012 Turkey been made in the market USD 120 billion. Considering utilization of our coal reserves was ranked as the largest structure and legislation, that a signiocant part of the are a vital part of this strategy. light commercial vehicle particularly in the last decade, required investment is going Utilization of our renewable producer of Europe. Turkey’s in order to create a liberal and to be made through equity energy sources is also crucial strength in the auto industry competitive energy market capital, Turkey’s integration to ensure supply security. Our has been built on its robust and to attract international into the global power sector aim is to increase the share of domestic demand, which has investors to the country. The and arrival of international in- renewable energy resources in attracted new investments into electricity demand of Turkey vestors in the Turkish market power generation to 30% in the industry by major inter- -- a country which achieved are of vital importance. ISPAT 2023. Developments such as national auto manufacturers. the highest growth rate in works with the international the ongoing privatization pro- Boosted by the country’s new 2011 after China, is growing at investors who wish to extend gram and the establishment incentive scheme, car makers a higher pace than the GDP. and enlarge their investment of an energy stock exchange with manufacturing opera- The electricity consumption portfolio, contributing to in line with Turkey’s vision of tions in Turkey are pressing in 2012 increased by 7% year- this growth by clearing the becoming a trading hub also ahead with their investment on-year, while an increase of way for realization of such create a diverse market, where plans totaling TRY 5 billion around 5.5% is expected for investments. the prevalence of the private (Approx. USD 2.58 billion) to 2013. While such a growth sector increases, and offer be realized throughout 2013. rate has been realized in the investors vital opportunities. In parallel with the country’s sector, the shares and roles of strong economic performance independent power producers in the last decade, car sales (IPP) in the market are also TURKISH MINING have also risen. Between increasing. The share of the INDUSTRY 2003 and 2012, the Turkish private sector in power gen- The mining sector provides automotive market grew on eration during the last decade the necessary raw materials average by 12% (CAGR). doubled to reach 60%. to industries such as auto- In 2012 vehicle sales With a current installed motive, construction and reached 837,000 units, power capacity of 60,280 manufacturing which are the earning the country the rank MW, Turkey ranks sixth in With a current backbones of our economic of 5th largest automotive Europe. Once this capacity installed power growth. The mining sec- market as compared with the has been doubled by 2023, capacity of 60,280 tor also contributes to the EU. Despite high sales ogures, Turkey will be the third MW, Turkey ranks development of rural areas the motor vehicle per capita largest electricity market in sixth in Europe. through new investments in rate in Turkey is only 165 per infrastructure and job op- 1000 people which is still well portunities. Although Turkey behind the European average is rich in many minerals, it is of 500. This on the side means still dependent on imports, further opportunities for the particularly in value-added car makers. An increasing minerals such as gold, copper purchasing power backed by and aluminum. Turkey is this low automobile owner- ranked 28th in the world in ship rate will certainly boost terms of total mining produc- the sales of automobiles in the tion, and 10th in terms of the coming years. diversity of mines produced. Only 13 out of the 90 types of TURKISH ENERGY minerals traded throughout the world have not so far been SECTOR explored in Turkey. Turkey The energy sector is of great has sufocient unexploited re- signiocance with regard to sources in terms of 50 types of achieving Turkey’s goal of minerals out of 90; therefore becoming one of the top ten it is thirsty for the unearthing economies in the world by and processing of its own min- 2023. Taking into consider- eral reserves. 30 Briefing

Exploration activities can be The Turkish machinery divided into governmental and sector has been set sig- private operations. The govern- niÖcant export targets in line mental exploration activities with Turkey’s 2023 vision are carried out by the General for its centennial year. It Directorate of Mineral Re- is expected to grow 17.8% search and Exploration (MTA) CAGR until 2023 in order under the auspices of the Min- to reach USD 100 billion of istry of Energy and Natural exports and 2.3% share of Resources. Meanwhile, private the global market. The share companies are also intensify- of the machinery sector in ing their exploration activities. Turkish exports is targeted In addition to several reforms to increase from 9% to 18% made for the enhancement of until this date. the investment environment in Turkey over the past decade, the machinery sector produces TURKISH TOURISM the government has recently intermediate goods, providing amended the country’s mining inputs to other key sectors such INDUSTRY regulations in order to facilitate as construction, energy, tex- Established in 1923, the the operations of national and tiles, agriculture and mining. It young and dynamic country international companies. The therefore plays a crucial role in is now getting ready to cel- exploration period in Turkey the development of the Turkish ebrate its 100th year anni- is currently 7 years, and after manufacturing industry. versary in 2023. The current this, the mining activities can Machinery is Turkey’s Turkish government has laid begin following the issuance third largest export sector; out a set of goals for all social of an operational permit. The with USD 12 billion worth and economic features of the process to obtain an op- of exports, it constituted 9% country for further progress. eration license and permit is of Turkey’s total exports in For the tourism industry, fairly structured and can take 2012. However, the grow- the Ministry of Culture from 3 months to one year. ing domestic demand has and Tourism of Turkey set Furthermore, the government resulted in a negative trade out ambitious goals such has recently launched a new balance despite the strength as attracting more than 60 incentives regime that contains of the local manufacturing million tourists and increas- generous privileges for inves- industry, with USD 26 bil- Turkey is currently ing the country’s tourism tors in the mining sector. IS- lion imported in 2012. Both the 6th most revenues by 2023. PAT has set mining as a high the local production capacity popular tourist Turkey is currently the priority sector and has been and the trade volume of the destination in the 6th most popular tourist working to attract further sector have been increasing, in destination in the world, FDI to the exploration and parallel with Turkey’s overall world, attracting attracting more than 30 exploitation of the existing, as economic growth. more than 30 million tourists each year well as undiscovered, reserves The growth of the sector has million tourists in recent years. The Turkish in Turkey. Thanks to investor also been aided by the struc- tourism industry possesses a interest and the efforts of the ture of domestic machinery each year in recent wide variety of features, such governmental and bureau- production. Since the sector years. as historic attractions like cratic bodies, we have observed is comprised mainly of small a robust increase in drilling and medium businesses, it has operations. In 2012, public great pexibility in respond- and private ventures drilled ing to technological progress 1.5 million meters -- 15 times and changing demand. This that in 2002. feature of the industry has also enabled it to become strongly competitive in customized and TURKISH MACHINERY made-to-order industrial ma- INDUSTRY chines. The industry’s capacity As with all developing econo- for innovation is continually mies, the machinery sector being strengthened with the carries a strategic importance added impact of R&D and for the Turkish economy. This strategic incentives from the is primarily due to the fact that government.

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archeological sites, museums and sacred religious Istanbul stands out as a dynamic and grounds, summer vacation reliable onancial center connected to major tourism with its breathtak- regional economies ing coastlines along the through trade and Aegean and Mediterranean investment. rich with long sandy beaches and virgin bays untouched by any artiocial impacts. In addition to its natural and historical resources, the Turkish tourism industry has been supported by re- formist government policies supporting diversiÖcation of its tourism assets. These policies include constructing large convention and expo centers to boost conventional tourism, eliminating almost all bureaucratic procedures for admittance of foreign patients to receive treatment in Turkish hospitals in order to tap its potential in health tourism, and offering incen- INVESTMENT tives for tourism infrastructure investments both locally and internationally. Road to 2023: Turkey’s tourism industry has a highly qualioed and trained workforce graduating from 190 vocational high CENTENNIAL CELEBRATION schools of tourism and 200 universities with tourism and travel management services FOR THE FOUNDATION OF THE departments. The tourism industry employs almost 2.5 million people in Turkey and REPUBLIC OF TURKEY is the second largest labor market after public sector. Turkey sets grandiose targets to be achieved by 2023 and This abundant availability of ISPAT is working to increase foreign participation in skilled labor for the industry investment projects in Turkey. is the backbone and the most important enabler of the HE WORLD ECONOMY the emerging economies, like industry to reach its ambi- T is undergoing a pro- Turkey, are offering an attrac- tious goals. found transformation, as it is tive business environment for The end result of being engulfed in the worst global global investors with an im- a wisely managed indus- economic crisis since the ‘30s. pressive and robust economic try, possessing abundant In these troubling times, the Turkey is offering performance vis-à-vis their natural resources and rich world’s economic center of an attractive counterparts in the developed and diverse historic heritage, gravity is gradually shifting business world. As a result of such pro- driven by large body of well- toward the emerging nations environment found changes, the onancial trained skilled labor force which are assuming a more actors of the global economy and continuing momentum prominent role in the world. for global are also restructuring and of growth gained in the last While majority of advanced investors with an redeoning their policies and decade, will no doubt carry economies are faltering and impressive and strategies accordingly. They the Turkish tourism industry unable to recover from the robust economic are looking for safe havens to its full potential. recent global onancial crisis, performance. where they can reduce onan- 32 Briefing

cial risks and avert economic the efocient running of the Istanbul’s embedded ad- the related institutions and hardships. In this vein, Istan- business operations in the vantages are supported by organizations to speed up the bul stands out as a dynamic region. For example, the city a favorable tax regime and process which will pave the and reliable onancial center has almost equal time dif- a strong Önancial regula- way for Istanbul to become a connected to major regional ferences to Tokyo and New tory and supervisory system onancial center. economies through trade and York while the time difference which has been tested in investment. between these two centers is the recent global Önancial MAJOR INFRASTRUCTURE fourteen hours. This practi- crisis as Turkey was the only PROJECT TARGETS FOR ISTANBUL FINANCIAL cal advantage matters a lot OECD country which did for companies whose area of not have to introduce any 2023 CENTER PROJECT operations stretch between Önancial rescue packages in Following the landslide victory The Turkish policy-makers continents. As a matter of order to mitigate the nega- in the last general parliamen- have realized the changing fact, multinational companies tive impact of the crisis. tary elections in June 2011, the economic environment in are already taking advantage Similarly, not even a single Justice and Development Party the world and launched the of the strategic location of bank had to be bailed out (Adalet ve Kalknma Partisi or Istanbul Financial Center Istanbul by relocating their while onancial institutions AK Parti) brought about a new project which aims to develop regional headquarters to and banks in the devel- vision for the year 2023 which Istanbul into an international Istanbul. For instance, GE oped countries were going is the centennial celebration for the foundation of the Republic of Turkey. Specioc targets have been set to achieve by 2023. These targets span from health to economy, from defense to education. Turkey targets to be one of the top 10 economies in the world with a GDP of USD 2 trillion, to increase its exports to USD 500 billion, to upgrade country’s energy, transportation and healthcare infrastructure, such as building hospital cities, more than doubling its installed power and building new bridges on Istanbul and Dardanelles straits. Among the major specioc targets set to be achieved by onancial center. As the Invest- Third Bosphorus Bridge, the world’s ninth 2023 are the third bridge ment Support and Promotion longest suspension bridge, will be constructed over the Bosphorus, a more Agency of Turkey (ISPAT), at the northern end of the Bosphorus. capacious new airport in we are well aware of Istanbul’s Istanbul Airport and various potential and the advantages highway projects. it offers as a global onancial Third Bosphorus Bridge, center. Its local economy, the world’s ninth longest skilled labor force and ad- Healthcare moved its regional bankrupt one by one, forcing suspension bridge, will be vanced technological infra- headquarters from London governments to intervene a constructed at the north- structure make Istanbul one to Istanbul to manage its avert more disastrous results. ern end of the Bosphorus. of the most attractive loca- operations in 80 countries in Promoting Istanbul as a The bridge will be situated tions in the world. Adding to four major regions - Central Önancial center is one of the between Garipçe in Saryer these advantages is the unique Asia, the Middle East, Russia key objectives of ISPAT, as it on the European side and strategic location of Istanbul and Africa. Similarly, both will certainly boost in×ows Poyrazköy in Beykoz on the which is situated at one of the Coca Cola and Microsoft have of FDI into Turkey. Appoint- Asian side. The bridge is part epicenters of the commercial their regional headquarters ed as the Head of the Promo- of the projected 260 km- and onancial crossroads in in Istanbul, managing almost tion and Image Committee in long “Northern Marmara the world. Providing a perfect a hundred countries from the organizational structure Motorway” which will bypass location for a regional head- Turkey. Istanbul is not only a of the Istanbul Finance urban areas of Istanbul quarters of a multinational place to do business but also a Center project, the Agency is in the north connecting company, Istanbul facilitates fascinating place to live. vigorously working with all Knal, Silivri in the west and

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Paûaköy, Hendek in the east. Some of the 2023 highway world. The country ranked as Real Estate Europe 2013, a The bridge will be construct- projects are Istanbul-Izmir the 3rd most attractive real sector report prepared by ed by a consortium of Turk- Highway (421 km), Northern estate investment destina- PricewaterhouseCoopers ish Içtaû and Italian Astaldi Marmara Highway (414 tion among the emerging (PwC) and Urban Land In- and will be opened in 2015. km), Sabuncubeli Tunnel (4 countries in 2012, according stitute (ULI), ranks Istanbul The new bridge designed by km), Ankara-Niúde Highway to a survey conducted by as the most attractive real French and Swiss engineers (342 km), Ankara-Kíríkkale- the Association of Foreign estate market with regard will have eight road lanes as Delice-Samsun Highway Investors in Real Estate to “Development Prospects” well as two rail tracks. The (330 km) and Ankara-Izmir (AFIRE). Similarly, according based on the city’s exciting third bridge is expected to be Highway (535 km). to another report (“European real estate potential. With about 1.4 kilometers in main Part of Turkey’s gran- Real Estate Assets Invest- its status boosted by Turkey’s span length and 59 meters diose targets for 2023 is ment Trend Indicator 2013”, robust economic growth and in width. When the bridge urban renewal. Turkey’s prepared by Ernst & Young), young population, Istanbul is completed, all trucks and urban infrastructure is in Turkey ranks as the second also takes advantage of its heavy vehicle trafoc will be dire need of redevelopment. most attractive market in transformation into a regional directed to it. The restructuring process Europe for real estate inves- onancial center and the coun- The New Istanbul Airport, in the cities requires slum tors. Today, Istanbul is one try’s relaxed property laws the city’s third international houses being demolished and of the most attractive real which allow foreign property airport, will be the world’s replaced by quality housing. estate investment destina- ownership to attract inter- largest airport with 150 mil- Turkey is also an earthquake- tions. Emerging Trends in national property investors. lion passenger capacity per prone country; therefore the The report by PwC and ULI year. The project will be con- government is committed also ranks Istanbul as the structed at the intersection of to build strong earthquake- second attractive real estate junction roads of Arnavutköy, resistant buildings across the market in “New Property Göktürk and Çatalca, north country. According to recent Acquisitions” and the fourth of European side of Istanbul. studies, USD 400 billion largest real estate market The Cengiz-Kolin-Limak-Ma- investment is needed for in the “Existing Property pa-Kalyon consortium, a joint the urban renewal projects Performance”. venture of Turkish companies in Turkey. Around 7 million As ISPAT we attach great will start the construction in out Turkey’s total 20 mil- importance to increasing for- 2017. First stage construction lion residential buildings eign participation in Turkey’s is scheduled to be completed will be replaced with new infrastructure development. within 42 months after land buildings that will be able to To this end, we are organiz- allocation. withstand earthquakes. The As ISPAT we attach ing overseas roadshows, the urban renewal project will great importance to latest of which was held in ROAD CONSTRUCTIONS make Turkey’s real estate increasing foreign London, to brief potential sector even more attractive. investors on the investment HAVE VITAL ROLE IN participation in TURKEY’S ECONOMIC Turkey has already been one opportunities presented by of the most attractive real Turkey’s infrastruc- Turkey’s large scale infra- DEVELOPMENT estate destinations in the ture development. structure projects. The Turkish Government gives priority to multi-lane roads. Turkey constructed nearly 15.000 km of multi-lane roads in 2002-2011 period. Today, Turkey’s multi-lane road network is about 21.000 km and the plan is to increase to 36.500 km as of 2023. As for the highways, Turkey have 12 Built-Operate-Transfer (BOT) highway projects with total cost of 47 billion dollars to be completed by 2023 and with total cost of 84 billion dollars to be completed till 2035. The current 2,236 km highways will be extended to approximately 7,786 km by 2023. 34 Cover / Attraction

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ATTRACTION Through stable politics and successfully implemented economic policies, Turkey has become a star in its region. This success draws in×ows of money and investors to Turkey.

BY CAN GÜRSU BY SEDAT GİRGİN

urkey, which delivered an excellent performance in a time of crisis in the international markets and which is regarded by investors T as a “safe harbor,” onally received the grade it deserved—according to many experts—when Fitch increased its credit score from BB to BBB- (which is investment grade). Other credit rating agencies followed suit, showing that this decision was no puke. In May 2012, Moody’s raised Turkey’s long-term foreign currency credit rating from Ba1 to Baa3. Also that month, JCR, the Japanese Credit Rating Agency, revised its rating of Turkey upwardly by two points to BBB-, or investment grade. These events drew a lot of attention to Turkey. The reforms enacted in Turkey in recent years played a large role in the current status of the economy as one that is powerful regionally and globally. Since 2001, the country has seen great transformations both politically and economically. The steady progress exhibited by Turkey in its bid for EU membership resulted in increased attention from both Europe and the rest of the world, and Turkey’s economy entered a period of sustained growth. 36 Cover / Attraction

CZECH REP. NETHERLANDS 2.9 OECD ECONOMIC OUTLOOK 1.7 DENMARK 2.5 AVERAGE ANNUAL REAL GDP GROWTH 1.3 (%) 2002-2012 GERMANY NORWAY AVERAGE ANNUAL REAL GDP GROWTH 1.7 3.6 (%) FORECAST IN OECD 2012-2017 ICELAND 2.3 UK

BELGIUM 1.9 CANADA 1.8 2.3 IRELAND SWITZERLAND 2.6 2.1

USA 1.6 FRANCE 2.7 2.2 PORTUGAL ITALY MEXICO 1.0 SLOVENIA 0.9 2.5 1.7 3.5 SPAIN GREECE 2.3 5.2 IS Between 2002 and 2012, Turkey was consistently ranked among the world’s 2 fastest-growing economies. In 2011, Turkey was the third-fastest growing G20 country. Over the past decade, NUMBER OF its economy grew by 5% on average FOREIGN COMPANIES annually, leaving Europe and many of the world’s developed countries in the (×1,000) dust. The OECD’s 91st general outlook 2012 33.1 report on the country stated that Turkey 2011 29.1 is expected to continue this performance BRAZIL 25.5 with 5.2% annual growth until 2017. 3.6 2010 Should Turkey be able to accomplish 2009 23.7 this, it would be the fastest-growing 2008 21 country in the OECD and Europe. The 2007 18.7 young and dynamic Turkish population has a signiocant inpuence in this 2006 15 spectacular performance. 2005 11.7 With a population of 76 million, 2004 8.8 most of which is young, Turkey is one CHILE of Europe’s most populous countries, 2003 6.7 and it is growing at a rate of around one 4.8 2002 5.6 million people per year. Roughly half the population is under the age of 30, giving it the youngest population in Europe. What this young population means for Data: Central Bank of the Turkey is a high-potential domestic Republic of Turkey and the market and a skilled workforce. Ministry of Economy

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 37

SWEDEN TURKISH DEMOGRAPHICS 2.6 Turkey has one of the youngest population in Europe. 90+ FEMALE MALE FINLAND 85-89 75-79 2.1 70-74 65-69 60-64 55-59 POLAND SLOVAKIA 50-54 ESTONIA 45-49 4.3 3.3 40-44 35-39 3.3 3.1 30-34 25-29 HUNGARY 20-24 ROMANIA 15-19 AUSTRIA 1.1 10-14 3.3 5-9 1.8 2.2 0-4 BULGARIA %311355 42024 3.5 Data: UN and TURKSTAT TURKEY JAPAN 5.0 0.8 5.2 1.2

KOREA SRAEL 3.4 2.8

AUSTRALIA FDI INFLOWS AND 3.6 S. AFRICA INVESTMENTS 3.5 $12.4 $2.5 $4.1 BILLION BILLION BILLION EURO ZONE OECD FDI DRAWN BY TURKEY’S FOREIGN TURKEY’S FOREIGN (17) N. ZEALAND TURKEY IN 2012 INVESTMENTS IN 2011 INVESTMENTS IN 2012 2.4 1.0 2.5 Data: UNCTAD 2013 38 Cover / Attraction

ZAFER ÇAĞLAYAN Minister of Economy

On June 19, 2012, we put into force our new investment incentive system, which we Its high-potential domestic market improving the investment climate, and put together to contribute to aside, Turkey, by virtue of its geostrate- it is recognized as a public sector–private fundamental policies such gic position, has the means to reach a as increased integration, the sector collaboration success story by in- facilitation of local production market of up to 1.5 billion people, a GDP ternational economic authorities. Today, of intermediary goods and raw of $25 trillion, and a trade volume of establishing a company in Turkey takes materials that are currently $8 trillion. As a bridge between Europe just six days. import dependent, and and Asia, Turkey is close not only to With the conveniences it provides in shifting from labor-intensive technology to information- developed countries but also to several establishing businesses and the advan- heavy technology, and to countries that are undergoing rebuilding, tages it offers to international investors, satisfy the requests that come such as Iraq and Egypt. In Turkey, which Turkey gained a reputation as an alluring from the real sector, which is offers countless opportunities to inves- safe and alluring harbor. “Over the last responsible for a signiocant tors, 200 out of the Forbes 500 compa- ten years, Turkey has shown a consistent portion of investment and manufacturing in our country. nies are active locally, and market leaders track record in attracting increasing Investment incentives create including Coca-Cola, Ford, Microsoft, signiocant cost advantages IBM, GE, and Novartis continue to for investing whether through prefer Turkey as a regional hub for both their regional and industry- based coverage or the elements manufacturing and management. of support provided during The Turkish government is providing the start of investment, signiocant levels of support to global KIRKLARELİ sometimes extending to the companies that decide to move their re- EDİRNE BART operational period of the İSTANBUL gional headquarters to Turkey. Thanks to ZONGULDAK investment. That support TEKİRDAĞ a a recent amendment in legislation con- KARA bound for less-developed KOCAELİ YALOVA DÜZCE regions has risen to notable cerning foreign direct investment, for- SAKARYA ogures increases the possibility eign companies can now establish their BOLU that incentives could directly ÇANAKKALE regional management centers in Turkey BURSA BİLECİK inpuence decisions to invest. under a liaison ofoce structure without BALIKESİR Additionally, investment ESKİŞEHİR ANKA projects examined and paying corporate tax, VAT, personal KÜTAHYA approved by our ministry income, or stamp duty. Reforms and new are subject to positive legislation have signiocantly improved discrimination in credit MANİSA AFYON the investing climate in Turkey. A UŞAK availability and customs İZMİR operations. new foreign direct investment bill was KONYA introduced in 2003, providing foreign AYDIN ISPARTA investors with legal guarantees ensur- DENİZLİ BURDUR ing equal treatment with local investors. MUĞLA

Later, the government established the ANTALYA Coordination Council for the Improve- ment of the Investment Environment, which has since proved crucial. The body acts as a forum where private sector can make contributions to the process of Data: “Investment Guide,” Invest in Turkey, accessed November 20, 2012.

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 39

amounts of international direct investments,” says YASED Chairwoman Serpil Timuray. She adds, “The cumulative BENEFITS OF FDI stock of Turkey increased tenfold to INCENTIVES 180 billion dollars in 2012, up from 18 billion dollars in 2002, and the number of companies with international capital surpassed 30,000 in 2012, up from 343% 10,000 in 2005.” Turkey aims to have INVESTMENT GROWTH RATE IN one of the world’s ten largest economies REGION 6 OVER ONE YEAR by 2023, and for this it plans to build on the successful performance it has shown in recent years. Zafer Çaþlayan, Turkey’s Minister 91% of Economy, says, “One of the most JOB CREATION FORECAST FOR important purposes of the investment MEHMET BÜYÜKEKŞİ REGION 6 OVER ONE YEAR incentives practiced in our country is to President of TIM contribute to a reduction in the develop- We as Turkish Exporters mental differences between the country’s Assembly have deoned three regions.” This principle, as emphasized main growth platforms in by the minister, is what guides the state order to reach our 2023 62% Strategic Goals to deliver USD in applying a regionally and categorically INVESTMENT GROWTH RATE IN 500 billion of exports. Those REGION 5 OVER ONE YEAR selective incentive program, one that are; takes into account the region in which an v Focusing on competitiveness investment will take place and exhibits and organic growth at all variance in the level and duration of the 26 sectors of goods export support provided. and diversiocation of export markets, 124% Reports published by the Ministry JOB CREATION FORECAST FOR of Economy show that the number of v Investments in branding, REGION 5 OVER ONE YEAR R&D, innovation and design, approved incentive applications grew v Attracting FDI for the aim of by 22% from 3,959 to 4,840 from June increasing exports. 2012 to June 2013, relative to the cor- The third pillar is very crucial for us to expand our overall competitiveness. Turkey is aiming to improve its REGIONAL CLASSIFICATION IN TURKEY’S investment climate by each day to pull more and more INVESTMENT INCENTIVE SCHEME advanced investments into the country to leverage the competitive power of TIN KASTAMONU SİNOP ARTVİN ARDAHAN companies delivering best-in- ABÜK SAMSUN RİZE class products and solutions. ORDU TRABZON ÇANKIRI AMASYA GİRESUN KARS ÇORUM GÜMÜŞHANE TOKAT BAYBURT ERZURUM IĞDIR AĞRI KIRIKKALE ERZİNCAN ARA YOZGAT SİVAS TUNCELİ KIRŞEHİR BİNGÖL MUŞ

NEVŞEHİR MALATYA ELAZIĞ BİTLİS VAN KAYSERİ AKSARAY DİYARBAKIR SİİRT NİĞDE KAHRAMANMARAŞ BATMAN ADIYAMAN HAKKARİ ŞIRNAK MARDİN ADANA KARAMAN OSMANİYE GAZİANTEP REGION 1 ŞANLIURFA KİLİS REGION 2 MERSİN REGION 3 HATAY REGION 4 REGION 5 http://www.invest.gov.tr. REGION 6 40 Cover / Attraction

responding period the previous year. The Between 2002 and 2012, Turkey was total oxed investment level grew from TRY 46.8 billion to TRY 76.1 billion, or consistently ranked among the world’s fastest- by 62%. Projected employment rose by 59%, from 111,596 jobs to 177,792. growing economies. In 2011, Turkey was the Çaþlayan stated that the new incentive third fastest-growing G20 country. system introduced on June 20, 2012 has played a crucial role in driving the growing economy and supporting its stability. The statistics show that incentives have increased in every region, and particu- These increases have drawn the atten- thereby attracting the interest of inves- larly in Region 6. tion of investors both local and inter- tors both local and foreign. national. Increases of 77% (from 317 to Region 6 Miracle 562) in incentive applications that were Increased M&A Activity “With respect to the results of the imple- accepted, 207% in forecasted oxed in- Serpil Timuray says, “Despite the nega- mentation of the new incentive system vestment levels (from TRY 2.2 billion to tive impact of the global slowdown in in its orst year, Region 6 was the region TRY 6.8 billion), and 171% in forecasted the global economy and the problems of in which the highest increases in the job creation (from 9,281 to 25,113) were the region Turkey belongs to, Turkey’s number of incentive documents, oxed observed in this period for domestic sustainable economic growth has had a investment, and jobs were observed,” says companies. positive effect on M&A activities.” Zafer Çaþlayan, and he continues, “The For international companies, increases According to Deloitte’s Annual results obtained in this period show that of 225% (from 4 to 13) in incentive ap- Turkish M&A Review 2012, the year international investors, too, are show- plications that were accepted, 117-fold in 2012 saw the highest number of M&A ing increased attention toward the area, forecasted oxed investment levels (from transactions in the country, the result of besides local investors.” TRY 12 million to TRY 1.84 billion), and an admirable economic performance. Relative to the corresponding period in 451% in forecasted job creation (from With the privatizations of 44 2012, the the previous year, the number of incentive 427 to 2,352) were observed in this amount of M&A transactions con- applications accepted in Region 6 from period. ducted in 2012 was the highest ever in June 20, 2012 to June 20, 2013 exhibits The incentive program introduced last the postcrisis period. According to the an increase of 79%—from 321 to 575. year is one of the most comprehensive report, 259 transactions—worth around The level of oxed investment increased incentive programs in the history of the $28 billion—were recorded in 2012. by 269% from TRY 2.2 billion to TRY Republic of Turkey. It has encouraged This corresponds to an 87% increase by 8.3 billion, and job creation increased by companies to attempt new investments, total value over 2011, with 18 additional 183% from 9,708 to 27,465. leading to growth and higher value, and transactions.

THE MINISTRY OF ECONOMY’S FOCAL POINTS OF INVESTMENT FOR THE NEAR FUTURE

MINING RAIL TRANSPORT TESTING CENTERS FOR THE TOURISM IN CULTURE AND PRIVATE-SECTOR PHARMACEUTICALS, ESPECIALLY OF CARGO AND AUTOMOTIVE, AEROSPACE, AND TOURISM PRESERVATION PRESCHOOL, ELEMENTARY, BIOTECH AND ONCOLOGICAL PASSENGERS DEFENSE INDUSTRIES. WIND AND DEVELOPMENT MIDDLE, AND HIGH SCHOOL MEDICINE, AS WELL AS TUNNELS. REGIONS INVESTMENTS HEMATOLOGICAL PRODUCTS

THE DEFENSE INVESTMENTS IN MANUFACTURING INVESTMENTS OF AT LEAST TRY 300 MILLION IN ELECTRICITY INDUSTRY THE PRODUCTS OF R&D PROJECTS THE PRIMARY MOTOR VEHICLE INDUSTRY, TRY 75 GENERATION BY MEANS SUPPORTED BY THE MINISTRY MILLION IN MOTORS, AND TRY 20 MILLION IN PARTS, OF MINERALS LISTED IN OF SCIENCE, INDUSTRY, AND COMPONENTS, TRANSMISSION MECHANISMS, AND THE 4-B GROUP. TECHNOLOGY AUTOMOTIVE ELECTRONICS.

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 41

Elaborating on the matter, Timuray based on the requests of the private sector, said 2012 was a particularly active year indicates the dynamism present in Turkey for private capital fund activities. Private and the seriousness with which it is han- capital funds inpuenced merger and ac- dling the investing climate. The Ministry quisition activity in 2012 via 57 transac- of Economy closely observes all industries tions worth a combined $1.6 billion, an in this context and quickly implements all-time record for Turkey. International the necessary regulatory measures. Echo- funds were mainly interested in the ing this, Minister Zafer Çaþlayan empha- e-commerce, retail, manufacturing, and sizes that the ministry will implement services sectors. International investor any and all measures to clear the path and private capital fund interest—and for investors, based on consideration of thereby M&A activities—is expected private sector requests and developments to continue in 2013. The completion both local and international. of the 2013 privatization program will Considering the signals of a recovery contribute to this process. The interest in the global markets and precrisis data in retail, services, entertainment, manu- from many countries, one could expect SERPİL TİMURAY facturing, food and beverages, onancial the worldwide investing climate to im- Chairman, YASED services, and infrastructure is expected prove within a few years. Should Turkey According to UNCTAD’s “World to continue. be able to sustain the progress it has Investment Report 2013, The fact that three legislative amend- been making, it could easily be consid- carried out in Turkey by YASED, ments have been made since the intro- ered a candidate for one of the world’s Turkey is among the countries duction of the new incentive system, top investment-drawing countries. that attract the highest levels of international direct investment in the world. In 2012, Turkey rose to the rank of 24th, two steps higher than its position the FDI INFLOWS TO NUMBER OF DAYS year before. Turkey ranked 14th TURKEY TO ESTABLISH A among developing countries and orst in the Western Asia region COMPANY in 2012. Looking forward, we FDI PROJECTS believe in Turkey’s potential IN 2012 for rising even higher in these ranks. According to a survey +27.5% TURKEY 6 included in the UNCTAD World Investment Report 2013, Turkey AVERAGE ANNUAL GROWTH RATE UK (2007-12) 13 is the 19th country among the 97 95 GERMANY 15 top prospective host countries for RUSSIA 18 FDI in the 2013-2015 period. In 64 SWITZERLAND 18 parallel to its goal of becoming one of the top ten economies 58 CZECH REP. 40 41 20 in the world, we believe Turkey JAPAN 23 should pursue a goal of entering INDIA 27 the league of the top ten in POLAND 32 international direct investments. This would correspond to a goal CHINA 2007 2008 2009 2010 2011 2012 33 of increasing Turkey’s FDI share from its current 1% to the region Source: Ernst&Young’s EIM, 2013. Source: World Bank Business Reports of 3%. As YASED, we assume a proactive role as a solution partner with all stakeholders, with the aims of establishing the best investment environment by TOTAL VALUE OF TURKEY’S global standards and increasing Turkey’s competitiveness MOST VALUABLE BRANDS as a center of attraction for BILLION USD international direct investment. 35

20 2009 2010 2011 2012 2013 42 In Depth / Exclusive Interview

SEPTEMBER-OCTOBER 2013 ISSUE 18 TheThe TurkishTurkish PerspectivePerspective 43 ON DOING BUSINESS IN TURKEY Turkey has set ambitious goals in a large number of Öelds for 2023. Investment Support and Promotion Agency President ûlker Aycí is conÖdent that the country will emerge as a strong global player. Aycí provided his evaluation of the investing climate in Turkey to The Turkish Perspective.

BY CAN GÜRSU

URKEY ATTRACTS in- global onancial crisis and it now stands vestment from all over the out as one of the most attractive foreign world. Likewise, it invests direct investment (FDI) destinations in many different countries in the world. Secondly, as the advanced itself.T What is your assessment of the economies, which have traditionally been endeavors Turkey has taken on in the main sources of FDI, falter in recovery, the past 2.5 years and the state of its we have shifted our focus toward new investments? sources of FDI in the world in order to The recent global onancial crisis and the diversify these sources. In this regard, ongoing euro zone crisis have had negative emerging economies like China, India, and impacts on the entire world economy, let Russia have been emerging as new sources alone the Turkish economy. In a gloomy of FDI. We have developed new strate- economic environment, global investors gies for each of these countries. Similarly, have had to either cancel or postpone their cash-rich countries—such as oil-rich Gulf investments. However, as the Investment countries—have also become new sources Support and Promotion Agency of Turkey of FDI, and we are proactively working to (ISPAT), we are turning the crisis into an attract FDI from these countries. opportunity—global investors faced with recession in advanced economies are look- Today, there are more than 32,000 foreign ing for safe harbors to anchor in. Emerging companies with active investments in economies, like Turkey, offer safe havens Turkey. The country has attracted around rich with economic opportunities. Turkey $123 billion of FDI over the decade since was one of the fastest-recovering econo- 2003. This is an impressive ogure, as mies since immediately after the recent Turkey attracted only $ 5 billion of FDI in 44 In Depth / Exclusive Interview

the eight decades preceding 2003. More- over, according to projections by international institutions and experts, Turkey is expected to attract around $130 billion of FDI over the next ove years.

The Investment Support and Promo- tion Agency has declared a target of attracting $110 billion in investment bgÖo^r^Zkl'PaZmlhkmh_Z\mbob- ties are you pursuing to reach this target? Turkey has set specioc targets to achieve by 2023 in oelds from health care to the economy and from defense to education. These targets include becoming one of the top ten economies in the world, with a GDP of $2 trillion; increasing exports to $500 billion by value annually; upgrading the country’s energy, transportation, and health care infrastructure through the construction of “hospital cities,” increasing electricity generation by more than double, and building new bridges across the Bosphorus and Dardanelles straits. Also among Turkey’s national targets is transforming Istanbul into an international onancial center. As Turkey implements its structural reforms, it has also been taking various been making important decisions since initiatives in close cooperation with the EVERY YEAR, AROUND 600,000 then. These decisions constitute the top private sector in order to improve the STUDENTS GRADUATE FROM OVER items on the reform agenda of the Coor- investment climate on. One of these dination Council for the Improvement of initiatives is the Coordination Council 170 UNIVERSITIES AND 700,000 the Investment Environment. for the Improvement of the Investment FROM HIGH SCHOOLS. Environment, which is a key structure by Which industries are attracting the which the private sector contributes to most investment? What kinds of the process of improving the investment incentives are offered to interna- climate and which is recognized by inter- tional investors in relation to these national economic authorities as a suc- industries? cess story of the public-private platform. If we look at the stock value of the exist- The council rationalized the regulations provement of the Investment Environ- ing FDI in Turkey, we will see that the on investments in Turkey, developed pol- ment, the government established the manufacturing sector has been the most icies by determining the arrangements Investment Advisory Council, with the attractive sector in Turkey, followed by necessary to enhancing the competitive- participation of senior executives from onancial services, energy, ICT, retail, ness of the investment environment, and prominent multinational companies, in health care, and mining. Further delving generated solutions to the administrative order to address the administrative bar- into manufacturing indicates that food barriers encountered by local and foreign riers to investment, improve the positive and beverages, automotive, electronics, investors in all phases of the invest- image of Turkey as an attractive invest- chemicals, pharmaceuticals, petrochemi- ment process, including the operating ment destination, and provide a global cals, and machinery manufacturing are period. Moreover, the government has perspective to the ongoing investment the main recipients of FDI. taken exceptional measures to provide a climate reform agenda. Since 2004, the There are also numerous investment more business-friendly environment for Investment Advisory Council of Turkey projects through PPP and further op- foreign investors in Turkey. In addition has been meeting under the chairman- portunities in education, energy, defense, to the Coordination Council for the Im- ship of the Prime Minister, and it has health care, transportation, and other

SEPTEMBER-OCTOBER 2013 ISSUE 18 TheThe TurkishTurkish PerspectivePerspective 45

The main objectives of the new incentives scheme include reducing the current account deocit and increasing $2 production and investment for highly import-dependent intermediate goods. TRILLION This means boosting investment support in the least developed regions, improv- Turkey’s GDP target by 2023. ing efociency in industry and logistics, and investing in medium- and high-level technologies to achieve the transfer of technology. The new program comprises four different schemes, namely general incentives, regional incentives, incentives “Development and Investment” category. for large-scale investments, and incen- Istanbul scored the highest in the “Exist- tives for strategic investments. More ing Property Performance,” “New Prop- speciocally, Turkey offers investors value- erty Acquisitions,” and “Development added tax (VAT) exemption and cor- Prospects” categories. Moreover, the porate tax reduction, as well as support government has amended the relevant for social security premiums, interest legislation to allow foreign nationals to payments, and land allocation. This new buy real estate in Turkey in exception to system will contribute to the structural the reciprocity principle, which makes transformation of Turkey’s industries, the oeld even more attractive. particularly through strategic invest- Attracting FDI is a major objective of ments, by encouraging domestic produc- the Turkish government. To this end, the tion of goods that are mainly imported. government has improved the invest- With the new system, the government ment climate through comprehensive has redeoned the regions, decreased the structural reforms and introduced lucra- minimum oxed investment amount for tive investment incentives. Over the past large-scale investments, and introduced public services. Similarly, opportuni- decade, the government implemented a new instrument—incentives for stra- ties are also available in privatization three incentives programs—in 2003, tegic investments, which are intended to projects. While Turkey’s privatization 2006, and 2009 respectively—and an- reduce Turkey’s current account deocit. efforts yielded $49 billion in the last nine nounced the fourth one in April 2012. Under the new system, the govern- years, there are still several more areas to The schemes put into action in the past ment intends to balance the levels of be privatized, such as infrastructure and decade have played an important role in local development nationwide, particu- energy generation (which has been partly drawing investment. Each program was larly focusing on raising investment in privatized). tailored to trends in the global economy the country’s least-developed areas. To Real estate has also been one of the and recent changes in the domestic mar- maximize the impact of the program, the most attractive oelds in Turkey. Turkey ket. The incentives scheme announced in regions were categorized according to ranked as the third most attractive real April 2012 was prepared and improved their levels of development as a balanc- estate investment destination among according to the new conditions, trends, ing mechanism. In preparation for this emerging countries in 2012, according to and requirements of domestic and global region-based approach, the government a survey conducted by the Association of conditions. conducted thorough research to update Foreign Investors in Real Estate. Today, information on each province’s socio- Istanbul is one of the most attractive real economic ranking and grouped them estate investment destinations in the into six categories. This ranking system is world. Istanbul’s rapid rise as a lucrative pexible, too, and it will be constantly up- property investment location has left dated as different areas reach new levels behind the likes of London, Paris, and TURKEY RANKED AS THE THIRD of development. With this new incentives Madrid, with the city emerging as the scheme, the main purpose is to focus on top growth market in Europe’s real estate MOST ATTRACTIVE REAL ESTATE the least-developed regions; therefore, industry. According to a recent survey INVESTMENT DESTINATION incentives for investors in these areas jointly prepared by PricewaterhouseCoo- AMONG EMERGING COUNTRIES beneot from a larger scope of support. pers (PwC) and the Urban Land Institute The new incentives system also gives (ULI), Istanbul ranks at the top of the IN 2012. priority to several specioc industries, 46 In Depth / Exclusive Interview

such as defense, automotive, aerospace Union and it has free trade agreements and aviation, maritime freight/passenger with 22 countries. Not only are there transportation, pharmaceuticals, educa- logistical advantages but there is also tion, tourism, and mining. Investments in a relaxed legal framework enabling these industries are supported by means investors to export to different markets of incentives provided for Region 5, the without customs duty. Moreover, the second-least developed region. As for the legal framework is reinforced by trea- incentives for strategic investments, the ties to prevent double taxation with 79 main goal is to promote and support in- countries and bilateral agreements with vestments in industries with considerable 75 countries for the promotion and trade deocits. By reducing trade deocits in protection of investments. key industries, the government is aiming Education and a skilled labor force at reducing the current account deocit. are also making Turkey more com- It is important to highlight that strategic petitive. Every year, around 600,000 investments are strongly supported in all IF WE LOOK AT THE STOCK students graduate from over 170 regions with identical incentives. VALUE OF THE EXISTING FDI IN universities and 700,000 students from high schools, with around half of the How would you assess Turkey’s in- TURKEY, WE WILL SEE THAT THE latter graduating from vocational and vesting climate in relation to the rest MANUFACTURING SECTOR HAS technical high schools. There are more of the world? What kinds of opportu- than 40 universities in Istanbul, making nities does Turkey present to interna- BEEN THE MOST ATTRACTIVE it the largest concentration of higher tional investors? SECTOR IN TURKEY. education in the region, and they offer Turkey’s strategic location allows investors world-class education and training to to access multiple markets around Turkey, meet the professional and technical which collectively hold a population of 1.5 demands of the business world. billion people and a combined GDP of $25 Multinational companies are trillion; provides investors in Turkey with already taking advantage of Istanbul’s logistics advantages; and provides Turkey strategic location by relocating their with connectivity advantages. Moreover, regional headquarters to Istanbul. For Turkey’s geographical proximity to export instance, GE Healthcare moved its markets is supported by a legal framework regional headquarters from London to through free trade and customs agree- Istanbul to manage its operations in ments—Turkey is part of the EU Customs 80 countries in four major regions—

SEPTEMBER-OCTOBER 2013 ISSUE 18 TheThe TurkishTurkish PerspectivePerspective 47

Central Asia, the Middle East, Russia, reform program in order to improve its also been secured, offering investors a and Africa. Similarly, both Coca-Cola investment climate. A new FDI law was safe haven. Another area is privatization, and Microsoft have their regional head- introduced in 2003, the corporate tax which has minimized the role of govern- quarters in Istanbul, from where they rate was decreased to 20% down from ment in the economy, enhancing the manage operations in 80 countries. 33%, and all bureaucratic hurdles were efociency of the privatized enterprises. removed; the legal framework was thus The government has realized numerous How might the investing climate be reformulated in favor of investment. projects in cooperation with the private affected by the increase of Turkey’s To this end, the government, together sector in order to develop infrastructure. credit rating to “investment wor- with the private sector, established the All these developments, reforms, and thy,” signs that the Fed could end its Coordination Council for the Improve- political commitment to economic de- expansionary monetary policy, and ment of Investment Environment. It is velopment, coupled with Turkey’s young the Turkish lira losing value? an excellent platform for partnership and dynamic domestic market, have put Turkey’s economic fundamentals have between the private and public sectors, Turkey in front of its peers. been strengthened as a result of Turkey’s and it is where stakeholders identify and Turkey has a bright future that political and economic transformation. remove regulatory and administrative promises more investment opportunities. The political stability and sustainable barriers to both foreign and local private This is not just our perception—many economic growth in Turkey paved the investments. As a result, the investment international institutions and experts way for comprehensive structural reforms climate in Turkey has improved dra- have a positive stance on Turkey’s future, that removed bureaucratic hurdles and matically. The reform process has yielded their projections placing Turkey as one streamlined procedures, thus creating results including making Turkey the of the top ten economies in the world. predictability and giving conodence to second-biggest reformer of its restric- More opportunities will come with the global investors. Such a macroeconomic tions on FDI among OECD countries. realization of Turkey’s ambitious targets outlook—recently boosted by rating Political stability since 2002 has made for 2023, the centennial celebration of upgrades—is imperative to attracting Turkey one of the most stable countries the foundation of the Republic. FDI, and global investors are quite aware in the region. Moreover, together with of such positive developments in the political stability, economic stability has Certain East Asian and Persian Gulf Turkish economy. All these developments countries with current surpluses are expected to pave the way for more FDI have lately set their eyes on Turkey inpows to Turkey in 2013 and beyond. for investment. Japan, Hong Kong, and China have especially been What regions in Turkey are inves- showing interest in Turkey, and you tors targeting? Have changes been visited the area in August in connec- h[l^ko^]bgÖ_ma&Zg]lbqma&k^`bhg tion to this interest. What are your investments with the new incentive expectations of these meetings? system? We are working relentlessly in order to An improved investment climate with attract FDI to Turkey. The main pillar lucrative incentives has attracted foreign of our strategy is to make Turkey one investors to all around Turkey. Abundant of top ten FDI destinations by 2023, investment opportunities are available in the centennial of the foundation of the Turkey ranging from real estate, onance, Republic of Turkey. East Asian coun- automotive, ICT, energy, renewable energy, tries will deonitely be part that strategy, and iron and steel to petrochemicals. since most importantly, Japan, Hong Turkey offers tremendous opportunities for Kong, and China are major investors global companies to penetrate the growing in the world. Over the past ove years, markets of the Middle East, North Africa, companies from Japan, Hong Kong, and Central Asia, and the Caucasus. China have been investing $100 billion, $80 billion, and $70 billion respectively. Turkey’s image abroad has changed TURKEY OFFERS TREMENDOUS Secondly, considering the nature of those immensely compared to ten years OPPORTUNITIES FOR GLOBAL economic models, investments from East ago. International investors are Asia will have high value added, since showing high interest in Turkey. In COMPANIES TO PENETRATE THE they are technology intensive and quality a historical context, what are your GROWING MARKETS OF THE MIDDLE oriented. For these reasons, we will fol- thoughts on this transformation? low investors from East Asia closely and Over the past decade, Turkey has em- EAST, NORTH AFRICA, CENTRAL ASIA, do our best to bring them to Turkey for barked on a comprehensive structural AND THE CAUCASUS. investment. 48 In Depth / Energy

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 49

THE REGION’S ENERGY FLOWS THROUGH TURKEY With its growing energy market and its status as an energy transit country, Turkey is a prime choice among investors’ favorite markets.

BY MEHMET ERDOĞAN ELGİN 50 In Depth / Energy

The Akkuyu Nuclear Power Plant, which is to be Turkey’s orst-ever nuclear power plant, will be built and operated by the Russian state corporation Rosatom.

NERGY IS ONE have notable roles in the construction of the essen- and operation of a nuclear power plant tials in our planned for Sinop, which is to be the daily lives. The second nuclear plant in the country. It leading factor is possible to elaborate further on the that determines numerous investments in the Turkish quality of life is energy market made by global energy easy access to companies. There is no end in sight for energy. Not so long ago, through the end these investments, and there are good ofE the 1990s, blackouts were frequent in reasons to expect them to continue. Turkey, negatively affecting residential These reasons are examined below. life and the practice of industry—one of the keystones of the economy—alike. GROWING MARKET AND INCREASING In the early 2000s, signiocant changes DEMAND started to appear in the energy sector, The year 2023 will be the centennial of which was under complete state control the declaration of the Republic of Turkey. until entering a period of liberalization The government and businesses have at that time. set specioc targets for this symbolic year. Especially after 2002, the need for One of the most striking of these targets energy was increasing rapidly in parallel is attaining an annual export volume with the growth of the worth $500 billion. Turkish economy. The Turkey’s current export is liberalization of the ener- ACHIEVING A $500 worth around $150 bil- gy market and increased lion. Sustaining such an energy demand brought BILLION EXPORT operation—at present lev- new investments to the VOLUME WOULD els—requires 240 kilowatt its partnership with Verbund of Austria, agenda, with investors hours of energy per year. citing strategic differences. Today, it is both international and REQUIRE THE The Ministry of Energy sustaining a relationship with the Ger- local scrambling to be ANNUAL ADDITION and Natural Resources man giant E.ON as it strives to achieve part of Turkey’s burgeon- has published an estimate its growth targets in the Turkish market. ing energy market. Ac- OF 500 BILLION that approximately 500 “E.ON also changed strategy in line with cording to data issued by KWH IN ELECTRICITY billion kilowatt hours developments in the European market. the Energy Market Regu- CAPACITY FOR of electricity would be They decided to focus not on Europe latory Authority, TRY 68 needed every year for but on growing markets. The markets million was invested in THAT PURPOSE $500 billion in exports. they selected were Brazil, Turkey, and the energy sector from ALONE, MAKING This is precisely why new India,” says Selahattin Hakman, Energy 2002 through 2010. A power plants must be Group President at Sabanc Holding. vast proportion of these IT NECESSARY TO built over the next decade “We will grow with our partner not only investments were private EXPAND CAPACITY BY to add between three and on the basis of electricity sales but also in sector investments. four gigawatts of capacity generation. We plan to increase our mar- Foreign capital, too, had 3,000–4000 KWH every year. The construc- ket share on the generation side to ten a signiocant inpuence on EVERY YEAR. tion of facilities on such percent. We will increase our generation such investments, with a scale could be achieved to 8,000 megawatts. Besides, with our OMV, E.ON, RWE, CEZ, and many through new investment, especially existing projects, we will have surpassed other international giants investing in foreign-funded energy investments. 5,000 megawatts between 2015 and Turkey’s energy market. The Akkuyu Many multinational companies have 2016.” Nuclear Power Plant, which is to be Tur- entered the market in the recent term. It is very clear that the Turkish energy key’s orst-ever nuclear power plant, will EnerjiSA, one of the chief players in Tur- markets are attracting companies hop- be built and operated by the Russian key’s energy market, includes partnership ing for aggressive growth in new mar- state corporation Rosatom. Meanwhile, with foreign companies in its growth kets. Local investors, too, are increasing Mitsubishi of Japan and Areva of France strategy. The company parted ways in their investments to ensure satisfying

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remain in the energy market. Either the small ones or the big ones will exist in this area. Medium-sized investors don’t have much of a chance on their own.” Having attained a certain size and level of experience, Turkish energy companies are starting to gain inpuence over other countries’ markets. The great transformation of Turkey’s energy sector over the past ten years played a major role in enabling this situation, of course. One of the companies now wielding international inpuence is Zorlu Energy, which has investments in countries including Pakistan and Israel. Zorlu Energy General Manager Sinan Ak says, “As Zorlu Energy, we invest in four different countries, namely Russia, Israel, Pakistan, and Turkey. We decided on these investments beforehand and we had started building them. Now, we have begun reaping the fruits of these investments.” market share gains. Ömer Faruk Özgül, regulatory changes. Today, investors TURKEY AS A STRATEGIC HUB CEO of Özgül Group—one of the are given the highest level of incentives The Anatolian peninsula has been rec- fastest-growing companies in the sec- possible. More importantly, land is be- ognized in politics throughout history tor—says, “I can now say that the regula- ing provided free-of-charge to investor for its strategic position that connects tions that constitute the foundation of companies. In what other country could the continents together. Turkey, the the energy sector have attained maturity. you ond these opportunities"” he asks. current occupant of the land, is an im- It’s all up to investors in the process that He continues, “Mergers will begin in the portant global transit country and a re- is coming next. Until the mid-2000s, coming term. From that point on, small- gional hub. A similar situation exists in investors suffered many regulation-re- scale, marginal investors investing ove relation to the global energy markets— lated predicaments. But the government to ten megawatts’ worth aside, mid-level Turkey serves as a bridge between the has since implemented all the necessary investors won’t have much of a chance to Middle East and Caspian regions, with 52 In Depth / Energy

their vast hydrocarbon resources, and the Western world, the chief consumer of such resources. Important routes in the global energy trade and energy cor- ridors planned for future construction frequently intersect in Turkey, passing through there to Western Europe. For Turkey, such a distinction makes resolving energy supply issues easier. Speaking in May, President Abdullah Gül said, “It is natural for Turkey, which serves as a bridge between countries rich in hydrocarbon resources and the markets consuming them, to function as a signiocant hub in the transmission and marketing of these resources. Our country has accomplished many strategic projects along both the east– west and north–south axes. In the area of operational pipelines, the Kirkuk– Yumurtalk, Baku–Tbilisi–Ceyhan, Blue Stream, and Interconnector Turkey- Greece-Italy pipelines are the projects of foremost importance.” These projects can be expected to multiply in the future. The countries to the east and southeast of Turkey that depend mostly on oil and natural gas for their exports are planning to increase the export of these products together with the markets where they are sold. DUBBED THE “SILK ROAD OF ENERGY,” TURKEY IS PLANS TO ATTAIN AN This suggests the construction of new ANNUAL TRANSMISSION CAPACITY OF 31 BILLION METERS CUBED PER YEAR pipelines, and Turkey is seen as a major BY 2026, AND THIS WILL BRING ABOUT A MORE RELIABLE ENVIRONMENT transit hub in a great deal of such projects. One of the most important of these FOR COMPANIES INVESTING IN ENERGY IN TURKEY, TOO. projects is the Trans-Anatolia Pipeline (TANAO). Russia supplies the majority of the the rest will move on to Europe. Dubbed to Europe, beyond Turkey’s border.” He European demand for natural gas. the “Silk Road of Energy,” Turkey is adds, “Turkey is our partner in the third Dependency on a single country is a plans to attain an annual transmission stage of this process. Turkey could be considerable threat for these European capacity of 31 billion meters cubed per part of the fourth stage as well; it is up to countries. It is therefore necessary for year by 2026, and this will bring about a Turkey to make that decision.” them to secure different sources of natu- more reliable environment for compa- Recently, an important development ral gas. One of these sources lies in the nies investing in energy in Turkey, too. occurred in connection to TANAP’s Caspian Sea, in the Azerbaijan-owned Kenan Yavuz, CEO of Socar Turkey, says, stage leg, which involves what hap- úahdeniz 2 oeld. Transferring this gas to “The TANAP project has four stages. pens after the gas leaves Turkey. The the European market is a job that will The orst is extracting natural gas from úahdeniz 2 consortium selected the be done by TANAP, which is to carry 16 the úahdeniz 2 oeld. The next is to carry Trans-Adriatic Natural Gas Pipeline billion meters cubed of the substance in the gas that emerges to the Turkish Project (TAP) as its project partner the orst stage. Turkey will buy six billion border. The third is transporting the gas to bring the gas to Europe. With meters cubed of this gas for itself, while across Turkey, and the last is to carry it TAP, Azerbaijani natural gas will pass PHOFOGRAPH BY AAPHOFOGRAPH SEPTEMBER-OCTOBER 2013 ISSUE 18 TheThe TurkishTurkish PerspectivePerspective 53

lend an advantage to Turkey in the regional energy game. Other resources that might be discovered in the future could strengthen the hand of the energy administration. The transportation of Iraq’s oil and natural gas over Turkey, through Turkey, Greece, and Albania to for example, could provide a great reach the Adriatic Sea, and from there it advantage. Likewise, the transport will be sent to southern Italy, and onally through Turkey of natural gas from to other European countries from there. Iran, Turkmenistan, or even the eastern This project presents various advantages Mediterranean could make Turkey the to Turkey that could help in becom- most important energy transit and hub ing an important player in energy on country both regionally and globally. a global scale. “Since I entered TAP, I “The most prootable and logical way to have made important contributions to transport Cyprus’s natural gas passes the promotion of this project in Turkey. through Turkey. Likewise, the most TAP will connect Turkey to the Balkans, economical transport route for Israeli with which it already has a historical natural gas is a pipeline that would pass connection. Turkey could have taken an through Cyprus to Turkey, and from active role in this. If they still have the there connect to pipelines leading west- desire, the TAP project will offer this ward,” says Ömer Faruk Özgül. possibility, absolutely. I see no reason Turkey’s energy sector is among the for the Azerbaijan–Turkey collaboration most investment-worthy sectors for to- that began with ANAP not to continue day and the future due to rising demand in the Balkans,” says Cenk Pala, PhD, and its location on energy transit routes. TAP’s representative for Turkey. Foreign and local investors alike are sure Even on its own, this project to carry to continue pocking to the industry in Azerbaijan’s natural gas to Europe could the years ahead. 54 In Depth / Exclusive Interview

Steven Young, Managing Director of Bosch Turkey since 2011, states that they are producing technology for the world.

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BOSCH GOES BEYOND THE NEEDS OF THE TURKISH MARKET Bosch has invested over €100 million and employs more than 300 engineers and staff solely for R&D activity. Bosch’s R&D not only beneÖts the company’s local activities but is also exported from Turkey to Germany.

BY E. MELEK CEVAHİROĞLU ÖMÜR 56 In Depth / Exclusive Interview

UIDING its cant economic reforms—the Turkish 300,00 associ- economy integrated itself with the ates worldwide international economy. Because of this, based on a Turkey has enjoyed a huge inpux in shared way foreign direct investment. Therefore, of thinking, a the Turkish market and the Turkish good grasp of economy, I would say, are clearly in the corporate prin- radar of many multinationals—even ciples, and action-oriented values, which midsize multinationals operating combineG to create the foundation for its worldwide. The domestic demand global success, Bosch enables its workers has been extremely rewarding. The to develop innovative and beneocial growth rate in the past ten years was solutions and products on a daily basis. 5% per annum—by world standards, Steven Young, Managing Director at this is very attractive. I would say that Bosch Turkey, indicates Turkey’s economy is that with the help of among the ove—or their Turkish engineers even three—most and employees, Bosch attractive growing produces technology for economies worldwide. the beneot of the whole This makes it ex- world. tremely attractive for companies to establish What has your ex- SINCE 2001, WE HAVE or expand operations perience in Turkey SEEN SIGNIFICANT here. been like? What Before Turkey, I is different about ECONOMIC worked in Germany Bosch has invested over working in Turkey? and in Australia, where €100 million and employs more than 300 engineers I have had a very excit- REFORMS—THE I started my career. and staff solely for R&D ing time over the past TURKISH ECONOMY Here, you have to activity. 17 years, and the busi- adapt to the external ness developments and INTEGRATED conditions to survive. experiences I witnessed Things happen very we would like to have the best systems in this time were ex- ITSELF WITH THE quickly. You have to in place, many companies still operate tremely satisfying and INTERNATIONAL be on your toes. You with signiocant contributions from the fulolling. We are oper- have to position your individual. However, for managers who ating in an extremely ECONOMY. BECAUSE company very carefully prefer to be in the driver’s seat and take dynamic market here. in order to avoid any manual control instead of relying on 2001 can be deoned as OF THIS, TURKEY HAS turbulence that might automatic, this is the place to be. a milestone—pre- and ENJOYED A HUGE appear. On the other post-2001, you could hand, there are many Given the important geostrategic call it. I came here in INFLUX IN FOREIGN opportunities. It helps location of Turkey, how would you 1995, when we had a DIRECT to be proactive and it describe the country’s relations coalition government helps to have a good with its neighbors? here in Turkey. In the INVESTMENT. network here. And you Turkey has always enjoyed very strong post-2001 era, you can must seize the oppor- commercial ties with the West, par- wake up in the morn- tunities as they arise. ticularly with the countries of the EU. ing and ond astonishing developments Germany and Australia are mature mar- EU countries account for a signiocant in law and legislation. kets—the parameters of doing business portion of its imports and exports. I would call the post-2011 era a are more or less set and the systems are The largest among these is its trade golden period, one in which we have in place. But Turkey is still an emerging with Germany. And this provides seen continuous and sustainable growth market. You bear the characteristics of our orm with great conodence and in the economy. We have seen signio- all the emerging markets here. Although advantages. Meanwhile, thanks to its

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geostrategic location, Turkey acts as a What is Bosch’s view of the Turkish bridge that connects East and West. market? Accordingly, it has recently engaged Present in Turkey for more than a cen- in a multifaceted development of its tury, Bosch Group today consists of six commercial ties with the countries separate companies that operate in au- to its east as well. In particular, it has tomotive technology, energy and build- been investing heavily in Iraq and ing technology, industrial technology, Central Asia. This transformation and and consumer goods. It is a net con- development in commercial channels tributor to the Turkish economy with also brings signiocant advantages and a turnover of €2.1 billion and exports opportunities for domestic and inter- of €1.3 billion as of year-end 2012. We national orms based in Turkey. All our want Turkey not only to reach but to business partners in Turkey have al- TURKEY’S ECONOMY IS surpass its 2023 targets. We account ready begun active operations in these for 1.1% of Turkey’s total exports. What newly opened regions. Turkey serves as AMONG THE FIVE—OR EVEN underlies our contributions in Turkey’s a central hub for many international industrial and economic future can be orms that wish to access and invest in THREE—MOST ATTRACTIVE examined under three basic headings: these regions. In general, I believe that GROWING ECONOMIES being a competence center, our “local- the ongoing political instabilities and for-local” approach, and our human problems do not have major impacts WORLDWIDE. resources. As we create intellectual on commercial ties. capital in our competence centers, it 58 In Depth / Exclusive Interview

is brought into Turkey as part of our local-for-local policy. We engage in know-how transfer and codesigning. We make maximum use of the Turk- ish subindustry and we manufacture here. With our production, we not only meet the needs of the Turkish market and substitute imports but also export to the rest of the world. Thus, we are contributors to the efforts to reduce the current account deocit. And we do all of this thanks to our skilled human resources. Our Turkish engineers and other staff have made signiocant contributions to Turkey’s success. With their help, we are producing technology for the beneot of the whole world in Turkey.

What is your view on Turkey’s demographic development? What could it yield in the long term? Turkey has a young and dynamic population. Both its GDP and its per capita income are continuously increasing. One of the most important features of the Turkish population is its youth. The population in the 0-14 age group constitutes 24.9% of the total population, and based on 2012 data, the median Are there any challenges in working age is 30. The pro- with Turkish employees? How do portion of the urban you manage your human resources? population has also We have a highly qualioed and pexible increased signiocantly team. One of our key strengths is that in Turkey. Turkey our associates are very result oriented enjoys major advan- and capable of delivering reliable results tages against an aging swiftly. Loyalty and dedication are high, European continent, in too. To elaborate, we, as Bosch Turkey, my opinion. This ad- have many initiatives to motivate our vantage has two facets—the market and team—we allow for different working the qualioed young workforce. Going ONE OF OUR KEY models such as telecommuting, enable forward, this demographic advantage STRENGTHS IS THAT OUR high connectivity through high-tech will create demand for new products communication devices, and fund MBA and services in the Turkish market. The ASSOCIATES ARE VERY programs and coaching for our associ- new families to be started by this young ates. We also support career develop- population will also create demand RESULT ORIENTED AND ment via international assignment growth for many items in the market, CAPABLE OF DELIVERING programs. Total training hours are ap- which in turn will help the country grow proximately 4000 hours per year, which in its internal dynamics, too. RELIABLE RESULTS SWIFTLY. makes us very proud.

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AS WE CREATE INTELLECTUAL CAPITAL IN OUR COMPETENCE CENTERS, IT IS BROUGHT INTO TURKEY AS PART OF OUR LOCAL- FOR-LOCAL POLICY.

requires us to do something different— employer for all potential employees, there must be a higher amount of local including fresh graduates. value added, a higher degree of intellectual content, and a diverse spread in ex- Do you have any predictions for in- port markets—not just Europe. Turkey vestment trends that might emerge predominantly produces products in the in Turkey over the next few years? lower and middle segments at the mo- The service industry accounts for 64% ment. In order to achieve these targets, of the current GDP. If we are to achieve we need to be active in the high end of a $500 billion export volume, we need the market. This is where R&D comes to be designing and producing prod- in. I believe that the target of 3% R&D ucts of a technological nature with a against GDP is spot-on, and the govern- signiocant contribution of local value- ment is providing extremely attractive add. Here, I am referring speciocally incentives to companies to encourage to the industrial sector. The beneots of cooperation and to initiate or enlarge what the industry can contribute to the What can you say about Bosch Tur- their existing R&D activities. Bosch overall economy of the nation are clear. key’s upcoming projects? has invested over €100 million in R&D Therefore, industrialization is a must if Turkey grew signiocantly over the last and employs more than 300 R&D- Turkey wants to achieve these chal- ten years. Turkey now has ambitious dedicated engineers and other staff. Our lenging targets. That’s my orst point. plans for the centennial in 2023. Right R&D does not only serve the purpose of My second is that when we analyze the now, we are in the middle of a 20-year meeting local requirements; we export import ogures, we see energy at the top window between 2001 and 2023. We R&D from Turkey to Germany, too. All of the list of factors behind the cur- can make forecasts for the next ten years of this is done in Bosch Group’s three rent account deocit. Turkey needs to based on what we achieved during the government-accredited R&D centers overcome this—one, it must produce last ten years. The government has set in Turkey. And we were one of the orst more of its own energy, and two, it must several notable economic targets for in 2008 to be granted accreditation. utilize and consume energy in a much 2023, including ranking among the On the matter of human resources, we more efocient manner. Renewable ener- world’s top ten economies, achieving value our employees and believe that the gies, particularly wind, will no doubt an export volume of $500 billion, and Bosch team here in Turkey will carry our contribute to resolving this issue. Apart raising budget allocation for R&D to company to the future and thereby con- from that, we believe the automotive more than 3% of the GDP. These are tribute to Turkey’s 2023 targets. In this technology will be a major contributor, extremely challenging yet extremely sense, we have initiated a number of lo- and machinery manufacturing, together exciting targets. We stand today with an cal initiatives— many of which are pilot with construction, will constitute the export of approximately $100 billion. To initiatives for Bosch worldwide— with back bone of Turkey’s industrialization go from here to $500 billion obviously the aim of making Bosch a orst-choice in the next ten years. 60 Content: A Handwritten Brand Story: ADEL P63. Innovation in Cheese: Muratbey P65. Editor: Can Gürsu

Brands TEXTILES, OFFICE SUPPLIES, CHEESE

HAMAM OPENS THE TURKISH BATH FOR THE WORLD Hamam—in 2006, the 17th brand to be accepted into the Turquality state-supported branding program—expanded its retail network from 45 to 200 over the past Öve years. We had a chat with Eke Tekstil CEO Haluk Eke on how the Hamam brand was born, the success it quickly attained, and plans for the future.

BY AYNUR ŞENOL ALTUN

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 61

KE TEKSTIL entered socioeconomic terms, and exhibition held twice a year E the domestic textile value design. Hamam’s prod- in Paris is of high impor- industry in 1989. Initially, ucts are presented in locking tance for Hamam, empha- it worked with famous antibacterial packages to en- sizes Eke. For Russia, the brands—American brands sure they are delivered to the company assembled a special primarily—appealing to the buyer in a hygienic manner. team to address logistical luxury segment. The experi- Specialty materials such as issues. Currently, the brand ence gained in these en- silk, linen, cashmere, and or- reaches consumers in Russia deavors and its R&D team’s ganic cotton are meticulously thanks to a 20-person team, Hamam’s products are innovation-focused efforts spun into threads and woven three stores, and two corner presented in locking kicked off the process of its into fabric using Hamam’s outlets. For distribution in antibacterial packages becoming a brand. In 1999, custom technologies before China, says Eke, they have to ensure they are deli- Eke began exploring ways to becoming products sold at been working for three years vered to the buyer in a exploit the lack of a luxury the world’s most prestigious with one of the country’s hygienic manner. bathroom textile brand in retail locations. Every item largest retailers: “Right now, the market. The name for the in its collection has its on we have one franchise store brand that resulted, Hamam, concept, lifestyle target, and and 20 retail locations. The was chosen by Haluk Eke’s color palette. According to products are sold at much wife. Trademarking and Eke, most sales are abroad: higher prices compared to patent applications were “Exports account for 80 other countries. Its identity begun immediately. The percent of our sales. We had as a manufacturer aside, brand’s public launch, under aimed to increase all our China holds signiocant po- the creative direction of üdil sales in 2013 by 30 percent. tential in the oeld of luxury Tarzi, was held in the high- The increase in exports over consumption, too.” However, prestige “Dreamland” setting the orst six months came in the majority of Eke Tekstil’s in 2003’s Heimtextil exhibi- at 20 percent. We predict the exports overall—90%—are tion in Frankfurt, Germany. total sales increase by year- to the US, and the com- Hamam became the orst end to be 30 percent.” pany opened an ofoce on 5th Turkish brand to enter the Avenue in New York City last bathroom textiles category. THREE PRIORITY MARKETS: FRANCE, year. RUSSIA, AND CHINA TARGETING HIGH INCOMES Eke says the most important INDUSTRY EXPORTS RISE 6.6% Hamam’s target audience markets for Haamam are IN TWO QUARTERS consists of people who take France, Russia, and China. In 2012, the Turkish care of themselves and their In 2006, Hamam opened its ready-to-wear clothing and homes, are generally aged orst showroom, which is in apparel industry’s exports 35 and above, rank high in Paris. The Maison & Objet totale $16.88 billion in value. 62 Brands /Textiles

Over the past Öve years, in the area of promotional Hamam expanded its retail Donec consectetur network to 200 locations and advertising support, a varius nisi eget aliquet. across 45 countries. Vivamus fermentum key requirement of branding, auctor imperdiet. in addition to international Phasellus gravida. ofoce and retail location in particular. We also have procurement and operation, projects developed with fairs and exhibitions, and TÜBüTAK >the Scientioc consulting. Over the past and Technological Research ove years, Hamam expanded Council of Turkey]. We, as its retail network from to Eke and Hamam, always give 200—including six concept importance to innovation, stores, 40 corner outlets, and and we recognize that we 160 retail locations in vari- have established differentia- ous prestigious parts of the tion through these means.” world—across 45 countries. The company has distributor- TURQUALITY LIFTS HAMAM UP ship and master franchising Over the orst two quarters of TOWARD ITS TARGETS agreements in place in sev- 2013, the industry increased In 2006, Hamam became eral categories. Eke adds that its exports by 6.6% relative part of the orst group of there are projects for which to the corresponding period brands to enter Turquality, talks are ongoing, too. in 2012. To further this, as the state-supported brand- In the name of securing Eke points out, high-proot 30 ing program. After the Hamam’s position as a world- production—to be achieved HAMAM’S 2013 SALES performance it delivered over famous brand, the company by a continued increase in GROWTH TARGET the orst ove-year period, it has plans to establish foreign quality and the use of R&D earned the right to remain for partnerships that would to achieve differentiation—is a second period. Turquality provide onancial support: “If crucial. Eke says, “R&D is supplied signiocant advan- you want to become a world- very important to us. We tages that helped Hamam famous brand, you must have a crew of 20 textile 160 achieve its targets quickly. pursue cooperation with engineers at the factory. NUMER OF HAMAM’S Eke notes that the company orms that have experience in Several projects are under RETAIL LOCATIONS beneotied tremendously branding and investment,” way with Japanese silk orms from Turquality especially says Eke.

SEPTEMBER-OCTOBER 2013 ISSUE 18 Brands /Stationery The Turkish Perspective 63

worthy. Hizaler ascribes this A HANDWRITTEN BRAND success to being a member of the large conglomera- STORY: ADEL tion that is Anadolu Group and its partnership with the ADEE has achieved rapid growth both domestically and world giant Faber-Castell, internationally. In 2011, ADEE founded the company Faber- and the fruits this has yielded have been collected for years. Castell Anadolu in Russia, through which it hopes to accelerate The best evidence of this, its growth in the world’s largest country. says Hizaler, is the distributorships they have been BY NESRİN KOÇASLAN working with for 43 years now. Today, ADEL enjoys a HE EXPERIENCE OF writ- as a pioneering ofoce and tributor in Turkey thanks to fruitful relationship with 90 Ting has deep meaning school supplies brand today, this partnership. Today, with distributorships. associated with its begin- but at its heart is a relation- the company it established ning, when humankind ship based on the venerable in Russia with Faber-Castell, EXPORTS TO 55 COUNTRIES discovered it—that of truly writing implement. Founded ADEL continues to grow. ADEL’s partnership with leaving a mark on history. in 1967, the brand was later ADEL General Manager Faber-Castell conveyed Although writing has par- partnered with the world Evrim Hizaler details the recognition of the brand be- tially been replaced by digital ofoce supply giant Faber- brand’s journey so far and its yond Turkey’s borders. Hiza- technologies, the traditional Castel, which would prove future plans below. ler says the brand exports pen or pencil still takes up an important step toward its products to 55 countries, some space in one’s bag or becoming an international LONG RELATIONSHIPS WITH including products under on desks, and they still play player. ADEL, an Anadolu DISTRIBUTORS its own brand and those of a big role in life. ADEL’s Group brand, started using According to Evrim Hizaler, Faber-Castell. A signiocant story is one that essentially the Faber-Castell trademark ADEL, now active in the amount of these products begins with the pen and on its own products and industry for many years, is bear ADEL’s brand. “In the pencil. ADEL may be known became the company’s dis- perceived as stable and trust- context of Faber-Castell’s 64 Brands /Stationery

ecosystem, ADEL is very emphasizes that all op- important when you see its portunities in the country success in Turkey. Faber- are open for consideration: Castell has de facto opera- “The place also represents tions in 15 countries, and to us a market development we are the second-biggest and discovery task. There- market after Brazil. Today, fore, in time, once we attain we have achieved a volume a certain volume in exports, even greater than that in we will certainly be assess- Germany, the brand’s native ing the opportunities again.” country,” says Hizaler. New Company in Russia NEW FACTORY, N Anadolu Group’s experi- EW OPPORTUNITIES ence and ADEL’s success In June, ADEL signed a created the result of a new TRY 50 million contract for partnership opportunity the construction of a new “In the context of in late 2011, when ADEL factory in Kocaeli Province, Faber-Castell’s ecosy- and Faber-Castell jointly which is expected to enter stem, ADEL is very ADEL’S JOURNEY established a new company operation one year later. important when you in Russia, Faber-Castell The new factory will give AS A BRAND Anadolu. Hizaler says they them a higher effectively and see its success in Tur- are quite hopeful of Russia: adaptability, says Hizaler, key. Faber-Castell has de facto operations in 1967: ADEL brand “Russia is truly one of the according to whom such in- established. most important markets vestments will also support 15 countries, and we 1969: ADEL’s Kartal, Istanbul worldwide for any industry. capacity increases in parallel are the second-biggest factory enters operation. It is a developing economy, with recorded growth. market after Brazil.” 1980: ADEL’s pencil slat Evil Hizaler (wood) factory enters says ADEE’s operation. The import of largest export market is cedar slats is slashed when Russia. slats can be produced from locally grown poplar, the result of a collaboration with Karadeniz Technical University.

1995: Faber-Castell partners with ADEL. ADEL starts using the Faber- Castell trademark on some of its products and becomes Faber-Castell’s exclusive distributor in Turkey.

1996: ADEL goes public. Today, 27.1% of ADEL’s shares are traded on Borsa Istanbul. it has a high population, and it’s relatively much 2000: Having exhibited wealthier. In whatever ADEL BY NUMBERS steady progress, ADEL starts industry you may look at, taking significant steps you see many players both toward expansion abroad. large and small in the area. In that regard, Russia is a 2011: ADEL and Faber- high-potential market for Castell establish Faber- us.” Currently, according 15.4 27.1 90 Castell Anadolu LLC in to Hizaler, the company FABER-CASTELL’S PERCENTAGE OF ADEL’S DISTRIBUTORSHIPS September, a 50/50 joint SHARE IN ADEL SHARES TRADED ON IN TURKEY operates just as a sales and BORSA ISTANBUL venture. distribution outlet, but she

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 65

INNOVATION IN CHEESE: MURATBEY Muratbey is one of the Örst brands to come to mind in Turkey on mention of cheese. The company has a 25-year background in the industry, and over the past decade it grew by 40%. We had a talk with Chairman Necmi Erol on the change undergone by the industry in recent times, the process of turning companies into brands in Turkey, where Muratbey stands today, and what the company’s plans are for the future.

BY BARAN KARAKUZU

P UNTIL TWO-AND-a- as Karadeniz Gda, was aware ing trademarks, designing Uhalf to three decades of how crucial branding is packaging, and controlling ago, what passed for brand- almost since it was founded, how the products reach the ing in Turkey was little more and it started using the Mu- consumer, says Erol, and he than a name printed on an ratbey marque in that decade. adds that they enlist profes- item’s packaging (with the Muratbey CEO Necmi Erol sional support in the oeld of exception of products by has witnessed all that hap- marketing as they monitor the very largest corpora- pened in branding up to this developments in the oeld. tions). Once the market day. Today, he emphasizes, “Since we are able to ensure started growing in the 1980s, they approach the matter product quality and stan- branding—especially in much more professionally. dards in the North African retail—started gaining more Following the lead of world’s Muratbey won the and Central Asian markets, importance in the eyes of powerhouse countries, Istanbul Chamber of too, our brand is perceived companies that were slower the company carries out Industry Innovation as quite trustworthy.” He to act. Muratbey, then known such activities as register- Award in 2011. continues, “We are thus able 66 Brands /Cheese

to sell a number of value- top ten with high-quality added products more easily. boutique products. “As Mu- The situation in Iraq and the ratbey, we want to achieve Southeast Anatolian region is world-class standards with not unlike that of Anatolian boutique products that no culture in general. other brands offer. Because of this, our target audience “OUR AIM IS TO CONTINUE BOUTIQUE will always be the distin- CHEESE PRODUCTION” guishing customer.” There are several advantages that come with FEED AN IMPORTANT EXPENDITURE being a brand, Erol states Feed accounts for 70% of emphatically. He highlights livestock farming expenses. the effect it has on product Cheaper feed translates to a pricing—every product has good reason to be opti- an associated basic cost, mistic about the industry’s and the purpose of sales is future. In a climate where to gain a proot from a prod- companies, fate ends up be- raw materials are short uct’s price after its producing controlled by others.” in supply and prices inch tion costs are considered. Monopolization has upward, livestock farm- However, for companies rapidly been overtaking the ing becomes an expensive that have not gone the way cheese market, says Erol. Ten pursuit, in turn leading to of becoming brands, this is years later, he warns, 90% of potentially signiocant price a minor concern, notes Erol. the market could be domi- hikes for many industries. “Every company has a group nated by just ove brands. Elaborating on the issue, in which it positions itself. For this reason, boutique Erol says, “Dairy products The unbranded companies and custom production very are expensive, for one, set the initial conditions for important to Muratbey. and various methods are the market, but if you have Though Muratbey may not Muratbey stands out explored to enable cheaper achieved branding, then you be aiming for the top ove in in the Öeld with its prices. But then the quality may determine the price of the industry, says the CEO, high-quality boutique of the cheese plummets.” Per the product. For unbranded they plan to stand out in the products. capita cheese consumption

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 67

in Turkey is around 5–5.5 who come from similar kg annually. For Europe, cultures and have similar NECMİ EROL this ogure is 20 kg, and for habits. Imported cheeses CHAIRMAN, MURATBEY Americans and Greeks it come to Turkey, too, and is roughly 25 kg. However, although they are of high We will continue producing these results also suggest 400 quality, they are unable to world-class, boutique-type that Turkey’s potential in MURATBEY’S GROWTH attain the results they desire products that no one else OVER THE PAST the oeld has signiocant DECADE because of the cultural dif- offers. Having achieved room to grow. ference.” “We have products quadruple growth in ten that generally appeal to years, we would like to MONETIZING KNOW-HOW countries that were in the continue this five and ten Muratbey has several old Ottoman territories and years later, too. In 2011, we products developed solely whose cultures descended won the Istanbul Chamber 350 of Commerce Innovation of its own innovation. The NUMBER OF from the same as ours,” he company is engaged in talks EMPLOYEES notes, and summarily points Award, and we rank alone as for collaboration on some out that everything relies on a limited liability company products with the world’s palate compatibility. among giant corporations. select giants in this area. We have ongoing talks “With the collaboration we STANDING OUT FROM THE PACK regarding collaboration with plan to see to fruition, we Competition in Turkey’s foreign companies, and after 15 some time we would like to will expedite our expan- NUMBER OF cheese market guides brands sion abroad. With the COUNTRIES EXPORTED toward pursuing brand dif- sell our know-how. There is TO know-how we sell to our ferentiation. Innovation is of rapid monopolization in the foreign partner, we will be vital importance to brands market, and this continues able to appear on market for this reason, indicates with increasing momentum. shelves under our own Kg Erol. That is also why Murat- Ten years later, 90% of our brand instead of practicing bey pursues differentiation, field will be held by five foreign-bound subcon- 5.5 he notes, and he adds, “The brands at most, and they tract manufacturing,” he ANNUAL PER CAPITA cost of copying something won’t be balanced among CHEESE CONSUMPTION explains. IN TURKEY is very clear, but pursuing themselves. Other than that, On investigating new something authentically, companies that produce markets, Erol says, “We adding value in the pro- boutique and custom- could consider introduc- cess, gives meaning to this. produced items will come ing innovative products to Small-scale companies have to the fore. And we, as part the Western market, but no recourse but to focus im- of the top ten, stand out 10 with our superior-quality if there is to be signiocant SHARE OF EXPORTS IN portance on innovation and consumption of products MURATBEY’S SALES ingenuity in a world where boutique products. We want manufactured in Turkey, the economy is monopolized to continue this. then we could sell to people to such a degree.” 68 The Turkish Perspective

Agenda FAIRS, EXHIBITIONS, SUMMITS, AND MEETINGS IN THE NEXT TWO MONTHS

ûzmir Autoshow International The world’s largest auto orms are SEPTEMBER scheduled to appear at üzmir Autoshow, where visitors will ond opportunities to 19–22 see the latest in the oeld, obtain detailed ō5($-0/*.#*2 information about the new models, have )/ -)/$*)'ō5($- hands-on experiences, and to purchase $- )/ -Wō5($- vehicles. The six-day fair included 78 companies in 2011, when it welcomed 52,104 visitors. This year, more than 100 companies and 100,000 visitors are expected to attend the fair.

U 2013 ISSUE 18 The Turkish Perspective 69

01 02 SEPTEMBER 5–8 OCTOBER 2–6 98./ )/ -)/$*)'** -* 0/.) 03 )&-0-)$/0- $- -* ..$)" #)*'*"$ .3#$$/$*) ATO International Convention and Exhibition Center—Ankara CNR Expo Yeşilköy Exhibition Center—Istanbul With the taglines “the exhibition that unites furniture with 04 art” and “products that make a difference in furniture,” Organized by EUF, ITE Group’s Turkish ofoce, this exhibi- ANKAFF will provide potential buyers of new furniture tion is expected to welcome a broad set of participants in 05 the opportunity to choose from a range of new models at its edition for this year, based on its previous performance. affordable prices. Worldfood Istanbul’s participant proole covers the oelds of 06 milk and dairy products, meat, confectionery and chocolate, vegetable oils, and foods made with pour. This year’s World- 07 food guest country is Azerbaijan. 08 SEPTEMBER 19–22 @/# )/ -)/$*)'"-* 3+*0-.$ 09 "-$0'/0- B- )#*0. B) $1 ./*&3#$$/$*) International İzmir Fair Center—İzmir 10 With a largely professional audience, Agroexpo 2013 is expected to retain its distinction of being the most produc- 11 tive agriculture exhibition this year. Agroexpo Eurasia 2013 will see companies showing off their latest products in the 12 categories of tractors, agricultural machinery and compo- OCTOBER 3–6 nents, irrigation and greenhouse equipment, and agricul- 13 8@/# U ō5($-3#$$/$*) tural chemicals. International İzmir Fair Center—İzmir 14 One of Turkey’s most comprehensive exhibitions for the construction industry, TURKEYBUILD üzmir will introduce its 15 visitors to the latest innovations, products, and technologies. The range of companies expected to participate in the show 16 covers infrastructure, electronic and building equipment, bathrooms and kitchens, and landscaping. 17

18 OCTOBER 10–12 1 -" ./)0' 19 Istanbul Expo Center, Yeşilköy—Istanbul Beverage Istanbul will present consumer soft drink prod- 20 ucts and technologies. Topics covered will include energy drinks, concentrates, and healthy beverage options. Various certiocation bodies are to participate in the exhibition, too. SEPTEMBER 21–29 21 :9) )/ -)/$*)' ./)0'*/#*2 Beverage Istanbul has the aim of bringing visitors together with international participants from the food, beverage, Marinturk Istanbul City Port—Istanbul 22 and food processing technology industries. Set to take place over an area of 150,000 square meters, Boat Show will welcome 300 companies to show off the 23 products of 650 brands and more than 380 boats. Up to 80,000 visitors are expected to come to the exhibition, 24 SEPTEMBER 24–25 which will include companies in the categories of engines, 978: )/ -)/$*)') -"4*)"- ..) $- sailboats and sailing equipment, marine equipment, con- 25 ATO International Convention and Exhibition Center–Ankara sumer-level products, components, and services providers. Organized by the Global Energy Association with the sup- 26 port of the Ministry of Energy, EIF 2013 emphasizes the idea that the prominent position of energy in the world agenda, together with the increasing world population and SEPTEMBER 27 27 the expected depletion of energy sources in the near future, "$' 0-& 40(($/ is an issue that merits assessment in a global context. Mövenpick Hotel—Istanbul 28 Professionals from the world’s foremost companies in agile practices and expert speakers in the subject will be meeting Turkey’s 29 IT industry in Istanbul. With the rich content it promises and important speakers recognized worldwide, Agile Turkey Summit 30 2013 stands out as the orst large-scale agile methodologies event to be held in Turkey and its surrounding region. 31 70 Figures

A MMOMOREREE AATATTRACTIVEATTRTTR COUNTRY FOR FOREIGN INVESTORS

TIM EXPORTER TENDENCY SURVEY RESULTS FOR Q2 2013

The results for Q2 2013 ofo Turkish Exporters Assembly’s regular tendency survey, includingi exporters’ expectations for the coming quarter, haveha been released. TIM’s survey indicates that inputinput costs rose as proÖtability fell in the year’s secondsecond quarter,quarter, and exportersexpor appear to be approaching the future with caution.

RESULTS FOR Q2 2013 Prompt: “Report the developments of the past three months (April–June 2013) in comparison to the corresponding period last year.” %

PRODUCTION EXPORTS CAPACITY STOCK INPUT UNIT EXPORT IMPORTED RAW MATERIAL OVERALL EXPORT UTILIZATION RATE COSTS PRICE INPUT RATE UNIT IMPORT PRICE PROFITABILITY PROFITABILITY

17 15.6 17.6 37.7 39.2 32.5 26.9 61.5 28.6 38.8

31.3 29.8 36.5 42.7 27.3 48.8 53.1 30.6 39.0 39.2

6.7 17.4 7.9 9.4 LOWER 22.7 29.2 23.8 23.8 40.4 37.4

8.3 1.8 7.3 6.7 4.6 5.2 22.1 21.3 5.0 5.8 N/A

#$' +-* 0/$*)"- 2$) 3+*-/. 0-$)"9978:B+-*Ĝ/$'$/4! ''A *2 1 -B 3+*-/ -.. ((*- #*+ !0'*!/# *($)",0-/ -A

SEPTEMBER-OCTOBER 2013 ISSUE 18 The Turkish Perspective 71

EXPECTATIONS FOR Q3 2013 Prompt: M +*-//# 1 '*+( )/.*!/# +.//#- (*)/#.Z 0'4V +/ ( -978:[ in comparison to the corresponding period last year.” %

PRODUCTION EXPORTS CAPACITY STOCK INPUT UNIT EXPORT IMPORTED RAW MATERIAL UNIT OVERALL EXPORT UTILIZATION RATE COSTS PRICE INPUT RATE IMPORT PRICE PROFITABILITY PROFITABILITY

17.9 18.4 18.4 37.7 39.0 33.5 27.1 47.5 23.0 31.3

34.8 36.4 40.4 46.7 39.8 56.8 51.0 39.2 44.0 46.8

18.5 21.4 18.5 19.8 7.1 14.2 9.2 7.3 31.0 29.0 LOWER

21.9 3.2 5.6 22.3 6.6 5.8 9.0 7.5 6.5 6.0 N/A

.+$/ - "$*)'/0-(*$') .$").*!.'*2 *2)$)/# 2*-' *)*(4B 3+*-/ -.#1 )*/-*0' $) 3+) $)"/*) 2(-& /.A

OVERALL ECONOMIC MARKETS TO BE ENTERED FOR THE FIRST NEW EXPORT EXPECTATIONS FOR TIME IN Q3 2013 MARKETS IN Q2 2013 THE YEAR 2013 Prompt:MM $./Ĝ1 (-& /.4*0+')/* )/ -!*-/# Ĝ-.//$( Prompt:M 1 4*0 )' Prompt: “What is your expectation of 2$/#$)/# ) 3//#- (*)/#.Z 0'4V +/ ( -978:[AN to enter new export in the how the rest of 2013 will play out?” past three months (April–June 2013)?” % Russia 19.0 USA 10.4 2011-Q2 30% INDUSTRY BETTER 14.4 WORSE Germany 10.2 2011-Q3 31% 27.6 58.0 China 9.4 2011-Q4 31% 2012-Q1 34% TURKISH -, 8.2 ECONOMY 2011-Q2 34% France 7.4 2011-Q3 33% 19.8 56.0 24.2 Brazil 7.2 2011-Q4 34% Africa 6.6 2013-Q1 34% EUROPEAN Japan 6.6 ECONOMY 2013-Q2 32% 8.4 Italy 6.2 33.2 58.4 UK 5.8 The leading choices among exporters aiming to expand to $4 WORLD 5.6 ) 2(-& /.2 - 0..$B/# ECONOMY &-$) 5.6 B -()4B#$)B) -,A 10.8 )/'4B -,#. )' $)" 65.2 24.0 5&#./) 5.4 /# +&*!*0)/-$ .2# - 0 $-$ 5.0 0-&$.#0.$) ..+ *+' 2*-& the most. 72 Special Report

NETHERLANDS 2.44 1.84 FRANCE 4.43 UK 5.61 ITALY USA 4.69 3.92 SPAIN 2.88 TURKEY’S TOP 20 ALGERIA 2.03 EXPORT MARKETS IN JULY 2013 (%)

RUSSIA 4.79

9.12 AZERBAIJAN-NAKHICHEVAN 1.82 2.02

IRAQ CHINA 7.77 IRAN 2.47 ISRAEL 1.69 1.82 SAUDI ARABIA 2.55 EGYPT 2.36 LIBYA UAE 2.03 1.87

Data: ō

U 2013 ISSUE 18

7 - 10 NOVEMBER 2013, MAXX ROYAL, ANTALYA, TURKEY

Golf at its best

This November the best in golf go head-to-head in Europe’s newest and most exciting tournament. This is your chance to witness sporting history as 78 champions battle it out in the third instalment of the European Tour’s thrilling Final Series. Be a part of it.

Purchase tickets and to follow the action: turkishairlinesopen.com

THY İLAN