turkey 4/11/09 14:27 Page 33 turkey 4/11/09 14:27 Page 34 turkey 4/11/09 14:27 Page 35 Turkey special report Turkey: Bridge between worlds ith a population that is set to Toyota, Hyundai and Fiat have chosen choosing to overtake Germany’s within a locate manufacturing and assembly plants here. Wdecade and a history of chemical The Turkish automotive sector is overwhelmingly production dating back some 70 years, export-oriented and it generated some €20 billion Turkey combines the demand potential of an of export revenue in 2008. The government has emerging market with a supply side befit- identified the industry as a key area to defend dur- ting that of a mature market. ing the economic crisis and has temporarily slashed its sales tax on new vehicles, which is normally Turkey has for many years exported chemicals to amongst the highest in the world. ‘old’ Europe. There is, however, growing confidence The chemicals industry has taken advantage of within the industry that it is ideally placed to take the indigenous automotive industry to establish new advantage of a ‘crescent of development’ stretching markets. It is selling advanced plastics, powder coat- from Russia through the Central Asian republics to ings and textiles to the 14 car manufactures and the Middle East and North Africa. Ask a Turkish three tractor producers present in Turkey, as well as chemicals company CEO to list Turkey’s compara- their numerous downstream OEMs. Akyuz – Attitude to Turkey affects export trends tive advantages and its geographic location bridging It is claimed that every fourth television used in Europe and Asia and position as the sole sea gate to will rise to 16.4% in 2010. A further 4% of the work- European households is manufactured in Turkey and Central Asia is sure to be mentioned. force in 2008 is estimated to be underemployed. the electronics and white goods sectors are impor- This geographic advantage is reinforced by the Despite the gloomy state of the economy in tant consumers of Turkish chemicals. Last year, history Turkey shares with Central Asia. The tribes 2009, there is widespread confidence that recovery Turkey produced 9.3 million colour televisions, while that conquered modern day Turkey originated from is imminent. Dr Ates Kut, chief executive of chemi- the electronics industry turned over €6.6 billion in the Central Asian steppes and there are strong lin- cals at the €2 billion/year industrial conglomerate 2007. Although the majority of sub-components are guistic ties between them. Turkey also has a strong Sisecam, believes that the crisis “will be over in the imported, the electronics and white goods sectors cultural relationship with its neighbours in the not too distant future.” consume some 10% of Turkey’s plastics output and Middle East. The OECD predicts recovery in 2010, while a numerous niche chemicals producers have emerged From its birth in the 1930s, the chemicals indus- mid-2009 report by investment bank Merrill Lynch to service the wide-ranging needs of the industry. try in Turkey grew during the 1950s and 1960s to forecast average 4.5%/year growth between 2010 Production in Turkey is focused on speciality service the booming textiles sector, which was cru- and 2019. Confidence in the economy is based on chemicals and finished products. Turkey has limited cial to the state-led economic polices of the time. Turkey’s demographics, improving political stability mineral reserves from which to produce bulk chem- Great emphasis was placed on the import substitu- and export opportunities in the surrounding growth icals, with the exception of soda ash (it has the tion of bulk petrochemicals, agrochemicals and basis markets. largest soda factory in the Middle East), sodium organic and inorganic chemicals. Turkey’s drive to join the EU has seen it open 11 bicarbonate and silicate, chrome ore, boron and The industry started competing at an internation- of 35 accession chapters and harmonise numerous sodium sulphate. al level as a result of the free market reforms imple- regulations with EU standards. Regardless of the Mustafa Bagan, secretary general of the Turkish mented by then prime minister Turgut Ozal – he eventual outcome of Turkey’s quest for member- Chemical Manufacturers Association (TCMA), notes later became president - during the 1980s and ship, it is clear that the process is making it easier that it is hard for Turkish companies to compete with 1990s. In 1995, Turkey entered into a customs and safer for foreign firms to invest here and is Far Eastern producers of bulk chemicals because of union with the European Union (EU) and the coun- improving the quality of the country’s chemical the high cost of energy, unstable and insecure raw try was recognised as a candidate member in 2005. products. materials supplies and bureaucratic hurdles. Turkey’s The World Bank describes Turkey as an “upper- future, he says, lies in niche, speciality and value middle income” country with a “dynamic emerging Domestic scene added goods. market economy” and a “lengthy track record of Turkey has a young and expanding population. Its Turkey remains one of the world’s largest pro- solid economic management”. Since the economic median age, 28, is 12 years lower on average than ducers of chemicals for the textiles and leather crisis of 2001, its economy has sustained significant most of West European countries and is growing at industries as well as for synthetic fabrics, but the growth, averaging 6%/year between 2002 and a rate of 1.3%/year, more the twice the rate of country has now established itself as a major pro- 2007. France and China. duction centre of generic pharmaceuticals, plastics, In 2008, Turkey attracted some €12.4 billion in Culturally and socially, Turkey is changing rapidly. coatings, soaps, detergents and cosmetics. foreign direct investment (FDI). The United Nations Growing wealth, increased social and geographic Most of the world’s major chemicals companies, Conference on Trade and Development (UNCTAD) mobility and the rise of consumerism, so evident in including BASF, Cognis and Clariant, have estab- ranked it the 15th most attractive FDI destination for Istanbul’s ancient bazaars and gleaming shopping lished operations in Turkey. In addition, the country’s 2008- 2010. malls, is driving the consumption of chemical-based home grown corporations are now also beginning The global economic crisis has hit hard, however, products ranging from detergents to clothes. to demonstrate their presence on the global stage. belying claims by Prime Minister Recep Tayyip Turkey is an important production centre for Erdogan in autumn 2008 that the economic crisis multinationals looking to gain access to the FDI had by-passed Turkey. Public debt has risen thirteen- European single market. Numerous Japanese and Amongst emerging markets Turkey represents an fold and predictions of the contraction in GDP this Korean companies have chosen to locate major pro- attractive destination for FDI in terms of market year range from the government’s optimistic 3.8% duction facilities in the country. access, regulatory environment and political stability. to the OECD’s 5.9%. The automotive sector is integral to the Turkish Whilst only an estimated 314 of the 4,000 + chemi- Inflation, which hit 54% in 2002, still stood at a economy and a key market for chemical products in cals companies in Turkey have foreign backers, this substantial 10.4% in 2008. In 2008, the unemploy- Turkey. In terms of output, Turkey is Europe’s fifth figure masks the fact that some of the largest firms ment rate was 10.4% and the OECD predicts that this largest producer of vehicles. Companies such as are partly or wholly owned by foreign investors. November 2009 Turkey Special Report 35 www.specchemonline.com turkey 4/11/09 14:27 Page 36 turkey 4/11/09 14:27 Page 37 Turkey Special Report The latest UNCTAD report estimates that Turkey worth of chemicals products, over 13% of Turkey’s attracted in excess of €1.5 billion in FDI and that total exports. overseas money paid for over 15% of the total Perhaps the most striking trend during the four- invested in Turkey’s property, plant and equipment year period since our previous visit has been the during 2007. Key actors within the industry see a changing demographics of Turkey’s chemicals trade. need for even more FDI if the chemicals sector is In 2004 the EU was the destination for 30% of going to reach its potential. Turkey’s chemical exports and this is still the case, Selcuk Aksoy, president of the Turkish Plastics with Germany the top export market in Q1 2009. Manufacturers Research, Development & However, non-EU markets had also risen to the fore Educational Foundation (PAGEV) and head of Aksoy by then, with Iraq second, the UAE fourth, Russia Plastik, argues: “The biggest problem the plastics fifth, Libya sixth and Azerbaijan seventh. industry faces is the cost of capital. We need foreign Subject to the vagaries of exchange rates and raw investment here, notably in the petrochemicals sec- material prices, international trade figures are always tor.” volatile. Many in the industry argue, however, that The business climate in Turkey is unrecognisable there are wider political and economic drivers when compared to ten or 20 years ago. Property behind the growing eminence of Turkey’s regional rights have been strengthened and foreigners are trade partners. free to set up and register companies---- without a “The UK government has reacted more positive- local sponsor. In principle there can be no discrimi- ly to Turkey’s EU aspirations compared to the nation between foreign and domestically owned German administration, with a consequential effect companies and there are some 80 bilateral invest- on business sentiment,” says Murat Akyuz, presi- ment agreements and over 70 double taxation dent of the Istanbul Chemicals & Chemical Products treaties in place with other countries.