The EU still matters to Turkey. Does Turkey still matter to the EU?

Transcription

1 tepav Economic Policy Research Foundation of Turkey The EU still matters to Turkey. Does Turkey still matter to the EU? Güven SAK Prague, 22 October 2012

2 Value chains in the EU are highly integrated across countries Share of manufactured inputs that are provided from own region, EU-27 vs ASEAN 80% countries, as percentage of total manufactured inputs import, % 60% 50% 40% 62% 70% 71% 67% 30% 20% 13% 17% 19% 22% 10% 0% Source: Comtrade and TEPAV Calculations EU27 ASEAN

3 Role of Turkey for EU supply chains getting more important Share of manufactured inputs that are provided from Turkey in EU s total manufactured inputs import (%) 1,20% 1,13% 1,00% 0,80% 0,60% 0,65% 0,87% 0,40% 0,20% 0,00% Source: WITS

4 Does Turkey still matter to the EU? Slide 4 Framework Customs Union and EU accession process has already triggered Turkey s transformation Turkey reached 52 % of the EU per capita income much earlier than expected Resilience due to vibrant domestic demand Time for new arguments Deepening B-2-B partnerships Toward a green, urbane, skilled and a totally connected Turkey

5 Does Turkey still matter to the EU? Slide 5 Reflection of EU enlargement on Turkey s trade: Connectivity increased Source: CEPII BACI Change in value of Turkey s trade with Europe regions, billion USD, 1995 vs ,5 bil. USD 13,4 bil. USD %63 %69 82,9 bil. USD %22 %6 %18 %54 %24 %5 %15 %56 Imports Exports Imports Exports ,0 bil. USD Western Europe Eastern Europe Northern Europe Southern Europe

6 Does Turkey still matter to the EU? Slide 6 In 1990, vis-a-vis EU, Turkey was less diversified and less sophisticated Composition of exports to world, 1990 (most important 5 products) 70% 60% 50% 40% 30% 20% 10% 0% Source: Comtrade 31,7% (423,8 bil. USD) 4,57% 4,89% 5,53% 5,70% 11,01% 5,31% 5,41% 5,45% 5,46% 7,02% 3,41% 11,11% 11,53% 13,40% 25,70% EU15 EU12 Turkey Manufactured articles Specialized machinery Electrical machinery Industrial machines 28,7% (8,2 bil. USD) Electrical machinery Road vehicles Petroleum and products Non-ferrous metals Iron and steel 65,2% (8,4 bil. USD) Tobacco and products Textile yarn and fabrics Iron and steel Vegetables and fruit Apparel and clothing

7 Does Turkey still matter to the EU? Slide 7 Today, Turkey s export structure is as diversified as the EU-12, thanks to EU process Composition of exports to world, 2010 (most important 5 products) 70% 60% 50% 40% 30% 20% 10% 0% -10% 33,7% (1,4 tril. USD) 5,06% 5,46% 5,96% 6,81% 39,4% (227 bil. USD) 47,2% (53 bil. USD) 6,57% 3,62% 7,97% 4,34% 8,81% 9,29% 9,37% 11,35% 10,40% 13,25% 12,03% EU15 EU12 Turkey Source: Comtrade Petroleum and products Industrial machinery Electrical machinery Medical and pharmaceuticals Power machinery Industrial machinery Electrical machinery Telecom. and sound sys. Road vehicles Electrical machinery Textile yarn and fabrics Iron and steel Apparel and clothing Road vehicles

8 Does Turkey still matter to the EU? Slide scenarios were expecting 50 % income convergence in 2020, came earlier than expected GDP per capita PPS (index, EU-27 = 100), EU-27 Turkey Source: Eurostat

9 Does Turkey still matter to the EU? Slide 9 But still, convergence could have been faster (if Turkey had the EU average female labor participation, we would reach 70% of EU income) GDP per capita PPS (index, EU-27 = 100), EU-27 Turkey Korea Source: Eurostat

10 Does Turkey still matter to the EU? Slide 10 How did this happen? Role of the EU companies. Integrating into EU value chains? Foreign Direct Investment to Turkey, distribution by region of origin, % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 9,53% 15,37% 16,77% 13,47% 19,29% 30,95% 15,37% 5,81% 7,58% 9,14% 9,52% 3,20% 75,11% 78,82% 75,65% 77,39% 65,85% 71,19% * EU MENA ROW Source: CBRT

11 Does Turkey still matter to the EU? 11 Large European Firms in Turkey Financial services Services Insurance Industry industry Energy -Dexia (Denizbank) -NBG (Finansbank) -ING Bank (Oyakbank) -BNP Paribas (TEB) -UniCredit (Yapı Kredi) Retail Trade -Carrefour (French) -Metro/Real (German) -Tesco (UK) -BC Partners (UK) Food -Aviva (UK) -Axa (France) -Allianz (Germany) -UniCredito (Italy) -Groupama (France) -BNP Paribas (France) -Euroko (Netherlands) -Unilever (Dutch-UK) -Barilla (Italy) -Verbund (Austria) -CEZ (Czech) -Energo-Pro (Czech) -Essentium (Spain) -Gaz de France Suez (France) -RES (UK) -Italgen (Italy) Telecommunications -Vodafone (UK) Automotive -Mercedes Benz (Germany) -MAN (Germany) -Renault (France) -Fiat (Italy) Aviation -Airbus (France) -LISI (France) -Fokker Elmo (Dutch) Component Suppliers manufacture -Bosch (Germany) -Eldor (Italy) -Pirelli (Italy) -Bekaert (Belgium) Source: EU Delegation in Ankara

12 Does Turkey still matter to the EU? Slide 12 How about European SMEs? From 4000 in 2003 to today, impact of the EU process Distribution of EU companies in Turkey by country, 2012 Italy; 930; 6% France; 1031; 7% rest of EU; 4190; 27% Netherlan ds; 2007; 13% Germany; 4885; 32% UK; 2356; 15% There are EU companies in Turkey half of foreign firms. Before 2004, this number was only around 4000 How about EU-Turkish joint ventures in MENA markets? Source: Turkish Ministry of Economy and ISPAT

13 Chezch vs. Turkish value chain integration: Room for deepening in Turkey 3,00% Share of Turkey and Czech Republic in EU s import of manufactured industrial supplies 2,50% 2,45% 2,00% 2,01% 1,50% 1,00% 0,50% 0,65% 1,50% 0,87% 1,13% 0,00% Turkey Czech Republic Source: WITS

14 Does Turkey still matter to the EU? Slide 14 So, how Turkey still matters to the EU: We need to add more reasons Typical arguments Economy s dynamism Geopolitical role Contribution to energy security Young population New arguments? Green growth? Massive urban transformation? Education and training SME internationalization Already existing success stories

15 Does Turkey still matter to the EU? Slide 15 Realizing the energy potential is essential to Turkey s sustainable growth Turkey s renewables (ranking and utilization of potential) Rank Potential Utilization Wind Energy 3 rd in Europe 8,2% Hydro Energy 3 rd in Europe 32,4% Geothermal Energy 2 nd in Europe 4,7% Solar Energy 2 nd in Europe 0,7% Targets have been set to meet the increasing energy demand in a more efficient way: 30 % of total energy will be through renewables 20 % lower energy intensity Source: Zorlu Energy Group and TEPAV Calculations * Higher Council of Science and Technology, 2010

16 Does Turkey still matter to the EU? Slide 16 Accelerating green growth in 6 areas would capture $428 billion resource efficiency until 2030 Total resource benefits, cost/benefit perspective (2030, billion USD) Investment cost (billion USD) Food waste Motor systems Urban water leakage Industrial waste water Grid integration Advanced bio products Total Source: TEPAV calculations based on McKinsey Resource Revolution Report and the World Bank data

17 Does Turkey still matter to the EU? Slide 17 Urban transformation combined with existing demand is a new growth axis 30% energy saving potential Annual housing demand of 650 thousand dwellings 20% Housing expenditures as a % of GDP 15% 10% 5% 0% Urban transformation toward safer and enegy efficient buildings 7 million buildings to be examined, most will be rebuilt This equals to the number of dwellings in Netherlands alone (or Denmark and Hungary combined)

18 Does Turkey still matter to the EU? Slide 18 Untapped potential: Only Turkey s western regions are connected with EU Asia; 4% MENA; 12% MENA 18% Europe; 78% other 13% Asia 8% İstanbul USD 51 billion Kocaeli USD 10 billion Bursa USD 11.2 billion İzmir USD 6.6 billion Asia; 27% Other; 12% MENA; 10% Konya USD 1 billion Other 16% Asia 7% Europe; 51% Kayseri USD 1.1 billion Gaziantep USD 3.6 billion Other 17% MENA 33% Asia; 8% Asia 11% Other; 8% Europ e 39% Europe; 24% Europe 61% MENA 44% Europe 33% MENA; 60% Source: TURKSTAT

19 Does Turkey still matter to the EU? Slide 19 Turkey s regional disparities (worst in the EU) due to lack of connectivity Six-lane Expressways (red lines, as of 2010) and the change in the number of firms located in the provinces that had more than 5 firms in the largest 1000 industrial enterprise rating of the Istanbul Chamber of Industry by 2009, between 1997 and Tekirdağ + 6 İstanbul Kocaeli + 40 Sakarya + 4 Samsun + 8 Ordu + 1 Trabzon + 3 İzmir - 37 Balıkesir + 2 Manisa + 7 Bursa + 28 Bolu + 2 Eskişehir + 1 Ankara + 18 Konya + 12 Kayseri + 10 Adana + 7 K.Maraş + 11 Denizli 0 Antalya + 2 Karaman - 1 Mersin - 3 Hatay + 8 Gaziantep + 15

20 Does Turkey still matter to the EU? Slide 20 EU is Turkey s largest trading partner, but 100% Share of geographic regions in Turkey s exports 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 30,4% 25,9% 28,3% 27,9% 27,1% 28,1% 26,6% 13,2% 17,8% 23,7% 26,1% 26,6% 25,7% 35,3% 56,4% 56,3% 48,0% 46,0% 46,3% 46,2% 38,2% Others MENA EU-27 Source: Turkstat and TEPAV Calculations

21 Does Turkey still matter to the EU? Slide 21 EU crisis is structurally bad for Turkey: Permanent damage? Export Sophistication Index (EXPY) of Turkey, M7 Source: Turkstat and TEPAV Calculations

22 Germany: Melander Family Weekly food consumption: $500.07

23 Egypt: Ahmed Family Weekly food consumption: $68.53 Does Turkey still matter to the EU? Slide 23

24 Does Turkey still matter to the EU? Slide 24 Conclusions Turkey s EU accession looks to be stalled on both ends Time for thinking about the future Both Turkey and the EU have benefitted from the Turkish accession process It takes to two tango: Turkey is now ready Time to deepen B-2-B partnerships, more integration to EU value chains Greener, urbane, more connected, more skilled Turkey New constitution should be the starting point of the much needed structural reforms It s the economy, stupid.