TURKEY. Background Note

Transcription

1 TURKEY Background Note TURKEY ECONOMY- AN OVERVIEW The Turkish economy has shown remarkable performance with its steady growth over the last eight years. A sound macroeconomic strategy in combination with prudent fiscal policies and major structural reforms in effect since 2002, has integrated the Turkish economy into the globalized world, while transforming the country into one of the major recipients of FDI in its region. The structural reforms, hastened by Turkey s EU accession process, have paved the way for comprehensive changes in a number of areas. The main objectives of these efforts were to increase the role of the private sector in the Turkish economy, to enhance the efficiency and resiliency of the financial sector, and to place the social security system on a more solid foundation. Turkey's economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 30% of employment. An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middleclass entrepreneurs is adding dynamism to the economy. Turkey's traditional textiles and clothing sectors still account for one-third of industrial employment, despite stiff competition in international markets that resulted from the end of the global quota system. Other sectors, notably the automotive, construction, and electronics industries, are rising in importance and have surpassed textiles within Turkey's export mix. Main Highlight(s) The Turkish economy has been growing in recent years. Turkey's well-regulated financial markets and banking system weathered the global financial crisis and GDP rebounded strongly to 7.3% in In 2011, it s GDP grew by 8.5%. By 2050, the country's economy is predicted to become the third largest in Europe -- and the ninth largest in the world. Textiles and clothing sector accounts for one-third of industrial employment. Turkey's textile and apparel industry is set to play an important role in helping the country to achieve this ranking and meet the government's ambitious export target of US$500 bn for The capacity to produce such products, coupled with Turkey's geographical proximity to major export markets, puts the country in a strong position to promote exports and attract inward foreign direct investment (FDI). An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication. Automotive, construction, and electronics industries, are rising in importance. The stock value of FDI stood at $174 billion at year-end EU membership is expected to boost Turkey's attractiveness to foreign investors. By 2015, experts believe a significant change will occur, putting the GDP over USD One trillion. Page 1

2 Oil began to flow through the Baku-Tbilisi-Ceyhan pipeline in May 2006, marking a major milestone that will bring up to 1 million barrels per day from the Caspian to market. Several gas pipelines also are being planned to help move Central Asian gas to Europe via Turkey, which will help address Turkey's dependence on energy imports over the long term. The stock value of FDI stood at $117 billion at year-end Inflows have slowed because of continuing economic turmoil in Europe, the source of much of Turkey's FDI. Further economic and judicial reforms and prospective EU membership are expected to boost Turkey's attractiveness to foreign investors. However, Turkey's relatively high current account deficit, uncertainty related to monetary policy-making, and political turmoil within Turkey's neighborhood leave the economy vulnerable to destabilizing shifts in investor confidence. Table 1: Key Economic Indicators Source: CIA World Factbook 2010(est.) 2011(est.) 2012(est.) GDP(PPP) $887.7 billion $960.5 billion $1.125 trillion (2012 est.) GDP (official $741.9 billion $783.1 billion (2012 est.) exchange rate) GDP composition by sector Agriculture: 25.5% Industry: 26.2% Services: 48.4% (2010) GDP- real growth rate Unemployme nt Rate Public Debt Inflation Rate (consumer prices) Exports Imports Major Sectors Agriculture: 9.4% Industry: 25.9% Services: 64.7% Agriculture: 8.8% Industry: 25.7% Services: 65.5% -4.7% 8.2% 3% (2012 est.) 14.1% 12.4% 9% (2012 est.) 46.3% of GDP 48.1% of GDP 40.4% of GDP (2012 est.) 6.3% 8.7% 9.1% (2012 est.) $109.6 billion $117.4 billion $154.2 billion (2012 est.) $134.5 billion $166.3 billion $225.6 billion (2012 est.) Textiles and clothing Turkey is a world leader in textiles and clothing. The textile industry accounts for more than 25% of the overall exports of the country. Turkey is the world s 7th largest cotton-lint producer, with almost 1 million tons of annual production. Turkey is also the global leader in organic Page 2

3 cotton production. More than 40,000 companies operate in the textile and clothing industry. The total annual production volumes of both these sectors exceed $30 billion. The textile industry is based out of cities like Izmir, Bursa, Ankara, Kayseri and Adana. Energy Turkey s energy industry, which supplied 40,000 MW annually, is dominated by hydro, natural, gas and coal resources. The share of public and private enterprises in this production is 58% and 18%, respectively. According to the 2020 projections, production capacity needs to be increased to 50,000 MW, which requires an investment of $4 to $5 billion annually. About 20% of Turkey s annual imports in 2007 had been energy related. The Turkish energy industry relies heavily on imports from Russia. Iran is Turkey s second largest energy supplier. Due to oil prospects in the Black Sea, companies like BP-Chevron, ExxonMobil and Petro Brass have collaborated with Turkish petroleum corporations in the Black Sea region. Automotive Turkey has a thriving automotive sector and is the 16th largest automobile manufacturer in the world and a leader in Europe. In 2007, the production capacity of the Turkish automotive industry was more than 1.3 million vehicles. Turkey aims to increase its production to 2 million units by 2015, to export 1.5 million units and generate $40 billion from the exports. The country also aims to be the third largest automobile producing country in Europe and tenth largest in the world. Shipbuilding Turkey is also one of the leading shipbuilding nations; in 2007 Turkish shipyards ranked 4 th in the world (behind China, South Korea and Japan) in terms of the number of ordered ships, and also 4th in the world (behind Italy, USA and Canada) in terms of the number of ordered mega yachts. Construction and contracting sector The Turkish construction and contracting industry is one of the leading, most competitive and dynamic construction/contracting industries in the world. In 2009 a total of 33 Turkish construction/contracting companies were selected for the Top International Contractors List prepared by the Engineering News-Record, which made the Turkish construction/contracting industry the world's 2 nd largest, ranking behind those of China. Tourism sector Tourism is one of the most dynamic and fastest developing sectors in Turkey. According to travel agencies TUI AG and Thomas Cook, 11 of the 100 best hotels of the world are located in Turkey. In 2005, there were 24,124,501 visitors to the country, who contributed $18.2 billion to Turkey's revenues, with an average expenditure of $679 per tourist. In 2008, the number of visitors rose to 30,929,192, who contributed $21.9 billion to Turkey's revenues. Over the years, Turkey has emerged as a popular tourist destination for many Europeans, competing with Page 3

4 Greece, Italy and Spain. Resorts in provinces such as Antalya and Muğla (which are located on the Turkish Riviera) have become very popular among tourists. INDIA - TURKEY BILATERAL ECONOMIC RELATIONS Bilateral relations are friendly and cordial and are steadily improving. Turkey is committed to secularism and democratic principles. Indian economic progress and technological advancement have been instrumental in the recent upsurge in Turkish interest towards India also given that both are G-20 members with progressive economies. Institutional arrangements in terms of Joint Commission for Economic and Technical Cooperation (JCETC), Joint Business Council (JBC) exist between the two countries. Last meetings of JCETC and JBC were held in Turkey in September Turkey and India are signatories to agreements such as avoidance of double taxation (DTA), reciprocal protection and promotion of investments (BIPA), S&T, maritime, agricultural and tourism cooperation. The JSG formed for examining feasibility of an FTA between the two countries is in the final stages of submitting its report to the two governments. Economic and commercial relations between India and Turkey have been growing steadily. Turkey is India's 40 th largest trading partner globally and the 40 th largest investor in India. Table 2: India-Turkey Bilateral Trade (in US$ Million) Year India s Export India s Import % Change (YoY) Total Trade India s Export India s Import Source: CGI Istanbul Total Trade , (Apr- Sep) Page 4

5 Recent Bilateral Trade and Investment Trends The last few years have seen substantial growth in trade relations between the two countries. The balance of trade has been in India s favour since long. Bilateral trade has been impacted negatively as a result of the financial/economic crisis of The trade which was showing signs of healthy growth, contracted by 23.28% in 2009, but for 2010 it has registered a volume of US $ 4.01 billion ( % yoy growth). Fig 3: India - Turkey Bilateral Trade US $ Million Source: CGI Istanbul India s Export India s Import Total Trade India s Exports to Turkey India s exports to Turkey include petroleum products, vaccines, cotton yarn, synthetic yarn, organic dyes, organic chemicals, denim, steel, granite, antibiotics, carpets, tobacco, cars, sesame seed, TV CRTs, mobile handsets, clothing and apparel. Turkey s exports to India include poppy seeds, auto components, marble, textile machinery, denim, carpets, cumin seeds, copper ores and concentrates, flat rolled iron and steel and gold. Turkish Investments in India Turkey ranks 40 th overall in terms of FDI Inflows to India with cumulative direct investment into India amounting to US $ 45 million (April 2000 April 2011) accounting for 0.03% of total FDI inflows. Indian Investments in Turkey More than 150 companies with Indian capital have registered businesses in Turkey in the form of joint ventures, trade and representative offices. They include M/s Polyplex, GMR Page 5

6 Infrastructure, TATA Motors, Mahindra & Mahindra, Reliance, Ispat, Aditya Birla Group, Tractors and Farm Equipment Ltd., Jain Irrigation, Wipro and Dabur. Major Bilateral Agreements India and Turkey have signed many Agreements over the years to strengthen and deepen their economic cooperation. The Bilateral Trade Agreement between India and Turkey was signed in This was followed by an Agreement on setting up an India Turkey Joint Committee on Economic and Technical Cooperation (JCETC) in Under this Agreement, JCETC meetings are held alternately in India and Turkey. The Ninth Session was held in Ankara on Sept 8, Establishment of a Joint Study Group (JSG) to explore the possibility of concluding a bilateral FTA was announced at this meeting. During his visit to Turkey on Sept 7-8, 2009, the Indian Co-Chair of JCETC Shri Anand Sharma, Minister for Commerce and Industry met the Turkish State Minister for Foreign Trade Zafer Çağlayan, Turkish Minister for Trade and Industry Nihat Ergun and the Turkish Co-Chair of JCETC State Minister Mehmet Aydın, on the sidelines of the ninth session. He also addressed Indian and Turkish businessmen in an event jointly organised by Federation of Indian Chamber of Commerce and Industry (FICCI) and the Turkish Union of Chambers and Commodity Exchanges (TOBB) on Sept 7, 2009 in Ankara. India-Turkey Joint Business Council (JBC) between Federation of Indian Chambers of Commerce and Industry (FICCI) and Foreign Economic Relations Board of Turkey (DEIK) was set up in The last session of JBC was held in Istanbul on September 9, During the visit of the Turkish Foreign Minister Ali Babacan in February 2008, FICCI and TOBB signed a memorandum of understanding to enhance cooperation. During visit of the Indian Prime Minister Vajpayee to Turkey in September 2003, it was also decided to set up an Indo-Turkish Joint Working Group on Trade and Economic Issues (JWG). The first meeting of JWG was held in New Delhi in October The second meeting of JWG was held in Ankara on September 7, During the Turkish Prime Minister Turgut Özal s visit to India in 1986, the bilateral Civil Aviation agreement was signed. Two Agreements one regarding avoidance of double taxation and the second on tourism were signed during the Turkish President Demirel s visit to India in Page 6