In a not so distant past, France was a global superpower with far-reaching influence. The heritage of this history is a vast network of foreign representations and their “Economic Missions”, focusing on providing useful services to French entrepreneurs wishing to develop internationally. Amongst those services are their weekly Newsletters, distilling intelligence on strategic projects and evolutions in the local business environment.
Since they are usually written in French, we decided to translate for you the latest Newsletter issued by the French representation in Turkey. We would absolutely love to make those documents available to you systematically, because they provide very useful contextualized intelligence that often would remain confidential otherwise. Maybe we’ll do just that! Enjoy!
ECONOMIC NEWS FROM TURKEY
Weekly Economic & Financial Newsletter
(Issue #16 – Feb 13th 2017)
(Published with the authorisation of the Mission)
Agriculture – Energy – Transports – Industry & Innovation – Macro Economics & Finance
Agricultural and Agro-food Industries
According to the Minister of Food, Agriculture and Animal Husbandry, Mr Faruk Celic, Turkey will progressively reduce its livestock imports: “We have decided to introduce a National Program for Animal Husbandry in the frame of the country’s agricultural policy in order to put a term to exterior dependency. We must remember that the main input in Animal Husbandry is the fodder and that its raw materials are imported, which raises the price of the meat. Consequently, provinces like Erzurum, Kars and Agri have been specifically designated to become fooder-producing regions.”
The Turk Institute of Statistics (TUIK) has announced the results of livestock production for 2016: the bovine production in 2016 has grown 0.7% compared to the previous year (14.2 million total units), ovine production has shrunk of 1.7% (31 million units), as goats (0.7% – 10.3 million tons). Likewise, honey production in 2016 has dropped of 2.2% compared to last year (105 000 tons), as did dairy production (0.9% – 18.5 million tons).
The President of the Agricultural Chambers Union of Turkey (TZOB), Mr Semsi Bayraktar, observed that Turkey is a country rich in aromatic and medicinal herbs. “We can’t say that we are benefiting [from this wealth]. Turkey is the 18th country in the world out of 110 exporters of aromatic herbs. And it gets only USD 158.4 million of the 25 billion that the global market represents”. According to the breakdown of the exports communicated by Prtesident Bayraktar, Turkey exports non-transformed Thyme to 61 countries and transformed Thyme to 74 countries.
According to the Foundation for Turkey’s Nature, Turkey might have lost 2 million hectares of wetlands over the past 60 years, the equivalent of 1.5 times the size of the Marmara Sea. According to the President of the Foundation, Mrs Tugce Kilic, the measures taken to protect the wetlands by the various administrations since the 90’s haven’t been sufficient. She added that the reduction of the animal population living in these areas, especially birds, is a proof of the progressive decline of those wetlands.
The agreement for the funding of the TANAP project by the World Bank, with a credit of USD 400 million, has been signed with BOTAS (Natural Gas Public Company) on February 8th 2017 in Ankara at the occasion of a ceremony in presence of the Vice-President of the World Bank for Europe and Central-Asia, Mr Cyril Muller, the Minister of Energy and Natural Resources, Mr Berat Albayrak, and the General Director of BOTAS, Mr Burhan Ozcan. During the ceremony, Mr Albayrak announced that a team from the ministry is working on a “funding package” of USD 3 Billion to finance projects in 2017, which will implicate other international donors.
The Minister of Energy and Natural Resources, Mr Berat Albayrak, visited the construction site of the Akkuyu Nuclear Plant, which will be the first nuclear facility in Turkey. During his visit, he announced that this Plant will enjoy the highest security standards and that it will use the 3G+ technology. The Akkuyu Plant will be operational in 2023. With a cost of USD 20 Billion, it will produce 25 Billion KW/H per year, with a life span of 60 years.
In the frame of the Request for Proposals for the privatization of the EUAS Cayirhan 2 Coal Mine according to the TOR model, the lowest bid has been submitted by the Kolyn-Kalyon-Celikler consortium, who proposed a pricing at USD 60.04 per MWh. Following the approbation by the EMRA (Energy Market Regulation Authority) and by the Supreme Council for Privatization, the contract will be signed with the consortium which should invest around USD 1.1 Billion for the construction of a Power Plant with a capacity of 800 MW. The State will grant a 15 year purchase guarantee on the unit price.
In the frame of the Request for Proposals of the Ministry of Transports, Maritime Affairs and Communication, lauched by KGM (General Directorate for Roads) in November 2016 for the realization of a Highway of 75km on a BOT base, seven Turkish companies gained access to the specifications book. According to our sources, the companies show a lot of interest towards the RFP because of the advantages given to Turkish candidates. The last date for submission of offers is on the 15th of February 2017.
According to data from the Ministry of Transport, Maritime Affairs and Communication, the number of air travelers reached 173.6 Million in 2016 against 181.7 Million in 2015, a drop of 4.1%. The number of international travelers fell to 70.9 Million in 2016 against 84 in 2015, a drop of 15.5%. At the contrary, the number of domestic travelers has risen of 5.8% to reach 102.6 Million travelers in 2016, compared to 97.04 Million in 2015.
The Metropolitan Municipality of Istanbul (IBB) will soon launch a Request for Proposals over the acquisition of 200 subway vehicles which will be used on the future subway lines. Companies will be granted 40 days to prepare their offers, which will be priced in Turkish Pounds. The provisional amount of the RFQ is TRY 971.5 Million.
The Minister of Transport, Maritime Affairs and Communication, Mr Ahmet Arslan, announced: “The construction of the Ankara-Izmir High-Speed Line is undergoing. Our goal is to ensure a direct trip from Istanbul to Sivas coming end of 2018. The works on the Ankara-Izmir Line will end in 2019. The Konya-Karaman-Ulukisla-Mersin-Adana-Osmaniye-Gaziantep line is also under construction and the section between Konya and Karaman will be in service in 2019. The works on the design of the Samsun-Corum-Kirikkale project are finished. The building of the Ankara-Samsun line will begin as soon as the design will be done. The Request for Proposals for the realization of the Halkali-Kapikule line will be launched this year. This project could be funded by European Funds but also by the World Bank and the Islamic Development Bank.”
The Cable Car Line between Sarisu andTunektepe has been opened for service beginning of this month. The project, first proposed by the Prefect Mr Huseyin Ogutcen in 1970, has been realized 47 years later, under Mayor Menderes Turel’s mandate. The line is 1.7km long and the ticket costs TRY 15 per traveler for a round trip.
The Bus production subsidiary of the Sabanci group has delivered 22 vehicles to France in January. According to the International Sales Director, the ultimate goal of the company is to reach a volume of 5 000 vehicles in circulation in France, against 4 000 currently. TEMSA sold 179 buses to France in 2016.
The Spanish CAF submitted the lowest bid for the International Request for Proposals launched by the TCDD in order to provide the Turkish Railway with 10 new High-Speed Trains, before the French Alstom and the German Siemens. The TCDD should make its decision within a few weeks.
INDUSTRY AND INNOVATION
According to the data published by the Turkish Association of Steel Producers (TCUD), steel production has grown at the rate of 5% during 2016. Turkey would therefore rank in 2rd place of countries with the fastest-growing production, behind India and Ukraine.
The Turkish Health Minister announced his intention to grant purchase guarantees to companies contemplating investment in the production of pharmaceuticals in Turkey. Through these purchase guarantees, the authorities hope to increase the production capabilities of medicine in the country. They also aim to promote the local production of part of the imported medicine, which volume is estimated to TRY 700 Million. According to the media, the authorities are studying the counterpart of raising the price of pharmaceuticals.
According to the Exporter’s Assembly of Turkey (TIM), the automobile exports increased 36% in January 2017, compared to January 2016. Commenting the results in a televised interview, the Turkish Minister of Finance, Mr Naci Agbal, has reminded the audience of the importance of the sector, which represents 19.7% of Turkish exports. The minister also emphasized that the government is studying the implementation of measures to develop the sector. The government has adjusted the OTV tax on automobiles with a progressive effect in relation to the vehicle’s price.
Arven Pharmaceuticals, Daughter Company of the Toksoz conglomerate has established a partnership with the American giant General Electrics in order to increase the production capacity of its factory in the Kirklareli province. With this investment, the company hopes to reinforce its presence in the Bio-pharmaceutical industry.
MACROECONOMICS AND FINANCE
The Turkish government has announced the transfer of USD 8 Billion of assets to the sovereign fund created after the July 2016 events, endowed with TRY 50 Million until then. On the 5th and 6th of February, the Turkish government has transferred TRY 31 Billion through a law-decree, including participations from the Turkish Treasury in national big companies (Ziraat Bankasi, Borsa Istanbul, Turk Telekom, THY …). This fund could control, in time, more than USD 200 Billion, according to the Minister of Economy, Mr Nihat Zeybekci. The opposition has criticized the absence of control and audit over this fund, placed under the authority of the Prime Minister. The Economist, Mahfi Egilmez has noted that this transfer of public funding was dangerous on various levels: it mortgages the National Treasury by putting Turkish companies as a collateral and creates what he calls a “parallel budget”, reminding that such mechanisms were used in the 80’s and 90’s and contributed to a weakening of the budgetary discipline.
According to a PwC study, the center of gravity of the world’s economy should continue to move from mature countries towards emerging economies. Countries of the E7 (China, India, Brasil, Indonesia, Mexico, Russia and Turkey) will represent 50% of the global GDP, while countries of the G7 will withdraw to 20%. In this context, an economy like Turkey’s should climb to the 10th global rank in 2050, in front of France, who will fall to the 11th global rank.
President Erdogan has initiated a 3 days visit to Bahrein, Saudi Arabia and Qatar. Turkey enjoys privileged commercial relations with these 3 countries, especially over trade of fossil fuels. The country exported for USD 33 billion between 2007 (date of the implementation of a diplomatic strategy towards the Gulf countries) and 2016 towards these 3 countries, for a total commercial volume of USD 53 Billion. Saudi Arabia is the favorite partner, the UK having imported USD 27 Billion of Turkish goods during this period, amongst which USD 1.8 Billion for the year 2016. Between 2007 and 2016, commercial relations with Bahrein grew of 150%, reaching USD 193 Million of Turkish goods imported by the Kingdom in 2016. In Qatar, opportunities are huge: it is around USD 200 Billion of projects that are going to be implemented in the next years to come, 43% of which are related to infrastructures, a sector on which Turkey is very competitive.
According to the Daily Sabah, the Lover’s day will contribute up to TRY 9 Billion in the Turkish economy, so a 25% jump. The textile sector would be the one to beneficiate most from this manna: each couple member would spend between TRY 50 to 150 for his/her better half.
Many thanks to the French Embassy in Turkey for allowing us to share their Newsletter!
If you are a French-speaker, do not hesitate to consult their weekly publications at this address: http://www.tresor.economie.gouv.fr/pays/turquie
If not, keep on following our news or Check out our others articles about doing business in Turkey!