Mükerrem Aksoy, Commercial Counsellor of the Republic of Turkey to Romania: Turkey – Discover the potential

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October 29 marks the creation of the Turkish Republic in 1923 and it is a symbol of the beginning of a new era in our country’s history. Today, we are celebrating the 94th anniversary of our Republic with great joy and pride. The Republic is the fruit of the existential struggle of the Turkish nation, made under the leadership of great commander Atatürk.

Turkey’s economy has performed remarkably well with its steady growth over the past 14 years. A sound macroeconomic strategy, prudent fiscal policies, and major structural reforms have all contributed to the integration of Turkey’s economy into the globalized world while also transforming the country into one of the major recipients of FDI in its region

These reforms have increased the role of the private sector in Turkey’s economy, enhanced the efficiency and resiliency of the financial sector, and placed public finance on a more solid foundation. These reforms strengthened the macroeconomic fundamentals of the country, allowing the economy to grow at an annual average real GDP growth rate of 5.6 percent from 2003 to 2016. Turkey is 13th largest economy in the world. (GDP and PPP Prices, 2016.)

In the second quarter of 2017, Turkey was one of the fastest growing countries in the OECD and Europe, with a growth rate of 5.1 percent. Investors have been informed that Turkey is expected to continue this performance throughout the year. Ministry of Economy conveyed to investors that this performance will be retained for the rest of the year.

Growth rate, undoubtedly, is one of the most important indicators that a country’s economy is functioning well. The Turkish Economy managed to enjoy positive growth for 27 consecutive quarters until third quarter of 2016, while at the same time many of its peers’ economies felt increasing burdens day by day. We are happy to see that our economy is maintaining its steady pace of robust growth that it seized upon following the 2009 global crisis. The biggest proof of this is the figures from the previous two quarters. Thanks to growth by %4.2 in Q4 of 2016 and by 5.2 % in Q1 and 5.1% in Q2 of 2017.

In early June, the World Bank increased its 2017 growth projection for Turkey to 3.5 percent, up 0.8 percent from initial projection.

Comparing our growth performance with other countries, we see that we are in a favorable position. Turkey, in this period of political uncertainties, enjoyed a performance far beyond the EU’s and Eurozone’s growth rates, which were 2 % and 1.8 % respectively.

Turkish current account gap narrowed to $,1.24 billion in August 2017 from $,1.41 billion a year earlier and below market expectations of a $,1.40 billion shortfalls. It was the smallest current account deficit since October 2015, as the primary income deficit declined to $,0.68 billion from $,0.76 billion in August 2016; the services surplus widened to $,3.51 billion from $,2.87 billion; and the secondary income surplus rose to $,0.21 billion from $,0.07 billion. Meanwhile, the goods deficit grew to $,4.28 billion from $,3.59 billion in the previous year. Considering the first eight months of the year, the current account gap rose to $,27.23 billion from $,22.89 billion in the same period of 2016. Current Account in Turkey averaged -1360.37 $, Million from 1984 until 2017, reaching an all-time high of 1132 $, Million in September of 1998 and a record low of -9407 $, Million in March of 2011.

Turkey is also a country whose growth performance has had a positive impact on the labor market. The unemployment rate in Turkey was unchanged at 10.2 percent in June of 2017, the same as in July of 2016. Non-farm unemployment was also steady at 12.3 percent. Among those aged 15 to 24 years old, the jobless rate increased to 20.6 percent from 19.4 percent. Unemployment Rate in Turkey averaged 10.03 percent from 2005 until 2017, reaching an all-time high of 14.80 percent in February of 2009 and a record low of 7.30 percent in June of 2012.

Turkey continues to be an attractive place in terms of investment, and there will be no disruption to the reforms and projects we will implement to make it an even better place to invest.  In fact, we will work even harder to strengthen our economy thanks to the solidarity demonstrated against the coup-plotters and these projects and reforms will be implemented even more quickly.

Our focus in all of these efforts is for a new push in the area of exports.  Therefore, we will mobilize all of our forces to support investors, producers, employers and exporters, just as we have done in the past.

However, Turkey has no fund or a similar resource to achieve its goal of becoming one of the world’s top economies, which is a serious handicap, so it established the “Turkish Asset Fund” (Türkiye Varlık Fonu) on 26 August 2016 to overcome difficulties in this regard. This fund will not only facilitate the financing of strategic investment projects in our country, but it will also provide depth to our capital markets. The Asset Fund is a very important and strategic vehicle for taking advantage of the potential that Turkey has possessed in the form of long-term income, but has been unable to leverage until now. The Fund will be structured based on similar examples around the world, and as a significant foreign policy instrument, it will give Turkey a greater voice and more maneuverability in the international arena. Instead of going to other countries, financing institutions, and agencies and asking for their resources to finance the joint ventures we have undertaken with countries, we will use our own capital to execute projects that we view as strategic.

Turkey’s economic success story did not go unnoticed, and our country has become a major destination for many foreign investors. Thanks to its ability to retain stability through difficult times, Turkey is the gateway for opportunities and potential for both domestic and foreign investors.

Between 1984 and 2002, total Foreign Direct Investment amounted $,14.6 billion; from 2003 until 2016, this figure increased significantly more than tenfold to $,179.7 billion. This a proof that Turkey has become a prominent destination for foreign investors.

In the first quarter of 2017, International Direct Investment (FDI) inflows to Turkey amounted as $, 2,803 million. This shows an increase by 1.85% compared to the same period of last year.

In the first quarter of 2017, out of the $,2.8 billion total FDI inflows to Turkey, $,1.598 million was net foreign capital inflows, $,1 billion constituted real estate purchases by nonresidents, respectively. In other words, real estate purchased by non-residents had an important share, as of 48% in the total inflows. Inflows from real estate purchases had same trend in 2017 as last year.

According to the World Investments Report 2017, prepared by the United Nations Conference on trade and Development (UNCTAD), Turkey has noticeably increased foreign direct investments (FDI) over the last 15 years, attracting $,12.3 billion in 2016 alone. The FDI inflows reflect the country’s diversified industrial structure, with manufacturing accounting for around half of the total FDI. The report also highlighted the reforms that have been implemented and the incentives that have been introduced in Turkey in recent years to attract investments, particularly incentives in R&D and those granting citizenship to foreigners under certain eligibility conditions.

According to the report, Turkey cemented its position as the most active country vying for FDI inflows in 2016 as it signed seven international investment agreements in the area of mutual encouragement and protection of investment. Canada, Morocco and United Arab Emirates followed Turkey with four international investment agreements each.

We are not only attracting foreign investors, but also investing in foreign countries. Today, the total value of Turkey’s foreign investments stands at $,31 billion. We see Turkish investors treading the globe and creating their own stories in every corner of world.

One of the most important things we have done recently is our new incentive system, which will be a system that helps use public resources more efficiently while satisfying investors and accelerating investments by making it possible to accurately identify needs on an investment project basis and provide direct, need-based state support.  The new regulation will meet our country’s current and future needs, ensure supply security, reduce foreign dependency, and help achieve our technological transformation with “project-based” high added-value investments that are innovative and R&D intensive.

All of these developments clearly demonstrate that our economy is on a good trajectory. Obviously, there are aspects of our economy that we wish were better, and we shall continue to strive to improve these areas. In the future, we hope to see a Turkish economy that grows much faster and employs a larger number of people due to the implementation of our reform packages.

Designed to contribute to the 2023 vision, which is a set of goals to be reached by the Republic of Turkey’s centennial in 2023, these projects represent the culmination of the giant leap taken in the last decade towards a well-developed and prosperous Turkey that seeks to count itself among the world’s top 10 economies.

Exceeding $,100 billion in total worth, the highways, bridges, airports, power plants and other mega projects remain on schedule. In addition to infrastructure related projects, rapid progress is also being made in the development of domestically designed and produced automobiles and aircraft.

International investors continue to find Turkey a center of attraction with its completion of mega projects in recent years and more on the agenda. Istanbul’s Third Airport and Airport City, which is to be established around the airport alongside the Eurasia Tunnel, Istanbul’s Third Bridge, the Marmaray, and the three-story Grand Istanbul Tunnel, which will connect Europe and Asia under the sea, are just some of those projects. At the same time, as Turkey undergoes a great urban transformation, districts such as Beyoğlu in Istanbul have entered into a great period of investment and gentrification, while many provinces, including Antalya, Balıkesir, Hatay, and Kocaeli, are benefiting from the revitalization.

In 2015-16 the world’s total investment in infrastructural PPP projects was $,111.6 billion of which US Dolars44.7 billion was invested in Turkey. In another word 40% of global investment came from Turkish PPPs. In 2015 Turkey made the largest single investment commitment ever recorded in the PPI database which is the 3rd International Airport in Istanbul. The investment amounted to US Dolars35.6 billion.

Since 2015, Turkey many PPP projects, most of them are greenfield projects, have been implemented in the energy, transport, and healthcare sectors. According to data in 2015-2016, the number of projects in operation was 168 and 31 are financially closed or under construction. This means that Turkey has a total of 199 PPP projects. Most of these projects are delivered by national authorities. Well known projects are the Eurasia Tunnel, 3rd Bridge and as mentioned before the 3rd Airport. Many of these projects are integrated healthcare campus projects. Several have already reached financial closure and many have been already tendered.

Mega Projects

Marmaray:  Marmaray is an undersea railway tunnel linking the Asian and European sides of Istanbul. Marmaray makes a significant contribution to Istanbul’s railway network, with connections to the Istanbul metro and the high-speed railway line between Istanbul and Ankara. Marmaray has carried more than 120 million passengers since its inauguration.

Third Bosphorus Bridge and North Marmara Highway: Istanbul’s third Bosphorus bridge (Yavuz Sultan Selim Bridge) links Istanbul’s European and Asian sides. It was designed as a hybrid bridge, and as such holds the distinction as the world’s widest and longest combined road and rail bridge. The bridge is part of the North Marmara Highway project, stretching from Adapazarı, Sakarya to Tekirdag. Once fully operational, the project will further ease the burden on the existing two bridges spanning the Bosphorus and provide a transit corridor for freight transportation that bypasses the busy city center. The project has created around 6,000 jobs and the construction activities have added an annual TRY 1.75 billion to the economy.

Eurasia Tunnel: The tunnel enables motor vehicles to travel between Asia and Europe via a highway tunnel running underneath the Marmara seabed. The 3.34 km-long two-deck undersea tunnel will have a daily capacity of 120,000 vehicles and will significantly cut the distance between Kazlicesme on the European side and Goztepe on the Asian side of Istanbul. It was opened in 2016. The fuel saving with the tunnel is around 38 million liters annually. The project, with an employment of 1,800 people, will also decrease carbon emissions by 82,000 tons a year.

Third Airport in Istanbul A joint venture of Turkish companies won a tender for the third Istanbul airport in May 2013. The companies will pay the government EUR 22.1 billion plus taxes for the right to operate the airport for 25 years starting in 2017. The project, which is expected to cost around EUR 33 billion with all investments and annual rent, is the largest project in the country so far. Located on the northwest of Istanbul’s European side, the 150-million-passenger capacity air terminal will be connected to the Third Bosphorus Bridge via the North Marmara Highway. The airport will play a vital role in making Istanbul a global air travel hub. The airport’s first stage will incorporate two runways and a terminal with an annual capacity of 90-million passengers. This first stage is due to be operational in 2018.

Gebze-Orhangazi-Izmir Highway and Izmit Bay Bridge: The project shortens the overland travel distance between Istanbul and Turkey’s third largest city, Izmir. This project features the 3-km long Izmit Bay Bridge (Osman Gazi Bridge), the fourth largest suspension bridge in the world.

Three-Storey Grand Istanbul Tunnel: The three-storey subsea tunnel will connect Istanbul’s Asian and European sides under the Bosphorus and will feature a railway sandwiched between two highways. The 6.5-km-long tunnel will sit 110 m below sea level and will be the first of its kind in the world. The tunnel will not only reduce the traffic load on the bridges spanning the Bosphorus, but will also maximize time savings.

Canakkale Suspension Bridge: This bridge will be located at the western end of the Sea of Marmara, close to the province of Canakkale. It will span the Dardanelles and will become the longest suspension bridge in the world, with a center span longer than 2 km once completed. The bridge will be part of the Canakkale-Tekirdag-Kinali-Balikesir Highway and feature three lanes in each direction as well as train tracks.

Canal Istanbul: The canal will be an artificial sea-level waterway that will run parallel to the Bosphorus, connecting the Black Sea with the Sea of Marmara. 47 km in length and 150 meters wide, the canal will provide relief to naval traffic in the Bosphorus, particularly tanker traffic. The canal will be able to handle 160 vessels a day and is set to offer many investment opportunities since there will be huge growth potential in its immediate vicinity.

Gebze-Halkali Commuter Rail Upgrading: The renovated train links that will connect Istanbul’s outskirts on the European side with those on the Asian side are expected to be completed in 2018. The EUR 1 billion project has created jobs for over 800 people and has contributed around TRY 500 million to the economy.

Baku-Tbilisi-Kars Railway: This railway will be the third largest project made jointly by Azerbaijan, Georgia and Turkey, following two major energy pipeline projects. Once the railway project is complete, the line will be able to carry a total of 1 million passengers and 6.5 million tons of cargo annually. The capacity of the railway is expected to increase to 3 million passengers and 17 million tons of cargo by 2034. The project has created 8,237 jobs and has made a contribution of around TRY 988 million to the economy so far.

Ovit Tunnel: The construction of a new highway tunnel in the northeastern region of Turkey, which is planned to be one of longest tunnels in the world, is invigorating the commercial prospects of local investors, both regionally and internationally. The tunnel is set to cut through Ovit Mountain, which is located between Ikizdere, a district in the northwestern province of Rize, and the eastern province of Erzurum’s Ispir district. The dual-tunnel project will eventually exceed 14.7 km, including the linking roads around it.

 With regard to the maritime sector, important projects include the Candarli Port on the Aegean Sea, the Mersin Second Container Port on the Mediterranean Sea, and the Filyos Port on the Black Sea. With these projects, one in each of the three seas surrounding Turkey, Turkey’s current container handling capacity is expected to triple.

Turkish overseas contracting services sector is among the most sophisticated service sectors of Turkey with having undertaken more than 9,000 projects in 118 different countries with the value of 347,1 billion US Dollars since 1972.

This success might be attributed to Turkey’s competitive advantages; including its qualified human resource, enhanced technical knowledge, wide business experience, strong discipline, ability of adaptation to new technologies and innovations alongside its strong political relations and cultural proximity to the neighboring countries, and its determination to sustain coordination and cooperation between public institutions and private sector.

Turkish contractors have successfully completed big and extensive milestone projects especially in the Commonwealth of Independent States, the Middle East and North Africa in time.

Turkish Contactors have undertaken 49,8 billion US Dollars’ worth of project value between the years 1972 and 2002, in 30-year time. After the year 2002, the international project value has reached to 297,3 billion US Dollars. The value of the projects undertaken in the last 14 years is 86% of all projects. Similarly, while annual project value was 2,9 billion US Dollars in 2001, it reached to 30 billion US Dollars in 2012 and 2013.

The improvement is not only quantitative but also qualitative. This can be extracted from the change of average value of the projects in years. The average value of a project has increased from 21 million US Dollars in 2002 up to 89 million US Dollars in 2015 and 71 million US Dollars in 2016.

This transformation indicates that Turkish Contactors are now more capable of carrying out larger and more value-added projects such as airports, subways, industrial plants, natural gas and petroleum refineries, highways and energy stations.

The achievements of Turkish technical consultancy and engineering firms are also highly appreciated in the international arena, thanks to their contemporary visions and local know-how.

According to the list showing the 250 largest construction companies of the world announced annually by the international construction sector’s leading magazine, Engineering News Record (ENR), based on the total value of projects undertaken in the previous year on international level, Turkish overseas contracting companies were in the 2nd place upon the number of national companies and in the 7th place upon the national overall revenue in the list.

We set our goal as to increase the yearly value undertaken projects by Turkish companies to 100 billion US Dollars in 2023.

That is why, we stick to our vision of: “Creating a Turkish construction sector that is leader in its region and respected around the world.”

Governments and international companies can contact us to find Turkish contractors and engineering firms for their projects or as partners in their joint ventures in those regions where Turkish contractors have a strong local know-how and experience.

Turkey is the second country in the world in contracting and engineering services by giving 46 companies in the 250 list.

We must take full advantage of Turkey’s position in this respect. As the famous philosopher İbni Haldun said, “geography is our destiny,” and we must carefully consider what this destiny will mean for us. Some of the countries in Balkan, Africa and the Middle East, with whom we share a long history, also comprise our traditional markets. Our contractors execute numerous projects in these markets, and our exporters can also be leaders in these markets. Our companies have achieved some very impressive accomplishments both in terms of investment and contractor projects. But we must be clear about one thing. Some of the countries that are traditional markets for us are viewed as risky by international financial institutions, and funding requests made by our companies either for investment or exports are either rejected or come at a very high price. Our Asset Fund will provide support to facilitate the business our companies do.

According to Turkish official statistics, there are around 60 companies with an investment of 152 million dollar. These numbers increase to 14.000 with the small Turkish business of Turkish citizens resident in Romania, as well as Turkey originated investment via third countries. Their current market values are over 6 billion $. These numbers make Turkey third foreign investor country in Romania. Arctic, Credit Europe Bank, Eti, Ülker, Sütaş, Şişecam, Kardemir, Martur, Kombassan (URB) , Yıldız Entegre and Kastamonu Entegre (prolemn) are some of the Turkish originated companies in Romania. These investments are active in a wide range of sectors, including finance, banking, white good manufacturing, industry, glass production, wood production, construction, real estate, food processing, health, and media. Our active business community is a strong force in bolstering our relations. As our economies continue to grow, Turkish investments in Romania will grow as well.

On the other hand, there are 204 Romanian firms operating in Turkey and the cumulative investment value of these firms is 17 Million Dollars.

Our focus in all of these efforts is for a new push in the area of exports.  Therefore, we will mobilize all of our forces to support investors, producers, employers and exporters, just as we have done in the past.

The trade volume between our countries reached to 4.4 billion Euro in 2016. In 2016, our exports to Romania were 2.6 billion Euro, while our imports from Romania were 1.8 billion Euro.

Besides, contracting and engineering service is another sector having a great potential between our countries. Romania is one of the leading countries in the EU in which Turkish contractors actively operate. Until today, Turkish contractors have realized 165 projects in Romania with a total value of 3.5 billion $.

I would like to re-emphasize my conviction for the bright future of Turkish-Romanian bilateral relations in all fields. I have no doubt that we will achieve the desired level of economic and trade cooperation between our countries before the 100th anniversary of the Turkish Republic.