Recent acquisitions of Turkish agribusiness interests by Gulf investors have highlighted the sector’s opportunities for expansion in the wider region. However, further development of the industry faces challenges, including the need for additional farm labourers.
In early December 2013, Dubai-based private equity firm the Abraaj Group acquired an 80% stake in leading Turkish dairy company Yörsan. This was followed by an announcement in January that Bahrain’s Investcorp had purchased a significant minority stake in Turkish meat product Namet.
Yörsan is Turkey’s fourth-largest dairy, selling ayran, yoghurt, cheese and milk. Namet is a producer of fresh cut and processed red meat products including sucuk, pastrami and salami. All of its products are certified halal.
Gulf nations have for some time focused on foreign acquisitions in an effort to bolster their food security. Investors from Saudi Arabia and the UAE, for example, have purchased farmland in Africa and Asia.
Given that most Turkish food is produced in accordance with Muslim dietary laws, Turkey has a potentially untapped market waiting just to its south. According to Çagatay Yarar, a consultant specialising in agribusiness at Istanbul-based Goncu Consulting, annual food exports to the Middle East and the EU could total $150bn in five years.
A fragmented industry
Agriculture is a central part of the Turkish economy, accounting for around 10% of GDP and about a quarter of the labour force. Turkstat data show exports of food and live animals amounted to $14.1bn in 2013, up from $12.7bn in 2012. Major categories include fruits and vegetables ($6.9bn in 2013) and cereals ($2.7bn).
However, Turkey lacks the medium-sized farms needed to develop arable land for the expansion of agricultural exports, in part due to a history of government-sponsored urbanisation schemes that drew people from rural areas to cities.
While major Turkish business conglomerates like Zorlu Holding are investing in agribusiness projects, the industry is a decentralised collection of mostly small family-owned farms.
Land ownership laws make it difficult for non-Turkish investors to buy farmland. However, in other areas of the economy, the government has in recent years indicated an increased willingness to ease the way for international investors, including opening major infrastructure tenders to foreign bidders, suggesting that solutions could be found.
Looking for labour
According to Yarar, another hurdle to overcome is a need for additional labour. “In the quest for urbanisation, land usage was ignored. In practice this means there are simply not enough people working in the agricultural industry, because they are moving to urban areas,” he said.
One possible solution would be to hire Syrian refugees living in Turkey, but they must first be given the permission to work legally in the country.
According to official Turkish government figures, more than 700,000 Syrian refugees live in Turkey. Syrians with a valid passport have been able to enter the country with ease, thanks to a visa waiver agreement designed to encourage business between the two nations. Following the onset of violence in Syria, the Turkish government has established refugee facilities and provided health care services, but official work papers remain difficult for Syrians to acquire.
With a partial easing of the restrictions on refugees, the agribusiness sector could hire from the large pool of eligible workers and expand. Syrians are already working illegally on farms throughout Turkey, according to various media reports.
The government’s efforts over the past decade to rebrand Turkey as an attractive emerging market with an ideal geographic position have allowed for the steady flow of foreign capital into the country. However, further changes to the regulatory environment may be needed to assist in the creation of the medium-sized enterprises that could boost agricultural exports.