The Report: Turkey 2012
Over the past decade, Turkey has experienced a number of important transitions that have led to demographic, economic and cultural transformation. These changes have made contemporary Turkey a regional focal point. The Turkish government is committed to balancing its regional and international interests with soft power and trade, while reducing the role of the West and NATO in setting policy. At the same time, Turkey has risen in prominence as a political and trade liaison for Western countries, and as Turkey’s ties with its Middle Eastern neighbours have grown stronger, its importance in Western politics has increased in kind.
Country Profile
The Country Profile contains a brief introduction to contemporary Turkey, with information about the geography, language, culture and history.
Explore chapterPolitics
The nation’s efforts over the past decade have seen slow progress on its bid to join the EU, however, Turkey has become vastly more prominent on an international scale. While still hamstrung by the Kurdish issue, the country’s “Good Neighbour” policy has made it a key partner in engagement with Western powers. Internally, the AKP is credited with providing the stability that has ushered in Turkey’s economic success in the past decade, and it is unlikely that the opposition will achieve success in the coming years without cooperation with the leading party. The Politics chapter contains interviews with Recep Tayyip Erdoğan, the Prime Minister of Turkey; Ahmet Davutoğlu, the Minister of Foreign Affairs; Rifat Hisarcıklıoğlu, the President of the Turkish Foreign Economic Relations Board (DEİK); and Joe Biden, the Vice-President of the US.
Explore chapterEconomy
The Turkish economy rebounded from the global crisis to become an island of economic stability between Europe and the MENA region. The 15th-largest economy globally and the 6th-largest in Europe has experienced an unprecedented transformation in the past decade, as per capita GDP has risen more than three times. While the economy is plagued by a structural current account deficit, due to dependence on foreign energy resources, the nation’s consumer population drove significant GDP growth of 11.9% in 2011, and each of the sectors dependent on consumer spending have seen significant returns. With increased interest in Turkey from the Gulf states and new partners in Africa and Southeast Asia, exporters are finding new alternatives to crisis-plagued Europe, ensuring the growth of foreign trade. The Economy chapter contains interviews with Ali Babacan, the Deputy Prime Minister responsible for the economy; Mustafa V. Koç, the Chairman of Koç Group; Hüsnü Özyeğin, the Chairman of FIBA Holding; and Jim O'Neill, the Chairman of Goldman Sachs Asset Management.
Explore chapterBanking
The Turkish banking sector learned hard lessons from the country’s financial crisis in 2001-02, and as a result, it was among the most stable and secure through the global financial crisis of 2008, remaining a safe harbour for foreign and domestic investors alike. The sector is very competitive, and profits declined during 2011 on the back of reduced margins from loans, however the stability of the sector remains one of the key elements driving the nation’s overall economic growth. With the nation rapidly developing, online and mobile services have enabled banks to attract more customers while developing adaptive offerings to utilise funds that are in flux. While tightening monetary policy has posed a distinct challenge to banks, they are readily adaptable, and the nation’s vast infrastructure and energy project pipeline offer significants opportunities for long-term returns. The chapter features interviews with Mehmet Şimşek, the Minister of Finance; Central Bank Governor Erdem Başçı; Adnan Bali, the CEO of Iş Bank; Hüseyin Aydin, the General Manager of Ziraat Bank; and Martin Spurling, the CEO of HSBC Turkey.
Explore chapterCapital Markets
Late 2011 and early 2012 saw dramatic changes in Turkey’s capital markets, with a rebranding campaign for the Istanbul Stock Exchange – to the Istanbul Bourse (IMKB) – as well as the appointment of new leadership. The IMKB was greatly affected by economic instability elsewhere around the world, because many of the markets key investors are foreigners. Under its new leadership, the bourse is focusing on restructuring – possibly as a private entity – and increasing the range of instruments to be used on the exchange. The IMKB is key to plans to make Istanbul a financial centre for the region, and as a new commercial code goes into effect in July 2012, minority shareholders and private equity traders are expecting to see their needs more readily met on the bourse. The chapter contains interviews with Vedat Akgiray, the President of the Capital Markets Board (SPK); Ibrahim Turhan, the Chairman of the IMKB Borsa Istanbul (IMKB); and Ilhami Koc, the CEO of Is Investment. Share analysis and data in the chapter were provided by OBG’s capital markets partner, Is Investment.
Explore chapterInsurance
The Insurance chapter examines Turkey’s relatively small insurance market, which has seen steady growth with the expansion of the nation’s GDP. The sector is dominated by banks, which provide the most accessible outlets for customers. The sector is extremely crowded and very competitive, which has made it difficult for insurers to grow their business. Despite the challenges, however, gross written premiums increased some 21.5% in 2011, to TL17.2bn (€7.3bn). The sector is dominated by the non-life business, however, the government has expressed its desire to grow the life segment, encourage savings, and thus create a much-needed pool of institutional money to finance current accounts. This could see important changes in the sector in the coming years.
Explore chapterEnergy
While the country has been poor in many energy resources, Turkey’s geography has been central to its economic success. To better leverage this advantage, the government is working with the private sector to make Turkey central to the transit and storage of natural gas and petroleum resources. Electricity demand steadily increased at about 8% per annum, and this is driving the formulation of policies that will see Turkey increase production from renewable resources. As energy resources constitute a significant portion of total imports, driving up the current account deficit, the government is also launching efforts to see domestic resources become a greater share of the energy mix. The Energy chapter contains interviews with Taner Yıldız, the Minister of Energy; Alexander Medvedev, the Director General of Gazprom Export; Tony Hayward, the CEO of Genel Energy; and Rovnag Abdullayev, the President and CEO of SOCAR.
Explore chapterIndustry
In defiance of global economic woes, Turkey managed to grow its export base, which resulted in an increase in industrial production of 9%. Turkey has been seen as an inexpensive alternative to European export products, mainly for regional buyers, and the country has hosted a booming trade in consumer goods. Vehicle sales rose by some 14%, steel production by 17%, and white goods sales jumped 19% in 2011. The government is currently focused on increasing investments into research and development (R&D), in the interest of making Turkey a value-added and high-tech exporter. Free zones and technology parks are central to this strategy, as are a raft of newly announced incentives for investors into R&D activities. The chapter has interviews with several of Turkey’s top industrial players, including Hüseyin Özdilek, the Chairman of Özdilek Holding; Tuncay Özilhan, the CEO of Anadolu Group; and Muharrem Dortkasli, the President & CEO of Turkish Aerospace Industries.
Explore chapterConstruction & Real Estate
The construction sector responded to the 2008-09 financial crisis with promising growth on the back of rising urbanisation and a newly announced urban renewal plan to secure the nation’s cities against earthquakes. Additionally, international interest in the country’s real estate investments, particularly from the Middle East, is helping to drive the sector. With a constantly rising need for affordable, mid-class, and luxury residential properties, as well as the prominence of mixed-use buildings and commercial properties, and a vast pipeline of infrastructure projects, the industry is expected to grow persistently in the course of the next decade. This chapter has interviews with Ahmet Haluk Karabel, the President of the Housing Development Administration of Turkey (TOKİ); Avni Çelik, the Chairman of Sinpaş; Erman Ilıcak, the Chairman of Rönesans Holding; and Anthony Khoi, the President and CEO of Aerium Turkey.
Explore chapterTransport
It has been even more clear to the Turkish transport industry in the past few years that an improved transit network is crucial to accommodate the nation’s population growth and urban migration. The government has made transportation a priority, and the private sector is responding. Turkish Airlines, the national flagship carrier, has been updating its network to improve the efficacy of both domestic and international connections. Turkey is also carrying this mission out on the ground, building new bridges and roads, and high-speed rail, while in the cities key upgrades are being made to public transport systems. Marine transportation, with collaboration from the private sector, is also being improved through the use of build-operate-transfer contracts. With the pipeline of investments set to tackle dramatic transport challenges, and improved communication between public and private sector, solutions to Turkey’s transport needs appear to be on their way. This chapter has interviews with Binali Yıldırım, the Minister of Transport, Communication and Maritime Affairs; and Temel Kotil, the CEO of Turkish Airlines.
Explore chapterAgriculture
Despite declines in the agriculture sector’s share of GDP since the early 2000s, Turkey still has prominent enough resources and the right climate for agriculture to be a leading sector of the economy. Turkey is the world’s seventh-biggest agricultural producer. While production is somewhat restrained by GMO regulations, the country remains ahead of EU competitors in this regard and is the Middle East’s biggest food exporter. Turkey attracts agricultural investment, with the significant potential for small-scale farms to consolidate on the back of the government’s investment plans. While agriculture’s contribution to the economy is still not ideal, because of trade- and production-distorting measures, with continued research and development there is substantial room to improve efficiency and output. The agriculture chapter has an interview with Recep Konuk, the President and Chairman of Konya Şeker.
Explore chapterTelecoms & IT
Having broken the monopoly of the Turkish Post Telegraph and Telephone Company (PTT) and with the privatisation of Turk Telekom, the prospects for telecoms in Turkey was radically altered. Rapid growth in internet use and the steady uptake of data-capable mobile phones has resulted in a convergence of telephony and internet services that is stressing telecoms infrastructure. However, firms are responding with the installation of fibre-optic lines to boost speed, while new offerings of apps and technologies are also a front for heavy competition. The government’s support offers technoparks incentives, including tax and duty exemptions, aid in construction and rent subsidies, in order to attract increased domestic and foreign investment. With sounder technology and infrastructure, more and more public services are being transported to the internet, and the emergence of a significant web culture is likewise driving new avenues for profit. This chapter has interviews with Gökhan Bozkurt, the CEO of TurkTelekom; and Süreyya Ciliv, the General Manager of Turkcell.
Explore chapterEducation & Health
The public school system, for which the state provides over 90% of the funding, has reportedly experienced steady improvement with a higher national budget and GDP percentage dedicated to education. However, the past decade has seen the private sector play a significantly larger role in education, particularly at the university and secondary levels, and increasingly among K-12 schools as well. The nation’s young population and under-supply of universities has driven private investment in the sector, and seen a dramatic increase in the number of institutions of higher learning. The government’s recent changes to public K-12 schooling – the so called 4+4+4 system passed into law in mid-May – have put the sector in the spotlight and anticipate more changes in quality and provision of education in coming years. This chapter has interviews with Zekeriya Yıldırım, the Chairman of the Darüşşafaka Foundation; and Dr Recep Akdağ, the Minister of Health.
Explore chapterTourism
New visa regulations have provided for greater access to Turkey by new market segments, and the recent turmoil in the MENA region has also improved the nation’s profile as a safer destination for tourists. Regional visitors, in particular, have constituted an increased share of the numbers. These factors, combined with a vast increase in the MICE segment, saw a nearly 10% increase in visitor figures in 2011. A government initiative to support efforts in the health tourism segment is creating a pipeline for new projects, and the high number of over-booked hotels in Istanbul has likewise driven rapid development of new venues. The chapter contains an interview with Kadir Topbas, the Mayor of Istanbul.
Explore chapterMedia & Advertising
Turkey’s young, tech-saavy population is driving a dramatic change in Turkish media, as content platforms and e-commerce have rapidly expanded. The sector is expected to see annual growth rates of over 13% in the 2011-15 period, and the move online is supported by vast expanses to internet infrastructure. This has seen major convergence in media outlets, as television, film and print producers are all working to grow their online offering. With new regulations also improving user access, the outlook for the sector is extremely positive and advertisers are focused on securing the multi-platform coverage necessary to secure their revenue streams. As digital marketing sweeps the sector, new players have also made a space for themselves and created a very competitive new industry. This chapter contains an interview with Hanzade Dogan Boyner, the Chairwoman of Dogan Online.
Explore chapterTax
An overview of the new Turkish Commercial Code, as well as important considerations on the tax environment and its ramifications for foreign firms. The accountancy chapter is written by OBG’s partner in Turkey, Deloitte, and contains an interview with Anthony Wilson, the partner in charge for Deloitte Turkey.
Explore chapterLegal Framework
New and upcoming legal changes are making it easier to conduct business in Turkey, and OBG’s legal partner, Herguner Bilgen Ozeke, provides an in-depth overview of the recent reforms to corporate law. The chapter also contains an interview with Ümit Hergüner, the managing partner of Hergüner Bilgen Özeke.
Explore chapterThe Guide
Turkey is a vast country with many things to see and do. The Guide contains highlights of some of the nation’s key attractions, as well as insights for new arrivals. Also contained in the guide are important phone numbers and hotel listings. The chapter also includes a feature article about the arts in Istanbul, with Bülent Eczacıbaşı, the Chairman of Eczacıbaşı Group and the Istanbul Foundation for Culture and the Arts (IKSV).
Explore chapterTable of Contents
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