Continued economic progress in Turkey will require greater private investment in logistics services, which would help local firms enhance their competitiveness in the global marketplace through cost savings and faster order fulfilment. The government also has a key role to play by facilitating the development of transport infrastructure, establishing intermodal connections and issuing reforms that ease trade. At stake is business productivity – precisely what the country needs to achieve its long-term growth objectives.


By and large, Turkey’s logistics performance is improving. The World Bank’s Logistics Performance Index (LPI) ranks countries using six criteria: Customs, infrastructure, international shipments, logistics quality and competence, tracking and tracing, and timeliness.

In the 2010 LPI Turkey placed 39th globally, below other upper-middle-income countries such as Malaysia (29), Poland (30), Lebanon (33), and Latvia (37). However, in the 2012 LPI Turkey placed 27th, good for third-best in the upper-middle-income category after South Africa (23) and China (26). From 2010 to 2012, Turkey’s largest improvements were observed in the areas of Customs (46 to 32) and tracking and tracing (56 to 29).

Progress is also illustrated by the “Global Competitiveness Report” (GCR), a biannual study published by the World Economic Forum that makes country evaluations based on 11 “pillars” (e.g., technological readiness, labour market efficiency). In the 2010-11 GCR, Turkey ranked 56th globally in the infrastructure pillar, with subpar scores in railroad (63) and port development (73). But in the 2012-13 GCR Turkey placed 51st in the infrastructure category, with port and railroad rankings of 53 and 63, respectively.


Though state support for the logistics sector has been welcomed, some argue that the authorities need to begin focusing more on improving regulations, especially Customs. “Turkey’s Customs regime has gradually become more efficient, largely through the (EU) harmonisation process,” Fulvio Villa, general manager of Gefco Turkey, told OBG. “However, bureaucratic weaknesses persist at the ports and at certain land borders.”

These sentiments were captured by the 2012-13 GCR, which ranked Turkey 96th out of 144 nations for the “burden of Customs procedures”, behind far less developed economies such as Pakistan (93) and Namibia (82). Further, Turkey ranked 98th in the study for the “prevalence of trade barriers” (tariff and non-tariff) to imported goods, below Swaziland (97), Malawi (87) and Bangladesh (81). “The Customs framework is a barrier, and not a facilitator, to trade,” Tom Grønnegaard Knudsen, Black Sea cluster managing director for Maersk, told OBG. “For example, Turkey is one of few countries to still require import declarations at the ports.”

Inevitably, such conversations also turn towards the EU, which signed a Customs union with Turkey in 1995. Some economists argue that this agreement, which triggered a dramatic increase in bilateral trade, has been beneficial to both parties, despite a trade deficit in favour of the EU. From 1995 to 2011, the total trade volume between the EU and Turkey jumped more than fourfold from $36.9bn to $153.5bn. Though bilateral trade has declined since onset of the financial crisis, in 2012 Europe still accounted for 38.8% of Turkey’s export volume.

However, in Turkey’s logistics sector, there is a widespread belief that the EU Customs union is unfairly structured (see Musul interview). “The Customs union doesn’t offer a win-win proposition,” Melike Tümen, Vice Chairperson of the Turkish International Transporters’ Association, told OBG. “It’s asymmetric and opposed to Turkish interests, because European nations have imposed a number of quotas and regulations designed to keep our companies out of their markets.”

This sentiment was echoed by Ergin Büyükbayram, a consultant at Global Logistics Consulting Services, who noted that European regulations have made it difficult for Turkish firms to be competitive in Europe, “due to restrictions on departure times, third-country trans-shipment and drivers’ visas.”


Despite these obstacles, Turkish logistics firms are pressing forward with expansion plans in Europe. Istanbul-based Ekol Logistics, for example, entered five European markets in 2012 (Bosnia and Herzegovina, France, Greece, Romania and Ukraine) in addition to its existing operations in Germany and Italy. However, Ekol CEO Ahmet Musul acknowledged that gaining further market share on the continent will not be easy. “Putting the issues we have with the EU-Turkey Customs union aside, logistics firms in middle-income European nations have pricing advantages over their Turkish counterparts, which face relatively high domestic energy and transport costs.”

The domestic market is challenging indeed. Along with comparatively high fuel costs, which account for over 30% of expenses at some firms, there is a general reluctance among local companies to outsource product delivery.

According to Musul, this reflects the persistence of a traditional business mentality. “Industrial enterprises in Turkey are often run by families that want to maintain total control over all elements of operations,” he told OBG. “Simply put, winning customers in this country takes a lot of hard work, relationship building and patience.”

Further, Turkey’s logistics business, which is estimated to be worth between $45bn and $59bn (compared to roughly €200bn in Germany), suffers from severe fragmentation. Although this is a characteristic of logistics markets worldwide, this problem nonetheless prevents firms from investing in research and development and achieving economies of scale. What is more, due to low profit margins in the sector, competition among industry players is particularly intense, and often boils down to competition on price rather than on differentiation based on the quality of service.

It Takes A Village

Eager to help the sector overcome such challenges, the state is building a number of “logistics villages” nationwide. These facilities, which are being developed by Turkish State Railways (TCDD) in partnership with local municipalities, aim to make the country’s intermodal transport system more efficient by creating dedicated support sites where logistics companies can concentrate, and where road, rail, port and airport connections can be integrated. Given that only seven out of 148 industrial zones in Turkey are currently connected to the railroad network, the need for supply chain integration is pressing.

Since 2007, TCDD has established villages in Istanbul, the Black Sea city of Samsun and the Aegean province of Uşak. By 2019, TCDD aims to develop 13 more villages, thereby creating an additional 26m tonnes of load capacity and 8.4m square metres of container depots. Further, TCDD representatives estimate that the villages will contribute some $40bn annually to the local logistics business. “Developing transport hubs, which is a priority for Turkish officials, will help grow the logistics business itself, and save firms across every industry money, time and space,” Büyükbayram said. “We will need many such hubs, but the three most urgent are for west Istanbul, east Istanbul and Mersin.”

Given the vast array of state-led construction projects underway (or recently completed) in these very transport segments (see overview), such gains should continue. “Government-led efforts to develop a mul-timodal network have been a huge positive for the transport and logistics sector,” Büyükbayram noted. “Along with new port and railway systems, several thousand kilometres of divided highways have been built over the past decade.”


Some of the leading players are striving to consolidate their positions and push the sector forward. In March 2012, the Turkish firm Mars Logistics purchased 100 fuel-efficient trucks from Renault Turkey for nearly €7m, boosting the size of its Renault-only fleet to 1500. In March 2013, Borusan Holding increased its logistics-related revenue to $600m after purchasing all of the shares of Balnak Logistics, which had been a rival to its subsidiary, Borusan Logistics. This acquisition would make Borusan, which has some 230,000 square metres of depot space in Turkey, the clear market leader – although at the time of writing the merger was still pending approval.

The sector has also welcomed several leading international firms over the years, including DHL (market entry in 1981), Kuehne + Nagel (1986), and CEVA Logistics (2007). This, too, has elevated competition, but also led to the inward transfer of technology and expertise. Given Turkey’s robust growth outlook – especially in key logistics segments such as automotive, chemicals, health, retail and textiles – as well its strategic location and improving transport infrastructure, more foreign interest should be expected in the future. These developments represent good news for the country’s economy, which needs a more efficient transport system to help realise its full potential.