Tag: Turkish economy

  • Turkey is economic winner of Iraq war

    Turkey is economic winner of Iraq war

    By Daniel Dombey | Financial Times, Published: March 12

    ISTANBUL — The Americans won the war, the Iranians won the peace and the Turks won the contracts.

    Turkey, which blocked the deployment of U.S. troops through its territory during the 2003 invasion that toppled Saddam Hussein, is emerging 10 years on as one of the prime beneficiaries of the battle for the Iraqi market.

    Although Turkey’s relations with Baghdad are increasingly bitter, its exports to Iraq have in the past decade soared by more than 25 percent a year, reaching $10.8 billion in 2012, making Iraq Ankara’s second-most valuable export market after Germany.

    Ozgur Altug, an economist at BGC Partners in Istanbul, predicts that as Iraq grows richer because of its oil reserves, demand for Turkish goods will keep climbing — by more than $2 billion a year. Turkish contractors have also been doing rich business, working on about $3.5 billion of construction projects last year, according to businessmen and officials.

    One company, Calik Energy, boasts that it is building the two biggest projects in the Iraqi power sector, two gas turbine plants in the Mosul and Karbala regions, earning more than $800 million from the Iraqi government in the process.

    While Iran is seen as the most influential outside power in Iraq today, on Baghdad’s streets Turkey’s presence is more visible than that of any other country, with everything from malls to furniture stores to pavement bricks bearing a Turkish trademark.

    But it is the Kurdish-governed north that accounts for the bulk of Turkey’s business, absorbing about 70 percent of Turkey’s exports to Iraq. In contrast, Ankara’s relationship with the rest of the country is becoming more poisonous, with political disputes leading Baghdad to hold back on giving new government contracts to Turkish groups.

    As Ankara’s economic and diplomatic ties with the Kurdish government expand, about 1,000 Turkish businesses are working in the north, including some of Turkey’s best known banks, retailers and hotels.

    Hundreds of trucks a day clog up the land border between northern Iraq and Turkey as a flow of goods makes the journey to Kurdish markets. Turkish products dominate the regional capital of Irbil, from the old covered souk to modern showrooms in residential neighborhoods.

    Less obtrusively, other groups are carving out markets for themselves. From his base in the southern Turkish city of Gaziantep, Adnan Altunkaya says his family-owned company commands two-thirds of the Iraqi diaper sector.

    Sales to the country account for 90 percent of the Altunkaya group’s annual $400 million exports and have been rising by 50 to 60 percent a year for the past two years. It has also just taken the leading position in the Iraqi olive market.

    “Our business with Iraq is increasing constantly,” he says. “But of course it is affected by political tension.”

    In large part, the success story represents Turkey’s return to its natural market, from which it was shut out since the 1980s by war, sanctions and instability. As a neighboring state with an industrial base, rich agricultural heartlands and businessmen undaunted by challenging environments, Turkey has advantages others find hard to match.

    via Turkey is economic winner of Iraq war – The Washington Post.

    more : http://www.washingtonpost.com/world/middle_east/turkey-is-economic-winner-of-iraq-war/2013/03/12/ec046746-8b47-11e2-9f54-f3fdd70acad2_story.html

  • Will Turkey become the next Black Swan?

    Will Turkey become the next Black Swan?

     

    By Luis Riestra Delgado — February 27, 2013

    Luis Riestra Delgado is an economist whose blog Macro Matters runs on Voz Pópuli.
    The new Turkish Lira could only bring economic stability for so long. AP Photo/Burhan Ozbilici

    turkishlira

    In the minefield of the global arena, Turkey, the 15th largest economy in the world, should be marked as the next contender for a financial crisis. If the past is the prologue of its economic disequilibrium, demography trend and history announce loud and clear a future destabilization that could beyond a financial crisis.

    An unstable economy

    Turkey has had record of high inflation and high public debt, but in 2003 it eliminated six zeros in its currency by issuing a redenominated Turkish Lira, commonly known as the second Turkish Lira, which brought a period of temporal stability to the economy.

    The economy booms

    The second Turkish Lira brought price stability and global investment to Turkey carrying the illusion that lower interest rates, higher fiscal income and lower public debt to GDP positioned the country as a stable nation. Turkey has even been qualified as emerging economy by the IMF, but the truth is that its economic disequilibriums are unsustainable and growing.

    From emerging to emergency

    Such a high growth track is not sustainable because their Current Account suffers a massive trade deficit, which jumped to 10% of GDP in 2011. That has been attenuated by an initial devaluation of the Lira making it close to 7% of the GDP but growing indicating that the problem is structural. This path is leading to a currency crisis that will bring higher inflation and unemployment, a higher public deficit and higher public debt putting the country at the doors of a sovereign debt crisis. In fact, the figures of Current Account deficit, Public Debt and Public Deficit are almost a mirror image of the Spanish ones during the year its real estate bubble burst.

    The day of reckoning will bring to Turkey a strong devaluation of its currency, which could have at least two devaluation stages with a loss pattern close to 0.4 Lira per dollar, until the economy stabilizes if it finally does. I don’t think that Turkey’s $118 million dollars in reserves, $18 million in gold, with a Current Account deficit close to $60 billion per year will be enough for an orderly devaluation without a strong fiscal adjustment to reduce consumption and imports.

    The population bomb is ticking

    In 1945, Turkey had a population similar to Spain’s in 1905; now it has almost doubled and will soon be larger than Germany. The necessary adjustment will probably leave the country with a structural unemployment that could be over 15%,  if we believe the official figures. This will aggravate a per se unstable nation that has a young population and additionally suffers the costs of a refugee crisis from the Syrian war.

    In modern times, Turkey has always seen the European Union as a solution to its need for growth. But the truth is, the EU cannot absorb the cost of its full membership, which is something that Turkey does not seem to understand. Meanwhile, the problem grows and the solutions frustrate Turkish citizens, pushing them to refuse membership to the West and radicalizing the Otomanism of the current government if a Turkish Spring were to explode.

    In the middle of nowhere?

    It remains even more uncertain how Turkey will react to a large succession of adverse events given its geopolitical situation, its long history of changing alliances (of which the flotilla is just a small appendix), its frustration with the EU rejection after 54 years of negotiation, and its renewed sight to the East,

    Imagine that a Turkish Spring radicalizes the government and induces it to join theShangai Cooperation Organization, which may induce it to leave NATO, where Turkey is, by now, just a mere observer. It could transform a financial crisis into a major geopolitical shift for the world. That would be a Black Swan.

  • Look east to Turkey as source of growth and trade

    Look east to Turkey as source of growth and trade

    Today, times have changed and stark truths face many Scottish businesses.

    Scotland is a market of only five million people, and the UK and the EU are in difficult economic times.

    Faced with these realities, Scottish companies seeking growth need to once more look outwith the European trading areas and outwith their comfort zones. The world no longer stops at the German border.

    Some of the biggest obstacles to doing business in emerging markets are the misconceptions that exist about those markets, primarily driven by what we see on television.

    Mention Russia and some people immediately think of Mafia assassinations, corruption and cowboy business practices. The reality is very different, and there are many Western companies doing business legally and safely in places such as Russia, and making above-average returns for shareholders.

    A perfect example of a country suffering from misconceptions, but which offers significant opportunities, is Turkey.

    Turkey is only a four-hour flight direct from Edinburgh, but the popular image of the country is of a holiday destination.

    My own experience of visiting Turkey regularly and doing business there is far from this stereotype.

    Turkey is the powerhouse economy at the centre of a region of huge resources and potential.

    It is the gateway to the Black Sea region – Bulgaria, Romania, Ukraine, Georgia, Russia – as well as the Caspian region, Central Asia, and the northern areas of the Middle East.

    Turkey is the 17th-biggest economy in the world, and if it were in the EU it would be the 7th-biggest economy.

    It has a population of 75 million, with 500,000 students graduating each year from outstanding universities.

    The banking system is world class, and after compound GDP growth of 5.2% from 2002 to 2011, GDP in 2012 was forecast to rise by “only” 3.2%.

    Many of the biggest names in world business have chosen Turkey as a regional hub.

    Microsoft runs its Middle East and Africa region from Turkey, as does Coca-Cola. Unilever runs North Africa, Middle East and Russia from Turkey, citing the stable business environment, talent pool, growth potential and strategic location in the region.

    In 2011, Diageo spent £1.3 billion to acquire Mey Icki, the leading spirits company in Turkey – a lot of money for a drinks business in a Muslim country.

    This reality is a far cry from the popular idea of Turkey, so why are more Scottish businesses not thinking about Turkey, and indeed other emerging markets?

    First of all, companies need to re-orient their maps. For most firms, Turkey is the edge of their regions. Their business is either run from Western Europe or Dubai, and in both cases it is a peripheral country.

    If you put Turkey in the centre of the map, you will then see it as the centre of an economically crucial region.

    Secondly, companies need to get beyond stereotypes. There is plenty of data available to indicate which markets are attractive to a business.

    The key step is then to board a plane and see the market yourself. Meet local businesses, talk to the embassies and the chambers of commerce. Talk to potential customers and companies who are doing business in those countries.

    I recently worked with a Scottish company which wanted a business in Kazakhstan. Turkey was not on their radar, as for them it was part of Western Europe.

    However the partner I found for them in Kazakhstan was a Turkish company, a subsidiary of a $4bn Turkish industrial conglomerate.

    We met the partner in Istanbul and agreed a partnership to cover not just Kazakhstan, but seven other countries, including Turkey, all run from Istanbul.

    This gave the Scottish company access to a market five times greater than they had forecast and with one point of contact.

    Recently, I spoke to the manager sent by the company to Istanbul to run the business. He was extremely positive about life and business in Turkey. Business is ahead of expectations and the ease of doing business has surprised him. The infrastructure is excellent and travel in the region is easy.

    His family has settled into an apartment near the Bosporus straits, and his wife and children are loving the city.

    A sure sign of their happiness is that they were not coming home for Christmas, preferring to spend the holidays in Istanbul.

    Turkey is just one example of how countries you may think are tough for business can turn out to be major opportunities.

    In today’s climate, Scottish companies cannot afford to ignore such potential.

    Andrew Peterson spent almost two decades at Procter & Gamble running businesses in Africa, Asia and Eastern Europe. Now based back in Scotland he helps Western companies set up in emerging markets.

    via Look east to Turkey as source of growth and trade | Herald Scotland.

  • Turkey Plans ‘Wall Street of Istanbul’

    Turkey Plans ‘Wall Street of Istanbul’

    Country to invest $2.6 billion to once more become ‘global center of commerce’

    By Marlene Y. Satter, AdvisorOne

    September 18, 2012 • Reprints

    It may not look like much now. But after $2.6 billion is plowed into a bare plot of ground in Atasehir over the next three years, the Istanbul suburb will be transformed into a sparkling ménage of high-rise buildings, a symbol of Turkey’s resumption of a position of power on the global commercial stage.

    Bloomberg reported Tuesday that the plan, advanced by Prime Minister Recep Tayyip Erdogan, is an effort to create a one-square-mile “Wall Street of Istanbul” that will be known as IFC-Istanbul—the International Financial Center. Erdogan, whose Justice and Development Party was reelected last year, sees Turkey as a growing center of economic and political power that will make its presence known in the Middle East and southeastern Europe.

    Environment and Urbanization Minister Erdogan Bayraktar said in the report that once IFC-Istanbul is functioning, “Istanbul will assume its historical role as a global center of commerce.” The country’s financial industry has already seen substantial growth even as its economy as a whole expanded by 8.5% in 2011.

    This year alone, Mizuho Financial Group Inc. and Mitsubishi Corp. of Japan, Kuwait’s Burgan Bank SAK and OAO Sberbank of Russia all came to the city, either buying Turkish firms or opening their own offices.

    They have plenty of company; such institutions as Citigroup and HSBC Holdings already have a presence in Istanbul, although currently the financial heart of the city is located in the Levent and Maslak districts.

    Not to be outdone, the Istanbul Stock Exchange has also grown, expanding 26% this year and more than doubling in size since 2009. While still very small compared with New York and London, it is a respectable size, larger by just a bit than Frankfurt’s at $51 billion and almost four times the size of Dubai’s.

    While everything in Istanbul isn’t perfect—some development projects have stalled—foreign investment is soaring, with direct investment 25% higher in the first two months of 2012 than it was a year ago. CEOs and senior executives seek out the Billionaire Club for nightclub entertainment and new hotels, villas and apartments are going up all over the city—with restaurants and other amenities following to satisfy demand.

    “I had no idea how big Istanbul was until I was appointed here,” said Martin Spurling in the report. Spurling, chief executive of HSBC Bank in Turkey, added, “I was shocked. In terms of its location, history, culture, human potential and hospitality, Istanbul’s a great candidate to be an international finance center. We have to explain it to the world a little better.”

    via Turkey Plans ‘Wall Street of Istanbul’.

  • Turkey aims to be one of top 10 economies in 2023

    Turkey aims to be one of top 10 economies in 2023

    ISTANBUL – Turkey is one of the fastest growing emerging markets in the world with impressive economic growth rates, expanding by 8.5 percent in 2011 – ahead of IMF expectations of 7.5 percent.

    Over the last decade, its GDP per capital tripled, reaching $772 billion in 2011, up from $231 billion in 2002.

    As part of its Vision for 2023, the country aims to be one of the top 10 economies in the world, to achieve a gross domestic product of $2 trillion, increase annual Turkish exports to $500 billion and achieve a foreign trade volume of $1 trillion.

    “Turkey is aiming high, but its goals are obtainable. The country’s geographical location makes it a natural bridge between the East to West and North to South axes, providing easy – cost efficient access to businesses around the world. Its young, dynamic and growing workforce also continues to be a key contributor which, according to the 2009 World Bank numbers, is the 5th largest among the European countries. And more recently, the World Bank stamped its belief in the Vision by awarding the country with $6.5 billion of financial support,” said Tim Reid, Regional Head of Commercial Banking for HSBC UAE and North Africa (MENA) during his welcome address at the HSBC MENA / Turkey Forum recently.

    Resulting actions have strongly attracted foreign trade to its already large domestic market. Foreign direct investment totaled $15.9 billion in 2011, up from $9 billion the year before. The MENA region now accounts for 18 percent of this. Vice versa, Turkey’s exports reached $135 billion by the end of 2011 of which the MENA region now accounts for approximately a fourth.

    Key sectors of interest for MENA investors include tourism and energy.

    Turkey is currently the 6th most popular destination to visit in the world with the UAE’s Jumeirah Group, the Rotana Hotels and Viceroy, as well as Saudi Arabia’s My Tuana have already announced investments.

    Through the liberalization of its market and geographical location, Turkey is also strongly positioned as an energy transit hub. With MENA accounting for two thirds of the world’s discovered crude oil reserves, Turkey is on a clear path to anchor its partnership with the region.

    Construction and contracting is also one of Turkey’s strongest international sectors – consistently exceeded annual targets over the last decade. In the MENA region, several of the large Turkish contracting companies already have extensive involvement in Libya. Aside from the UAE market, we continue to see widespread interest and activity through bids for lead positions on projects in Qatar, Saudi Arabia, Kuwait and Oman.

    “Turkey has an extremely strong long-term story,” said Reid. “The combination of strong fundamentals and good demographics should see Turkey maintain a very respectable pace of growth throughout the forecast horizon”. Gathering business leaders, the Forum is the third leg of its series, held as part of its Global Connections campaign.

    Trade flows between MENA and the emerging markets is a key theme of HSBC’s Global Connections story in the region.

    According to the HSBC Global Research “World in 2050” report, economies we currently call “emerging” are going to power global growth over the next four decades. As a result, in October 2011 HSBC held its first forum on discussing international trade between UAE and India.

    Speaking about Turkey’s economic growth, Ambassador of the Republic of Turkey to the United Arab Emirates Vural Altay said “I would like to encourage Emirati and Arab brothers and investors to further boost their engagement in the highly lucrative Turkish market. Turkey offers rich opportunities for MENA companies in the areas of agriculture and food, energy, tourism, real estate, finance, healthcare and many others.”

    “My message to the MENA business community, in particular to the UAE business community is to utilize the vast opportunities that the Turkish economy offers needless to say to the benefit of both sides. And if we can do that I am sure that our relationship and togetherness will reach higher levels,” he added. – SG

    via Saudi Gazette – Turkey aims to be one of top 10 economies in 2023.

  • Turkey to Europe: Who’s Sick Now?

    Turkey to Europe: Who’s Sick Now?

    turkey schadenfreude rdv tmagArticle

    The Istinye Park shopping mall in Istanbul.

    With Europe roiled by economic crisis, Turks could be forgiven for engaging in a bit of Ottoman-style chest-thumping.

    A sense of material-fueled contentment is evident in Istanbul’s giant gleaming malls where clutches of hip young women in brightly colored headscarves clasp their Gucci purses while shopping with reckless abandon.

    Corporate lawyers join six-month waiting lists to pay more than $150,000 for the latest BMW model. There is even a new lifestyle magazine for the burgeoning Islamic bourgeoisie that eschews thrusting cleavage in favor of chic designer veils and five-star resorts with separate his and her’s beaches.

    While much of the continent sputtered last year, Turkey’s economy grew by 8.5 percent, according to official data. Even with the fallout from the troubles in the European Union, which accounts for the bulk of Turkey’s exports, the Turkish government forecasts that growth will be 4 percent this year. (The International Monetary Fund predicts a more modest 2.3 percent).

    During the decadence of the Ottoman Empire in the 19th century, Turkey acquired the unwelcome nickname “The sick man of Europe.” Now that distinction has been happily passed on to neighboring Greece, where high-spending Turkish tourists have been flocking to islands like Mykonos this summer, perhaps helping to give the battered Greek economy a bump.

    Yet for all the signs of evident prosperity — and the loud declarations by Turkish leaders that Turkey is an economic model for the world — economists warn that the Turkish economy is at risk of overheating and then stalling.

    Analysts say explosive growth in consumer credit has stoked a worrying expansion in the country’s current account deficit, which is forecast by the government to be 8 percent of gross domestic product this year, an improvement over last year’s 10 percent, but hardly reassuring.

    The challenges of plugging financial holes of that magnitude were behind the country’s past two economic ruptures, and some fear that Turkish arrogance threatens to blind Ankara to the perils ahead.

    “The economy is slowing down, and if external conditions do not improve the country may not be able to rebound like it did after the 2009 crisis,” said Sinan Ulgen, a visiting scholar at Carnegie Europe. “The government, however, seems to discount this scenario,” he added, noting that overconfidence threatened to blind it to the effects of protracted crisis in Europe on Turkey.

    While Turkey’s economic luminaries gloat that Turkey — not Europe or even the United States — will win the 21st century, the I.M.F has in recent months been expressing a far less rosy outlook. That may explain why Deputy Prime Minister Ali Babacan, who is in charge of the economy, recently acknowledged that Ankara had blocked the domestic release of four to five I.M.F. reports, according to the newspaper Milliyet. It said the minister cited “certain subjective analyses” to justify the blackout.

    Among its warnings, the I.M.F. has noted that Europe’s spiraling crisis threatens to undermine Turkish exports while the availability of easy credit risks drying up as European banks, which own a sizable chunk of the Turkish banking sector, focus on challenges closer to home. The I.M.F. has forecast 2012 inflation of 10.6 percent and an unemployment rate of 10.3 percent.

    On a trip to Turkey in May, the fund’s straight-talking chief Christine Lagarde warned that while Turkey had had a remarkable period of growth over the last ten years, “vulnerabilities are arising as a result of the large current account deficit financed by short-term capital flows.”

    The I.M.F. is not alone in advising caution.

    In May, Prime Minister Recep Tayyip Erdogan lashed out at the ratings agency Standard & Poor’s after it downgraded Turkey’s credit rating from positive to stable, even as it improved its outlook for crisis-wracked Greece. “This is entirely an ideological approach. You cannot fool anybody, you cannot fool Tayyip Erdogan,” the irate prime minister harrumphed.

    Justifying its view, S&P said that less buoyant European demand for Turkish exports combined with the country’s large external debt and a dependence on indirect taxes to plug budget gaps were undermining Turkey’s creditworthiness.

    Others point out that regional instability, including the festering conflict in neighboring Syria, could also have a detrimental effect on Turkey.

    And while Turkey, buoyed by the Arab Spring, seeks to offset its dependence on Europe by investing in and expanding its presence in the Middle East, economists warn it could take decades before fragile, still underdeveloped economies like Egypt or Iraq yield meaningful economic dividends for Ankara.

    Even as the notes of caution intensify, Turks show little sign of reining in their bullishness.

    ‘‘Those who called us ‘sick’ in the past are now ‘sick’ themselves,’’ Zafer Caglayan, Turkey’s minister of economy, said recently, with more than a hint of well-honed Turkish schadenfreude. ‘‘May God grant them recovery.’’

    via Turkey to Europe: Who’s Sick Now? – NYTimes.com.