Select Committee on Trade and Industry Appendices to the Report


Memorandum submitted by Major British Exporters

Major British Exporters is an informal grouping of some of the principal UK based companies who are engaged, either through manufactured exports or contracting, in carrying out major projects overseas.

  Some of our members will have made independent submissions to you in response to your announcement of 4 July that you were undertaking an inquiry into trade relations with Turkey.

  Equally, due to the nature of their particular business, although some of our members may only carry out limited direct business with Turkey, their products can end up with Turkish users. Thus, a Turkish airline could very well use American aircraft with Rolls-Royce engines.

  The purpose of this memorandum is therefore to outline briefly to you how we see prospects in the Turkish market, particularly in those sectors which are of direct current and potential interest to a number of our members.

  You will already be aware of the general economic background of Turkey. It can, perhaps, be briefly summarised as having a large (65 million) and rapidly growing population with an economy which is expanding well, if somewhat erratically. Although it is rapidly industrialising, the infrastructure is seriously deficient in many ways and will require very large investment over a long period of time. It is this situation which makes Turkey a very important and attractive potential market for a number of our members and other UK companies generally.

  UK companies have, of course, been active in major projects in Turkey. An outstanding example was the Bosporus Bridge which was built by Cleveland Bridge, a subsidiary of one of our members. Other projects include the Adapazari water treatment plant (built on a BOT basis), the Ankara to Istanbul motorway, the passenger transit railways of both those cities, and a number of power generation and transmission projects.

  Specific areas in which opportunities lie for our member companies include:

    (a)  Water supply and water and sewage treatment. This market is very large and the current infrastructure is not only generally inadequate, but is under additional pressure from the growth in population; increasing industrialisation; the irrigation requirements from local agriculture; and tourism. Good quality water and proper waste treatment is essential if tourism is to flourish, and thus numerous coastal towns have a particular need for improvement.

        This market is, therefore, not only important, but it is one which some of our members, particularly Biwater, are fully competent to attack and it is also one which could potentially benefit other UK based suppliers, many of them SMEs who benefit from supply to the main contractors.

        The problem in the water market is that although there is no shortage of planned projects—some of them very large—the limiting factor is finance. The financing demands of Turkey's infrastructure as a whole on its domestic financing capability are such that many of the projects in the water market can only proceed with foreign financial support. In this context, UK companies are considerably disadvantaged, particularly in comparison to their active and competent German competitors. Our members, such as Biwater, cannot compete where the Germans have access to KfW finance. This financing is dressed up as private sector finance to avoid accusations of German government support and subsidy, although in truth KfW is not a private sector financial institution at all, being owned by the Lander or German regional governments.

        Thus, our companies often cannot compete at all, or, if they do, have to make co-operative arrangements with German firms which result in a much reduced UK content compared to undertaking the job as a whole.

    (b)  Power generation and transmission. There is a large potential market here, and evidence that industrial growth and improvements in living standards will be prejudiced unless more investment is made soon in hydro-electric and thermal power plant and in much improved transmission. Some of this requirement may be met by schemes on a basis similar to PFI, where UK firms have a good background, although Turkish official attitudes need to change somewhat to realise the full potential of this route. Competitive ECGD support will be essential for UK firms.

    (c)  Rail. Modernisation and upgrading of the mainline system is essential, as is development of light rail transit and subway systems given the serious congestion in major cities and in the access to them. This offers considerable opportunities for some of our members. Adequate export credit and other financial support is essential in this field. In past submissions to various parts of government we have repeatedly made the point that several of our members, although UK based, are not UK owned and are part of multinational businesses. They therefore may have the option of carrying out a project from a location other than the UK, and this naturally reduces the UK export content. This applies to an increasing extent to some UK owned companies. One of our members, for example, which is UK owned today has an easy option of carrying out overseas rail business under the German flag with the access to German finance, and the loss of work to the UK, which that implies.

        Competitive ECGD and other financial support is therefore essential.

    (d)  Other fields. General construction, airports, harbours and ports, highways and bridges are all markets of substantial potential. Although the capability of indigenous Turkish companies to carry out such projects has developed significantly, in projects of this kind where specialist expertise is required there are excellent opportunities for contractors, equipment suppliers and consulting engineers to obtain a valuable and important part of the work, as indeed there are for those in the financial sector.


  (1)  Before making any detailed suggestions, a word of caution is required on what might best be described as the psychology of the Turkish market, particularly as many major projects in Turkey involve an interface with their government. It has to be recognised that the strongly nationalist legacy of Attaturk is a continuing factor. It is not simply a matter of being a widely and proudly held sentiment. It still colours attitudes to the outside world, for example in such things as the whole principle of concessions to foreigners, and even such smaller things as the jurisdiction of contract arbitration. Again, the Turkish definition of what are entirely domestic matters, and what are issues of general international concern is quite different from ours. It is thoroughly stupid and self-defeating not to recognise this, and in the last analysis, Turkish attitudes are just as legitimate a reflection of their distinctly unique history as our own are. Those single issue groups who so easily, and doubtless quite sincerely, criticise Turkey in various ways not only forget this, but also forget that Turkey, at its present stage of development, often has to take decisions for the general good of the whole country which are not as sensitive to some sections of the community as the decisions we would have the luxury of making in similar circumstances.

  (2)  We hope your Committee will urge HMG to do everything it can to develop and promote business with Turkey, not only to the benefit of UK companies but for the benefit of Turkey and its citizens.

  (3)  The UK should take a very positive long-term view and commitment to the undoubted potential of the country.

  (4)  The market is very competitive, as our rivals like Germany clearly recognise its potential. It is, therefore, essential that ECGD, both in premium rates and in the overall amount of cover available, is competitive with the ECAs of the countries with whose companies the likes of ourselves need to compete.

  (5)  Organisations like the Turkish British Business Council should be supported more strongly and directly.

3 October 2000

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