Memorandum submitted by the Department
for Business, Enterprise and Regulatory Reform (BERR)
THE ECONOMIC CONSEQUENCES OF TURKEY JOINING
1. The UK remains strongly committed to
Turkey's accession to the European Union, which we believe to
be in the strategic interests of a prosperous and secure Europe.
2. Continuing to promote and support the
progress and momentum of the accession process for Turkey will
be a key part of the Government's strategy on Turkey, given the
benefits gains for Turkey and EU Member States in fulfilling the
legislative alignment criteria.
3. Based on current EU policies and knowledge,
the direct net economic benefits of Turkey's accession to the
EU would be positive but asymmetric: Turkey would gain proportionally
more than the rest of the EU because of the relative sizes of
the Turkish and EU economies. However, it is likely to take Turkey
a decade or so to fulfil all the rules and obligations of EU membership
and, with Turkey at an early stage in its preparations, its economy
growing rapidly and the EU evolving at the same time, there are
obvious difficulties in predicting the precise economic impact
of Turkish accession.
4. Although it can be a difficult market
in which to do business, Turkey also represents a sizeable and
growing market for British goods and services. It is a country
of strong economic potential with one of Europe's fastest growing
economies with a predominantly young population of 72 million
people that could help balance Europe's ageing population. The
current Turkish Government sees reform and modernisation as a
genuine priority (and not only for EU accession reasons).
5. From the economic point of view, Turkish
accession will increase the size of the EU internal market and
will enable further trade integration through the removal of trade
restrictions in areas not currently covered in the Customs Union,
eg agriculture and services, and the abolition of customs controls
and some other technical barriers to trade. Turkey has a potentially
large role in the EU's future energy security since it borders
some of the richest hydrocarbon territories in the world and is
already a key transit state for gas into the EU. Turkish accession
would provide a stable market framework within which EU companies
can transit gas to customers in the EU at competitive prices.
Turkish accession could help improve access to these resources
and their safe transportation into the rest of the EU by further
securing the sections of the routes which transit Turkey.
6. Turkey's accession would also have an
important impact on several transport modes. Its role as a corridor
for road, rail, air and maritime pipeline connections between
Europe and its southern neighbourhood would be strengthened.
7. Labour migration is another area where
implications would arise from accession although it would be premature
to attempt to assess the impact of Turkey joining the EU on the
UK's labour market. The eventual impact would depend on the economic
situation in the UK, Turkey, and the wider EU at the time of accession;
the level of access granted to the UK labour market; decisions
of other Member States on labour market access; and historical
patterns of migration from Turkey to the UK and other EU member
8. A major part of the Government's strategy
in Turkey is to deepen our trading relationship.
The proposed high level government to government forum will have
a potentially important role to play in working towards this aim
and addressing current market access disputes. Even with such
a mechanism, we need to utilise all avenues to develop the necessary
relationship with the Turkish Government. Lobbying by UK business
and ourselves will remain an important element in this. The objective
remains to support the Turkish Government in their aspiration
to modernise their economy by:
reinforcing key messages that simpler
regulation and lighter government are good for trade;
helping ease tension between protectionist
elements and `free traders'; and
raising a number of specific dispute
9. Another part of the Government's strategy
is to challenge potentially inaccurate perceptions in the UK that
Turkey is not a sufficiently attractive market-place to warrant
interest or perseverance. This perception is a significant factor
in holding back stronger British interest in Turkey. Our major
competitors show far less reluctance and have consequently enjoyed
greater success than ours. Competition from developing economies
such as China, Iran and Russia is also affecting the relative
market share of all developed countries in Turkey including the
UK's. It is notable that whilst there has been healthy growth
in our trade overall, with bilateral trade having increased from
£3.8 billion to £6.5 billion between 2002 and 2006,
our relative market share has declined in the past five years
from when we were in third place to now where we sit eighth in
10. In addressing this perception, UKTI
have already embarked on a programme to raise awareness of the
opportunities in modern Turkey among the business community around
the UK. While Turkey remains a difficult market because of the
issues discussed in chapter 2 of this paper, the attractions of
doing business there are considerable and will grow further as
economic reform and preparations for EU accession progress. The
economic figures make clear that business prospects have improved
considerably. FDI interest in Turkey has grown rapidly as political
and economic stability becomes more assured. It is no longer true
to claim that it is not worth persevering. Yet the challenge remains
for us to reach into UK boardrooms to understand and counter the
caution that business appears to exhibit towards Turkey.
11. This memorandum incorporates material
from BERR/UKTI, the FCO, Home Office, Defra and HMT.
1. The road to integration with and accession
to the EU has been a protracted and convoluted one for Turkey.
2. Turkey first applied for associate membership
of what was then the European Economic Community (EEC) in 1959,
and on 12 September 1963 signed the "Agreement Creating An
Association Between The Republic of Turkey and the European Economic
Community", also known as the Ankara Agreement. This agreement
came into effect the following year on 12 December 1964. The Ankara
Agreement sought to integrate Turkey into a customs union with
the EEC whilst acknowledging the final goal of membership. In
November 1970, a further "Additional Protocol" established
a timetable for the abolition of tariffs and quotas on goods traded
between Turkey and the EEC.
3. There was a temporary freeze in Turkish-EEC
relations in 1980, following a military coup in Turkey. Relations
were re-established in 1983 following multi-party elections and
Turkey applied for full membership in 1987. The European Commission
responded in 1990 by confirming Turkey's eventual membership but
declining to begin accession negotiations immediately on the basis
of concerns about Turkey's economic and political situation, including
poor relations with Greece and conflict with Cyprus. This position
was reaffirmed in 1997 when accession negotiations began with
central and eastern European states but not with Turkey.
4. In 1995 a Customs Union between Turkey
and the EU was established and took effect in 1996 which removed
tariffs and quantitative restrictions on industrial goods. Since
then there has been a significant increase in Turkey's share of
the EU's foreign trade and Turkey is now the EU's 7th largest
trading partner (2006).
5. In 1999 Turkey was officially recognised
as a candidate country and in 2004 the European Council concluded
that Turkey sufficiently fulfilled the criteria agreed at the
Copenhagen European Council in 1993 ("the Copenhagen criteria")
to open accession negotiations. The negotiations were opened in
October 2005 but in December 2006 the EU decided to suspend accession
negotiations on eight chapters of the EU body of law (the acquis)
because of Turkish refusal to meet its commitments under the Ankara
Protocol to open its ports and airports to ships and aircraft
from Cyprus. However, in practice this has not prevented steady,
if slow, progress on the technical negotiations requesting opening
positions and setting opening benchmarks in respect of the frozen
chapters (those relevant to the Ankara Protocol) and opening others.
6. The UK has always been a strong supporter
of enlargement as one of the EU's key tools for achieving stability
and prosperity in our continent; securing agreement to start accession
negotiations with Turkey was one of the notable successes of the
UK's Presidency of the EU in 2005 and the Government is very keen
that the current progress and momentum should continue.
7. The arguments for Turkish accession are strong
and span a number of spheres, including the strategic political,
security and economic, all of which are linked and will impact
on each other. But Turkey's accession process promises to be more
difficult than that of the Central and Eastern Europe countries
and the necessary preparations are likely to last well into the
next decade, with both Turkey and the EU evolving during this
period and the climate for enlargement becoming unpredictable.
8. There are therefore uncertainties in
assessing the impact of Turkish accession across the range of
issues. This memorandum focuses specifically on the economic implications
where, notwithstanding the uncertainties, there are clear benefits
and opportunities, as well as challenges, in Turkish EU accession.
9. The Government commends the Portuguese
Presidency's continuing progress on accession negotiations with
Turkey and Croatia, a process that Member States committed to
at last year's December European Council, and hopes this progress
will continue under the Slovene Presidency. We hope the screening
of applicant countries' compatibility with the acquis will continue
at a steady pace in 2008. The UK will work to ensure that Turkey's
accession process remains on track, with technically ready chapters
being opened, building on the June accession conference during
which Turkey opened two chapters.
10. In this context we note the Conclusions
of the December 2006 European Council:
"Enlargement has been a success story
for the European Union and Europe as a whole. It has helped to
overcome the division of Europe and contributed to peace and stability
throughout the continent. It has inspired reforms and has consolidated
common principles of liberty, democracy, respect for human rights
and fundamental freedoms and the rule of law as well as the market
economy. The wider internal market and economic co-operation have
increased prosperity and competitiveness, enabling the enlarged
Union to respond better to the challenges of globalisation."
11. Turkish accession also offers great
benefits both to current EU members and Turkey in areas such as
Justice Home Affairs co-operation on migration, drugs and terrorism,
as well as increasing engagement on military co-operation, energy
security, regional economic development, and dialogue between
Islam and the West. Within the Customs Union, Turkey is already
an important economic partner for many European countries. Full
accession will reinforce the application of EU standards across
the Turkish economy.
12. The current state of play on the negotiations
in relation to the individual chapters of the acquis is summarised
in Annex B.
Overview of Turkish Economy
13. Turkey established an industrial base
through state intervention and import protection in the post-war
period. Policies shifted towards liberalisation in the 1980s.
IMF-backed reforms since the 2001 financial crisis have improved
macro-economic stability. The IMF stand-by agreement is due to
expire in early 2008. A large current-account deficit and heavy
reliance on short-term capital inflows could leave the economy
vulnerable to sharp changes in investor sentiment. Increasing
employment and income equality are key policy concerns, but the
resources to tackle them are limited.
14. Turkey has experienced impressive growth
over the last six years. Its dynamic economy is a complex mix
of modern industry and commerce along with a traditional agriculture
sector that still accounts for about 26% of employment. It has
a strong and rapidly growing private sector, yet the state still
plays a major role in basic industry, banking, transport, and
communication. The largest industrial sector is textiles and clothing,
which accounts for one-third of industrial employment (though
facing stiff competition in international markets); other sectors,
notably the automotive and electronics industries, are rising
in importance within Turkey's export mix.
FIGURE 1: REAL GDP GROWTH RATE (%)
Source: Eurostat, ECFIN forecast Spring 2007
15. As a result of strong overall GDP growth, consumers
in Turkey are becoming wealthier and better able to afford the
higher value added goods and services that are produced in the
UK and elsewhere in the EU27. GDP per capita in Turkey is, at
5,000, still considerably lower than in the EU27. Turkey's
GDP per capita was in 2006 only 19% of the EU27 average. Furthermore,
wealth in Turkey is not evenly spread, with huge regional variations
between the more industrialised west and the generally more agricultural
and poorer east, as well as variations between urban and rural
16. Even if Turkey were to continue the impressive growth
rates of the last six yearsand they are likely to slowit
would have no prospect of catching up with the EU in terms of
GDP per capita in the run up to accession.
17. Although the IMF programme is scheduled to end in May
2008, the Turkish Government's own economic strategy has highlighted
their commitment to continue a programme of reform. Working with
the IMF has led to a strong budget performance. According to the
Commission autumn 2007 forecasts, there was a budget deficit of
0.3% of GDP in 2005, and a surplus of 0.4% of GDP in 2006 (compared
with -33% in 2001). However, Turkey still has a sizeable but stable
current account deficit and a significant government debt, although
according to the Commission autumn forecasts, the debt ratio will
be 54.1% in 2007, so is now within the Maastricht criteria of
60%. Bouts of financial instability occurred in May and September
2004, in March 2005 and during May-June 2006 which show that Turkey
may still be vulnerable to volatility and sharp changes in global
investor sentiment, but at the same time the combination of healthy
growth, falling inflation and a tight fiscal policy has made the
Turkish economy more robust and resilient to shocks.
18. State interference in the economy has been reduced
in recent years. Political influence on state banks has declined
and important markets, such as electricity, telecommunications,
sugar, tobacco and petroleum have been liberalised. Turkey is
still undergoing a transition from an agriculture based economy
to a service oriented economy, although the share of employment
in agriculture is still high.
19. Inflation has been drastically reduced, having come
down from 65% in 1999 to 7.7% by October 2007. The reduction in
inflation to single digit figures also made it possible to introduce
the "New Lira" (the Turkish lira was converted to the
New Turkish lira as 1,000,000 = 1), which has been the only legal
tender since January 1, 2006.
1. Bilateral Trade and Investment Opportunities
1. Turkey is a significant market for the UK and the
UK is a major destination for Turkish exports, particularly for
clothing and other textiles. There is a strong entrepreneurial
culture in Turkey and despite regular economic downturns, business
has a good track record of successfully riding out these setbacks.
2. There are 1,420 UK companies currently doing business
with Turkey, with close to 500 having resident offices there.
Some 220 Turkish companies are working in the UK. Significant
British investors include Vodafone, Tesco, BP, Shell, HSBC, Aviva
and Cadbury Schweppes.
BILATERAL TRADE FIGURES: (£ MILLION)
Average Percentage change over previous year:
Exports: +11.6%/ Imports: +11.6%
(ii) Exports to Turkey
3. The UK's market share has been falling in recent years.
The UK is reasonably well placed in overall terms of market share
and trade volumes although it has been declining along with other
countries in the west in the face of imports from Russia (energy
related exports) and China.
LEADING EXPORTERS % OF TOTAL
(Source: UN statistics)
MAJOR OVERALL EXPORTS TO TURKEY(2006) % OF TOTAL
|Machinery, appliances & parts||20.1
|Chemicals & chemical products||15.0
|Mineral fuels & oil||12.2
TOP EXPORTS FROM THE UK TO TURKEY (VALUE £M)
| Vehicles (other than rail and tramways)
|Metalliferous ores and metal scrap||45
|Power generating machinery, equipment, parts
|Specialised industrial machinery||51
|General industrial machinery and equipment
|Electrical machinery and equipment||79
|Miscellaneous manufactured articles||52
|Plastics in primary forms||42
|Office Machines and ADP equipment||60
|Telecomms and sound recording equipment
|Professional scientific and control instruments
(iii) Turkish exports 2006
4. Turkey is a growing source of manufactured exports.
In addition to traditional textile products, a developing manufacturing
base in the telecommunications, electronics and automotive sectors
dominate Turkey's exports. The UK is the second largest destination
for Turkish exports.
LEADING TURKISH EXPORT MARKETS (2006)
|% of total|
MAJOR TURKISH EXPORTS (2006)
|% of total|
| Clothing & textiles||25.5
TOP TURKISH EXPORTS TO THE UK
|Articles of apparel and clothing accessories
|Telecoms and sound recording and reproducing apparatus
|Electrical machinery, and parts thereof
|Textile yarn, fabrics, made-up articles
|Vegetables and Fruit||123
|Iron and steel||68||82
|Power generating machinery and equipment
|Prefabricated buildings; plumbing, heating and lighting
|Non-metallic mineral manufactures||52
|Manufactures of metal||32
|Miscellaneous manufactured articles||41
|Other transport equipment||5
(iv) Sectors of Specific Opportunity
5. Details of the Government response to opportunities
in specific sectors are included in the edited version of UKTI
Strategy document at Annex C. Not all sectors which offer opportunities
will have specific programmes of the UKTI activity associated
with them. It is the case that some sectors are not a good fit
for UK exporters of goods or services and, in other cases, better
opportunities exist elsewhere in other markets which are accorded
a higher priority. However there are significant specific opportunities
in the following sectors:
6. Turkey's economy is still proportionally highly dependent
on agriculture and is a producer of a wide range of agricultural
products. Many of Turkey's exports are in the food and drink sector
and Turkey enjoys a comparative advantage in a number of products.
Turkey is among the largest producers of hazelnuts, figs, raisins
and apricots and grows tea and tobacco. Opportunities exist in
livestock, equine, crop development, fisheries, post harvest technology,
research and development.
7. Turkey is a producer of many basic and intermediate
chemicals and petrochemicals. The production value of the Turkish
chemical sector is in excess of $11 billion, export revenues are
worth $2.9 billion, and imports account for $17.4 billion, which
is a striking 15% of total Turkish imports. Often these products
are derived from available raw materials in Turkey. Others manufacture
for industries already present there, such as auxiliaries for
textiles and leather, paints and coatings for the construction
and automotive sectors or additives for the plastics sector.
8. There are opportunities for export of specialist products
and for the provision of services into the sector. For many companies
in this sector, R&D and technical services are the best areas
9. There are 10 million primary school children, three
million high school students and over 100 universities covering
all disciplines in Turkey. Education and Training receives over
10% share of the national budget, worth £7 billion in 2007.
There is a new Government programme for the expansion of the vocational
training system and IT and high tech education and training equipment
and material is being widely used, starting from primary education.
10. Turkey is Europe's largest bus and coach manufacturer
and 3rd largest light commercial vehicle manufacturer with 17
companies manufacturing motor vehicles in Turkey. 2006 was a record
year for the industry with vehicle production over 1m units and
the sector's overall exports exceeding USD14 billion. There are
over 700 companies manufacturing a wide variety of automotive
components. The industry is becoming more and more competitive,
characterised by increasing globalisation, industry consolidation
and diminishing margins. One notable feature of the Turkish auto
industry is the prevalence of imports within overall sales figures.
By the end of 2005, the industry imported over US$7.5 billion
worth of components for use by vehicle manufacturers and the aftermarket.
11. In the short and medium term, as the Turkish automotive
manufacturing is largely assembly, there are business opportunities
for UK suppliers of not only parts and components but also component
production equipment. More components are inevitably going to
be sourced locally and this will lead to opportunities for UK
investment in the country to meet the purchasing requirements
of their customers.
12. Turkey is a major manufacturer, exporter and importer
of miscellaneous mechanical, electrical and process engineering
products. As for advanced engineering products, ie components,
equipment or machinery that require high precision and high technology,
Turkish companies source these from abroad. A wide variety of
motor vehicles, engines, pumps, metal working machinery, foundry
equipment, textile machinery, mechanical handling equipment, ship
and marine equipment and electronic automotive components are
imported into the country.
13. The Environment Heavy Cost Investment Planning organisation
(EHCIP) of Turkey has led to the allocation of 68 billion
for the infrastructure needs of the sector to be spent by 2023
(or EU accession). Half of this has been allocated to the water
sector, mostly covering much needed wastewater treatment facilities
and solid waste investments. The EU allocated 1.5 billion
of IPA (Instrument for Pre-Accession Assistance) funds to Turkey
covering 2007-09, 40% of which will be used by the environment
sector. The World Bank is also supporting the municipalities by
loans for their environmental investments through Turkey's Bank
14. Opportunities for UK companies exist as consultants
and technology providers with the much needed investment in sanitary
landfill sites, hazardous waste incinerators and sludge drying/incinerating
facilities providing the biggest impetus.
15. In the Financial and Legal Services Sector, Turkey
is experiencing the launch of new products and services. Profitability
in the sector has increased considerably. There is also particular
foreign interest in the field of insurance, with FDI in that area
reaching US$1 billion. Turkey offers numerous major project opportunities
with supplier financing the key to winning such projects. Opportunities
exist to provide Public Private Partnership (PPP) solutions, which
are recognised as a British-designed tool and have become of interest
to the Ministries of Health, Transport, Energy and Finance and
the State Planning Organisation.
16. The fine jewellery manufacturing industry in Turkey
has undergone enormous expansion within the past 15-20 years,
focusing particularly on the production of gold jewellery. Turkey
is now the world's third largest producer of gold jewellery, its
third largest consumer, and also second largest exporter of gold
jewellery (source: UKTI post report). Turkish exports of gold
jewellery were worth US$ 1,031 million in 2006, and it is estimated
that the Turkish jewellery manufacturing industry employs around
250,000 people. Against this background, opportunities may exist
for UK companies in the following areas:
(1) For UK manufacturers/suppliers of machinery, tooling,
chemicals, packaging, and other equipment to supply product to
Turkish jewellery manufacturers.
(2) For UK jewellery designers to supply design services
on a consultancy basis to Turkish manufacturers, or to enter into
other co-operation agreements with Turkish manufacturers, including
outsourcing of jewellery production for sale by the designer.
17. Turkey has over 1,220 state, university, private
and foundation hospitals and spending on healthcare receives a
4% share of the national budget worth £70 billion in 2007.
Turkey increasingly acts as a regional health hub for the Caucasus,
Central Asia and the Middle East with patients travelling to Turkey
to receive treatment. New programmes funded by the EU and WHO
have been introduced standardising healthcare across Turkey.
18. Turkey offers many trade opportunities to the healthcare
industry, the UK's fourth largest area of exports to Turkey in
2006. As the country grows more affluent opportunities will remain
strong for the sale of products into the healthcare sector. There
will also be opportunities which are funded through IBRD and EU
Accession funds for consultancy and management services. www.worldbank.org;
19. The telecommunications sector in Turkey is amongst
the most attractive and potentially lucrative anywhere in the
world. Sector analysts all agree that the market is booming. Conservative
estimates suggest the size of the sector is approximately US$
22 billion and growing at about 20% pa. Mobile carrier services
show the greatest rate of growth at 66% with software also showing
growth rates of 25%.
20. Opportunities exist in the supply of goods into the
sector and services and consultancy related to the increased amount
of foreign direct investment there.
21. The Turkish software industry is one of the fastest
growing sectors of the economy claiming 25% growth in 2006 and
double-digit growth rates in the past five years, estimated to
be approximately US$700 million pa. (2006). Products of the local
software industry range from packaged programmes (accounting,
payroll and other business applications) to customised applications
in, for example, financial services, telecommunications, manufacturing
processes, retailing, healthcare, and education. Public sector
companies in particular, almost always require custom-built software
for their specific needs.
22. Opportunities exist for UK companies as local software
companies, many of whom operate to internationally recognised
methods and standards such as CMMI, SPICE: ISO 15504, ITIL and
COBIT, are actively looking to form partnerships with companies
overseas in order to gain international recognition and to expand
their activities in new markets.
23. Turkey is one of the largest producers of mega yachts
in the world. Turkish production of other marine craft creates
a number of good opportunities for UK companies seeking to supply
marine equipment, communications and navigation equipment and
design into the market.
24. Turkey's geographical location makes it a natural
land bridge connecting Europe to Asia. Therefore, it has an increasingly
important role to play as an "energy corridor" between
the major oil and natural gas producing countries in the Middle
East and Caspian Sea and the Western energy markets. Expansion
of the national gas grid, international gas pipeline projects
like Nabucco and Turkey-Greece-Italy Interconnector and the Samsun-Ceyhan
crude oil pipeline, along with Turkey's aspirations to be an energy
corridor and an energy hub in Ceyhan also provide short-term opportunities
in pipeline equipment and services along with equipment and services
for the three planned refineries at Ceyhan.
25. The Turkish energy sector needs a total estimated
investment figure of USD128.5 billion through to 2020, with the
following breakdown as provided by the Under Secretariat of the
Ministry of Energy and Natural Resources: USD 104.7 billion for
power generation, USD16 billion for oil and gas exploration and
production, USD 5.1 billion for coal exploration and development
and USD 2.7 billion for the expansion of the Turkish natural gas
grid. With the liberalisation of the market, privatisation of
urban natural gas distribution is continuing at full speed, with
the complete coverage of the 81 provinces to be completed by 2010.
Section 6 covers energy transit issues.
26. Primary energy demand in Turkey has been growing
at a rate of 6% per annum as a result of rapid urbanisation and
industrialisation. This trend is expected to continue, with an
additional 56,000 MW of new capacity required by 2020, with an
investment of USD 7 billion per annum. Turkey aims at full utilisation
of indigenous coal and lignite reserves along with hydro and renewable
resources. Integration of nuclear energy into the Turkish energy
mix will also be one of the main tools in responding to the growing
electricity demand while avoiding dependence on importing fossil
fuels. Privately owned nuclear plants corresponding to a total
installed capacity of 5,000 MW will be commissioned by 2020. New
laws and regulations are being enacted, including the recent Renewables
and Energy Efficiency laws.
27. Although the regulated part of the Turkish electricity
market is currently under the control of government companies,
this will change drastically with the privatisation of the generation
and distribution assets which will start early in 2008 and is
wide open to foreign investment.
28. There are opportunities for British companies to
provide services in areas of process management systems, advisory
services including legal and regulatory frameworks, market structure
and system development.
29. The textile and clothing industry contributes significantly
to the Turkish economy accounting for 10% of the GDP, 17.5% of
total manufacturing and 20% of the manufacturing labour force.
One of the major drivers of Turkish exports, the clothing sector
produced £6.8 billion worth of goods in 2006, while the textile
sector generated export revenues to the tune of £3.0 billion.
Although a net exporter of textiles and clothing, imports have
also been rising steadily. There is a growing demand for technical
textiles, eg geo-fabrics, conveyor belts, non-woven tyre cord
etc, in the Turkish market particularly in automotive, protective
clothing and healthcare end-use industries.
30. Turkey is a major tourism destination and is among
the world's top ten in terms of revenue generated. In 2006 Turkey
was 11th in terms of numbers of visitors following a small dip
after the record numbers set in 2005.
Turkey is host to both leisure based tourists in resorts along
the Mediterranean and to cultural tourists exploring Turkey's
rich ecological, religious and historical sites.
31. Many opportunities exist for investors and UK citizens
are purchasing property on and around the Mediterranean coast.
Trade opportunities for UK business tend to be on a small scale.
32. Turkey attracted 5.5% of total FDI inflows to developing
economies in 2006 ($20 billion) and 30% of total FDI inflows to
emerging Europe in 2006. The estimated FDI inflow for 2007 is
33. Foreign interest in the Turkish market has increased
rapidly since 17 December 2004 when Turkey was given a date to
start negotiations with the EU, and inflows accelerated further
with the start of accession negotiations on 3 October 2005 reaching
$8.6 billion in 2005 and around $20 billion in 2006. Despite a
perceived slowdown in EU negotiations, foreign interest remains
strong, particularly in financial and retail sectors. Standard
and Poor's investment Grade rating is BB- indicating that Turkey
is more prone to changes in the economy.
Issues that may impact on FDI in connection with EU accession
are covered in section 6.
UK investment in Turkey
34. The number of UK owned businesses in Turkey has increased
strongly in recent years to represent approximately 10% of all
foreign owned businesses in Turkey over the period 1954-2006,
as shown in the following table.
(Source: Turkish Under Secretariat for Treasury)
36. The level of UK investment in Turkey is shown in the
following table. UK investment in 2006 was 6th according to Turkish
Treasury statistics above the US, Germany, France and Italy. The
increase in investment from the Netherlands, UAE and Austria is
particularly noteworthy, representing in the latter case sizeable
mergers and acquisitions activity. Figures here for the UAE and
Greece reflect annual payments for the acquisition of Turk Telecom
and the acquisition in 2006 of Finansbank by the National Bank
of Greece respectively.
|TOTAL Incl. Other countries||622
(Source: Central Bank of the Republic of Turkey -www.tcmb.gov.tr)
Major UK investments in Turkey
Aviva and Ak Insurance merged in June 2007. The
merged company will become the biggest individual pension and
the third largest life insurance company in Turkey.
Cadbury Schweppes (CS) purchased the biggest chewing
gum company in Turkey (Intergum Group) in June 2007. Intergum
Group's market share in Turkey is estimated at 46%. Cadbury Schweppes
had acquired 51% of Kent, the largest confectionery manufacturer
in Turkey in 2002. CS now has a leading position in Turkey's confectionery
Vodafone purchased Turkey's second biggest GSM
player Telsim in 2006 for $4.5 billion. Vodafone has invested
$1 billion to extend the Telsim network and increase the quality
of communication. This is Vodafone's biggest investment project
in Europe. The number of Vodafone subscribers in Turkey increased
by 32% between May 2006 and June 2007.
Since purchasing Izmir-based supermarket chain
Kipa in 2003, Tesco has been expanding in the Turkish market,
increasing the number of stores under the name of Tesco-Kipa from
five in 2003 to 15 by the end of 2006 and 70 by the end of 2007.
The medium-term goal is to become one of Turkey's top three retailers.
Total investment in Turkey is likely to reach $1 billion by the
end of 2007.
Turkey's retail property sector is also attracting
increasing British investment. A number of British companies (some
with foreign partners) have invested in Turkey, including Saint
Martin's (which bought Cevahir Mall in Istanbul, Europe's largest
shopping mall), Parador Properties, Financial Dimensions, King
Sturge, and Jones Lang Lasalle.
HSBC purchased Demirbank in 2001, then Turkey's
sixth largest bank. HSBC accounts for 10% of total consumer credit
market and 7% of credit card market in Turkey. HSBC's business
plan is to record a 100% growth in Turkey by 2010 and increase
the number of branches from 159 to over 350 in the coming five
BP is one of Turkey's largest foreign investors.
The company is active in distributing and marketing fuel, oil
and lubricants, LPG and the exploration of petroleum and gas.
BP is also the operator of the $4 billion Baku-Tblisi-Ceyhan oil
pipeline project, which is the biggest energy project in the world,
so far carrying 10 million barrels of oil per year. BP is the
biggest shareholder in the BTC holding 30% of the company shares.
BTC launched "Community Investment Programme" and "Environmental
Investment Programme", which involved a total of $12 million
funding to mitigate the negative impacts of the construction and
long term presence of the pipeline.
Shell (Anglo Dutch) is among the major gas producers
in Turkey. Shell holds around 2% of Turkey's biggest oil refinery,
Unilever (Anglo Dutch) has been active in Turkey
for years. In terms of turnover, Unilever Turkey is among the
top 10 Unilever companies in the world (out of 151). The company's
2007 turnover target is Euro 1 billion with a growth rate of 15%.
Unilever Turkey has also become a training centre of global Unilever.
Turkish Investment in the UK
37. Turkish outward investment is rising; figures from
UNCTAD show that levels of outward investment rose from $175 million
in 2002 to $499 million in 2003 and $859 million in 2004, reaching
$1,078 million in 2005 before falling back to $934 million in
2006. Turkish investment in the UK is currently more limited.
In 2005 inward direct investment from Turkey amounted to only
£140 million and currently only 221 Turkish companies are
investors in the UK; traditional Turkish manufacturers do not
consider the UK as a manufacturing base because of high manufacturing
costs. However, UKTI believes there is considerable scope for
more Turkish investment.
38. Turkey offers a range of opportunities across many
sectors. To reflect the potential of Turkey, UK Trade and Investment
(UKTI) has included Turkey in the group of 17 High Growth Emerging
Markets for which extra resource is being made available (see
section 3 on HM Government support for business).
2. Difficulties faced by UK businesses wishing to trade,
or forge investment links, with Turkey
1. Although Turkey aims to create a business friendly
environment, there are still some significant concerns and impediments
faced by UK businesses wishing to trade or forge investment links
with Turkey, principally in the following areas.
2. The top income and corporate tax rates are relatively
high, at up to 55% and effectively 45-55% respectively, and overall
tax revenue collection is relatively low as a percentage of GDP
compared with other OECD countries. There is a large informal
3. There remain some challenges from corruption, although
there has been some improvement. The Transparency International
report of 2006 found that Turkey was one of a number of countries
that showed a significant improvement in perceived levels of corruption.
However Turkey remains 60th out of 163 in the corruption index
and there is still no centralised strategy to tackle corruption
within the country.
4. Another main concern is government interference in
the economy which creates distortions in the market. An example
of this is direct subsidy by government of a variety of agricultural
products. Total government expenditures equal more than a third
of national GDP. Monetary controls remain a problem with state
involvement in the availability of credit and the operation of
some state banks.
5. Turkey's labour market flexibility is exceptionally
low, being one of the 20 least flexible in the world. A recent
World Bank study found that it is very costly and legally difficult
to dismiss workers. Severance pay is typically 20 months salary;
in the UK it is often much less and is based on years of service.
There are also rules in place that give priority to recently dismissed
workers when filling new vacancies, restrictions on night work
and work at the weekends, and problems in the temporary work marketas
term contracts can only be used in certain specified situations,
again reducing opportunity.
6. One of the biggest disincentives to trade remains
a lack of transparency in the legal system and inefficient and
lengthy dispute resolution procedures. There are some serious
outstanding problems for UK businesses that result in significant
loss of business, inhibit business prospects and hamper further
investment in the market.
7. A number of barriers to trade are caused by Turkey's
non-compliance with its obligations under the Customs Union. Such
difficulties relate to divergent rules for external trade, standardisation,
import licences, and technical trade barriers, as well as intellectual
property rights (IPR), food safety and public procurement.
8. Despite the undisputed improvement in the business
environment in Turkey, there remain a number of commercial disputes
that are damaging, result in significant revenue loss and could
potentially deter future investment. Specific cases are listed
9. Leading UK exporters of alcoholic spirits to Turkey,
such as Diageo, Maxxium etc, have encountered a number of significant
problems including a protracted and potentially crippling dispute
over supposed dual pricing. They also face difficulties over certification
and labelling, customs bureaucracy and discriminatory tax treatment.
An EU trade barrier regulation complaint against Turkey is currently
being raised. The decision over dual pricing currently sits with
the Danistay (Turkey's Supreme Court).
10. Although the UK has enjoyed significant success in
introducing new carriers into Turkey, including BMI, EasyJet,
GB Air, BA, Thomsons etc, there remains a reluctance on Turkey's
part to adhere fully to the existing UK/Turkey Air Services Agreement
and to increase competition in the market. EasyJet have applied
to extend their routing from London-Gatwick to Istanbul Sabiha
Gokcen in addition to their existing Luton/Istanbul business but
still await formal authorisation from the Turkish CAA. BA do not
enjoy fast track facilities for their VIP/business class passengers
in Istanbul. In contrast, THY enjoys such services at London Heathrow.
BMI continue to experience difficulties over the cost of introducing
additional security at Esenboga from the monopoly provider and
11. There are significant British interests in Turkey's
telecommunications sector with Vodafone being the largest single
investor in the market with the purchase of Telsim for some US$4.5
billion in 2006. BT are technical advisers to Saudi Oger who purchased
51% of Türk Telekom. Vodafone remain concerned about plans
to introduce a 3G system before the introduction of full "number
mobility" between GSM operators. Number portability is a
key requirement for a truly competitive GSM market place. Heavy
taxation also remains a burden and is a major barrier to competition.
12. Pharmaceuticals is a growing sector for both the
UK and Turkey. Major UK pharmaceutical companies continue to do
significant business in Turkey, but although encouraging improvements
have been made with Data Exclusivity (DE), there remains poor
IPR enforcement, lack of adequate DE and difficulties over pricing
and reimbursement. Further improvements are needed to ensure full
compatibility with Turkey's EU and WTO commitments. Over-protection
of Turkey's generic industry leads to significant revenue losses
13. There are several Balfour Beatty issues in Turkey.
The outstanding balance (US$40 million) for the Ankara/Istanbul
highway remains unpaid and is currently awaiting international
arbitration. Balfour Beatty Networks are still owed some US$18
million by Turkiye Elektrik Ilisim AS (TEIAS) for the completion
of the World Bank funded 380Kw Borcka Kalkandere energy transmission
line. Non payment of these projects is discouraging further BB
involvement and investment in Turkey.
14. ECGD have negotiated terms with the Turkish Bankruptcy
Administration (TMSF) for the settlement of a seven year old debt
to a UK company arising from a Turkish Media Company (Sabah) that
went bankrupt. The process now requires Halk Bank and the TMSF
to agree to the monies being released.
15. UK/Turkey signed a bilateral Memorandum of Understanding
in March 2007. This centred on the development of collaboration
in three main areas: animal husbandry, equine and organic farming.
Although significant progress has been made in all these areas
over the past two years, difficulties still remain over the requirement
for health certificates for all agri-business products, perceived
protectionism over certain produce (including black teaTwinings)
and over burdensome bureaucracy for the importation of general
Education and Training
16. Turkey has a wide manufacturing and educational base,
much of which does not currently meet EU standards. There is a
significant requirement for improvement in education, training,
design, innovation and research and development in a number of
key areas. The UK is looking to significantly improve collaboration
in these key areas. There remain a number of concerns, however,
including Ministry of Education directives preventing the use
of foreign produced publications in Turkish schools, the encouragement
of duplicated materials and the lack of intellectual property
rights and enforcement in the publishing industry. These restrictions
and failings create difficulties for a number of British publishers,
including Longmans and Oxford Publishing. More broadly, legal
restrictions make it very difficult for foreign education providers,
including for vocational training, to operate in Turkey. Relaxation
of these restrictions would enable a swift expansion of education
provision in Turkey, which is strongly in its economic interests.
17. A growing number of British interests are looking
to establish retail outlets in Turkey. These include Harvey Nichols,
Debenhams, and British Home Stores etc. There remains concern
over Turkish restrictions on imports from China which inhibit
Istanbul flagship stores from maximising their opportunities and
establishing a presence as high quality international brands.
18. There has been progress on the Turkish side in addressing
some of these problems, in particular in reducing domestic protection,
tax reform and speedier resolution of commercial disputes. But
there are still too many disputes creating significant barriers
to trade that need to be resolved. Otherwise, we have been in
regular contact with the industry and have regularly raised the
issues with the Commission and at the highest levels with the
Turkish Government, including PM Blair to Erdogan. We also pushed
hard in the accession process to secure appropriate benchmarks
for the relevant chapters requiring Turkey to remove the discriminatory
measures before they can be opened.
19. As Turkey makes further progress on the accession
process, fulfil the benchmarks being set and align with the Acquis
on the individual chapters, more of these outstanding problems
will be addressed. Our work with Turkey to support their accession
preparations, together with our work to assist economic reform
and the enhanced dialogue and co-operation represented by the
Turkey/United Kingdom Strategic Partnership, will all support
efforts to resolve the existing barriers to trade and the trade
3. THE ROLE
UK GOVERNMENT IN
THROUGH UK TRADE
1. In July 2006 a new strategy was launched providing
for a refocus of UKTI resources to emerging markets. One of its
main objectives is to maximise the UK's ability to win market
share in the new high growth economies by achieving a step-change
in our performance in these markets. The strategy is supported
by a comprehensive marketing strategy emphasising the UK as a
place in which and with which to do business under the banner
"hit the world running". Turkey was one of 17 countries
categorised as a High Growth Emerging market. Other high growth
emerging markets include China, India, Brazil, Mexico, South Africa,
Saudi Arabia, Indonesia, Thailand, Singapore and Malaysia.
UKTI Strategy for Turkey
2. An edited version of the UKTI Strategy for Turkey
is attached at Annex C. Its key objectives include:
(a) raising general awareness of the market characteristics
and opportunities for doing business in Turkey;
(b) increasing the level of UKTI resources in Turkey;
(c) identifying more proactively opportunities for business
in particular priority sectors;
(d) increasing the UK's effectiveness in the marketplace
by working with companies with potential to enter the market;
(e) engaging with Turkish companies through the Turkish-British
Business Council and
(f) working with UK stakeholders to influence the Government
of Turkey to improve the competitive playing field for British
3. In Turkey, an additional objective is to build a greater
understanding and appreciation of the benefits of trade with the
UK. A programme of awareness seminars is now in place with a number
of events underway. These are listed in the strategy document
at Annex C.
4. More than £5 million of UKTI resources are being
transferred from mature markets to focus on emerging markets like
Turkey. An Inward Investment Team has been established in Istanbul,
a Marketing Officer appointed and enhanced capacity placed in
Izmir and in Ankara. The overall strength of the team in Turkey
has been raised from around 15 to 19. In London the Turkey team,
which numbers five, also has responsibility for Russia, the Caucasus
and Central Asia.
5. The enhanced team in Turkey will allow for more targeted
identification of potential opportunities. They will also be responsible
for delivering a range of UKTI services to help UK companies enter
the market and develop their business further once there.
6. In addition to the awareness seminars, a High Growth
Market Adviser has been appointed to increase the UK's effectiveness
in the marketplace. The UKTI High Growth Markets Programme helps
UK companies to capitalise on major commercial opportunities in
some of the world's fastest-growing markets by targeting mid-corporate
companies with the potential to enter or expand in the designated
high-growth markets and aims to:
(a) develop and deliver support services tailored to the
needs of individual companies;
(b) enable the sharing of experiences and lessons learned
from exporters in these markets and
(c) provide intelligence about specific opportunities
in particular high growth markets;
7. The Turkish-British Business Council (TBBC) is being
refocused. Its aim is to strengthen the trade and investment relationship
between Turkey and the UK by:
(a) identifying the most promising sectors and business
opportunities for Small and Medium-Sized Enterprises from the
(b) encouraging investment in both directions;
(c) encouraging co-operation in third markets between
the private sectors of the two countries;
(d) enhancing networking between the private sectors of
both countries and
(e) creating specific opportunities through which companies
and their organisation in both countries can develop a greater
understanding of their respective strengths and potential areas
8. The TBBC is a joint council with a UK side consisting
of predominantly UK companies, many of them major UK plcs, which
has been chaired since 2007 by Sir Julian Horn-Smith. Members
on the UK side include Balfour Beatty, HSBC, Denton Wilde Sapte,
Imperial Tobacco, Allied Domecq, Vodafone and the Scotch Whisky
Association. The Turkish side comprises a secretariat provided
by DEIK, The Foreign Trade Board of Turkey and an Executive Board,
made up of a number of senior Turkish industrialists. The Turkish
co-Chairman is Metin Mansur, appointed in 2006.
9. UKTI aspires to begin a dialogue at ministerial level
with the Government of Turkey, with the aim of raising outstanding
market access issues at the highest levels while underlining the
UK's commitment to developing further trade and investment links
10. The bulk of services for Turkey are delivered by
UKTI's regional network in England and their equivalents in the
devolved administrations. The Devolved Administrations for Scotland,
Wales and Northern Ireland are directly responsible for the provision
of international trade support. UKTI's regional network comprises
International Trade Advisors (ITAs) based in International Trade
Teams. ITAs work closely with Commercial Staff overseas and market
and sector desks within UKTI headquarters.
11. UKTI's trade teams provide a range of export related
services including: one-to-one help, advice and counselling, including
help to determine whether exporting is in the client's best interest,
and strategic advice to help the client plan and implement an
12. The Devolved Administrations for Scotland, Wales
and Northern Ireland have their own networks of advisors (both
at home and overseas) and support programmes. They also draw on
the resources of UKTI posts in the majority of overseas markets,
including Turkey, and also can access most of UKTI's national
services eg the Overseas Market Introduction Service and Tradeshow
Access Programme. As partners they also have access to internal
information on the UKTI website.
13. Delivery of the UKTI strategy on Turkey in the regions
and devolved administrations is assisted by a network of regional
"Champions", whose role is to provide communication
links for posts in Turkey and with UKTI HQ in London. They have
been instrumental in helping to organise the programme of regional
14. By 2012 UKTI expects to have delivered improvements
in the business performance of our international trade customers
in Turkey, with an emphasis on innovative firms. We will do this
by improving the networks that support business, enhancing the
availability of information which allows business to make informed
choices, and influencing the market conditions, where possible,
to be more receptive to UK trade and investment.
1. There is little specific empirical evidence that Turkey
represents the best gateway to markets in the wider region. In
some cases the markets involved represent areas with limited current
opportunity for British business, while in others such as the
Gulf States the UK is already a strong bilateral trade partner.
Such evidence as there is for influence in nearby markets can
be contradictory. For example a paper prepared by the Turkish
Foreign Economic Relations Board (DEIK) points to significant
contact and influence by Turkish business with the Turkish speaking
republics of the Former Soviet Union and with other countries
in the region. Investment
flows from the Arabian Peninsula are increasing according to DEiK.
However, the 2nd International Turkish-Asian Congress organised
by Turkish Asian Centre for Strategic Studies (TASAM) in Istanbul
on 23-24 May 2007 asserted that Turkey's failure to establish
very close links with the former Turkish republics, meant that
bilateral economic relations remained well below their potential.
The report further concluded that Turkey was neither benefiting
from the great economic potential of the Gulf countries nor engaging
more with these countries politically.
2. However, as a potential transit route for hydrocarbons
to Europe, Turkey does offer a different option to established
alternatives through Russia (see paragraphs 4 to 8 on energy below).
There are also examples of business which Turkey has won in the
Central Asian region in conjunction with British companies from
the late 1990s. For example John Laing, together with Alarco from
Turkey, constructed the international airport in Ashgabat, but
there has been little more recent evidence of co-operation since
then. Furthermore, Turkey has strong regional partnerships in
the Middle East including Israel and enjoys good bilateral trade
and investment relations with the Gulf States, Levant and North
3. Bilateral trade figures with some of the region are as
follows with a brief explanation.
TURKEY'S TRADE RELATIONS WITH REGIONAL ECONOMIES (2004-06
|2004 exports||2004 imports
||2004 Trade balance||2005 exports
||2005 imports||2005 Trade balance
||2006 exports||2006 imports
||2006 Trade balance|
Russia: Turkey's huge trade deficit with Russia is
largely attributable to gas imports. There are also non-tariff
barriers such as visa obstacles and long clearance procedures
for Turkish trucks.
Caucasus: There are strong political and economic
ties with Azerbaijan and Georgia. But these are not fully reflected
in trade relations. Around 1,800 Turkish companies are active
in Azerbaijan. Main Turkish investments in Georgia include two
airport contracts (Tbilisi and Batumi) at $90 million and a number
of tourism projects.
Central Asia: Kazakhstan is the most popular investment
destination for Turkish business in the Central Asian region followed
by Turkmenistan. Turkish companies have undertaken around $6 billion
contracting business in Turkmenistan.
Iran: Economic relations between Turkey and Iran are
limited; bilateral trade only accounted for 5% of Iran's trade
volume. Iran is the second largest oil and gas exporter to Turkey
and in 2006 became a top 10 supplier to Turkey overall.
Egypt: There are a few Turkish textile companies moving
production to Egypt to benefit from cheap labour and energy. Egypt
also has a qualified industrial zone agreement with the US which
is a potential area of partnership.
Gulf Countries: Gulf countries are recording huge
capital surpluses, and are seeking profitable investment destinations.
The AKP government established close links with Saudi Arabia in
particular. Turkish contractors have won $3.5 billion worth of
business in Saudi Arabia. Gulf countries are particularly interested
in Turkey's energy, property and financial markets.
Israel: There are significant links between Turkey
and Israel including a free trade agreement. Israeli companies
invest in Turkey and are strong trading partners with the Turks.
In the first six months of 2007 figures released by the Israeli
Embassy recorded bilateral trade worth $1.3 billion. Israeli exports
to Turkey increased 24.7% to $512m, while Turkish exports to Israel
increased 29.6% to $782m.
4. As noted above, Turkey's proximity to some of the richest
hydrocarbon territories in the world mean that it has a potentially
large role to play in the future of EU energy security of supply.
This has already been recognised by the EU Commission in their
2006 Energy Green Paper
and 2007 Strategic Energy Review An Energy Policy for Europe;
by EU Heads of State at the March Spring Council; by endorsing
the Nabucco pipeline project; and by HMG in submissions to the
Commission and Council on a European Energy Policy in January
5. The EU is in a unique position whereby 75% of the world's
known natural gas reserves are within pipeline distance and form
an arc around the Union. The EU, including the UK, is a net importer
of gas and, as such, is reliant on both producer and transit countries
for the safe delivery of our piped gas. In order to mitigate the
risk of supply interruption, for whatever reason, we need to strive
for diversity of transit states and for the development of the
world LNG market. Turkey, with its unique geographical position,
has the potential to develop its infrastructure and as an even
more significant transit country for gas into the EU than it already
is. The EU already imports the majority of its piped gas from
Russiasome of this already comes through Turkey, via the
Blue Stream Pipeline.
6. But Turkey is also a bridging state for the EU to access
to other sources of Caspian Gas, from Azerbaijan and Turkmenistan
in the first instance. The EU Heads of State and Governments have
supported the proposed Nabucco Pipeline project as the key vehicle
for transporting gas from the Caspian to the EU. This would link
Turkey and Austria through Romania, Bulgaria and Hungary. The
Turkish transmission company BOTAS is a partner in project. The
Nabucco project has been given the status of a project of special
European interest and the European Commission has appointed Mr
Jozias Johannes van Aartsen, the former Dutch Foreign Minister
as a political co-ordinator for the project.
7. The value to the EU of Turkey's possible role as an energy
"hub"importing sources of gas for transit on
to the EU, depends largely on the model followed by Turkeyie
whether it becomes an aggregator or operates according to market
rules(ie allowing multiple commercial entities to procure,
trade and supply gas). While Turkey could benefit from transit
revenues under either approach, it is in its own and the EU's
interests for them to adopt a market approach so that companies
are exposed to competitive pressures, prices are transparently
set, and investment in energy infrastructure can flow in.
8. Turkey has shown an inclination towards a market approach,
for instance setting up a regulator along the lines of Ofgem,
and has indicated willingness to join the Energy Community Treaty
in the future (which extends the EU Acquis communitaire in gas
and electricity plus parts of the competition and environment
Acquis into the nations of the Western Balkans). However, Turkey
has held back from joining the Treaty at this stage, preferring
instead to try an open the energy chapters in the wider accession
5. THE IMPACT
OF EU TRADE
UK TRADE WITH
1. Some of the difficulties and market access issues with
Turkey have been mentioned in section 2 above but in general there
are few bilateral trade policy issues between the UK and Turkey.
2. As far as trade defence is concerned, there are currently
only two EU anti-dumping measures in place against Turkish exports
(both related to certain steel products), both of which are currently
subject to review.
3. In the other direction, as at the end of 2006, Turkey
had six trade defence measures (all safeguards. Of these two (voltmeters/ammeters
and activated earth and clays) are directly targeted against the
UK (along with three other EUMS) with the balance (4) against
the EU as a whole. Four of these measures were introduced in August
2006 and will remain in place (early accession aside) until at
least August 2011.
4. Post-accession trade between UK and Turkey will of course
be subject to internal market and competition disciplines not
5. Steel is one sector where concerns are raised from time
to time, both in the unfair trade field but also a current, long-term
concern about implementation of a restructuring plan for the Turkish
steel sector. This has wider industrial as well as trade policy
concerns and echoes similar concerns in relation to steel industry
restructuring in other recent accession countries.
6. EXPECTED CHANGES
1. Enlargement of the EU to include Turkey would increase
the size of the Union significantly in terms of population, increasing
the market for UK firms, and thus providing opportunities to exploit
both economies of scale and gains from increased competition and
2. The economic benefits of Turkey's entry into the EU stem
from factors which have a direct positive impact on the economic
environment (trade, FDI, migration flows and better economic governance),
and from political factors which have indirect economic benefits.
Although other factors such as globalisation and internal reform
may lead to increasing alignment with EU economies independently
of the accession process, the EU accession negotiations provides
important incentives for Turkey to continue in its current direction
and pursue sound economic policies.
3. The accession process not only has a direct effect on
Turkey's economic development but will assist in attracting foreign
direct investment (FDI). Progressing towards accession would help
Turkey push through their economic reforms contributing to increased
potential growth rates. EU membership can be an aid to the Turkish
Government because it establishes a framework for peer review
amongst member states on micro-economic reform (Lisbon process)
and also at the macro-economic level through the review of national
Stability and Convergence programmes.
4. During the accession process, Turkey will need to tackle
some significant challenges. Anticipating and managing the associated
risks will influence the way that the trade and investment relationship
develops. Among these issues will be labour and migration, trade
barriers, the Common Agricultural Policy (CAP) and energy security.
5. In terms of the potential economic impact of accession,
in assessing this account has to be taken of the extent to which
the accession process encourages the momentum for reform. Were
the prospect of accession for Turkey to be removed, there could
potentially be a range of risks. For example, macroeconomic stability
in Turkey could deteriorate. This is a particular risk as Turkey's
current IMF programme comes to an end next year, potentially increasing
the role of the EU as an external anchor. There is also a risk
that relations with the EU could also worsen if Turkey turned
eastwards for its partnerships, and economic barriers to for example
trade with the EU could increase. Against this scenario, which
would have negative economic consequences for both Turkey and
the EU, the impact of EU membership could be large.
6. Another scenario however is that even without the accession
process encouraging certain reforms, Turkey could slowly move
closer to Europe even without accession as its aim. Political
stability could be maintained, the economy could be well managed
and economic reforms could continue. If this were the case, the
effects of EU membership would be smaller.
7. It is, however, important to be aware of the potential
economic costs of stalling or reversing the accession process,
Calls within Turkey for an amendment of the current
Customs Union Agreement, or its replacement by a Free Trade Agreement,
could grow, which in turn could reduce trade levels; signing up
to the CUA was seen by Turkey as step along the route to accession
and if the prospect of accession were removed or reduced Turkish
commitment to it could be weakened. This might particularly be
the case because the CU is asymmetric; causing there to be some
opposition to it in Turkey, in that under its terms Turkey cannot
enter into any new preferential trade agreements with third countries
without EU agreement. On the other hand the EU can enter into
such agreements without Turkish agreement. The asymmetry also
partly stems from Turkey being an automatic counterpart to any
new preferential trade agreement signed by the EU. Another source
of asymmetry is that if Turkey faces a trade dispute with the
EU, the last legal resort is the European Court of Justice, causing
the EU to be both a party and the arbitrator in trade disputes
FDI could also decrease; FDI flows to Turkey increased
following the start of the accession negotiations, and if the
accession process stalled, there is risk that these flows could
be reversed. In other words, if part of the increase in FDI visible
in recent years is part of an already occurring "EU effect",
there is a potential for these flows to be reversed.
8. Before the EU opened negotiations with Turkey, the EU
the effects of Turkish membership on the EU including migration.
They noted the existing population and that migration would be
affected by the imposition of transition periods and permanent
9. There is already labour migration from Turkey to the EU,
especially to Germany. It is likely that the accession of Turkey
to the EU would lead to an increase in labour migration at the
point of accession. However, enlargement and the prospect of enlargementshould
over time reduce the incentives for economic migration as EU membership
will boost growth, create job opportunities, and improve the quality
of life in Turkey. Accession will also make return and temporary
stay easier for Turkish nationals moving between current EU Member
States and Turkey.
10. The impact of accession on labour migration, and the
impact of any increase in labour migration on the UK labour market,
will depend crucially on the circumstances at the time. Given
the uncertainties over timing at this early stage in the negotiation
process, it would therefore be premature to make any quantitative
estimates of the possible impact. Any assessment would need to
take into account the following key factors:
the economic situation in the UK, Turkey, and
the wider EU at the time of accession;
the level of access granted to the UK labour market;
decisions of other Member States on labour market
wider social factors, such as historical patterns
of migration from Turkey to the UK and other EU member states.
11. The UK Government is taking a gradual and managed approach
to workers from the new EU states, taking account not only of
the impact on the labour market but also the wider social impacts.
It is generally recognised that A8 migration has benefited the
UK labour market and wider economy. The UK Government has also
introduced new initiatives to assist in assessing and understanding
the impacts of migration, including labour migration, to the UK
The Migration Impacts Forum (MIF): This forum
will help build the evidence base for the effects which migration
is having on communities and public services throughout the United
Kingdom and advise on how these challenges can best be met.
The Migration Advisory Committee (MAC): This is
initially advising Ministers on where migration might sensibly
fill gaps in the labour market with respect to skilled workers.
Trade and Foreign Direct Investment
12. Turkey is already a relatively open economy with trade
in goods and services equivalent to 61% of its GDP. The EU is
Turkey's biggest trading partner and is the destination of nearly
55% of Turkey's exports in goods and services and the source of
48% of its imports. This has increased vastly over the last 10
years due to Turkey becoming a member of a Customs Union with
the EU in 1995. In 2006 the UK was the second largest export market
for Turkey and over the same period the UK has seen imports from
Turkey rise 462%. in nominal terms. In 2006 Turkey imported nearly
£2.5 billion worth of goods and services from the UK. The
UK's trade with Turkey is about 1.0% of our total.
13. The already existing CU limits the extent to which the
trade could be expected to increase following Turkish accession
to the single market. However, there is still some scope for trade
to increase as certain non-tariff barriers still exist in manufacturing,
and as both the agriculture and service sectors are excluded from
the CU. De Mooij and Lejour (2004)
find that Turkey's trade with the EU15
would increase by 34% following Turkey's accession to the single
market. This corresponds to an increase in exports over the longer
term of 0.2% for the EU15, and for the A10, exports would increase
by 0.3%. Another
study by Flam (2003)
has results of similar order of magnitude; he finds that trade
with the EU could increase by almost 50% over the longer term.
Such trade increases would be important for Turkey, but would
only have small positive effects on the EU's GDP.
14. Whilst Turkey is not the UK's most important trade partner
for a range of reasons including geography and history, an increased
EU market would provide increased FDI and export opportunities
for UK businesses. As Turkey's services market opens up, UK firms
will benefit from increased levels of exports and more opportunities
for FDI. The EU Services Directive would also ensure increased
market opportunities are not just felt in goods but also services,
the latter potentially having a higher impact.
15. As Turkey adopts the Acquis, improves its institutions
and governance and combats corruption, Turkish companies' competitiveness
will grow which should further enhance the prospects of increased
trade. However, the effect on the UK and the EU is likely to be
16. As Turkish consumers become more affluent there will
be more scope for exporting high-value added goods and services.
If UK firms wish to exploit these opportunities they will need
to invest time and energy establishing a profile in their markets
of choice. This is especially true for services providers.
17. Foreign Direct Investment (FDI) to Turkey increased significantly
in 2005 and 2006. Net FDI doubled to reach around 5% of GDP between
2005 and 2006. This
growth in FDI was driven by such factors as improved macroeconomic
stability, recent legal changes and notably, the FDI law passed
in 2003 which lowered barriers to FDI. A further driver of increased
FDI has been privatisations, eg Turkish Telecom. The majority
of the total 14,955 companies with foreign capital are in the
wholesale and retail trade sectors, followed by manufacturing,
real estate renting and other business activities. Textile goods
production leads the manufacturing sector investments followed
by chemicals and food and beverages. However, FDI stock still
remains low for an economy the size of Turkey's. Enlargement could
lead to more investment as Turkey would have to undertake reforms
that would stimulate investment, including improving its infrastructure
and reducing some of its bureaucratic barriers to trade.
18. Certain competition constraints still exist in Turkey
that have to be overcome as Turkey adopts the Acquis; Turkey has
to move forward with its privatisation programme and, for the
public enterprises that are not privatised, state aid has to be
reduced. Other reforms that will follow from the adoption of the
Acquis relate to improvements in bureaucratic processes and the
rule-of-law. These changes could increase FDI in Turkey.
19. The prospect of Turkish accession could well spur further
reforms to the Common Agricultural Policy (CAP) and redirect the
focus of the budget away from CAP towards innovation and entrepreneurship.
Current discussions are focusing upon changes that will come into
effect in the next spending period, from 2013 onwards, although
many of these will be agreed in the forthcoming CAP Healthcheck
and EU Budget Review. Turkey may therefore benefit from CAP reform
upon accession, depending on what arrangements are agreed for
New Member States. This should be welcomed, as the benefits stemming
from such productivity enhancing activities would be far greater
and more evenly distributed across the EU than those from CAP.
The budgetary cost of Turkish accession from structural funds
(and CAP if it is not reformed by then) is also likely to increase
pressure on the UK to give up its rebate.
20. Providing an exact estimate of the post-accession budgetary
costs is extremely difficultTurkey's economic environment
will have changed by accession, as will the rules governing the
CAP and structural funds. Yet it is safe to assume that even by
the time Turkey accedes, its GDP per capita will be low relative
to the EU-27 average, and its dependence on agriculture and regional
disparities in income still high. Richer existing Member States
will incur a net annual budgetary cost and relatively poorer regions
in existing Member States that are currently in receipt of Structural
Funds may lose out from Turkey's accession.
EU as an Anchor Improving Turkish Institutions
21. As Turkey adopts the Acquis, it has to improve its institutions,
improve governance and combat corruption. Chapter 24 on Judiciary
and fundamental rights covers 10 principles for improving
the fight against corruption. It stresses the importance of anti-corruption
laws, integrity, accountability and transparency in public administration.
Other chapters are also relevant for improving institutions; public
procurement policies are covered by chapter 5, intellectual property
rights are covered by chapter 7, competition policy and state
aid are covered by chapter 8 and financial control is covered
by chapter 32.
22. Recent economic literature supports a positive link between
the quality of institutions and economic growth. Some economists
even go as far as suggesting that institutions trump everything
else in contributing to growth.
Furthermore, empirical work finds a positive relationship between
institutional quality and trade flows, implying that Turkey's
trade partners as well as Turkey would directly benefit from improved
institutions in Turkey.
If the adoption of the Acquis leads to improved institutions,
this could therefore lead to increased growth and trade.
23. The study by de Mooij and Lejour (2004)
estimates the effect of improving Turkey's institutions. They
do this by assessing the impact of corruption on trade relations,
and by looking at how much trade would increase if Turkey's ranking
on the Corruption Perceptions Index improved. They find that an
improvement from Turkey's current level to that of Portugal would
lead to a 57% increase in Turkey's aggregate trade. They also
find that the EU would benefit from this, with exports increasing
by approximately 0.5%, and welfare increasing by $9.4 billion.
If Turkey's ranking improved less, to the level of Hungary rather
than to the level of Portugal, they find that Turkey's trade would
increase by 28% rather than by 57%. Looking at the experience
of the New Member States, the improvements on the Corruption Perception
Index have not been as large as the improvement required by Turkey
to reach the level of either Hungary or Portugal. As such, the
estimate by de Mooij and Lejour can be considered as an upper
24. In the longer term, we could see some distributive effects
whereby some countries and sectors are affected more than others.
The sectors with the largest trade barriers at present would be
expected to see the largest trade increase. In terms of countries,
a study by Adam and Moutos (2005)
on the effect of the CU on the EU15 finds that the "southern"
EU15 countries, whose export structure is the most similar to
Turkey's, saw a relatively small increase in exports to Turkey
being offset by decreasing exports to other European countries
a as result of increased Turkish competition. The "northern"
European countries, on the other hand, experienced a larger increase
in their exports to Turkey, and did not suffer from a decrease
in exports to other European countries, causing them to be better
off. The distributional impact of Turkish accession could be similar,
with the southern European countries as well as the NMS experiencing
a possible decrease in certain exports as competition from Turkey
increases, whereas the northern European countries could see an
increase in their exports.
25. The comparative advantage of the UK is quite different
from that of Turkey. This implies that UK exporters on aggregate
are not likely to receive significant additional competition from
Turkey as barriers to trade are removed. Instead, exports from
the UK are likely to increase, and consumers will gain from cheaper
26. Apart from the political benefits of improved peace,
stability and security, the Government believes that Turkish EU
accession will bring potentially significant benefits and a range
of economic impacts stemming from increased trade and FDI, improved
institutions in Turkey, free movement of labour, dynamic gains
and other political impacts such as energy security and the promotion
of peace and stability in the region.
27. The channels with the largest economic effects are likely
to be dynamic gains over time and benefits stemming from the political
impacts of accession. Migration could also have an economic impact,
though the magnitude of the flows and level of impact will depend
on the level of economic development in Turkey at the time of
accession and on whether transitional measures on labour mobility
are put in place. Globalisation, Turkey's own modernisation and
economic reform programme and gradual alignment with the acquis
in the run up to accession will all combine to increase the bilateral
trade and investment opportunities with Turkey.
TURKEY/UNITED KINGDOM STRATEGIC PARTNERSHIP 2007-08
The British and Turkish Prime Ministers met in London on
the 23 October 2007. On this occasion they agreed that the relationship
between Turkey and the United Kingdom is of crucial and growing
importance. The two countries share close ties and common perspectives
on a wide range of international issues and global challenges.
They commit to six monthly consultations to take forward work
on the following key strategic priorities of mutual benefit in
Support and maintain the momentum of Turkey's
EU accession talks, through continuous dialogue and co-operation
at all levels, advice on accession negotiations, help with promoting
Turkey in Europe and more twinning and bilateral projects.
Help end the isolation of the Turkish Cypriotsand
encourage others in the international community to join us in
Deepen the UK-Turkey defence relationship, including
within the framework of NATO and through support for Turkish participation
in ESDP operations. Further promote the transatlantic partnership.
Improve our co-operation on global security, in
particular the fight against terrorism, counter-proliferation
and aviation security, the illegal drugs trade, illegal immigration
and other organised crime.
Promote regional stability and peace, especially
in the Middle East and Afghanistan, including partnerships to
promote economic development.
Tackle climate change and cooperate on developing
secure energy supplies.
Increase our bilateral trade and investment, promoting
Turkey as a high growth, high priority market, raising awareness
of mutually beneficial business opportunities, supporting economic
reform and stimulating co-operation on R&D, ICT and other
areas of business innovation.
Increase our ties in education and culture, including
through establishing a British University in Turkey.
EU ACCESSION PROCESS
Close dialogue and co-operation in support of
Turkey's preparations for EU accession. We shall hold regular
consultations between our Foreign Ministries on Turkey's accession
process and wider developments within the EU, backed up by periodic
review at Foreign Minister level.
Advice on the negotiating process. Assistance
and co-ordination in troubleshooting on individual chapters where
further cooperation is needed. Help with continued compliance
with the political criteria, including through resumption of our
human rights dialogue.
Joint work on promoting Turkey in Europe, improving
the understanding in governments, the public and the media of
the strategic importance of Turkey's accession bid, and demonstrating
that Turkey is capable of and prepared to take the bold reforms
necessary for accession. Further EU-Turkey networking and relationship-development
projects such as the Bosphorus Conference. A public diplomacy
campaign to give improved visibility to Turkey's contributions
to the EU in eg the field of CFSP.
Moreand more strategicEU twinning
and bilateral projects to help Turkey fulfil the priorities in
its Accession Partnership and reinforce its administrative capacity
to assume the obligations of membership. Help to ensure the effective
use of IPA funds. More work on political reform and human rights,
through Whitehall visits and exchanges. English language training
for officials working on Accession issues. Use of the Foreign
Office Global Opportunities FundReuniting Europe project
budget, and greater involvement in the Commission's Civil Society
Dialogue (eg through city twinning, university and NGO links).
Climate change and energy security
Joint work to support Turkey's ambition to be
a global energy hub, through an enhanced UK/Turkey Energy dialogue,
with an emphasis on diversifying energy sources and transport
routes. Shared best practice on issues surrounding energy market
liberalisation, to ensure transparency and market pricing. UK
involvement in regional energy conferences and regional groupings
in the Middle East, Black Sea and Caspian.
Joint work on Climate Change, especially on renewables,
technology transfer and climate change agreements. Cooperation
on the effects of climate change on human health. Further cooperation
on the basis of Turkey's First National Communication on Climate
Change to the UN.
Greater technical co-operation on maritime safety
and security, especially in the Turkish Straits. Co-operation
on marine and coastal research and management including pollution
reduction, remediation, prevention and control. Continued monitoring
of environmental and security concerns of oil transit through
the Turkish Straits, and promotion of pipelines that help to reduce
the pressures on this route. Further coordination on issues with
regard to activities carried out by IMO and EMSA, and support
for Turkey's effective participation in activities originated
Joint work on the energy and environment chapters
of the EU accession process. UK involvement in future EU environment
Work with UK companies, to ensure future investment
on energy and climate change projects, building on the success
of the BP-led consortium's BTC pipeline.
Joint programmes in support of these objectives,
including the Foreign Office Global Opportunities Fund.
Increasing our bilateral trade and investment
Stronger trade and economic ties, through two-way
ministerial visits, a meeting of the two sides of the Turkish-British
Business Council in 2007. Greater investment in both countries.
Raise awareness of business partnership opportunities
in key sectors such as energy, education and training, the environment,
financial and legal services. Seminars and sectoral trade missions,
targeting top businesses to understand their needs and interest
in investing in each country. Trade collaboration in the UK and
in the wider region (eg Middle East, Central Asia and the Caucasus).
Defence Export Services Organisation MOU with relevant Turkish
Continued support for economic reform and an environment
conducive to foreign investment, including through the early resolution
of contractual and market access disputes. Promoting interest
in the business opportunities offered by Turkey's privatisation
programme. Public Diplomacy project on business and the economy.
Advice on improving the functioning of Turkey's job market. Capacity
building for commercial courts. Co-operation on Lisbon/Hampton
Better technological co-operation by signposting
help and advice about EU and other international research programmes
and supporting UK-Turkey scientific links.
Aim to establish a high level Government to Government
forum to lay stronger foundations of economic partnership for
EU ACQUIS CHAPTER NEGOTIATIONS: CURRENT STATE OF PLAY
Accession negotiations between the EU and Turkey opened on
3 October 2005. Slow but steady progress continues.
As of 3 September 2007:
One chapter has been provisionally closed:
Ch25 Science & Research (June 2006).
Three chapters are open:
Ch18 Statistics (June 2007).
Ch20 Enterprise & Industrial Policy (March
Ch32 Financial Control (June 2007).
Under the Portuguese Presidency (until 31 December 2007)
it is hoped that Ch21 Trans-European Networks and Ch28 Consumer
& Health Protection could open, and good progress should continue
on other chapters including Ch26 Education and Culture and Ch23
Judiciary and Fundamental Rights.
Under the December 2006 Council Conclusions, eight chapters
were frozen until Turkey implements the Ankara Agreement Protocol
(AAP), which deals with policy areas relevant to Customs Union
and Turkey's restrictions on the Republic of Cyprus.
Ch1 Free Movement of Goods.
Ch3 Right of Establishment and Freedom to Provide
Ch9 Financial Services.
Ch11 Agriculture & Rural Development.
Ch30 External Relations.
As part of the revised screening process, Member States can
agree opening benchmarks for individual chapters based on the
recommendation of the Commission. These benchmarks set out steps
that the candidate country must take before the chapter can be
considered ready for negotiation. For Turkey, opening benchmarks
have so far been set for thirteen chapters:
Ch 1 Free Movement of Goods.
Ch4 Free Movement of Capital.
Ch5 Public Procurement.
Ch7 Intellectual Property Rights.
Ch8 Competition Policy.
Ch9 Financial Services.*
Ch11 Agriculture & Rural Development.*
Ch12 Food Safety, Veterinary & Phytosanitary
Ch19 Social Policy & Employment.
Three of these chapters (asterisked) include implementation
of the Ankara Protocol as an opening benchmark under the December
2006 Council Conclusions.
UKTI STRATEGY FOR TURKEY 2007-08
By 2011 deliver measurable improvements in the business performance
of UK Trade & Investment's international trade customers in
Turkey, with an emphasis on innovative firms; and deliver a measurable
improvement in Turkish investment in UK.
To achieve a step-change in the UK's profile in
Turkey by raising general awareness of the market characteristics
and opportunities for doing business there.
To enhance the effectiveness of the UKTI effort
in Turkey by identifying more proactively opportunities for business
and engagement with Turkish companies.
To foster an ever-improving environment for business
in Turkey which enhances business prospects and opportunities
and levels the competitive playing field.
To build a greater understanding of and appreciation
of the benefits of Trade with the UK, ostensibly through the Public
Diplomacy Pilot on business and the economy.
We will address these objectives in a variety of ways, working
closely with key players in the UKTI network and other third party
multipliers, as appropriate:
1. Demonstrably deepening and strengthening our trade and
economic relationships and networks: (eg contact-building, door-opening
and encouraging the Turkish government to see the benefits of
policies that allow UK companies to compete and win business there)
With Governmentwe aim to establish in 2007-08
a high level government to government forum to address weaknesses
in the macro-economic environment, to tackle barriers to trade
and to resolve trade disputes between UK companies and Turkish
counterparts. Ensure appropriate cross-Whitehall contribution
(particularly FCO) to the strategy by setting up a form of Liaison
Group for periodic meetings / updates on progress.
With NGOswe will engage with leading Turkish
NGO actors (eg TBBC, TUSIAD etc) to stimulate greater dialogue
with government and the private sector with the aim of increasing
their influence over commercial interests and the business environment.
With EU representative officeswith the
appointment of a new C4 2 Sec Commercial in Ankara we will engage
the EU Offices here to help in identifying ways in which the Turkish
business environment can be improved and in securing any commercial
opportunities that arise from this work.
With Turkish Businesswe will aim to develop
key relationships with the top 100 companies in Turkey to sell
the "compelling proposition" and to emphasise the benefits
of involving the UK as a strategic business partner in their corporate
strategies. We should identify the strategies they intend to adopt
for the period ahead. We should seek to insert UK partners, projects
and solutions into their strategies. We should approach the business
development and/or strategy managers on our target list and we
should build, develop and sustain relationships with each of these
With UK BusinessWorking with our network
in the English Regions and the Sectors Group and Posts to identify
our target audience in the UK (ie in which sectors). Also identify
who our primary customers should be [the expectation being that
these will primarily be middle-to-larger size businesses who are
Others: eg Trade and Business organisations, academia,
Chevening Scholars, the Mediathrough the Public Diplomacy
Pilot we shall aim to widen understanding and awareness of the
compelling proposition offered by the UK and to build consensus
towards an improved business environment in Turkey.
2. Identifying the challenges and barriers to market access
and putting in place strategies to tackle them: (eg work on economic,
regulatory, energy, sustainable development and trade policy issues)
Market/ institutional barrierswe will carry
out an analysis of the key barriers inhibiting trade, engaging
stakeholders to help identify these and the solutions for overcoming
Weaknesses in supporting networkswe shall
aim to strengthen institutional weaknesses in key networks (eg
the TBBC) and to build a wide community of stakeholders to help
press for reforms and change to improve the business environment.
Information failureswe shall both improve
the presentation of information about business in Turkey through
our local and UKTI websites and seek to market more effectively
(eg using the PD Pilot), and through a widened audience, the potential
for greater business between the UK and Turkey.
3. Identifying opportunities and providing UK business with
timely access to information and opportunities:
SectorsA re-focused and re-energised effort
on fewer key sectors promoting in particular opportunities that
reflect the new UKTI strategic targets (high value, high tech,
R&D, Inward Investment or creative/innovative).
R&D and S&TWe will devise a new
initiative designed to strengthen awareness and co-operation on
key R&D and S&T areas and to report regularly on Turkish
projects and activities in these disciplines.
Through the provision of UKTI services including
the High-Growth Business Advisors, and UKTI's English Regional
Network, the RDAs and the Devolved Administrationswe shall
carry out a targeted programme of activities to increase awareness
of Turkey and Turkish opportunities amongst our target audience
in UK business, the ITA (eg an ITA Seminar) and RDA networks and
other key stakeholders such as interested Trade Associations and
Within the UKTI regional trade teams and the responsible
bodies in the Devolved Administrations (SDI, IBW, INI) a number
of individual "Champions" will be identified to help:
provide a focal point within each region for
queries relating to Turkey;
be a contact point for Posts;
facilitate collaboration between regions on
events/missions etc; and
be well placed to lead missions to Turkey.
These networks will help bring together the activity
which the regions are already doing or considering. By working
together in this way UKTI expects that the improved communication
between Posts and regions will bring other benefitsfor
example, a better mutual understanding of Turkey and a more productive
environment for generation of effective support for business through
our services and use of our Customer Relationship Management system.
4. Measurably improving the perception of the UK by marketing
the UK's Business Strengths:
To market UK as the preferred choice for business
To market the success of the UK economy and the
strengths of the UK business community.
To market our high-tech and R&D success and
To market the unique skills and expertise of the
City of London.
To market the UK as the single best location for
Embedding in all activities the `UK's compelling
proposition': Business UK.
Public diplomacy: working with others eg British
Council and FCO and in particular on the PD Pilot theme Promoting
Pay particular attention to the design and content
of market web pages and websites to ensure they reflect the strategy.
UKTI sector groups decide which markets should be given priority.
These decisions are always reached in close consultation with
the UK business community, principally through the Sector Advisory
Groups. Those markets we target are those where we can make the
most impact by government supporting business, and while the list
below is an indication of where we are targeting resource for
Turkey this financial year, it does not mean that companies are
not assisted on the Turkish market in other sectors. UKTI services
can help companies access market opportunities across the range
of sectors. An explanation follows of the major sectors where
UKTI is active:
(ABOUT 75% OF
Water (incl waste water).
Agriculture (led by International Agriculture Technology
Marine (led by UKTI South East).
Security (led by UKTI South East).
Opportunity Markets (approximately one key event per year).
Mass Transport (Airports only).
Jewellery and Giftware (in partnership with Advantage West
Financial and legal services.
Information and communications technology.
DIRECT SG SUPPORT
Education skills and leisure.
1. Turkey has been a priority market for the environmental
sector for the past three years. The UKTI Advisory Group (Environmental
Sector Advisory groupESAG) has identified Turkey as one
of seven markets world-wide that offer huge business opportunities
for UK companies supplying environmental technologies and solutions.
As a result Environmental Industries Sector Unit (EISU) has been
working with our colleagues at posts in Turkey (Istanbul and Ankara)
to facilitate meetings between UK environmental sector and interlocutors
in and from Turkey. For, example, in each of the past three years
UKTI has sponsored seminar missions to Turkey. During these visits
UK companies have had the opportunity to interact with potential
business partners in Turkey. UKTI has also sponsored a number
of business delegations to visit the UK from Turkey, which again
offered the opportunity for business partnerships to be established.
2. The Turkish Government has estimated that it will take
total investment of more than 68 billion to bring the state
of their environmental infrastructure up to the standard required
for EU membership. Hence, ESAG is keen for UK environmental companies
to exploit this huge market.
3. Turkey has been identified by UKTI as a new destination
for British Agri-business. There are already well-established
bilateral relations between the UK and Turkey Ministries of Agriculture
which signed a Memorandum of Understanding in March 2007 to develop
co-operation in Livestock, equine, crop development, fisheries,
post harvest technology, research and development.
4. Turkey was identified as a priority by the Marine Sector
Advisory Group in 2005. In three areas Turkey is seen as having
potential for exporters:
i. For more experienced exporters there is likely to
be opportunity for leisure boats and marine equipment;
ii. In the longer term opportunities are going to exist
for ship equipment;
iii. A special case is made for experienced exporters
to tackle opportunities associated with the niche super- yacht
5. UKTI South East lead on this sector and have organised
a seminar on opportunities in the security market in Turkey in
October 2007. An outward mission to Turkey is planned to follow
this up in 2008.
Mass transport (airports only)
6. Some work in the airport sector has been undertaken under
UKTI programmes but this is now tailing off.
7. Turkey was identified by the giftware, jewellery &
tableware sector as an "opportunity" sector in 2006-07.
As a result, the sector has supported or undertaken the following
A visit to Turkey in March 2007 by representatives
of the British Jewellery, Giftware & Finishing Federation
(BJGF), the leading trade association, to research the jewellery
market, including a visit to the Istanbul jewellery show.
A programme of market research visits by Istanbul
post representatives to leading Turkish jewellers in order to
investigate the above opportunities in more detail.
8. At the same time, the London Jewellery Export project,
a separate regional scheme (funded by London Development Agency)
has also been investigating potential for London-based manufacturers
and designers, specifically focusing on UK design
9. Although potentially of interest to the UK financial sector,
Turkey is a long way off from being seen as an open market, with
the state still prominent in the financial sector and the retail
sector not yet mature.
10. Turkey has positioned itself as an attractive and promising
investment destination. Turkish reform efforts receive technical
and financial support from the IMF, the World Bank and the EU.
Turkey has restructured its banking sector and harmonised its
legislation with European Union laws and international standards.
11. However, while post-crisis progress is recognised, a
substantial reform agenda is still ahead. The 3 large state banks
are yet to be sold to private investors. Supervisory frameworks
are still building capacity while adapting to EU and Basel II.
Credit markets need institutional support, auditing and accounting,
credit information systems, collateral regime, enforcement of
contracts and development of a mortgage market. Transaction taxes
are still distorting financial mediation.
12. Joining the EU will have positive implications on standards
and regulation which will benefit UK companies. However, given
the UK's competitive edge in Telecommunications technology, there
are good opportunities for Communication companies irrespective
of Turkey's EU status,
13. An inward mission from Turkey is due in January 2008
as part of a Central/Eastern European combined mission.
14. The focus of UKTI activity in software will be in retail
and logistics with some activity to assess specific opportunities
in the fields of Communications, Enterprise Systems, Financial
Services and Healthcare.
15. A programme of activity has recently come to an end.
A report on opportunities in the automotive sector in Izmir has
been completed and is now available on the UKTI website.
16. The Power sector team has produced a report on the Turkish
market which is on the UKTI portal or available direct from UKTI.
A sectoral mission of six companies visited Turkey in November
Education and training
17. UKTI held a two day Education and Skills Forum in Istanbul
in 2006. Although the forum was positively received, there has
been little follow-up from the Turkish side in the areas that
were highlighted to improve their development of this sector.
This will be reviewed periodically and some work is anticipated
in support of the ministerial visit by the Department of Innovation,
Universities and Skills with a trade mission in December 2007.
UKTI SUPPORTED TURKEY
Meeting of the UK side of the Turkish-British Business Council.
Turkey Investors meeting at the Foreign and Commonwealth
Opportunity for government to engage with stakeholders.
Meeting of the Caspian and Turkey Business Information Group.
Round-table of regional champions from the UK regions and
Meeting of the Turkish-British Business Council (TBBC) in
Turkey breakfast briefing, Aston Business School, Birmingham.
UKTI West Midlands Seminar exploring opportunities in Turkey.
Speakers with in-depth knowledge and experience of the Turkish
market provided the key information necessary for any company
TurkeyPositioned for Business (Multi-Sector).
Seminar with the London Chamber of Commerce exploring Turkey's
recent government transformations and unprecedented levels of
UKGlobalisation Breakfast Seminar, Bristol and Poole.
The HSBC and UK Trade & Investment series of globalisation
seminars in October and November in Bristol and Poole focused
on high growth markets with particular emphasis on meeting the
challenges, embracing the opportunities and managing the threats
in rapidly growing markets such as China, Brazil, Turkey, South
Winning Business in Turkey seminar.
UKTI South-East hosted a seminar on doing business in Turkey
in preparation for a trade mission addressing opportunities in
the Security sector in Turkey in early 2008.
TurkeyWater Sector Fact Finding Visit.
UK Trade & Investment undertook a fact-finding visit
to Ankara and selected Eastern Turkish towns in the week from
21 October to 26 October 2007.
Power sector mission.
Organised by UKTI Power Sector Team. Contracted to EA Technology.
6 companies to Turkey. 2 CentreAnkara and Istanbul (Also
participating in STEAM Conference.)
Banking on Turkey:
FT and DEIK organised conference on the banking and financial
services sector in Turkey.
TurkeyTUSID (Food & Drink):
TUSID is the largest regional hospitality event in EURASIA.
Attendance supported by UKTI via the Tradeshow Access Programme
TurkeyPlast-Eurasia 2007 (Mechanical, Electrical &
Plast-Eurasia 2007 is the 17th International Istanbul Plastic
Industries Fair, with around 900 exhibitors and 30,000 visitors.
Attendance supported by UKTI via the Tradeshow Access Programme(TAP).
Turkey seminar, BERR Conference Centre, London:
UKTI Seminar exploring opportunities in Turkey. High level
seminar with presentations by Nick Baird, HMA Ankara, and the
Ambassador of Turkey provided the key information necessary for
any company entering Turkey.
Turkey Seminar, Leeds:
UKTI Yorkshire and Humberside seminar on exploring opportunities
Turkey seminar, Swindon:
UKTI South West Seminar exploring opportunities in Turkey.
Speakers with in-depth knowledge and experience of the Turkish
Outward Trade Mission organised by UKTI South East focusing
Turkey Seminar, East Midlands:
UKTI East Midlands together with East Midlands International
Trade Association present a seminar on exploring opportunities
Turkey Seminar, Newcastle:
UKTI North East presents a seminar on exploring opportunities
Selected sections of the UK-Turkey Partnership document are included
at Annex A (see Ev 68). Back
UNWTO Tourism Highlights 2007. http://unwto.org/facts/eng/pdf/highlights/highlights_07_eng_hr.pdf Back
Standard and Poor (July 2007). Back
TurkeyTurkey and beyond,prospects for cooperation in Central Asia/Caucasus,Asia/Caucasus,
Afghanistan and Iraq:
(Paper produced by the Foreign Economic
Relations Board of Turkey-DEIK Sept 2007). Back
Israel Times, 3 August 2007. Back
European Commission Energy Green Paper: A Strategy for Sustainable,
Competitive and Secure Energy, COM (2006) 105 final; pg 16;
Commission Communication to the Council and the Parliament, Europe
An Energy Policy for Europe COM(2007) 1 final; pg 25; http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52007DC0001:EN:NOT Back
HMG's submission can be found as a link from here: http://www.berr.gov.uk/energy/policy-strategy/international/eu/page28034.html Back
Announced in a Commission Press Release on 12th September 2007;
As set out in their published Staff Working Document titled "Issues
Arising From Turkey's Membership Perspective" dated 6.10.2004
[SEC(2004) 1202, COM(2004) 656 final]. Back
Lejour, A M and de Mooij, R A (2004), Turkish Delight-does turkey's
accession to the EU bring economic benefits? CESifo working paper
1183 (also published in Kyklos, vol. 58, 2005). Back
The EU15 are the 15 countries that were members of the EU prior
to the 2004 enlargement round. Back
The A10 are the ten countries that joined the EU in 2004. Back
Flam, Harry (2003), Turkey and the EU: Politics and Economics
of Accession, Seminar paper no 718, Institute for international
economic studies, Stockholm University, February 2003. Back
Barysch, K, Hermann, R, (2007) EU business and Turkish accession
Centre of European Reform essay. CER. London. Back
Altug, S; Filiztekin, A; and Pamuk, S (2006), Sources of Long-Term
Economic Growth for Turkey, 1880-2005, October 2006. Lejour, A
M, Solanic, V and Tang, J G (2006), EU accession and income growth:
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Lejour, A M, Solanic, V and Tang, J G (2006), EU accession and
income growth: an empirical approach, CPB discussion paper No
72, October 2006. Back
Lejour, A M and de Mooij, R A (2004), Turkish Delight-does turkey's
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1183 (also published in Kyklos, vol 58, 2005). Back
They find that the EU15's exports would increase by 0.5%, the
A10's exports would increase by 0.4%, Romania's exports would
increase by 1.2% and Bulgaria's exports would increase by 3.7%.
Welfare would increase by $8.5 billion for the Eu15, by $0.2bn
for the A10, by $0.2 bn for Romania and by $0.5bn for Bulgaria. Back
Adam, A and Moutos, T (2005), Turkish Delight for Some, Cold Turkey
for Others?: The Effects of the EU-Turkey Customs Union, CESifo
Working Paper No 1550, September 2005. Back
Adam and Moutos include Greece, Italy, Spain and Portugal in their
definition of "South 1". An alternative version of the
Soutehrn Eruoepan countries, "South 2", includes France.
Their conclusions are starker when "South 1" is used,
but they are still significant when "South 2" is used. Back
Adam and Moutus defines the "North" as all EU15 countries
not included in their definition of "South". Back