Turkey: Market Briefing

U.S. Department of Commerce | International Trade Administration

John FayCommercial AttachéU.S. Embassy Ankara

Turkey “In the middle”

U.S. Department of Commerce | International Trade Administration

“Three Turkeys”

Western Turkey

•Highly Industrialized

•Mostly urban

•Historical seat of trade & industry

Central Anatolia

•Newly emerging industrialists – Anatolian Tigers

•Significant growth in production, exports

Eastern Turkey

•Less Industrialized

•Mostly rural

•Agricultural focus

•Less than 1% of Tax Revenue

U.S. Department of Commerce | International Trade Administration

Turkey: Snapshot• Turkey: the most eastern country in the West, the most western country in the

East.

• Turkey: A country in rapid transformation politically, economically, demographically, socially.

• Turkey playing increasing regional and international political and economic role – G-20 member;

• Strong position of ruling AKP Party (2002), but opposition vocal;

• Key constitutional reforms hottest political issue, as well as foreign policy issues such as Syria, Libya, Arab Spring;

• Growing economy puts Turkish interests in play in former Soviet Union, Middle East and Africa;

U.S. Department of Commerce | International Trade Administration

Turkey: Snapshot• Sixteenth largest economy in world. G-10 goal by 2023. Turkish

construction sector accounts for 30% of GDP. Politically influential.

• Economy tripled in the last 10 years to over $750 billion; 8% growth in 2011, (first) engineered soft landing in 2012 with 3.5% expected growth for 2012; 2013-2015 average forecast is 3-4%. GDP per head $3k in 2002, $10k today.

• Increasingly export-oriented economy also raises demand for imports in capital goods and technology – sweet spot for American exporters;

• Recent upgrade to investment grade rating by Fitch, first time since 1994, but clouds remain with current account deficit and regional instability

• Continued efforts to accede to European Union although questions remain on how to pay for improved infrastructure

U.S. Department of Commerce | International Trade Administration

Turkey: Economic Snapshot

U.S. Department of Commerce | International Trade Administration

• General exchange rate stability at 1.8TL: 1 USD; forecast 1.8-1.85TL into 2014. Inflation (10%) watched closely.

• Record $20 billion bilateral trade relationship in 2011, up 38% from previous year and doubling U.S. exports to $15 billion. Small downturn in 2012 due to relative economic slowdown; growth forecast for 2013 with expanding economy.

• BB+ Fitch Rating (just below investment grade, watching current account deficit and inflation);

• Growing import market and expensive energy imports create large current account deficit;

• Lessons learned from 2001 crisis; banking sector strong and well-regulated;

U.S.-Turkish Relations

• Strong political/defense relationships with long-standing NATO ally;

• Cooperation across a spectrum of common interests: Iraq, Afghanistan, Arab Spring;

• April 2009 President Obama visit called for closer economic/commercial relationship;

• G2G an B2B councils created to develop strong bilateral trade links;

• 40% plus growth in bilateral trade for first eleven months of 2011 (vs. 2010); 40% plus increase in U.S. sales in Turkey;

U.S. Department of Commerce | International Trade Administration

Business Case for Turkey

U.S. Department of Commerce | International Trade Administration

• Increasingly affluent population (per capita GDP from $3k (2002) to over $10k (2011);

• Economic growth backed by strong demographics, trained work force;

• European Union Customs Union;• Location, Location, Location: Use Turkey as

springboard into regional markets;• Weakening lira a short/medium term challenge

for U.S. exports;• Strong interest in U.S. technology, management,

global relationships, trade/project finance

Business Case for Turkey

U.S. Department of Commerce | International Trade Administration

• 2010: U.S. Exim announces $1 billion credit line for energy projects in Turkey;

• Over 1,200 American firms registered in Turkey. Two active American Chambers of Commerce (ABFT and TABA).

• Identified as priority market by U.S. Department of Commerce; growth in staff and resources to help American firms enter market/secure greater market share;

Turkey SWOT Analysis

U.S. Department of Commerce | International Trade Administration

Strengths/Weaknesses

o S: Political stability, growing economy, “thinking big”

o Increasing domestic consumption, deeper pockets

o Long-term partnership with U.S., desire to deepen trade ties

o W: Regional tensions and soft EU market present challenges to export-led growth

o Foreign direct investment still relatively low given size of economy

o Turkey still largely unknown to U.S. firms and vice versa

Opportunities/Threats

o O: Import market will continue to expand; technology play

o Turkey as platform for regional plays, infrastructure development

o Trade finance to seal the dealo 2013-4: project

bonds/pension fund activity?o T: Regional instability affects

investor perceptions/decisions

o EU Accession talks falter/tension over possible transfer to Presidential system in 2014

o Inability to reach financial close on key projects.

Best Prospects for U.S. Exporters

• Energy, including traditional and renewable sources

• Defense and aerospace• Infrastructure• Information and telecommunications • Safety and Security• Healthcare• Automotive parts• Plastics• Education and Training services

U.S. Department of Commerce | International Trade Administration

Map of U.S. Investment in Turkey

Note: Given concentration of industry in northwest Turkey, map not necessarily geographically representational.

Trade and Project Finance: Key to Success in Turkey

U.S. Department of Commerce | International Trade Administration

• Given strong Asian and European competition, U.S. firms need to bring competitive financing options to front end negotiations with Turkish partners;

• Some Turkish firms will offer 30/60/90 day terms however export credit insurance and other trade finance options (public and private) can sweeten the deal;

• U.S. Export-Import Bank: Turkey as third largest market after Mexico and India;

• Overseas Private Investment Corporation: developmental projects

• U.S. Trade and Development Agency: front end feasibility study financing;

• U.S. Commercial Service network of relationships with local and U.S. banks

U.S. Commercial Service

U.S. Department of Commerce | International Trade Administration

Our mission:• To promote the export of goods & services from

the United States, particularly by small- and medium-sized businesses

• To represent U.S. business interests internationally• To help U.S. businesses find qualified international

partners

Presence in over 100 U.S. cities and 70 countries worldwide

Helping Your U.S. Firm Succeed in Turkey

U.S. Department of Commerce | International Trade Administration

•Business Development Advisory•Project and Policy Advocacy with the Turkish Government•Due Diligence on Local Partners•Relationships with Local Banks and U.S. Trade and Project Financiers•Project Vetting and Identification•Strategic Partnering•Market Research•Corporate Communications and Company Promotions

Thank You!

John FayCommercial Attaché

U.S. Embassy Commercial ServiceAnkara, Turkey

Direct Tel: + 90 312 457 7188E-mail: John.Fay@trade.gov

Web: http://export.gov/turkey

Irvine USEACTel: 949-660-1688

Email: Office.Irvine@trade.govWeb: http://export.gov/california/irvine/index.asp

U.S. Department of Commerce | International Trade Administration

Annex I

U.S. Department of Commerce | International Trade Administration

•Maps•Service Brief Slides

US Exports to Turkey by State

UNITED STATES $14,657,438,498

Texas $3,627,607,729

Washington $1,759,612,846

New Jersey $1,484,752,302

Louisiana $937,426,720

New York $740,962,512

California $665,691,913

Georgia $610,037,139

Connecticut $445,820,715

Florida $408,942,420

Pennsylvania $396,875,110

Free Zones in Turkey

U.S. Department of Commerce | International Trade Administration

• 21 Free Zones• Advantages:

– 100% corporate tax exemption for manufacturing companies

– No customs duties for goods, equipment and machinery brought into the Zone

– Warehousing for unlimited time in a customs free area and ability to sell in Turkey immediately upon demand

– Opportunity to buy Turkish products at export prices without Value Added Tax (VAT)

– Minimum bureaucracy