Made in Turkey - Ocak15 by Made in

ISSN 1300-2260

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January 2015 Year: 12 No: 121

Turkish gold imports surge in November

Istanbul bids for leadership in international arbitration

Turkey, ‘a reliable partner for Russia’ P3

New economic action plan urges for sustainable growth and development

Turkey’s packaging industry significantly boosts exports to EU Turkish packaging industry increased its exports by 11 percent in the first nine months of the year from the same period of 2013, up to $2.87 billion...| Page 2

Shortly after announcing the first nine programs of a detailed economic transformation plan, the Turkish Government has announced an additional set of macro-economic reforms.

he latest growth figures have been below our expectations. However, it is a performance that has been appreciated in general,” Turkish Prime Minister Ahmet Davutoğlu said, recalling that Turkey’s gross domestic product (GDP) had grown 1.7 percent year-on-year in the third quarter of 2014, according to official data released , below the forecasts that had predicted growth of around 3 percent. Speaking at a press conference accompanied by seven members of his Cabinet, Davutoğlu announced a second stage of economic action plans. The measures comprised various

prioritized structural reforms, including increasing domestic savings at the national level, preventing wastefulness, rationalizing public expenditure, raising the quality of public revenue, improving the business and investment climate, and developing statistical information on infrastructure. “From now on, when I make initial visits to a place, none of the local administrations, governorates or other institutions will present me with a plaque or a gift,” Davutoğlu said, striking an austere tone. “Packages or gifts that are just waste and aimed at celebrating a person will not exist in the public [sector] from now on,” he added.

“If a gift is to be presented, then planting a tree may be the gift and it may be announced that those trees have been planted in that region on behalf of the visiting person. This would be enough,” Davutoğlu said. Also speaking at the same press conference, Deputy Prime Minister Ali Babacan drew attention to how new zoning plans and amendments in zoning plans have recently led to considerable unearned revenue in the construction sector, calling for “fairness” in the determination of rental prices. The government has begun a study to provide equal opportunities and justice, and to determine the rent

Turkey keeps growing and prospering

that the state should request on state-owned land, Babacan said at the same meeting. “The construction sector is a field where rents [unearned revenues] develop out of nowhere. We will imminently implement a study that will provide equal opportunity in this area. What matters here is being able to secure justice,” he said. “There is a need for emphasis in order to avoid misunderstandings. The construction sector is a sector that is important for Turkey and has open prospects. In the upcoming period, we expect to see a rise in the sector’s share of national income. | Page 7

A call from Hannover Messe to Turkish companies: “Join Integrated Industry Network”

Turkey continues to grow in a stable manner, despite the negative conditions surrounding it, said Deputy Prime Minister Ali Babacan at an award ceremony.

Turkish exports reach all-time high in 2014

“Turkey may be growing at a slower pace than it was a couple years ago, but the country continues to grow in a stable and reasonable way amid many negative conditions,” he said at a ceremony organized by the Mersin Entrepreneurs’ Association. | Page 4

UNESCO Director General applauds ‘New Turkey’

“Turkish banks face tougher 2015, but outlook stable”

ANKARA - The Director General of UNESCO hailed the “new Turkey” during her speech in the Seventh Annual Ambassadors Conference in Ankara. | Page 8

Ratings agency Fitch has warned Turkish lenders against tougher conditions in the new year, but affirmed the country’s outlook as stable. | Page 4

Reminding Turkey’s assertive economic targets, Hannover Messe’s Senior Vice President Marc Siemering said that they expect broad participation from Turkish companies this year. “Turkish industry needs to adopt more digital systems. And all technologies related to future energies will also be exhibited at this fair. That’s why the fair is important for the future of Turkey”, he added. The world’s leading industrial technology fair organized every year in Hannover, Germany, HANNOVER MESSE has just announced its main theme and partner country for 2015. The press conference was held at

Park Bosphorus Hotel in Istanbul, the city which was chosen as the first stop in Europe, with the participation of Alexander Küehnel, General Manager of Hannover Fairs Turkey, as moderator, and Marc Siemering, Senior Vice President of Hannover Messe, as speaker. Getting ready to open its doors to professional visitors from April 13 to 17, 2015, the fair will host exhibition of advanced production technologies and focus on the motto “Integrated Industry – Join the Network” this year. And India is announced as the official partner country of the fair. | Page 6

Turkey exports ships, yachts worth around $1.3 billion | Page 7

EconomicNewspaper

January 2015

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Mehmet Soztutan Editor-in-Chief

Letter From The Editor

Business is business

ommitment to sound economic policies since 2003 has placed the Turkish economy in a good position to embark on a sustained path of growth. Progress has been achieved in improving public finances, restructuring the financial sector, improving the business environment and reforming the public sector. Actually, sustaining the stable growth process, increasing employment, securing the fiscal discipline, narrowing the current account deficit and as a result, strengthening the economic stability are the major priorities of the Turkish Government. In addition, the reforms of the last decade, together with the strengthening of the macroeconomic policy framework during that period, provide the necessary foundations for Turkey to reach its goal of becoming a high-income economy. Turkey is an attractive location for foreign investment because of its emerging role as a springboard for foreign companies to access the newly emerging markets of the Mideast and Central Asia via entering joint ventures with Turkish partners.

Turkey’s own emerging potential and its market attractiveness arise mainly from the sustainable growth and development path launched by the Government. For this reason, Turkey closely monitors developments in global economy and implement policies in line with its medium-term economic program. The Government focuses on policies to increase private sector’s investments, direct international investments and exports. Nevertheless, it is hard to keep its competitive position in the world market full of emerging players. Thus, manufacturers have shifted their operations to value-added products and brand names more than ever. Currently, many of Turkish manufacturers have their own designs and brands in international markets. As known, Turkey, being the oldest of our publications, conveys the messages of the Turkish exporters for years by participating in a series of international fairs and exhibitions. We wish Turkish business people and their counterparts lucrative trade. Business is business...

The Fed

Some economists say that the high and growing inequality in The Fed has repeatedly empha- the United States is a result of its sized that the timing will depend policies and politics, and those on the state of the U.S. economy. that have emulated the United If things look better, policy rates may increase earlier. Conversely, States—the United Kingdom, for weaker than expected data may example—are seeing similar rewell mean that interest rates will sults. The inequality is a result of the country’s ersatz capitalism— move up later. rampant with monopolies and Based on most recent economic oligopolies, government-conprojections, there is some scope ferred benefits on corporations for policy rates to stay at zero for a little while longer than mid- and the rich, bailouts for the 2015, given the remaining slack banks, deficiencies in corporate in the labor market and still low governance, and tax laws that allow the richest to move their inflation. money to offshore tax havens B. Gregg/ Frankfurt and pay far less than their fair share of taxes.

Many Fed officials – including Ms. Yellen – expect some people who have left the labor market to start looking for work again as the economy improves. They note that wage growth remains around the pace of inflation, suggesting that employers are feeling little pressure to compete for the workers that they need.

The country’s imports in November reached 46.9 tons, an increase of 609 percent from October when the country imported 6.6 tons of gold bullion. ANKARA - Anadolu Agency

Turkey’s gold imports surged to their highest level on record in November 2014 with 47 tons worth nearly $2 billion, which marked the highest level in 17 months. The country’s imports in November reached 46.9 tons, an increase of 609 percent from October when the country imported 6.6 tons of gold bullion, according to a statement by the Istanbul Gold Exchange on Dec. 31. The country’s gold imports increased by 127 percent, to $1.99 billion compared with $879 million in November 2013. Turkish imports stood at 19.3 tons in the same month in the previous year. But Turkish imports of the precious metal declined by 56 percent for the period from January to November of 2014, to 119.1 tons compared with 270.7 tons in the same period of 2013. Turks are, in fact, the world’s third-largest purchasers of the precious metal, after the Chinese and Indians. In 2013, the country’s gold imports skyrocketed 150 percent, to a record level of 302.3 tons totaling $16 billion in value on booming business with Iran, according to central bank statistics. Turkey’s gold production is not enough to meet the demand, meaning that it must import the precious metal to be able to sell

Letters to the Editor turkey@ihlas.net.tr

What does Yellen expect?

Turkish gold imports surge in November

H. Jaggort/ Basel

Mario Draghi

Unlike three-year ECB loans made to banks in 2011 and 2012—which banks used to buy government bonds and roll over debt–the new ones carry a condition: banks must increase Still, the progress of the recovery private-sector lending or, after has shifted debate inside the Fed. two years, repay the loans. “They The strongest supporters of the stimulus campaign have stopped are to be used to lend to the pushing for its extension, and in- real economy, to the non-finanstead are focused on advocating cial companies, and especially for a gradual retreat. Other offi- to (small and mid-sized busicials, meanwhile, are pushing for nesses),” ECB President Mario the Fed to begin that retreat as Draghi said. early as the first quarter of 2015. Bank lending has long been the K. Fret/ Berlin ECB’s preferred stimulus route, unlike the Federal Reserve which has bought large sums of public Adverse effects of the and private debt. Eurozone credinequality it expansion is bank-based, so The IMF has recently empha- this is the channel the ECB fosized the adverse effects of the cuses on. inequality on economic perforA. Wagner/Tokyo mance.

it to buyers in India, Iran and countries in the Middle East. Gold is also seen as a traditional investment for many Turks, who seek security against the declining value of the Turkish Lira. In addition to gold, jewelry is seen as a traditional gift for newborn children and is also given at wedding ceremonies in the country.

The country’s $2 billion gold imports in November led to the realization of a foreign trade deficit above expectations; the deficit stood at $8.3 billion in November, nearly $1 billion more than expected. Haluk Bürümcekci, a chief economist at Burgan Investment, said gold imports have had a negative effect on the foreign trade balance, while energy imports have had a positive effect due to low prices in 2014.

Ziraat receives bank Turkey’s packaging industry license in Azerbaijan significantly boosts exports to EU ANKARA - Anadolu Agency

ISTANBULTurkey’s pack-

aging industry increased its exports by 11 percent in the first nine months of the year from the same period of 2013, up to $2.87 billion, said the Packaging Manufacturers Association (ASD) in a written statement on Dec. 17, adding that five European countries were included in the industry’s 10 largest export markets.

said ASD head Sadettin Korkut.

Turkish Statistics Institute (TÜİK).

The packaging sector made the most exports to Germany with $228.4 million, followed by the U.K. with $188.5 million and Iraq with $188.5 million, according to the data compiled by the association from the

There are five European countries in the top 10 export markets, including Italy, the Netherlands and France as well as Germany and Britain, according to the ASD report.

“Turkey grew 1.7 percent in the third quarter of the year and exports made a big contribution to growth. Our industry reach a more than $225 million trade surplus in the first nine months of the year, making a positive contribution to the Turkish economy’s growth,”

“Despite recession risks in the Eurozone, our exports to Europe have increased to significant levels. On value basis, we saw the biggest increase in exports to Italy by 31 percent, to the Netherlands by 18 percent, to Britain by 12 percent, to France by 8 percent and to Germany by 4 percent,” Korkut said.

Sharp increase in sales of houses to foreigners in Turkey ANKARA – Anadolu Agency

Housing sales to foreign buyers have jumped by close to 60 percent for the January to November period, as data from the Turkish Statistical Agency (TÜİK) has shown. Housing sales to foreigners in Turkey increased 59 percent compared with the same period in the previous year, rising to 17,104 from

10,740. Foreigners bought 1,554 houses on average per month. The purchases have primarily been in Antalya, where foreigners bought 6,035 houses. Istanbul is the second favorite location, with 6,035 houses purchased, while 1,104 were purchased in the Aydin province. Sales in these favorite locations accounted for 71

percent of all housing sales to foreigners. The overall housing market in Turkey is flat. The total housing sales in the Turkish market stalled this period, with the total sales slightly declining from $1.04 million to $1.03 million. Sharp interest rate hikes introduced in late January and a slowing economy have made purchasers cautious at this time.

The Turkish state-run Ziraat Bank has been granted a banking license by the Central Bank of Azerbaijan, marking its entrance into the lucrative market. The banking sector in Azerbaijan experienced high growth rates in 2013, according to a report released by the World Bank in October 2014. However, Azerbaijan’s financial penetration indicator remains one of the lowest inEurope and Central Asia, the report said, and this offers a clear market opportunity for Ziraat Bank. The Turkish bank employs more than 24,000 people in 1700 branches. There are 57 branches in foreign countries such as Germany, Bosnia and Herzegovina, Kazakhstan, Russia, the U.K., the U.S., Georgia, Bulgaria and Greece. Separately, on Oct.15 of this year, Ziraat Bank received permission from the Turkish banking regulator to establish a bank working on Islamic financial principles. The Central Bank of Azerbaijan is continuing its reform of the sector, recently introducing a new legal and regulatory framework for consumer protection and financial literacy, as well as risk-based supervision, according to the World Bank report.

EconomicNewspaper

January 2015

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Istanbul bids for leadership in international arbitration Istanbul is making a bid to become a regional leader in the trillion-dollar business of legal arbitration, used for major corporate litigation or disputes between sovereign states. ANKARA - Anadolu Agency

Istanbul is making a bid to become a regional leader in the trillion-dollar business of legal arbitration, used for major corporate litigation or disputes between sovereign states. Arbitration provides an alternative to years of expensive litigation in courts. “There is definitely a great chance for an international arbitration center in Istanbul to be successful, but it will take time,” said London-based international arbitration expert Gaetan Verhoosel. The stakes are high. The total value of global arbitration claims and counterclaims hit $1.7 trillion in 2014, according to The Global Arbitration Review. The review sees claims growing larger and increasing in volume. But there are concerns in the arbitration field about whether Istanbul can establish an arbitration center that will compete with the current regional leaders in Singapore and Dubai. Provisions for binding arbitration as an option in disputes are now employed in virtually every type of contract, as well as in international treaties between sovereign nations, said Thomas J. Stipanowich, a professor of law at Pepperdine University in California. On Nov. 20, Parliament passed a law laying the legal framework for the center; there is to be one forum for domestic disputes and another for international arbitration. Parliament also adopted a law allowing arbitration in a wide variety of legal disputes. Funding for the center will be provided by the Prime Ministry for two years. There are some challenges in Istanbul’s ability to attract arbitration proceedings. “It is essential that the arbitration center demonstrates its independence,” said Verhoosel. “It must build up its credentials in terms of international capability and independence.” The choice of arbiters is also crucial to the success of an arbitration center, adds Turkish arbitration expert Leyla Orak Çelikboya in a note published in July 2014.

Leyla Orak Çelikboya

The ability for the legal system, in which the arbitration center is based, to enforce its decisions is also an important factor, Çelikboya added. The biggest problem is bandwidth, says Karl Hopkins of the international law-firm Dentons. “The number of lawyers who are up to the task is relatively small,” he added. There are currently some really good Turkish firms, Hopkins says, but a successful international arbitration center must bring together a wide array of talent. “The autonomous character of an institution, the appointment of impartial and independent arbiters, as well as the arbitration-friendliness of the applicable legislation and the general practice of the courts play an important role,” Çelikboya added. The success of such a center could have an impact on Turkish businesses. As the publication Legal 500 points out in a recent assessment of the Turkish judicial system, the workload of the courts is strained. Arbitration would provide an opportunity for corporations to deal with their issues away from the courts, and to resolve them faster. Still another advantage of arbitration for business: It is not subject to appeal. So proceedings cannot drag on for many years through a lengthy appellate process.

Turkey actively shifting to high value-added exports Turkey is actively shifting to high value-added exports that can compete around the globe. Turkey’s exports stood at 151.7 billion in 2013 but the country wants to increase its exports further. Turkish exporters performed well in the first 10 months of 2014 with an average increase of 5.6 percent. Exports stood at $131 billion in October. According to Turkish officials, turmoil in Iraq, Syria and Egypt, along with the Islamic State of Iraq and the Levant advance through northern Iraq, and the ongoing Syrian civil war are all factors that have hurt the country’s exports this year. Turkey’s exports to Iraq declined nearly by 25 percent this year. According to Turkish Exporters Assembly, Turkey’s exports to Russia declined by 15 percent in the first 11 months as well. Exports to the Middle East have been particularly strong. Trade volume with the Middle East increased to $63 billion from $5.9 billion between 2002 and 2012, and now accounts for 16.4 percent of all Turkish trade, according to theTurkish Statistic Institute. “Turkey’s autonomous and independent position has made it a valuable ally for

many MENA countries. Turkey’s multiple trade treaties with many countries in the region have made the Middle East the second largest destination for Turkish exports after the European Union,” writes Serra Basoglu Gürkaynak, partner and head of corporate at the Istanbul law firm Mehmet Gun & Partners, in a report released in April 2014. Foreign direct investment has seen an equally healthy trend. Net foreign direct investment in Turkey increased by 4.7 percent to $9.79 billion in the first ten months of the year, according to the Turkish Economy Ministry. The manufacturing sector, with nearly $1 billion more than 2013, benefited the most from foreign capital with $2.3 billion, and banks and related financial institutions followed

with $1.33 billion. Turkey’s electricity, gas and water sectors have seen foreign direct investment worth over $1 billion in the first ten months. And the real estate sector displays insolent good health, as nearly 36 percent of foreign direct investment, $3.6 billion, went to the purchase of luxury units in Istanbul and holiday resorts in Antalya. Sales of houses to foreign buyers jumped by close to sixty percent for the January to November period, data from the Turkish Statistical Authority shows. But industrial production has nonetheless been healthy in 2014. The Chairman of Istanbul Chamber of Industry, Erdal Bahcıvan said: “Despite challenging conditions in 2014, Industrial production increased 3.8 percent for the period of Jan.-Oct. of 2014.”

Bahcivan said Turkish Industrial sector’s exports increased 5.4 percent, precisely because of the lower value of the Turkish lira in 2014 compared with the previous year. Bahcivan expects that 2015 will be better than this year -- in fact that seems to be the consensus among analysts. 2015 will be much better for Turkey’s exports, said Economy Minister Nihat Zeybekci. “We live in such an unpredictable region, where everything can change in a matter of weeks. So many negative developments happened in 2014 that 2015 can’t be worse. We expect Turkey’s trade to recover in the next year, especially with its southern neighbors,” he said at the economy ministry’s annual assessment meeting.

Turkey uses second cheapest gas in EU Turkey used the second-cheapest natural gas in Europe during the first half of 2014, as shown by European data released. The gas price per kilowatt-hour in Turkey was 0.033 euros ($0.039) for households and 0.024 euros ($0.029) for industry in the first half of last year, according to data from European statistics agency Eurostat released. This was a drop in the price from 2013, when natural gas was 0.041 euros ($0.050) per kilowatt hour for households and 0.031 euros ($0.038) for industry. Energy Minister Taner Yıldız said that Turkey has about the cheapest electricity and natural gas among the 28 EU countries, and that energy prices would not rise in 2015. Turkey imported over 44 bil-

lion cubic meters of natural gas from January to December in 2014. Of this amount, it imports around 30 billion cubic meters of natural gas from Russia, nearly 10 billion cubic meters from Iran and 6.6 billion cubic

meters from Azerbaijan. Romania pays the lowest price for natural gas in Europe. Natural gas per kilowatt hour was 0.031 euros ($0.038) in households and 0.030 euros ($0.036) in industry in 2014 in Romania.

EconomicNewspaper

January 2015

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Turkey ‘a reliable partner for Russia’

THOUGHT OF THE MONTH

Humor A consultant is someone who takes the watch off your wrist and tells you the time. THINGS A CONSULTANT SHOULDN’T SAY TO A CLIENT

4. I’m useless without ten hours of sleep a night

1. That was my first guess as well, but then I thought about it

5. There are lies, damn lies, and statistics

2.You should see the hotel I’m staying at

6. Are your rental cars covered for collision ?

3. Hey, I just realized that I was in junior high when you started working here

7. College taught me working in teams is great for slackers

4. I like this office space. I’ll have them put me in here when you’re gone 5. My rental car is nicer than that junker you’re driving 6. Sure it’ll work; I learned it in business school 7. So what do you need me to tell you ? 8. Of course it’s right; the spreadsheet says so MOSCOW - Anadolu Agency

9. I could just tell you the answer, but we’re committed to a six month contract

Russian Energy Minister Aleksandr Novak considers Turkey to be a reliable partner for the delivery of Russian natural gas to Europe, he said in a live TV interview Dec. 22. “We have recently had very good relations with our Turkish partners, especially in the field of energy,” Novak told Russian news channel Rossiya 24 in an interview. “I find this relationship reliable. We hope, of course, that all existing agreements will be fully carried out,” he added. On Dec. 1 Russian President Vladimir Putin made an official state visit to Turkey, during which he announced the cancelation of the “South Stream” natural gas pipeline project. Instead, a new gas pipeline project has been proposed, which will carry gas via Turkey to Europe.

10. What are you, stupid ?

THINGS YOU SHOULDN’T SAY AT A CONSULTANT INTERVIEW 1. I’m a t-shirt and jeans kinda person 2. Do you pay overtime ? 3. I hate flying Meanwhile, Russia is discussing legal issues with some of its partners over the scrapped South Stream gas pipeline project but financial claims are not expected, Novak told Kommersant newspaper. “We understand that the countries, through which the gas pipeline was supposed to go, were expecting investment projects and the creation of jobs and tax

revenue growth,” Novak said.

8. I think three letter acronyms are for people too stupid to remember whole phrases 9. Two words: family first 10. Call it what you want, it still means firing people

WAYS TO TELL YOU’VE GOT THE CONSULTING BUG 1. Can’t stop using words that don’t exist 2. Worried that he who dies with the most frequent-flyer miles wins 3. Use so many “buzz words” in conversation, friends think you’re speaking a foreign language

by-two matrix 8. Tired of having a social life beyond work 9. A two-page story in Business Week is all it takes to make you an expert 10. Firmly believe that an objective viewpoint means more than any real work experience

THINGS YOU’LL NEVER HEAR FROM A CONSULTANT 1.You’re right; we’re billing you way too much for this 2. Bet you I can go a week without saying “on board” or “value-added” 3. How about paying me based on the success of the project ? 4. This whole strategy is based on a Harvard business case I read about 5. Actually, the only difference is that I charge more than they do 6. I don’t know enough to speak intelligently about that

4. Constant urge to give advice on subjects you know nothing about

7. Implementation ? I only care about writing long reports

5. Always hyphenating words thatdon’t-need-to-be-hyphenated

8. I can’t take the credit. It was George in your MIS department

6. Compose your grocery list using bullet points

9. The problem is, you have too much work for too few people

7. Can fit the thematic undercurrents of War and Peace into a two-

Everything looks OK to me, you’re doing just fine

Well!

They’ll tell what can’t be done and why. Then do it

THE ECONOMIST Always listen to experts.

“There is a legal study over the intergovernmental agreements that were signed in 2008-2009.” Novak said he did not expect financial claims to come from the agreements on the $40-billion pipeline project, which was to enter the European Union via Bulgaria.

Turkey keeps growing and prospering “Turkish banks face tougher 2015, but outlook stable” LONDON

Ratings agency Fitch has warned Turkish lenders against tougher conditions in the new year, but affirmed the country’s outlook as stable. Modest economic growth, competition for deposits and moderate asset quality deterioration will pave the way a tough operating environment for Turkish banks in 2015, but solid capital and profitability buffers mean the outlook will remain stable, ratings agency Fitch said in a statement. “The sector’s increased reliance on short-term, foreign-currency funding represents the biggest risk to the outlook,” the agency said, repeating its previous warnings. “Our base case is for economic growth over the medium term to remain below recent highs, with ongoing but manageable interest- and exchange-rate volatility and continued access to international funding,” it added.

The agency warned that asset quality might deteriorate “due to seasoning of loan portfolios, increased consumer indebtedness and the depreciation of the lira, which may weaken the debt servicing capacity of foreign-currency borrowers.” Asserting that Turkish lenders’ foreign debt has almost trebled since the end of 2008 and has become much more short term, the agency cautioned against the potential impact of an abrupt change in investor sentiment cutting the banks’ market access. However, Fitch also added that it “[believes] that under most scenarios foreign-currency liquidity would be sufficient.” The agency stressed that high interest rates and competition for deposits will raise funding costs but margin pressure should only be moderate, as banks have successfully repriced loans.

MERSİN - Anadolu Agency

Turkey continues to grow in a stable manner, despite the negative conditions surrounding it, said Deputy Prime Minister Ali Babacan at an award ceremony. “Turkey may be growing at a slower pace than it was a couple years ago, but the country continues to grow in a stable and reasonable way amid many negative conditions,” he said at a ceremony organized by the Mersin Entrepreneurs’ Association. He cited Turkey’s experience with the Gezi protests in 2013, followed by the corrup-

tion claims, as examples of the negative situations affecting the country recently. “A local election and a presidential election were conducted in the last two years. The civil war continues in Syria, right beside Turkey. We can barely say Iraq is stable. The recent Russia-Ukraine conflict also makes things worse around Turkey,” he said. Despite all these negativities, and the decision by the U.S.

Federal Reserve (FED) to end the high liquidity party in global markets, the Turkish economy keeps growing and creating new jobs, he said. He noted there are some critical principles of great importance to maintain good performance in the economy. “The most important principles are building confidence and maintaining stability. Economic growth is not possible unless these are ensured,” he said,

adding that it was not easy to achieve them. Babacan also said there are several problems with the country’s investment environment. “We have problems in the judicial area. We also see that the links between municipalities and business circles are not strong, as well as the links between universities and the industrial world. We’ll be focusing on solving these problems in the future,” he said.

EconomicNewspaper

January 2015

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Turkish exports reach all-time high in 2014

İbrahim Küpeli ibnahim.kupeli@img.com.tr

How long oil prices might fluctuate Starting from last months of 2014, crude oil prices have been declining. Peaking up to $115 per barrel in last June, now the oil prices downed to around $43 per barrel. In June 2014, the price of Brent crude was up around $115 per barrel; in January 2015 it had fallen under $50 per barrel. As an indispensable source of energy predominantly for transportation and mobility sector, oil is being used since being discovered in many industrial sectors.

The 2014 exports of Turkey increased some 4 percent, reaching $157.6 billion, a record in the history of the modern republic, according to figures released by Turkish Exporters’ Assembly (TIM). Although the figure remained slightly below the government’s target at $160.5 billion, the record, which came at a time when Europe, its core market, is facing shrinkage risks and neighbors are challenged by internal tensions, was welcomed by the business organization and the economy minister. Car sales have been a major drive, netting $22.3 billion, with textiles and chemicals following. Minister Nihat Zeybekci also confirmed the figure was a record, noting Germany ($14.9 billion), Iraq ($10.7 billion), the U.K. ($9.7 billion), Italy ($7 billion) and France ($6.4 billion) topped the list of top markets.

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Since early 1970s the prices of oil surge steadily and in the economies of nations had been a foremost component. During the last century oil has been also source of welfare for the oil rich countries.

Istanbul-based businesses shouldered some $68 billion portion of the Turkish exports in 2014, followed by Bursa ($12.7 billion), Kocaeli ($12.4 billion), İzmir ($8.9 billion) and Ankara ($7.5 billion).

exports to Iraq had increased some 11 percent. However, the clashes in the country driven by the Islamic State of Iraq and the Levant (ISIL) militants turned the tide, as Turkish exports to it fell 11 percent in the year end.

Meanwhile the countries which do not possess this resource suffered economic trouble regarding high prices. Also all of oil rich countries could not benefit sufficiently from their oil reservoirs.

“I would like to congratulate our exporters, who have broken a record despite political unrest in our close region and economic problems in many parts of the world,” the minister said in a written statement.

TİM Chairman Mehmet Büyükekşi said in a written statement that the overall increase could reach some 8 or 9 percent, adding one percentage point to the national income, if these elements did not hurt the sales.

Turkey’s exports to Russia, which is facing a large depreciation in local currency and economic problems with Europe due to the ongoing Ukraine crisis, fell 15 percent as sales to neighboring Iran also dropped 10 percent.

Büyükekşi also said exports to European Union countries slowed down in the second half of the year.

One of the most striking examples of the oil rich countries which have been exposed to strife and war is unfortunate Iraq. Especially invasion of the coalition forces in the US-led; Iraq could not use its oil resources sufficiently and efficiently in last decade.

In the first five months of the year,

“We continue exporting at our maximum ability for sustainable peace, considering the fresh developments and emerging opportunities,” he said.

Economy expanded at healthy pace in 2014 ANKARA - İbrahim

Caglar, the Head of the Istanbul Chamber of Commerce said that Turkish businesses expanded at reasonably healthy pace in 2014, in spite of geopolitical and economic hurdles. “The conflict between Ukraine and Russia, tensions in Iraq and Syria, both Turkey’s neighbors, are also affecting economic agenda. Despite these risks, Turkey has reduced its trade deficit. Besides, the similar picture is waiting for Turkey in 2015; the export-oriented manufacturing and diversity in foreign markets will strengthen our hand.” exceeding every other annual total on MergerA look at Turkish mergers market record. and acquisitions (M&A) Turkish companies have activity in 2014 confirms been energetically enCaglar’s observation. gaging in cross-border M&A targeting Turkish transaction this year, both companies was valued at inbound, for $39.9 billion $9.6 billion up to the end of the third quarter of the and outbound for $71.4 billion. It is the fifth conyear, according to statissecutive year that M&A tics from MergerMarket has increased, Mergerreleased in September. market said. There were 125 transactions, with eight more Economic growth, in deals than in the same terms of GDP, has of period in 2013. Deal value course been slow. Turdecreased, however, by key’s growth rate has been 28.9 percent. The conbetween 2.5 to 3 percent sumer sector showed a in the last few years. very high level of activity Caglar estimates that with 31 deals through the economy in 2015 will the third quarter in 2014, growth above 4 percent,

with exports as the driver. But current slow growth is a challenge for Turkey. “Unfortunately these figures are well below our potential and our needs,” said Sabanci Holding Chair Güler Sabanci in a statement released to media. “However, the decline observed in the country’s growth rate is due to the turbulent economic environment in the world, lack of confidence in emerging markets, and lack of domestic investment due to the low national savings rate.” Gulenci warned of an upcoming reduction in foreign investment in

emerging markets, as oil exporting countries are suffering from the low oil price, and the U.S. Federal Reserve’s tighter money policy is likely to attract funds to that country away from countries like Turkey. She added that Turkey could escape from “middle income trap” by using its still considerable resources to increase the quality of its education as well as by nurturing innovation. The “middle income trap” occurs when wages rise in an exporting country to the point that exports are no longer competitive.

A few reasons are shown in oil declination, oil shale and oil sands, as well as renewable resources. High prices urged the companies in the US and Canada to drill shale formations and oil sands. Also demand for oil in places like Europe, Asia and the US began tapering off regarding weakening economies and new efficiency measures. Another reason is global warming and climate change which is attributed mostly to the fossil fuels, mostly to oil. So, in recent years, renewable energies have been on the agenda. Especially, sources of solar, wind and hydrogen energies have been increasing in recent years. These are regarded as the energy of the future. Either featuring its high price or pollutant for the environment, electric mobility is going to favorite across the world. Production and demand in electric vehicles are flourishing with every passing year. Every country has scheduled to increase the number of electric vehicles especially in public transportation in terms of being green, clean and cheap transport. Now low prices are excellent for oil consuming countries, but this declination is different for the oil producing countries especially Russia and Venezuela. The largest oil cartel of the world, OPEC’s statement the cartel would continue production 30 million barrels a day for first six months of 2015 and then it would evaluate the market in June meeting. The plummeting price of oil is still the biggest energy message in the world right now; it is bringing back cheap gasoline to the oil-poor countries while wreaking havoc on oil-producing countries like Russia and Venezuela. In conclusion, how long the oil prices would fluctuate seemingly is not clear, but conjecture of the world, sources of renewable energies and new technologies might urge the oil prices unstable in the future.

EconomicNewspaper

January 2015

Please mention “Made in Turkey” when writing to advertisers

A call from Hannover Messe to Turkish companies:

“Join Integrated Industry Network” Hannover Messe 2015, the world’s leading trade fair in industrial technology, will open its doors from April 13 to 17, 2015. As announced during the press conference in Istanbul, main theme of the Hannover Fair 2015 will be “Integrated Industry – Join the Network”. And India is designated the official Partner Country this year. “HOPE TURKEY WINS HERMES AWARD IN 2016”

Speaking at the press conference, Hannover Messe’s Senior Vice President Marc Siemering told that the HANNOVER MESSE 2015 would host exhibitors from all corners of the world and comprise of various fields including Industrial Automation, Hydraulic and Pneumatic Systems, Energy, Wind, Mobile Technology, Digital Factory, Pressured Air and Vacuum Technology, Industrial Supply, Surface Treatment Technology and Research-Technology. Touching on digitalized economic transformation all over the world, Marc Siemering said that companies needed to be open to new ideas in order to be prepared for competition in this transformation. Siemering also underlined that energy will be supplied through smart network connections in the future, there is an increasing trend towards integrated systems and it is significant to establish a large network in industrial fields. Thus he mentioned the importance of the fair in terms of providing an insight for the future. Referring to a worldwide transformation in the field of energy and increasing trend towards renewable and local resources, Siemering said, “All technologies related to the energy of the future will be exhibited at the fair. All important topics about research and development will be covered as well.” Emphasizing the importance of the fair for Turkey as it hosts over 6,000 exhibitors and 200,000 professional visitors from over 100 countries every year, Hannover Messe’s Senior Vice President Marc Siemering said that they are aware of Turkey’s assertive economic plans for 2023. “The machine industry is among the most dynamic industries in Turkey. Government promotes these sectors as well. And the digital technology that is needed in these fields will be exhibited at the Hannover Messe Fair. Companies will see all recent developments and innovations they need. And they will be able to achieve a more sustain-

Touching on the capacity of Turkish companies to become pioneers in economy, especially in R&D, Alexander Küehnel, General Manager of Hannover Fairs Turkey, announced his dream for the HERMES Award of 2016, an essential part of the Hannover Messe. He dreams that in 2016 a Turkish company wins the HERMES Award, the world’s one of the most important and desired technology awards that opens doors to important collaborations worldwide. “We should start working for 2016 already. I dream that a Turkish company succeeds and wins this award. The target for Turkish companies should be winning the Hermes Award in 2016”, he added. THE FAIR TO EXHIBIT SMART FACTORY SYSTEMS

Marc Siemering1

able production. Turkey also has well-developed SMEs. They influence the economy. However, Turkish industry needs to adopt more digital systems. That’s why the fair is important for the future of Turkey”, he added. Marc Siemering pointed out that they consider Turkey important as a powerful participant of the Hannover Messe Fair and expect a broad participation from Turkey this year as well. Alexander Kuehnel, General Manager of Hannover Fairs Turkey, said that machine industry, automation and integrated systems are of interest for Turkey. “All industries should work together in Turkey. I’m aware that networks are important in Turkey. And Turkey needs integrated systems to meet its targets for 2023. We are exhibiting these platforms at the fair”, he added.

The message behind the theme “Integrated Industry – Join the Network!” is that the key challenges of the fourth industrial revolution – such as achieving universal standards for machine-to-machine communication, maintaining data security and finding new business models – can be mastered only through collective endeavor in networks. As part of new business models where factories and energy systems are digitally networked, HANNOVER MESSE 2015 will showcase the great innovative power that all sectors of industry can unleash and bring together suppliers, manufacturers and customers to form networks of communication and collaboration with the common goal of optimizing products and solutions. The technological advances that can flow from networking will be made tangible at HANNOVER MESSE this coming April. Visitors to the fair will witness digitally networked production plants, ingenious new production processes, and next-generation industrial robots live in

Alexander Küehnel-Marc Siemering

action. They will see collaborative robots with sensor systems so advanced that they can work right alongside their human counterparts without any safety barriers. And they will see IT-based automation solutions that will bring fundamental change to all in-factory organizational processes. The exhibition halls at the Hannover Exhibition Center will be home to the most advanced production technology available.

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EconomicNewspaper

January 2015

Please mention “Made in Turkey” when writing to advertisers

Turkey exports ships, yachts worth around $1.3 billion

New economic action plan urges for sustainable growth and development Shortly after announcing the first nine programs of a detailed economic transformation plan, the Turkish Government has announced an additional set of macro-economic reforms.

BURSA - Anadolu Agency

Turkey’s ship and yacht exports reached $1.3 billion in 2014, a 10.1 percent increase over the previous year, according to figures compiled from the Turkish Exporters’ Assembly database. Some 72 percent of the exports were made from Istanbul and 18 percent from the northwestern province of Yalova. The most ship and yacht exports were made to Norway with more than $224.5 million, followed by the Marshall Islands with $165 million. Turkey also exported ships and yachts worth $121.5 million to Iraq, $93.6 million to Malta,

$88.3 million to Germany and $64.6 million to Italy. Turkey’s total 2014 exports increased 4 percent , reaching $157.6 billion, a record in the history of the modern republic. Although the figure remained slightly below the government’s target of $160.5 billion, the record, which came at a time when Europe, its core market, is facing shrinkage risks and neighbors are challenged by internal tensions, was welcomed by business organizations and the economy minister. Car sales have been a major drive, netting $22.3 billion, with textiles and chemicals following.

ture per capita was $4.20. 30 percent of Turkish population used to live under that threshold. Now only 2.7 percent live under the threshold,” he added.

However, while this sector develops, revenues need to be taxed and unfair revenues need to be prevented. This is the essence of our study,” the deputy prime minister added.

He described Turkey as a country that now has one of the strongest middle classes in the world.

Turkish Prime Minister Ahmet Davutoglu praised Turkey’s rising economic development, which was achieved without needing to resort to foreign financial assistance as it did in the past. “Now we have a Turkey that can develop without receiving external loans,” he told a plenary session at the Turkish Parliament, where he made his remarks during parliamentary discussions over Turkey’s 2015 budget. Turkey liquidated its 52-year debt to the International Monetary Fund, or IMF, when the Turkish Undersecretariat of Treasury paid the last installment on May 14, 2013. With 188 members, the IMF loans money to countries with payment imbalances as well as monitoring the global economy and promoting economic co-operation, trade, employ-

ment and exchange rate stability. Turkey even took a seat at the executive board of the International Monetary Fund in mid-July for the first time, as Ibrahim Canakci, Undersecretary at the Turkish Treasury, was appointed as executive director to the Fund for the 2014-2016 term. Ankara offered to give a loan of $5 billion to contribute to efforts to increase IMF funds as agreed at the G20 Los Cabos Leaders’ Summit in Mexico back in June 2012. Speaking on Turkey’s macro-economic figures, Davuto-

glu stressed that the Turkish economy has grown more than three times over under Justice and Development Party rule since 2002. The economy scaled up from $230 billion to $822 billion, he added. He also maintained that foreign exchange reserves climbed from $28 billion to $133 billion within the same 12-year period. The premier said the 2002 export figure of $36 billion grew four-fold to $151.8 billion in 2013. “When we took over the government, the poverty threshold in terms of the daily expendi-

He also stressed that the ratio of public debt to national income fell from 74 percent to 33 percent in the same period, which he said is a figure better than all 25 EU member countries and well above EU standards. He added that direct investments rose from $1.1 billion to $12.9 billion in 2013. While direct foreign investment was $14.6 billion between 1984 and 2002, the figure is now $145 billion in total since 2003. Davutoglu stated that Turkey now allocates $87.5 billion to education and $80.9 billion to health. As for social services, he said the 2015 budget earmarked 26.5 billion Turkish liras for this sector compared to 1.37 billion Turkish liras back in 2002.

EconomicNewspaper

January 2015

Please mention “Made in Turkey” when writing to advertisers

Turkish Parliament approves 2015 Budget The biggest share of the 2015 budget was allocated to ministries of education and health with each getting $38B. Turkey’s parliament approved the government’s central administration budget for 2015 with 297 votes in favor and 145 against. The ministry estimated the budget expenses for 2015 fiscal year at 520.4 billion Turkish liras ($225 billion), while budget income for 2014 is estimated at 499.5 billion Turkish liras ($216 billion); resulting in a budget deficit of 20.9 billion Turkish liras ($9 billion). The budget was debated in the parliament’s planning and budget commission, and the general assembly before it got approved. The biggest share of the budget was allocated to the ministries of education and health with

each getting $38 billion. This was an increase of $2.4 billion for education and $4.5 billion for health ministries compared with 2014 figures. According to the Finance Ministry, the growth rate of Turkey’s gross domestic products would be four percent in 2015, while the expected Consumer Price Index would be 6.3 percent by 2015 end. Turkish exports would also reach 391 billion Turkish liras and imports 583 billion Turkish liras in 2015, according to budget figures. The government spends nearly 25 percent of its budget on employees, which was nearly 3.5 million people in October 2014. Turkish government spent approximately $38 billion on its employees in fiscal year

11 months of 2014 with an 8.4 percent increase compared The budget deficit narrowed to with the same period in 2013. 11.3 billion Turkish liras ($4.9 Budget expenditures for the billion) in the first 11 months of same period rose to 398.2 bil2014, according to the Finance lion Turkish liras ($173 billion) Ministry. This was a significant with an 11.2 percent increase reduction from the18.4 billion year-on-year. Turkish liras ($8.3 billion) Meanwhile, the budget expensbudget deficit in 2013. es for 2014 fiscal year was calAccording to the ministry, culated at 436.4 billion Turkish Turkey’s government revenues liras, while budget income for reached 387 billion Turkish 2014 was estimated to reach liras ($167.5 billion) in the first 403.2 billion liras. 2013 alone.

ANKARA - The Director General of UNESCO hailed the “new Turkey” during her speech in the Seventh Annual Ambassadors Conference in Ankara.

Bokova also thanked the Turkish government for its 2012 $5 million financial contribution to UNESCO’s Special Emergency Multi-Donor Fund.

“I wish to thank the government of Turkey for its resolute action to fight illicit trafficking of cultural artifacts across the region,” she said. “I call on all parties to immediately stop all military use and targeting of cultural sites and I urge all actors to integrate “A new Turkey is rising: an influthe protection of cultural heritage ential economic leader, a bridge between East and West, a strategic and diversity into humanitarian and peace building efforts.” power with the global voice. All these draw on the rooted history Bokova also mentioned the situand diversity of Turkey,” Bokova ation in Iraq, explaining the main said. reasons she paid a visit to the Irina Bokova, the Director General of the United Nations Educational, Scientific and Cultural Organization, or UNESCO, said a new Turkey is rising to lead its region.

“Turkey is aiding today some 1.6 million refugees from Syria. We see Turkey’s leadership in strengthening multilateralism and its vision in human development,” the Director General said.

country on Nov. 2, 2014: “This is why I went to Iraq, to appeal for national dialogue across all cultural and religious lines to say these are the past of Iraq and it is essential to save the future of the country and our collective history.”

Turkey has adopted an open-door policy for civilians fleeing from war in its conflict-ridden neighbors, Syria and Iraq.

Bokova also mentioned the importance of soft power to build cultural ties for “education, protection of culture and cultural diversity, the sciences, communication and information.”

It has given refuge to at least 1.6 million Syrians since the beginning of the civil war in March 2011, “This is the power to broker new and spent more than $5 billion on ideas, to mobilize collective action them so far. for essential global roots,” she said. “The challenges remain deep. Exclusion, poverty, conflict and “We need approaches to build new ones are emerging,” Bokova peace and this is why Turkey’s said. “We are living at a time of a strong partnership with UNEgreat change. Conflict has moved SCO is so important,” Bokova concluded. within countries.”

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UNESCO Director General applauds ‘New Turkey’

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Hard-hit Russian economy may affect Turkey

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ANKARA - While low oil prices are beneficial for Turkey’s current account deficit, the effects on the Russian economy may also bring certain disadvantages, said Rifat Hisarciklioglu, Head of the Union of Chambers in Turkey.

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Hisarciklioglu said tourism and foreign trade in Turkey could be affected by plunging oil prices hitting the Russian economy, which is based on energy exports, hard. “It has been said before that Russia had $500 billion in reserves but because of low oil prices, its purchasing power has decreased,” he said. The global benchmark Brent crude oil price has decreased nearly 50 percent since June, and has stabilized at around $60 per barrel. The Russian ruble took a major fall , losing more than 20 percent of its

value in a single day. Although the currency has since managed to make modest gains, it still remains at lows not seen since 1998. Russia has also suffered from a rapidly deteriorating economy wracked by international sanctions and massive capital flight. According to Hisarciklioglu, the situation that Russia is currently facing can have negative indirect effects on Turkey, namely a decrease in the number of Russian tourists and with regards to exports of agricultural goods and manufactured products. The number of Russian tourists visiting Turkey in 2013 amounted to more than 4 million. Russians constitute the second biggest tourist group in Turkey, after Germans, according to the Turkish Ministry of Culture and Tourism.