|Head of Investment Support and Promotion Agency, Mr. Alparslan KORKMAZ gives interview with People's Daily|
Mr. Alparslan KORKMAZ, head of Investment Support and Promotion Agency of Turkey gave a paper interview with the People's Daily during the Daily's journalists visited Turkey on Dec 9-16, 2009.
1. How did global financial crisis affect Turkey's foreign trade? How did Turkish government cope with the crisis? Did it succeed?
Turkey's economy, in general, has shown a serious resistance to destructive effects of global crisis, thanks to strength of finance sector and public sector's strong fiscal position together with the impact of the measures taken so far. However, Turkey is a country which is totally integrated to global economics with a foreign trade volume which quadrupled between 2002 and 2008. Turkey's exports jumped from 36 billion USD to 132 billion USD in the same period. This made Turkey more sensitive to the global economic trends. Turkey's foreign trade volume decreased 33.2% in 2009 when January-October period is considered. For the same period, Turkey's exports decreased by 27.6% due to the sharp decrease of demand in main trade partners of Turkey, especially EU countries which receive half of Turkey's exports. But as we said at the beginning, Turkey is resilient to global crisis thanks to the measures taken before; none of the banks has bankrupted so far while the increase in the public debt stock was very limited.
When we look at the effects of the global financial crisis on foreign direct investments, we can talk about an estimated 15% decline in the global FDI inflows. Two major factors have caused the sharp drop in global FDI; one of these factors is that as a consequence of the reduced access to financial resources, the capability of companies to invest has been reduced; another major factor is the gloomy economic prospect which negatively affected the propensity of the companies to invest. As a result, transnational companies postponed their investment projects woldwide.
In spite of this negative trend of global FDI all over the world, we had some major investment announcements in 2009: HP and its partner FoxConn, in the establishment of a production facility, will create employment for some 2000 people. We signed an MoU with Pfizer and Huawei has decided on Turkey for their new R&D center. Very recently we made two important announcements; South Korean Posco, world's 4th biggest steel company and China's 3rd biggest automotive manufacturer DFM decided to invest substantially in Turkey.
So we believe that even during the crisis, and after Turkey will still be in the focus of many potential investors and we are ready here to help them. With the very recent New Incentive Law, we see some movement in the withheld demands and in due course we do believe that there will be much more interest. Turkish government is quite responsive to the dynamics of global economics and is taking many important measures to make Turkey's investment environment better. As the Agency, we are also feeding back the decision makers about the demands of the investors.
2. Could you tell us about Turkey's foreign investment characteristics? What are the recent changes or adjustments in Turkey's foreign investment structure? What kind of incentive politics does Turkish government follow in order to attract foreign capital?
Actually Turkey is an ideal investment environment with its unique qualities: With its location; geographically, economically, culturally with a clear EU objective. Also in terms of figures; with its population; 72 million, where the average age is 28.3, 65% being under 34, 50% under 24. High qualified work force – every year 450.000 graduates only from universities. 66 million GSM users, 30 million internet users. Within 4 hours flight from Istanbul, you can reach 1.5 billion people.
A significant range of additional economic reforms has changed the global investment conditions in Turkey. An FDI frame law was passed by the Parliament in 2003, which guarantees national treatment to all investors without differentiating local from international investors. This law enables all international investors: to enter Turkey without a preliminary authorization request, to transfer dividends freely, to access real estate, to be protected against expropriation, and to hire expatriates, etc. Turkey also decreased corporate taxes from 33% to 20% for all companies. Important parameters, like the acceptance of the Arbitration Courts, have also been in effect for more than 6 years now. All these measures have made Turkey one of the most liberal countries in the world, in terms of the legal framework for FDI, and in terms of investment environment.
While in the previous 30 years $18 billion worth of foreign direct investment came into the country, just for the last five and half years' FDI figure is $78 billion. According to the UNCTAD report, between 2008–2010 Turkey is the 15th most attractive country of the world regarding FDI.
As we mentioned before, Turkish government installed a new incentive programme, which has been in effect since July of ‚09. Free land allocation, corporate tax as low as 2%, social security costs reduced by 50% etc are the new measures. Companies appreciate the fact that we are responsive to their needs. Projects with other large-scale investors are currently in the making.
3. What are your expectations about Turkey's foreign trade and foreign investment for the next year? What is the program of Turkish government in these terms?
We believe that 2010 will be better than 2009. For the foreign trade, the signs for recovery has already started; for example, Turkish export to EU countries increased by 11,7% in October 2009 when compared the same month of 2008. Paralel to its active foreign policy, Turkish government's attempts to strengten foreign trade links with other countries were very immense in 2009; lots of bilateral treaties and MOUs were signed, visa barriers with many countries were abolished and many official visits, especially to China, which include business delegations were organized in 2009. For example, I personally attended 3 official visits to China, one of them was together with the President of Turkey and the others were together with two Ministers of Turkey who are in charge of Finance and Foreign Trade. We believe these attempts will continue and even increase in 2010. Likewise, we witness more movement also from the investors in the last quarter of 2009. It can be said that, as the Agency, we will focus more on cash-rich markets for FDI such as China and Gulf Countries.
4. How do you evaluate the rise and effects of emerging economies? What is the Turkish government planning to increase collaboration with emerging economies?
We can say that the global financial crisis denotes to an increasing prominence and importance in the global economy for emerging economies. Emerging economies are expected to play a large role in the global recovery from the financial crisis. In 2009, it is estimated that emerging economies will constitute the vast majority of global economic growth due to negative growth in many developed countries. Recovery of the emerging economies will be essential to global growth, as China, Russia, India, Brazil (BRIC) and other large emerging economies now make up nearly 30% of global GDP. In 2005 Goldman Sachs mooted the BRIC successors, otherwise known as the Next-11 (N11). This grouping comprises Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Vietnam and Turkey. According to projections of Goldman Sachs, Turkey's economy in 2050 will be bigger than Japan's, France's, or Germany's, and both Nigeria and the Philippines will have larger economies than Canada and Italy. Korea, Iran, and Saudi Arabia will all have bigger economies than Spain. According to same projections, the Chinese economy will overtake the U.S. economy and the economies of Brazil, Russia, Indonesia, and Mexico will all be bigger than that of the next-largest old-rich country, Britain.
As I mentioned in the previus question, Turkish government's attempts to strengten bilateral links with different countries were very immense in 2009 and it is obvious that this trend will continue in 2009. It is inevitable for Turkey to increase collaboration with emerging economies. If you take a look at some of the major investments we recently announced; you will see DFM automotive from China, TAFE and Jain from India, Posco from Korea. We have recently appointed a reprsentative in Brazil. Relations with Russia are also quite important. So we can say that these economies are definitely within our radars.
5. What do you think about economic and trade characteristics and advantages of Turkey and China? In this respect, what are your expectations regarding the collaboration between China and Turkey? What do you think should be developed and strengthened?
Turkey attaches great importance to its relations with China, hence it is working closely with the Chinese authorities to improve bilateral relations ranging from trade to investment opportunities. Bilateral trade between the two countries have increased exponentially in recent years, today, China is the fourth trade partner of Turkey with a trade volume exceeding USD 17 billion in 2008 up from USD 1.6 billion in 2002, that represents a 945% increase in the last 6 years, however, China's exports to Turkey surpasses its import from Turkey, thus, creates a huge trade deficit. Such an imbalance can be compensated through robust Chinese investment in Turkey, inbound tourism from China, joint-ventures in the third countries, and opening of the Chinese market further to the Turkish products. Therefore, I believe that the two countries have not fully discovered their potentials as there are a myriad of opportunities yet to be explored in many areas, let alone trade. I am confident that further dialogue between the Chinese and Turkish investors will create new areas of cooperation for both parties.
6. What is the investment potential of these countries? What are the applicable cautions we can take in order to increase mutual investments?
There are more than 360 Chinese companies operating in Turkey; it is better than nothing, but still low, therefore, it needs to be improved. It is imperative for the Chinese investors to realize how close Turkey is to important markets with economic potential beside its own potential. We believe that once the Chinese companies discover the lucrative investment opportunities which Turkey offers, they will definitely boost their investments in Turkey, because there is ample opportunity for the Chinese investors in Turkey, considering Turkey's unique position as well as its strong and institutionalized relations with the European Union (EU) and other countries in the region. Turkey has Customs Union with the EU since 1996, moreover, Turkey has free trade agreements (FTA) with 15 countries in the region and more FTAs are being negotiated with key countries. What does that mean to Chinese investors? It plainly means that products originated in Turkey can be freely exported to those markets in the EU and FTA countries. But, you may ask me why I am stressing this fact, let me tell you why; as you already know, the EU is China's largest trade partner, with the EU being the main exports destination and we all know the trade rows between China and the EU on the exportation of the Chinese products to the EU, for example, the so-called "bra wars" dispute between China and the EU is well known in the literature. There are numerous obstacles hindering the Chinese exports to the EU, but once the Chinese investors produce in Turkey, they can easily access the EU and other markets in the region. Here, we can see two tangible advantages for the Chinese investors, first they save from logistic cost and second from import tariffs and regulations. Moreover, those advantages can be amplified further, for example, proximity to the main exports destination will also enable the Chinese investors to explore more opportunities in addition to reduced cost of transportation. Therefore, the stakes are high for the Chinese investor with regard to investment in Turkey. This is why we have a representative in China who is responsible for promoting the investment environment of Turkey to Chinese investors.