HOW TO DO BUSINESS IN TURKEY: INVESTOR'S GUIDE
3. Industrial outlook
Financial markets are in turmoil; prices for oil and other commodities are fluctuating wildly; housing, automotive, and other industries are fighting for survival; millions of people are unemployed – the litany of woes continues as many nations slip into a global recession. Yet, even amid the economic upheaval, opportunities and positive signs exist: Medical and technology advances are continuing apace; greening initiatives are moving forward; and governments, corporations, and citizens around the world are collaborating to identify real and lasting solutions to today’s and tomorrow’s challenges.
This 2009 industry outlook features Deloitte and DEIK’s insights, analyses, and projections for the following industry sectors both in global and local aspects:
I. Global Aspect*
Aerospace and Transport Sector
The large commercial aircraft sector is expected to generate most of its revenue from Asia Pacific Japan (APJ) and the Middle East, due to the current economic climate. In the next two decades, Boeing forecasts delivery of 29,400 new commercial aircraft worth $3.2 trillion. In the short term, however, airline companies worldwide will continue to struggle with the global economic recession, fuel price fluctuations and the difficulty in raising ticket prices, which might impact airplane and engine purchase orders in 2009. Fortunately, the multi-year backlog for airplane production at the major commercial aircraft companies appears to be solid, with expected 2009 deliveries on the order of 900 large commercial airplanes. Business aviation forecasts for the coming decade are quite robust: Honeywell’s 2008 forecast predicts 17,000 new business aircraft valued at $300 billion. Because of the global credit squeeze, however, there may be short-term customer financing challenges for some portion of the backlog for business jets. Thus, we would expect that 2009 may see a falloff in business jet orders, production and deliveries.
The challenge for the airline industry is to ease the growing pains of product and process innovation to realize the potential for technology advances. For example, aerospace process innovation will need to continue attacking structural cost reduction opportunities via industry-wide implementation of digital product definition tools and processes, as well as outsourcing parts manufacturing to lower-cost countries. Commercial airline order backlogs from China and the Middle East are robust and appear to be solid. By focusing on product innovation, process improvements and new revenue opportunities, Aerospace and Defense companies will be wellpositioned to take advantage of an economic turnaround.
Automotive
Pressures from plunging sales, frozen credit markets, global competition, higher raw material and, until recently, gasoline prices, and growing consumer demand for more fuel-efficient vehicles are driving a transformation of the industry across its entire value chain. With an extraordinary drop in third and fourth quarter sales, the entire industry has been put into crisis mode. There is no question that the automotive industry is in turmoil. The global financial crisis has begun to negatively impact automotive Original Equipment Manufacturers (OEMs) around the world. The financial crisis has manifested itself in the automotive sector in very tight global credit markets for OEMs, dealers and consumers. This in turn has had a dramatic impact on consumer demand, with double digit year-over-year sales declines leading to sales levels not seen since the early 1980s. As bad as 2008 is shaping up to be in terms of retail sales, the 2009 forecast points to even sharper declines in the coming year. The fight for share in a shrinking market will likely prompt consolidations and alliances at the OEM level around the globe. Expensive or scarce credit for vehicle purchases and dealership floorplan financing is expected to continue through 2009. Credit is the life blood of dealerships and is used to finance vehicle inventories. Lenders’ reluctance to extend financing and/or increased interest charges could have a devastating effect on already-struggling dealerships. The refusal of captive finance entities as well as banks to extend retail financing to consumers with poor credit could potentially eliminate three out of every four customers, driving further sales declines. The lack of credit could open up interesting possibilities in terms of program collaborations, vehicle assembly alliances, and partnerships around the globe. Watch for more merger and acquisition activity, both for OEMs and suppliers. Consumer interest in alternative fuels and greener vehicles is driving other industry changes. Most observers believe that automotive has turned the page on the internal combustion (IC) engine as its sole powertrain solution. Manufacturers are adapting the IC engine to alternative fuels such as ethanol and other bio-fuels; however, the end game likely will be the all-electric powertrain – although it will take time to get there. In this unstable dynamic environment, virtually all major automakers are looking to collaborate with other automakers to jointly develop new technology like hybrid powertrains, share components such as transmissions, or fill excess production capacity by assembling vehicles for other OEMs. The industry transformation that is underway will see the rise of a variety of partnerships and other forms of collaboration that only few years ago did not seem possible. A dramatic change in the increased proliferation of global platforms is very likely. These global platforms will truly be common platforms in some cases possibly sharing over 70 percent of their components. These global platforms will substantially reduce costs and speed time to market. Finally, OEMs that capture the services business – and, most importantly, keep it after warranties expire – will gain not just in sales and profit, but also in reduced costs and greater customer satisfaction and loyalty. All are key components to helping automotive companies survive what is expected to be a very challenging year.
Financial Services Industry
The banking and securities industry enters 2009 in an unprecedented state of turmoil and dislocation. What started as a credit issue in the subprime niche of the mortgage market has extended to all corners of the financial services industry, and all corners of the globe. What was a financial crisis is now a full-blown economic crisis with global impact. As the industry continues its crisis-related evolution in 2009, five emerging trends indicate a paradigm shift that would affect not only financial institutions but also borrowers, investors and regulators;
1. Intervention, regulation and the role of government. In many parts of the world, the discussion concerning the future role of the government in the industry will continue and begin to take more concrete shape. Look for the following to begin to be addressed in 2009:
2. The move from ‘alpha to beta’ markets. Due to the turmoil in the financial markets, the pursuit of alpha – high-return/high-risk profile products – dramatically decreased as a strategy in 2008. From investment banking to hedge funds, those businesses with high-risk/high-return business models have been negatively impacted. Moving forward, it is likely that regulators may try to limit exposures and customers will be more riskaverse. This shift could have a number of implications including: governance and “exit strategies” for these high-risk businesses are becoming increasingly important, and institutions may need to refocus their businesses on more traditional, simpler products, with more predictable returns.
3. De-leveraging. The world financial system is undergoing massive de-leveraging. Many institutions, such as banks, hedge funds and private equity firms have become less leveraged. Some are implementing economic capital models to enhance risk management disciplines. The implication for banks and other non-bank financial institutions is that returns on equity will be lower than in recent years.
4. Fragmentation to consolidation. For nearly two decades, consolidation has been creating larger entities across many segments of the financial services industry, and the current crisis has dramatically accelerated that trend. If the notion of “too big to fail” was a concern before, it will be a greater concern in 2009 and beyond as weaker entities fail or are absorbed by larger, more successful players. The flight to quality will continue to reinforce this trend as corporations look to the strongest and largest players for their financial services needs.
5. From buyer beware to seller beware. In the last year or so, many financial institutions have taken on the responsibility to support products by putting structured investment vehicles or SIVs on the balance sheet, injecting money to restore the “buck” in money market funds, and covering losses for auction rate securities. These efforts have been undertaken to restore the public’s trust and confidence in financial products – and to avoid damage to the institutions’ reputation. As they enter 2009, financial institutions will likely return to basics. This could mean placing greater emphasis on more relationship-based and less transaction-based businesses in 2009, and promoting product simplicity, transparency, and enterprise risk management. Expect to see future products that provide far more clarity and greater assurances regarding likely performance, risks, and outcomes.
Banking and securities organizations should consider staying focused on the things they can control by: Maintaining their “fortress balance sheet”, Reassessing risk management and overall governance, Pursuing cost and organizational efficiency, Striving for fair and ethical treatment of customers, and Looking for opportunities to acquire and grow.
Regardless of the length and breadth of the downturn, it seems clear that global regulators plan to move forward with regulatory reform aimed at enhancing regulatory oversight, risk management, leverage and liquidity. Financial institutions will need to respond to any new standards – and business models – accordingly.
Consumer Business A tainted-milk scandal in China and e-coli-related recalls of tomatoes and salsa in the United States are drawing heightened attention to the need for consumer products (CP) companies to more closely manage and evaluate their supply chain risks on a global scale, while concurrently trying to improve efficiency and extract optimal value in troubled economic times. Supply chain concerns, sustainability/social responsibility, branding imperatives, and an evolving regulatory environment are among the top issues facing consumer products companies in 2009. Factoring in a consumer spending slowdown in the market, CP companies likely will find themselves playing a zero-sum game: The only way they will be able to grow significantly in the coming year is through strategic acquisitions or by stealing market share from competitors.
Forward-thinking CP companies are recognizing that automating their business and supply chain processes can help to significantly improve product quality, add organizational agility, and reduce costs.
Sustainability and social responsibility offer CP companies growth opportunities through new products and marketing. For many organizations, “green” product sales are growing faster than sales overall. Furthermore, CP companies are addressing increasing cost inflation by reducing packaging costs and by employing stealthy price increases. A recent, broad-based survey of consumers and cause marketing experts found that a company’s investments in social marketing, cause marketing and corporate social responsibility initiatives enable it to charge an average premium of 6.1 percent – and consumers say they are willing to pay a premium for brands viewed as “green.”
Effective branding is always important in the consumer products sector, but it is expected to become a front-burner issue in 2009. In troubled economic times, consumers are inclined to scrutinize each purchase more closely, particularly in terms of branded versus private label products. CP companies will need to clearly differentiate their products from competitors’ if they hope to grow (i.e., steal) market share in 2009. Consumers have to believe that a product is safer, of higher quality, or tastes better to make paying an up-charge worthwhile. When consumers can’t differentiate, their tendency is to buy private label – especially when pennies count. If poor economic conditions persist into 2009, watch for continued growth of private label products, countered by aggressive marketing efforts by name brands. Similarly, CP companies should avoid competing on price to the exclusion of all else, particularly in increasingly commoditized categories such as electronics, fashion and processed foods. Those brands that differentiate on other attributes will be the winners of the future.
M&A becomes an important tool as domestic markets grow slowly and offer CP companies limited ability to raise prices. Setting aside expansion in emerging markets, the only way to grow in a big way is through strategic acquisitions and the juggling of product portfolios. Those CP companies that have the capital to do this should be able to work through the current economic downturn by acquiring and maximizing access to new markets as a source of growth.
Energy and Resources
The world’s economy is no longer impacted by record high energy prices; it’s being driven by the economic downturn and continuing credit crisis. These constraints, in turn, are pushing down energy prices because of slowing demand – and that trend is expected to continue in the coming year. The new mantra for the Energy and Resources sector? “As the economy goes, so goes energy.” To survive in this altered landscape and to prepare for an eventual economic upswing, energy companies in 2009 should focus on maintaining liquidity, promoting operational efficiency, and expanding their long-term reserves through the drill-bit and acquisitions.
Concurrent with managing the fallout from volatile commodities prices, oil and gas companies in 2009 will continue to need to address the longer-term, two-sided issue of increasing demand and constrained supply. Despite the recent slowdown in demand – a result of the economic downturn and developed nations’ increased energy efficiency – the world’s need for energy is increasing at an ever-faster pace. Analysts agree that fossil-based energy – oil, gas and coal – will remain a dominant source of energy through the predictable future; however, supply is not keeping pace with demand. Oil and gas are getting harder and more costly to find and produce; accessible reserves today are located in difficult places such as deep waters and arctic regions. In addition, countries such as Saudi Arabia, Russia, China, Venezuela, Brazil and Malaysia, which own the world’s largest reserves of oil and gas, continue to limit or restrict access to international oil companies (IOCs). Finally, the ongoing threat of natural disasters or geopolitical conflicts also jeopardizes energy prices and supply levels.
While oil and gas prices are temporarily depressed, there is little doubt that prices – and demand – will continue their rise as we move out of the global economic crisis.
On a positive note, fluctuating energy prices and tightened supplies may stimulate the development of energy-efficient technologies and processes that can be leveraged by a number of industries. Energy-intensive, manufacturing-based sectors such as Automotive, Aerospace and Defense, and Consumer Products have considerable incentive to look at options to lower their plants’ energy bills, including onsite- or co-generation, solar and wind power, and energy-efficient, demand-side equipment.
Among the top issues facing power and utility companies in 2009 is the continued trend toward rising input costs (e.g., coal, natural gas) and increased construction risks, as the sector seeks to build out new infrastructure (both generation and transmission) to meet demand in environmentally responsible ways.
In light of the challenges faced by the sector, the 2009 outlook for Power and Utilities could best be termed as “stable.” The current financial crisis suggests that investors will look for investments in “hard asset” companies with healthy balance sheets and stable earnings – which is the profile of much of this sector. Also, companies should be able to attract capital on reasonable terms if state regulators provide rate relief where needed, and show an inclination to support a flexible, longterm construction strategy. While growth in demand for energy may slow down or falter in the short term, the sector will continue to grow its asset base (and earnings) consistent with the need to meet the requirements for environmentally friendly energy supplies.
Life Sciences and Health Care
Now, more than ever, stakeholders in the industry’s three major sub-sectors – health care providers, health plans, and life sciences companies – must balance short-term needs to control costs, fill product pipelines and connect with consumers with the longer-term imperative to radically transform expensive, cumbersome and inefficient systems that threaten the sustainability of their organizations.
The news for health care providers in 2009 is more bad than good. If the economy continues to have problems, all industries will be negatively impacted, hospitals included. Yet, even in the current environment there are still pockets within health care where providers can make money, particularly service lines such as orthopedics, cardiology, and some areas of oncology. As they look ahead to the coming year, health care providers first and foremost must make sure they are financially stable. The typical provider is not an overly wealthy organization. Although hospitals and health systems generally manage expenses to revenues, and have been able to achieve thin, positive operating margins in recent years, the financial picture for 2009 looks murkier. Creditworthiness will be tougher to achieve, with anticipated near-term downgrades three to one over upgrades.
Health plans in 2009 should focus on blocking and tackling as a way to navigate through the struggling economy. This means being extremely efficient, challenging cost structures, managing and allocating capital with an eye toward liquidity and debt structure, and looking at all aspects of the way information flows throughout their organizations. For many health plans, provider negotiations could be quite challenging in 2009. Providers are experiencing increased bad debt and ever-tightening margins, which can heighten tensions in contract discussions with health plans.
Finally, life sciences companies are facing growing challenges around their traditional, physicianfocused sales and marketing model. Sales and marketing are all about creating demand. As the industry becomes more consumer-oriented, life sciences companies need to rethink the steps they take around demand creation. The markets of the future will be less physician-centric; other stakeholders will be involved in the product evaluation and purchase process and companies need to understand how to engage them. This will be particularly challenging in light of increasing regulatory constraints around patient education and information.
Technology, Media and Telecommunications
Technology companies may be able to offset some of the growth challenges they face in 2009 by identifying revenue opportunities in niche markets that might not have been as interesting when revenue was more robust.
Technology companies should develop a support services plan for their non-first-generation products or they risk being underpriced and displaced by specialty niche service providers. In past economic downturns, mergers and acquisitions in the technology sector have actually increased. M&A activity could once again help to spur sector growth, particularly in the form of small acquisitions funded out of companies’ R&D spend. In addition to identifying creative revenueproducing opportunities, technology companies will be looking to reduce costs and maximize enterprise efficiencies in the coming year. Similarly, as the amount of economic uncertainty grows and risk increases, it is important for technology companies to more systematically stage their investments in research and development (R&D). Challenging economic times can create incredible opportunities for innovators, and technology is the home of innovation. Expect to see significant new disruptive capabilities emerge – both in products and services – and interesting new ways of doing business result from this economic crisis.
Digitization has created a number of industry-wide challenges that will continue into 2009 and beyond. Among these are protecting intellectual property, sustaining historical revenue streams, and finding ways to utilize and monetize emerging new platforms for traditional content – including print, filmed entertainment, and recorded music – as well as user-generated content and other new services, applications and formats that compete for consumer mindshare and time.
The increase in digital content and number of new distribution channels – a result of rising Internet penetration, shifting demographics, and changing consumption habits (more Internet usage, a continuing decline in TV viewership, the extraordinary growth of interactive games) – is having a dramatic impact on the M&E (Media and Entertainment) supply chain. Combine that reality with the growing consumer demand for content that is available at any time on any platform, and the current M&E supply chain structure appears inadequate.
While this new ecosystem will take years to develop, 2009 will mark the beginning of its evolution. To prepare, companies should begin to assess the capabilities they have – or must develop – to remain relevant, maximize and implement new business models and supporting infrastructures, and facilitate alignment with key supply chain partners.
The M&E sector has tended to be resistant to (although not immune from) traditional economic downturns because its products and services are among the few affordable pleasures left to consumers in a tight economy. In fact, the last two times the economy experienced a downturn, movie ticket and DVD sales went up. It is likely that people will continue to indulge themselves in the small pleasures of DVD consumption, interactive game-playing, online entertainment, books, social networking and television while eschewing big-ticket items such as cars, refrigerators and computers. Advertising budgets will go down, but guerilla marketing and other innovative platforms for reaching consumers may thrive. The game business will continue to prosper, albeit perhaps at a slower pace, as will many Internet-related businesses. Newspaper readership will continue to decline, but books and DVDs will be sold in perhaps greater numbers. 2009 is expected to be a year of contrasts: Although more mature media outlets such as publishing and traditional advertising may struggle for survival, Internet upstarts and game companies likely will be riding a wave of digital success, either absolute or comparative.
As per telecom industry, wireline’s demise is being hastened by the phenomenal growth of wireless, which – despite irritating connectivity reliability issues that are still being resolved – is rapidly becoming consumers’ communications technology of choice. After all, why use an oldfashioned wireline phone when your snazzy new wireless model offers on-the-go voice, text, Internet, video, music and a directory with all of your important contacts?
The emergence of non-traditional competitors in the telecom space also indicates that wireless data is the future. Google is making the source code for its Android mobile platform freely available, banking that an open-architecture approach will spur development of a wide variety of applications, as well as cheaper and faster phones. Clearwire’s WiMax is pushing wireless data as its core service and Apple’s iPhone is redefining the handset, particularly in the area of video consumption. Wireless carriers must remain alert to both threats and opportunities presented by these and other market entrants. Wireless won’t be the only focus for telecom carriers in 2009. Major players are expected to continue their move into media, competing with cable companies for the coveted subscriber “triple play” of telephony, broadband and media services. The goal is to bundle multiple communication services to increase subscriber “stickiness.” The paradox is that the new “smart phones” are much more than phones; they are digital cameras, GPS devices, MP3 players and more. These feature-rich devices provide amazing new subscriber capabilities but they also challenge carriers to question what they are subsidizing, since carrier revenue does not necessarily benefit from some of these advanced features. However, carriers will likely continue to invest in increasing service capabilities as they move toward a data-dominated market.
As difficult as 2009 may prove to be, the telecom sector could look back on it as one of those historic inflection points that defined the future of the industry – a future that is data- and servicesdriven, not voice-based. This shift will require telecom companies to transform their strategies and operations to support and leverage advances.
Real Estate
Following several years of spectacular returns for the commercial real estate industry, global credit problems that began in the U.S. residential subprime market have spilled over into the commercial debt markets, resulting in suppressed transaction volumes and limited access to financing. While real estate remains a relatively good investment option, especially in light of the recent volatility of competing asset classes such as stocks and bonds, the real estate sector itself faces several challenges in 2009 that are symptomatic of a general economy in distress.
In terms of magnitude, commercial real estate’s biggest concern is debt maturity. Quite a few companies have debt coming due in 2009; however, it is becoming increasingly difficult to access credit to refinance that debt. If companies can’t secure financing, they can’t operate. Even those commercial real estate firms which have debt maturity into 2010 and 2011and are looking to purchase distressed assets to build-out their portfolios are finding it difficult to obtain financing. The end result: Nothing is selling and business is grinding to a halt.
Overall, the outlook for commercial real estate in 2009 is neutral to slightly negative. Private real estate returns are expected to remain relatively attractive, although lower than in recent years. And while fundamentals remain relatively strong in certain markets, the economy is curtailing overall growth and increasing cap rates. Also, there is growing concern about commercial mortgagebacked securities (CMBS), most of which will mature in 2010-2012. If there is no market for these securities, the impact on the sector could be extremely negative. As they wait for financing (and deals) to flow again, commercial real estate investors can take comfort in the fact that the sector is not as overbuilt relative to previous economic downturns or to the housing market, and that real estate continues as a relatively attractive investment option, both at home and abroad.
Tourism, Hospitality and Leisure
The combination of a housing debacle, credit crunch and rising unemployment has placed the economy at or near recession – leaving fewer money available for consumers’ leisure travel and other forms of entertainment. Corporations, meanwhile, are implementing cost-cutting measures such as reducing employee air travel and scaling-back or eliminating group meetings at convention hotels and destination resorts. Economic difficulties are expected to continue well into 2009, affecting how and where people travel. According to Deloitte’s October 2008 travel survey, 38 percent of respondents said they expect to spend less on vacation/leisure travel over the next 12 months, nearly double the 21 percent who expect to spend more.
On the whole, THL companies can expect to be under continued duress well into 2009, but smart hospitality organizations with innovative and costeffective programs will be able to increase customer loyalty and drive demand.
With economic conditions becoming more challenging by the day, building brand value is more important than ever. The competition for customers and market share is expected to intensify in 2009; therefore, the ability of a hotel, restaurant, and cruise line or vacation destination to crisply define and consistently deliver on a distinct brand promise can help to increase demand and build customer loyalty.
While the 2009 forecast for the THL sector is somewhat negative, the outlook is slightly rosier than for other industries. Businesses will continue to cast a discerning eye on employee travel and group meetings at resort properties but roadwarriors will press on. From a leisure travel perspective, consumers seem to be hanging on to their vacations and timeshare properties. They may take a shorter trip in 2009 and travel by car rather than air, but people love to stay in hotels, visit amusement parks, casinos and historic sites, and eat at restaurants because they have positive experiences there. THL companies which continue to focus on building customer loyalty and look for opportunities to grow, particularly overseas, should be able to navigate, and even prosper, in these troubling times.
II. Local Aspect *
Aerospace, Transport Services and Defence Industry in Turkey
Turkey enjoys a privileged position at the crossroads among Europe, Caucasus, Middle East and Central Asia. As a result of being a regional logistics base, Turkey’s transportation sector partakes among principal sectors in terms of economic growth and employment.
With the influence of economical development and the EU accession period, the modernization of transportation sector has been already kicked off through privatizations and foreign direct investments. There are several ongoing projects on especially infrastructure and many privatizations have been realized mostly through build-operatetransfer (BOT) contracts. Moreover, Transportation Master Plan Strategy Report has been recently prepared for the Turkish Ministry of Transportation, which encompasses numerous project proposals on infrastructure, traffic and management of transport modes.
Turkish Transportation Sector Statistics
| 2006 | 2007 | |
| Railways | ||
| Length of main lines (km) | 8,697 | 8,697 |
| Passenger traffic (m passenger-km) | 5,277 | 5,553 |
| Goods traffic (m tonne-km; incl private wagons) | 11,242 | 12,108 |
| Sea | ||
| Passenger traffic (m person-miles; domestic) | 753 | 843 |
| Goods loaded (.000 tonne; incl domestic, excl transit) | 78,783 | 80,383 |
| Goods unloaded (.000 tonne; incl domestic, excl transit) |
154,540 | 171,405 |
| Road | ||
| Length of motorway (km) | 1,987 | 1,987 |
| Length of state and provincial roads (km) | 61.764 | 61,912 |
| Passenger cars (no.) | 6,140,992 | 6,472,146 |
| Total road vehicles (no.) | 10,936,714 | 11,695,611 |
| Passenger traffic (m person-km; domestic) | 187,593 | 209,115 |
| Goods carried (m tonne-km; domestic) | 177,399 | 181,330 |
| Air | ||
| Domestic passengers (.000) | 28,800 | 31,971 |
| International passengers (.000) | 32,884 | 38,382 |
| Cargo handled
(.000 tonne, incl domestic) |
1,347 | 1,547 |
Source: Turkish Ministry of Transportation
In order to realize a nostalgic dream, the revival of the historical Silk Road as a part of international transportation came into agenda in 2006. Turkey has a primary role as a natural bridge within the Silk Road project, which links the Asian economies with high shares in world trade and Europe, due to its strategic geographic location, its proximity to the international transport routes, its renovated transport infrastructure and strong road fleet. Road transport is the main means of freight and passenger transportation. The 43% of Turkey’s total export was carried by road in 2008 to 57 countries by 1453 road transportation companies operating in Turkey. The Turkish Government aims to modernize existing roads and launch new projects. The estimated cost for modernization and construction of the roads is 37 billion TL. Roads which will be modernized are;
As a part of the project of Silk Road, construction of Black Sea Ring Highway, which has a total length of 7140 kilometers and crosses the borders of 12 Black Sea Economic Cooperation (BSEC) member countries, takes place among upcoming projects. To ease traffic jam in Istanbul, construction of a third Bosphorus bridge and a underwater tunnel is on the agenda. Bridges that span the Istanbul strait will be privatized as well.
Turkey has a railway of 8,697 km owned by public institution, TCDD. However since most of the railways are old and inefficient, the Turkish government aims to modernize railways through various projects. Construction of Ankara-Istanbul, Ankara-Konya, Ankara-Izmir and Istanbul-Bulgaria highspeed lines are on the agenda.
Turkey has targeted to become a center for railway freight traveling by realizing and completing The Strait Rail Tube Crossing and Commuter Railway Upgrading (MARMARAY) Project, which will connect Turkey to the Trans- European Network. The total length of the Project is approximately 76 km and total amount is estimated as 3 billion USD. Once the project is completed, Turkey will become an essential center for railway freight among Europe, Central Asia and the Middle East. Developing rails for more freight cargo is required. 23,5 billion USD is allocated for railways by 2023.
Turkey also has a leading role in Kars-Tbilisi-Baku Railway Project, which is an alternative route within the contemporary Silk Road. Known as the ‘Iron Silk Road’, Kars-Tbilisi-Baku Railway Project creates an alternative route to the existing West- East corridor through Iran. The total length of the project is 124 kilometers. 92 kilometers will pass through Turkey and the rest will pass through Georgia. Other railways which will be modernized are:
Domestic and international flights are operated by state-owned company, Turkish Airlines (THY) as well as some private airlines.
There are 67 airports in Turkey:
The estimated cost for airport modernization and construction is 4 billion TL. Construction of airports in Bingöl, Igdir, Hakkari Yüksekova, Sirnak, Kütahya-Afyon-Usak, Istanbul, Çukurova and Diyarbakir takes place among upcoming projects.
Istanbul-Izmit, Izmir, Adana-Mersin and Samsun are the major ports for domestic and international freight and passenger transportation. In order to increase quality and productivity, ports of Bandirma and Samsun will be privatized for 36 years.
Apart from aforementioned upcoming projects, 10 logistics villages will be built in Halkali, Köseköy, Kayseri, Samsun, Eskisehir, Balikesir, Yenice, Erzurum, Mersin and Aydin.
Turkey spends 3-4 billion USD annually in arms procurement. The proportion of defense systems produced locally is 25%. In 2005 Turkey ranked as the fourth biggest country in defense imports while standing at 28th in defense exports.
Turkey has traditionally made modest efforts to become self-sufficient in basic defense industrial activities. Starting in the second half of the 1970s, these capabilities were expanded through several vital investments, particularly into the defense electronics and aerospace fields. In 1985, Undersecretariat for Defense Industries (SSM), a government entity charged with coordinating and financing the development of the defense industry, was established. Since its establishment in 1985 the SSM has been entrusted with the responsibility of a fairly large number of defense industry projects, valued about 30 billion dollars.
But the imbalance between the local production and the imports led Turkey to pursuit of a stable local defense industry infrastructure. In May 2004, SSM decided to cancel three major projects, including the multi-billion dollar attack and tactical reconnaissance (ATAK) helicopter programme, and instead introduced a new procurement model to boost ailing local industry. The initial goal is to increase the proportion of defense systems produced locally from the current 25% to 50% by 2010. The next stage proposes an increase in exports of defense products and services to around 1 billion USD per year by 2011 from the current 200-300 million USD per year. The SSM target for defense exports are 1.8 billion USD between 2006 and 2016.
Meanwhile under the new offset directive adapted on February 2007, offset arrangements should generate work that will boost the local industry as well as its exports equal to around 50% of the contract value. The policy resulted in Turkish defense industry companies, which number around 67 including 15 military-owned companies, increasing turnover to 1.6 billion USD in 2005.
The prime mover on the aerospace side of Turkey's defense industry is TAI (TUSAS Aerospace Industries). It has been co-producing the needed air planes and helicopters by the Turkish Air Force. Another Turkish company Aselsan, has established itself as the leading electronic systems house in Turkey as well as having a major capability in radars and optronic systems. Roketsan is one of the few companies in Europe with the capability to design, develop and manufacture artillery rocket systems (ARS). FNSS Savunma Sistemleri is the largest manufacturer of tracked armored fighting vehicles (AFVs) in Turkey. Another company Otokar has developed and placed in production a complete range of 4x4 reconnaissance vehicles. Makina ve Kimya Endustrisi Kurumu (MKEK) is the main manufacturer of ammunition, small arms and other weapons in Turkey and is also a major subcontractor to other Turkish defense contractors. TLFC has extensive facilities involved not only in the upgrading of AFV and artillery systems but also in production. It has upgraded over 4,000 tanks and the center has developed and put into production specialized versions including ambulances, command post and engineer squad vehicles. The main repository of naval shipbuilding and repair experience remains resident within state-owned hands at Naval Shipyard. The navy's other major surface acquisition is the locally designed and built 12 MilGem corvette ships. Also, a private company Yonca Onuk designed and built most of the fast patrol craft in service with the Coast Guard.
Besides Turkish companies, there are many foreign companies working for Turkish defense industry. Imtech, RMK Marine Shipyard, German Minehunter Consortium of Abeking & Rasmussen and Lurssen Werft and Dearsan Shipbuilding and Repair Company are some of them. Beneath the surface, the Gölcük shipyard has experience working under the license of Germany's Howaldtswerke-Deutsche Werft (HDW) in constructing submarines.
Turkish defense industry is expected to continue its growth in the future due to Turkey’s geographic and strategic position. At the same time with the new legislations and incentives for the local defense industry to grow, Turkey’s export and import in the sector will be more balanced in the future as well.
Automotive Sector in Turkey
Turkey, the 16th automotive manufacturer in the world, is Europe’s largest bus manufacturer and 2nd light commercial vehicle manufacturer. The Turkish automotive sector includes production of trucks, buses, trailers, midi and mini buses and passenger cars with a capacity of 1.5 million vehicles. Until the global financial crisis got deeper in the last quarter of 2008, the manufacturing numbers were in a steady rise in recent years.
Turkish automotive sector started in 1967 as a domestic production. Over the years industry imported foreign models and produced them for domestic market under the protection of high tariffs. As customs union came into effect in 1996, tariff protection for the industry finished. After this point many global brands such as Honda, Toyota, Hyundai joined the already existing brands like Renault, Ford, Fiat in Turkish automotive industry. Today there are 18 manufacturers and 900 component makers in Turkey. Prior to the crisis they were employing over 230,000 people.
Automotive Exports (Amount)
| 2006 | 2007 | 2008 | |
| Production | 1,026,427 | 1,132,951 | 1,171,917 |
| Export | 706,402 | 829,879 | 920,763 |
| Export/Prod. (%) | 69 | 73 | 79 |
Source: Automotive Manufacturers’ Association (OSD)
Automotive sector exports 80% of its production. 90% of the exports go to Europe. In 2008 the Turkey exported $18.3 billion worth of vehicles. Where as the import was $12.8 billion. As the effects of the global financial crisis reflect on global trade, both exports and imports are expected to decrease in 2009.
Automotive Production (Amount)
| 2006 | 2007 | 2008 | 2008/2007 (%) | |
| Automobiles | 545,682 | 634,883 | 621,567 | -2.1 |
| Commercial Vehicles | 441,898 | 464,531 | 525,543 | 13.1 |
| Tractor | 38,847 | 33,518 | 24,807 | -26 |
| Total | 1,026,427 | 1,132,932 | 1,171,917 | 4.3 |
Source: Automotive Manufacturers’ Association (OSD)
Financial Services Industry (FSI) in Turkey
Turkish banking sector mostly dominates the Turkish financial system. By the end of 2007, assets of the banking sector constitute 88% of the financial sector. Major reforms were carried out in the finance and banking sectors between 1999 and 2002. “The Banking Sector Restructuring Program” was initiated in May 2001 with the aim of modifying the banking sector into a sound and competitive structure consistent with sustainable growth. Banking legislation was adjusted to international regulations, BIS recommendations and European Union banking directives. Also in line with the previous principles and the BASEL (Banking Supervision and Auditing) Committee principles, a banking law was issued in 2005 to regulate the sector. With the new structure of the banking system and improvements in the Turkish economy, Turkish banking sector had significant growth in the bank’s balance sheets and changes in their structure.
There are 49 banks, 9,304 branches and 182,667 employees in Turkish banking system by the end of 2008. Total assets of the banking sector is 434 billion USD (733 billion TL) which constitutes 75% of Turkish GDP. Total assets were 485 billion USD (563 billion TL) by the end of 2007. Although there seems to be a decrease in total assets in dollar terms during 2008, actually there was a 30% increase in Turkish Lira terms (As the global financial crisis got deeper at the last quarter of 2008, dollar gained value over Turkish Lira).
In 2008 the number of branches increased by 1,180 (15%), employee number increased by 14,904 (9%). Even during the last quarter of 2008, when the global financial crisis got deeper and many European and American banks got smaller, 268 new branches opened and 1,140 new empolees were hired.
Total loans were 218 billion USD (368 billion TL) at the end of 2008, which was half of the total assets. Loans increased 29% in 2008 (in TL). 44% of the loans were institutional and commercial, 32% of the loans were personal and 24% of the loans were for small and medium sized enterprises.
Although global financial crisis affects Turkish banking sector, it has some advantages according to other countries. These are;
- There is no toxic product,
- Turkish banking sector is conventional, wide spread, mainly constituted from deposits and have a wide spread of customer net,
- Weight of the individual loans are not much in the GDP,
- Turkish banking sector started very late to the mortgage system and the interest rates are fixed.
- Due to some politic and financial developments, Turkish banking sector pushed on the brakes starting from the beginning of 2007 and - Turkish banking sector has the crisis experience.
For more information on FSI sector please refer to “Türkiye Finans Sektörü Raporu - Dünden bugüne ve yarina...” report at www.deloitte.com.tr.
Main Indicators of the Turkish banking sector and National Income
| Billion USD | 1990 | 1995 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
| Loans | 27 | 29 | 51 | 28 | 30 | 48 | 74 | 112 | 149 | 234 | 218 |
| Deposit | 33 | 44 | 102 | 81 | 84 | 111 | 143 | 181 | 211 | 295 | 259 |
| Total Assets | 58 | 67 | 155 | 116 | 130 | 179 | 229 | 296 | 346 | 485 | 434 |
| GDP | - | - | 265 | 197 | 230 | 305 | 390 | 481 | 526 | 659 | 573* |
Source: Banks Association of Turkey (BAT), BRSA, Turkstat
* 2008 estimation
Consumer Business in Turkey
Agriculture and food industry is one of the leading sectors of Turkey with rich resources, huge potential of fish products and livestock. Edible nuts, frozen fruits and vegetables, confectionery products, poultry, dairy products, oil and vast variety of fresh vegetables and fruits are produced in Turkey and are exported to numerous countries.
Textile accounts for 20% of total industrial production and around 10% of total GDP in Turkey which is world’s 4th largest clothing supplier with more than 35,000 textile companies. Cotton clothing, knitted clothing, woven clothing and accessories as well as home textile products constitute main products in the sector. Thanks to strong leather sector of Turkey, footwear industry is a well-developed industry as well. Turkey is world’s 5th manufacturer of floor-coverings including hand-woven and machine-made rugs and mats.
Turkey is Europe’s second largest producer of white goods with production of refrigerators, washing machines and other household appliances. In addition to establishing production units in the eastern Europe, Eurasia and Asia, like Russia, Romania and China, some of the Turkish white goods and electronic appliances producers also bought world’s leading brands in 2008.
Furniture sector is one of the most important sectors in Turkey with its huge export potential. Metal office furniture, wooden furniture, seats for automobiles and seats convertible into beds constitute the major items of production and export in the sector.
Exports in Textile Sector (000 $)
| 2007 | 2008 | Annual Change (%) | |
| Silk (silkworm cocoon, crude silk, silk fiber, silk-woven hosiery) | 3,390,868 | 3,522,574 | 3.9 |
| Fleece wool, bristle | 238,560,584 | 240,485,795 | 0.8 |
| Cotton | 1,656,387,637 | 1,661,737,014 | 0.3 |
| Other herbal fibers for weaving | 30,911,917 | 29,351,594 | -5.0 |
| Artificial filament | 1,282,811,544 | 1,368,244,258 | 6.7 |
| Artificial and discrete fiber | 1,082,577,249 | 1,066,810,443 | -1.5 |
| Shoulder pads, felt, unwoven hosiery, special fibers | 208,319,716 | 226,008,241 | 8.5 |
| Special woven hosiery, hosiery for weaving, embroidery | 672,450,337 | 701,709,195 | 4.4 |
| Imbued, smeared or covered hosiery for weaving | 328,882,838 | 341,110,542 | 3.7 |
| Woven fabric | 1,033,701,311 | 1,149,089,988 | 11.2 |
| Total Textile Export | 6,554,050,000 | 6,807,831,000 | 3.9 |
Source: Union of Exports
Around 1,400 companies operate in the cosmetics sector. Shampoos, depilatories, products for bath, lip and eye make-up products, deodorants, perfumes and baby care products are major items in the sector. Turkey partakes among world’s leading laurel and olive oil soap producers.
Given to its cultural heritage of jewelry, Turkey ranks among world’s top jewelry producers and exporters with modern techniques in the sector.
As per Deloitte’s “Global Powers Of The Consumer Products Industry” report, Arçelik ranked 2nd and Vestel ranked 3rd in Africa and Middle East region in terms of net sales.
Top 10 home furnishings and equipment companies, 2006
| Company name | Product sector rank | Top 250 rank | Country | Region | FY06 net sales (US$mil) |
| Sanyo | 1 | 30 | Japan | Asia/Pac | 18,964 |
| Whirlpool | 2 | 32 | United States | North America | 18,080 |
| Electrolux | 3 | 46 | Sweden | Europe | 14,109 |
| BSH | 4 | 67 | Germany | Europe | 10,437 |
| Steinhoff International | 5 | 116 | South Africa | Africa/ME | 5,344 |
| Arcelik | 6 | 127 | Turkey | Africa/ME | 4,885 |
| Miele | 7 | 164 | Germany | Europe | 3,578 |
| SEB | 8 | 182 | France | Europe | 3,331 |
| Gree Electric Appliances | 9 | 199 | China | Asia/Pac | 2,989 |
| Ashley Furniture | 10 | 204 | United States | North America | 2,964 |
Again, as per Deloitte’s “Global Powers Of The Consumer Products Industry” report, Arçelik ranked 6th in Top 10 home furnishing and equipment companies in the world in terms of net sales.
Energy and Resources in Turkey
Turkey is an important energy consumer as well as an important hub for energy supplies transportation. Turkey’s primary energy consumption was 106 million TEP in 2007. 29.2 MTEP was produced at home and the rest was imported. Primary consumption is expected to rise 6% annually (average annual increase in the world is 1.8%) and reach to 220 MTEP by 2020. Total $130 billion of investment is needed in the energy field by 2020 in Turkey to meet the energy needs.
Except coal (mostly lignite), currently Turkey has very limited mineral resources. TPAO (The Turkish Petroleum Corporation) has invested $500 million in exploration in Black Sea region where 10 billions barrels of potential reserves thought to be lying. Although she mostly imports her oil and natural gas, Turkey is becoming a hub for energy supplies. There is Baku-Tbilisi-Ceyhan (BTC) and Iraq-Turkey crude oil pipelines which bring oil from Azerbaijan and Iraq. BTC’s capacity was 1 million barrels in 2008. With some technical changes it will reach to 1.2 million barrels in 2009. Capacity of the Iraq – Turkey pipeline is 1.6 million bpd. Also Trans – Anatolian pipeline project is planned to carry Russian and Kazakh oil from North of Turkey to the South beginning 2010. From Ceyhan, a big port in the South of Turkey where the oil Trans – Anatolian pipeline ends, the oil will be shipped to other parts of the world. Also there is Tupras refinery in Ceyhan. The crude oil is refined at Tupras and refined products are sold both domestically and internationally. So, Ceyhan area on the Mediterranean coast has become a focal point of the international crude oil trade.
There are two Russian-Turkish natural gas pipelines (West and Blacksea), one Azerbaijani-Turkish natural gas pipeline (Baku-Tblisi-Erzurum) and one Iranian-Turkish natural gas pipeline transmits natural gas to Turkey. 32.2 billion cm3 natural gas imported from these pipelines. Additional 5.6 billion cm3 natural gas imported in LNG form from Algeria and Nigeria.
Turkey realizes 90% of her oil import from three countries, namely Iran, Russian Federation and Saudi Arabia.
Turkey makes 90% of her natural gas import from three countries, namely Iran, Russian Federation and Algeria.
On the energy supplies transportation side, already one fourth of Azeri natural gas goes to Greece. Nabucco gas pipeline has planned to connect Central Asian natural gas to Central Europe through Turkey. Also Turkey is building a link to the Egypt – Jordan – Syria – Lebanon gas pipeline. The link will be connected to the Turkish natural gas network. Another under sea pipeline is planned to be built between Ceyhan and Israel. The gas from the pipeline will be transferred to India from Red Sea by ship. Energy Market Regulatory Agency (EPDK) is the independent regulator who controls the standards of the electricity, natural gas, petroleum and LPG in Turkey.
Turkey’s demand for electricity is growing fastest after China. Between 2002 and 2007 annual average growth in electricity demand grew 8%. However in 2008 with the affects of the global crisis this rate fell to 3.5%. As iron, steel, cement and textile industries slowed down, the commercial use of electricity decreased as well. It is expected to accelerate again in the second half of 2009.
Turkey has 40,835 MW installed capacity. Commercial and industrial sectors use 62% of the electricity, whereas residential consumers use 24% of it. Government owns 57% of Turkey’s installed capacity which was as high as 98% until recently. The Turkish Electricity Distribution Company (TEDAS) is a government company
It distributes and sells electricity in 21 regions and to 29.4 million customers. To attract foreign investment and have efficiency in both production and distribution, government continues privatizations in the field. It sold Baskent Electricity Distribution Corporation (BEDAS) and Sakarya Electricity Distribution Company (SEDAS) to private companies. In recent years government changed the laws and regulatory framework for energy industry. The industry has been modeled according to European Union’s regulatory framework and industry structure.
As Kyoto agreement signed by Turkey in 2008, she needs to increase the renewable energy production in coming years. With the changes in regulatory framework, government also gives buying guarantees with increased prices. As a result of this new attempt many international and local companies have started to invest in the field. Some of these companies include General Electric, BP and Spain’s Iberdrola. Also an electricity interconnection net between Turkey, Syria, Egypt, Iraq, Jordan, Lebanon and Libya is planned to be built.
For more information on Energy and Resources, please refer to Deloitte’s “Türkiye Dogal Gaz Piyasasi - Gelismeler 2008” and “Sürdürülebilir Enerji: Yatirim Degisimi ya da Iklim Degisimi” reports at www.deloitte.com.tr
Life Sciences and Health Care in Turkey
Turkey has been going through a comprehensive healthcare restructuring thanks to liberalizations and attempts to develop and scale up its healthcare services by continuously improving quality. Due to its quality of medical care, geographical advantage and affordable prices, Turkish medical groups are rapidly becoming providers of healthcare for international patients especially from Russian Federation, Europe, Balkan countries, Middle East and Middle Asia.
As private investors entered the healthcare market at the beginning 1990s, the private sector investments doubled that of public within the last decade. Currently, there are 305 private hospitals with 13,300 beds that account for 7% of Turkey’s total capacity. There are 17 healthcare institutions composed of 22 hospitals which are accredited by “Joint Commission International”, and this number accounts for 15% of the total accredited hospitals in 27 countries across the world.
Oncology (medical and surgery), organ transplantation, neurosurgery, cardiology and cardiovascular surgery, orthopedics and traumatology, obstetrics and gynecology, ophthalmology, plastic surgery and dental services are major fields in which Turkish healthcare has expertise.
Moreover, as Pharmaceutical Research and Manufacturers of America (PhRMA) mentioned, Turkey is a country that could develop into a globally competitive powerhouse in pharmaceutical research, manufacturing and exports, due to its human resources, geographic proximity to major markets and rapidly evolving domestic pharmaceutical market. 90% of purchased products are made in-country in Turkey which is world’s 16th drug-making country.
There are 43 production facilities in Turkey 14 of which are foreign companies. Bayer from Germany, GlaxoSmithKline from the United Kingdom, Aventis Pharmaceuticals Inc., Baxter and Pfizer from the United States, Roche and Novartis from Switzerland, Sanofi from France have manufacturing operations in Turkey. EIS Eczacibasi, Abdi Ibrahim, Fako, Ilsan Iltas, Mustafa Nevzat, Ibrahim Ethem and Bilim are the leading Turkish pharmaceuticals manufacturers.
For more information on LS&HC, please refer to “Türkiye’de ve Dünyada Saglik Ekonomisi – 2008” at www.deloitte.com.tr
Construction and Real Estate in Turkey
Construction is an important sector in Turkey with 5.5% - 6.5% share in the GDP during the last five years period. Also construction materials sectors such as cement, iron, steel, glass, ceramics etc. are very well developed and deeply rooted with the sector. Turkish construction firms are not only active in the country, but many of them engaged in different projects especially in Middle East, Central Asia, Balkans and North Africa. According to “Engineering News Record” magazine, 23 Turkish firms were ranked among the top 225 international contractors in 2008.
The construction sector had grown steadily between 1980 and 1988. With the liberalization of the economy and the increase in interest rates, the investment costs raised after 1988. As a result of higher costs and lower demand, investment from the government and the financial sector was low and the sector’s growth slowed. Construction sector grew 22.4% during the period of 1993 and 2003, which was lower than the general Turkish economy’s growth rate: 26,13%.
By 2004 the growth rate for the sector started to rise again. In the first half of 2005 the number of construction licenses grew 40% according to the previous year’s same period. The growth continued in 2006. By 2007, the growth rate started to deteriorate as the general economy in the country and in the world began to slow down.
Real estate market followed the similar expansion and shrink period as the construction sector. After 2001 the real estate sector has been an important part of the economic growth. 10.6% of the GDP in 2007 came from real estate ownership where rentals and real estate services accounted for 4% of the real estate. Although home ownership is at 72%, more than half of the population is under 29. So, the demand for homes is expected to rise. Also according to “The Property Guide” magazine Turkey was the first in future potential in real estate sector (2007). According to the magazine the prices are lower than Europe and especially real estates in big cities and the coastal areas will appreciate in the future.
Yearly Change in the Construction Sector, GDP and the Construction Sector’s Share in GDP
| Year | Construction Sector (%) | GDP (%) | Construction Sector’s Share in GDP (%) |
| 2003 | 7,8 | 5,3 | 5,5 |
| 2004 | 14,1 | 9,4 | 5,8 |
| 2005 | 9,3 | 8,4 | 5,8 |
| 2006 | 18,5 | 6,9 | 6,4 |
| 2007 | 5,7 | 4,6 | 6,5 |
Source: TUIK
Housing Development Administration of Turkey (TOKI) is the public authority which provides housing for low and middle income groups. It is the biggest player in the sector an it works under a special law frame. It provided credits to over one million housing units and completed 250,000 units between 2003 and 2007. TOKI has targeted to build 500,000 units by 2011.
Turkish construction materials sector is the third largest sector in Turkey and it constitutes 13.1% of all exports. The sector is not only serving to Turkey, but it is providing materials to the surrounding geographies of Turkey. Turkey is the biggest cement exporter in Europe and the third largest in the world. She is the 11th largest exporter of steel with an average 11% growth in the last five years.
Turkish contracting firms abroad generated $ 130 billion business volume by the end of 2008 in 68 different countries. There were 14 Turkish companies in “The Top 225 International Contractors” list made by “Engineering News Record” magazine in 2005. By 2007, this number reached to 22 and 23 Turkish firms were ranked among the top 225 international contractors in 2008.
For more information on Real Estate, please refer to “Real Estate Investment in Turkey: From reluctance to appetite” report at www.deloitte.com.tr
Technology, Media and Telecommunications in Turkey
Turk Telekom owns the national infrastructure and was the government monopoly on fixed line services before 2005. 55% of it privatized to Saudi Oger in 2005, another 15% was privatized to small shareholders in May 2008 and the rest belongs to the state. With the privatization of Turk Telekom, telecom sector has been in a big change. There were 19.1 million subscribers by the end of 2007. It decreased to 17.5 million subscribers by the end of 2008. Because of the increasing prices that the company charges to its customers, company’s revenues did not decrease in 2008. 67% of the company’s revenues were from fixed line customers and 15% of it was from broadband. Turk Telecom expects the continuation of decrease in the number of fixed line customers and increase in the number of broad band customers. By the end of 2003, Turk Telecom’s monopoly on fixed line voice transmission and infrastructure finished. Though, the company still dominates the market.
There are three GSM operators in Turkey. Turkcell is the largest GSM operator with 35.4 million subscribers at the end of the first half of 2008. Vodafone had 17 million subscribers and Avea had 11 million subscribers at the same period. By the end of 2008, there were about 66 million active mobile phone subscribers in Turkey.
Turkey has a large market for IT and it is expected to grow in a fast pace. Turkey ranks 11th in internet users. 30% of the 17 million households in Turkey are connected to the internet. 95% of the market belongs to Turk Telekom’s internet division TTNet. And the rest belongs to smaller companies which buy space from Turk Telekom and resell it to private users. By 2011, penetration rate for broadband users are expected to rise to 60%. There were 4.5 million broadband internet users at the end of 2007. In six months, this number increased to 5.2 million. The estimated number for the end of 2008 was 6 million users.
The number of internet users expected to rise as government’s recent announcement to lower the Special Communication Tax from 15% to 5% for internet connections becomes effective from 1 March 2009. Also there is a new law for R&D firms to use the existing special economic zones as incubators for new technology firms, property rights issue remains an obstacle for technology firms.
Telecoms/technology market, 2005-08 (€ billion)
| Year | Technology | Telecoms | Total |
| 2005 | 3.2 | 10.7 | 13.9 |
| 2006 | 3.8 | 11.5 | 15.3 |
| 2007 | 4.4 | 12.8 | 17.2 |
| 2008* | 5.7 | 15.1 | 20.8 |
Source: Turkish Informatics Industry Association
By 2006, there were 4843 print media publications in Turkey and 85 television channels. Also Turkey ranks 11th in largest number of internet users in the world. The number of jobs were approximately 42 thousand in the same year. Magazines constitute 57.1% of the total number of publications. Newspapers are the most influential in Turkish media. Dogan Media Group (the biggest media group) and The Turkuvaz Group are the biggest media groups in Turkey. Kanal D, Show TV, ATV and Star TV have the biggest market share in television market. Whereas Posta, Hürriyet, Sabah and Zaman are the biggest among the newspapers. Currently AGB Nielsen Media Research is the only ratings monitoring company and a debate of establishing a second one is continuing.
Tourism, Hospitality and Leisure in Turkey
Tourism Arrivals and Revenues
| Year | Tourist Arrivals | Annual Change (%) | Tourism Revenues (million $) |
Annual Change (%) |
| 1991 | 5,517,897 | 2.4 | 2.654 | -17.7 |
| 1992 | 7,076,096 | 28.2 | 3.639 | 37.1 |
| 1993 | 6,500,638 | -8.1 | 3.959 | 8.8 |
| 1994 | 6,670,618 | 2.6 | 4.321 | 9.1 |
| 1995 | 7,725,885 | 15.8 | 4.957 | 14.7 |
| 1996 | 8,614,085 | 11.5 | 5.650 | 14.0 |
| 1997 | 9,689,004 | 12.5 | 7.002 | 23.9 |
| 1998 | 9,752,697 | 0.7 | 7.177 | 2.5 |
| 1999 | 7,487,285 | -23.2 | 5.203 | -33.4 |
| 2000 | 10,428,153 | 39.3 | 7.636 | 46.8 |
| 2001 | 11,618,969 | 11.4 | 8.090 | 5.9 |
| 2002 | 13,256,028 | 14.1 | 8.473 | 4.7 |
| 2003 | 14,029,558 | 5.8 | 13.203 | 55.8 |
| 2004 | 17,516,908 | 24.9 | 15.888 | 20.3 |
| 2005 | 21,124,886 | 20.6 | 18.154 | 14.3 |
| 2006 | 19,819,833 | -6.2 | 16.851 | -7.2 |
| 2007 | 23,341,074 | 17.8 | 18.487 | 9.7 |
| 2008 | 29,756,458 | 27.4 | 21.910 | 18.5 |
Source: Ministry of Culture and Tourism
Turkey is one of the most preferred tourism destinations in the world. Besides its abundant archaeological and historical sites, hunt tourism, winter sports, faith tourism, thermal resorts, congress and fair tourism and medical tourism are attracting more foreign visitors every year. According to the UN World Tourism Organization, Turkey ranks 9th and 10th in the world in terms of international tourist arrivals and tourism receipts, respectively.
The Turkey Tourism Strategy 2023 which has been recently launched shows ambitious targets of the Turkish government to take place among 5 most preferred destinations in the world by 2023 by attracting 50 million tourists per year. The strategy also includes constituting nine cultural and tourism zones, 10 tourism cities, 11 cruise ports, nine marinas and one airport. The Strategy presupposes establishment of seven tourism development corridors which are Thrace Culture Corridor, the Silk Road corridor, Faith Tourism Corridor, Olive Corridor, Western Black Sea Corridor, Plateau Corridor and Winter Corridor.
In 2008, the number of tourist arrivals reached 29.75 million with an annual change of 27.4%. Antalya, a coastal province in the Mediterranean Region receives approximately one third of the total foreign tourists visiting Turkey, while Istanbul and towns in the Aegean region constitute other leading destinations for foreign visitors, who are mainly coming from the European Union countries.
Tourism is one of the most advantageous sectors for foreign investments, as Turkish Government aims to diversify the tourism sector by providing several incentives for the investors in the sector. Turkey, one of the world’s leading countries in terms of geothermal resources, strives to improve health tourism by building new facilities in the fields of medical and thermal tourism, SPAWellness, and tourism for handicapped and elderly people. Turkish government also aims to improve winter tourism by allocating new areas for new winter sport facilities. Congress and fair tourism is another priority in the tourism strategy. Istanbul, Ankara, Antalya, Izmir, Konya, Bursa and Mersin have been considered as the leading provinces for congress and fair tourism.
Moreover, several projects regarding sport tourism is in the agenda where new golf courses are being recently constructed especially in one of the most important tourism cities, Antalya. Istanbul will be the European Capital of Culture in 2010, which will also create numerous investment projects as well.
Turkish economy
Industrial outlook
Incentives and financing
Business regulations and requirements
Employment law and practice
Choice of business entity
Corporate income taxation
Individual income taxation
Withholding taxes and double tax relief
Other taxes
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