Investment Opportunities In Turkey

Please note that the followings are just to give some sort of initial insight to the readers.

After reading the following information, you may need further information. Should you have any further enquiries, please contact the relevant organisations referred below.

How to contact Turkish organisations which would help you?

Links for some Turkish organisations listed on our links page may give you an additional insight.

a) Chambers of Commerce and Industry

If you;

• have a clear business plan and exactly know in which sector(s) you are interested and • look for a Turkish counterpart to co-operate with

then the fastest way to reach interested parties would be to directly contact the Chamber of Commerce and Industry of the provinces where the investments are to be made (please refer to the web page at www.tobb.org.tr )

Once this is done, the relevant Chamber will be able to forward the proposal to its members very promptly. Our experience in the past suggests that Turkish companies are very sensitive to fit and proper business proposals.

b) Associations

Most of valuable companies either are registered with the Export Unions or operate in special industrial parks.

Please also note that the State Planning Organisation is in charge of producing sectoral analysis reports (www.dpt.gov.tr ).

Sector-specific opportunities

In our opinion, the followings will be on the agenda of foreign companies which focus on business opportunities in Turkey (in no particular order):

a) Banking

Taking into account the experience of the countries which recently joined EU, very severe mergers and acquisitions in the Turkish banking system are expected. In this regard, outsourcing services for banks would be important for potential investors (Banking).

b) Insurance

Alike the Banking sector, the size of the insurance sector in Turkey is very small compared to those in the developed economies. Introduction of the mortgage law by the end of this year, introduction of new insurance instruments based on the contemporary needs, the fact that recent competitive markets laws require supply to be of quality, secure and on a continuous basis, the fact that the Turkish economy is eventually expected to converge to the EU average when it becomes a full EU member all suggest that opportunities in the insurance sector (even for insurance brokers' and intermediaries' businesses) are great (Insurance).

c) Energy

Privatisation Administration (PA) of Turkey is in charge of privatising the electricity distribution and generation assets. The assets/companies listed at www.oib.gov.tr/portfoy/enerji_eng.htm are now in the privatisation portfolio.

The PA carries out the prepatory work pursuant to the Strategy Document issued by the Government last year and tenders will commence in early 2006 (www.oib.gov.tr/program/2004_program/2004_electricity_strategy_paper.htm).

For the details you are interested in, please contact the PA through:

Address: Ozellestirme Idaresi Baskanligi Ziya Gökalp Caddesi No : 80 Kurtulus 06600 Ankara/TURKEYTel: +90 (0) 312 435 4790 or +90 (0) 312 430 45 60Fax: +90 (0) 312 435 93 42Web: www.oib.gov.tr

In addition, you are also advised to contact the following organisations for further information with regards to the facts and prospects of the power market in Turkey:

-Department of Energy of the Undersecretariat of Treasury which used be in charge of investment and financing programs of the electricity companies in questions (www.treasury.gov.tr)

-Energy Market Regulatory Authority (www.epdk.org.tr)

Please note that Turkey has very rich lignite reserves and the Government is arranging auctions for transferring the State reserves to private sector provided that new investors commit to build new electricity generation plants. For further information, we would refer you to the Ministry of Energy and Natural Resources (links)

Furthermore, Turkey currently utilises only 20% of its hydroelectric power generation capacity (i.e., if necessary investments had been made in the feasible basins in the past, Turkey would have been able to have a five-fold installed capacity).

The Government encourages construction of new hydroelectric power plants (HPPs). According to the relevant regulations, HPPs of installed capacity of 50 MW or less (or of reservoir capacity of 100 million cubic meters or less-as they are deemed to be renewable energy sources- are subject to several incentives (www.epdk.org.tr/english/regulations/electricity.htm).

Finally, current lignite-fired power plants need environmentally-friendly investments especially in terms of coal-cleaning and CO filtering. We think that after those plants are privatised, the environmental regulations will push new operators to make those necessary investments. In this regard, firms having the relevant know-how may help those future power plant operators.

Being between main supply (the Caspian and Middle East resources) and main demand (EU) locations, having a strategic position, and the Government's focus on the energy issues will make Turkey one of the most important energy hubs of the world. Current natural gas pipeline networks for imports from Russia and Iran, LNG-routes from Algeria, and Nigeria, oil imports through the BTC pipeline and future energy projects will make Turkey an energy gateway.

In this regard, not only physical flow but also the financial dimensions of energy would be of importance. Thus, Turkey is also expected to host an exchange similar to the UK's IPE or the NYMEX of the US if the above mentioned long-term target can be attained. Moreover, Turkish energy sector is expected to focus on energy-based financial instruments.

d) Services

Construction and property market

Increasing interest by foreigners, implementation of mortgage law in this year and the fact that housing supply lags behind the demand will boost construction investments and lead to great opportunities within the property market. Moreover, Turkish companies started participating in very big international projects and being found very successful (www.tmb.org.tr ). Finally, construction-related industries such as cement production, ready-mix-concrete production, carpentry, doors-windows-PVC/window glass production, engineering & architecture professionals are to benefit from the future developments.

Tourism

The number of tourists who visited Turkey reached 22 million in 2005 and is expected to double within the medium term. This means there are great opportunities for businesses. Currently, Turkey is famous for its nice beaches. However, there are great business opportunities in the following segments: Faith tourism, cultural tours, historical places and museums, winter sports, golf, health tourism and 'spa's. Side-industries such as catering etc. are also expected to enjoy the future activities.

Healthcare

Many economists estimate that Turkey will host lots of foreign patients from petro-dollar rich countries when appropriate investments are made. Turkish medical professionals contribute well to the medical literature. They also estimate that the prices of those services will be very reasonable.

Leisure, sports, betting, lottery

As Turkey gets more integrated to the global economy, more companies in this category are expected to emerge.

Football is the biggest sportive fun for Turks. Majority of Turkish men are very fond of the football clubs they support.

Football clubs’ budgets are approaching the European average. For example, Fenerbahçe, with 25-to-30 million fans, is about to have an annual budget of US$ 100 million, owns a contemporary stadium worth around US$ 120 million and of capacity of 55,000 people, operates its own TV channel which has a significant share, has stores around the country and Europe in which the Club’s products are sold and significant income is generated.

Football matches in Turkey are broadcast by an encrypted-TV channel and the relevant company (Digiturk) so far has paid hundreds of million of dollars to the industry.

Sponsors contribute tens of millions of Dollars in return for advertisements.Majority of Turkish football fans are inclined to purchase the products/services of companies which sponsor the clubs they support.

Thousands of people are employed by the industry.

Moreover, licensed betting companies make hundreds of millions of Dollars per year some portion of which is transferred to the football industry.

The National lottery makes revenues worth hundreds of millions of Dollars per year through several instruments and those instruments are to be privatised this year (www.millipiyango.gov.tr). Future operators are expected to need creative business solutions to boost their market share. In this regard, foreign investors having the expertise are expected to enjoy the market.

Taking into account the above information, investors which are able to create fans-oriented business innovations are expected to enjoy the football-related industries in Turkey.

Press & Media

Foreign investors are interested in investing in media/press. Their main impetus is that average advertisement revenues generated by the sector will converge to the EU average as Turkey gets closer to the full-membership.

To give an idea about TV broadcasting segment, for example, Star TV was acquired by the Dogan Group at US$ 306.5 million last year. Several TV broadcasting companies are in talks with foreign investors.

Foreign investors interested in broadcasting the Turkish football industry’s matches are also expected to participate in the next tender to be held by the Football Administration.

The number of daily newspapers sold out nationwide is more than 5 million. These newspapers’ income generation capability is also expected to increase very radically.

Thus, provision of some relevant goods and services such as new printing technologies, page and internet design, business innovations to boost the sales or market share, alternative newspapers distribution systems, creative TV programs etc. are all welcome.

e) Industrial Production

Especially, the "cars and car parts production" segment, the new national export champion, is worth analysing.

The Textile industry is another national champion. The Industry now tries to increase its market share in the EU and US through quality products in spite of severe competitive pressure from China.

In addition, giant international pharmaceutical companies have been increasing their investments in Turkey.

In the area of food processing and packaging, there will be big opportunities for new investments once the EU's relevant rules come into effect in the near future.

Finally, many environmentally-sensitive production facilities in the EU are being relocated to Turkey. Setting up a business which would aim at helping those EU companies would also be very profitable.

f) Mining/Minerals/Oil

For the official information on current reserves/potentials of Turkey, please visit www.mta.gov.tr. Please note that Turkey has always underutilised its mining/minerals reserves and has failed to properly market them.

Now, the Turkish Government encourages private sector and welcomes FDI companies to make use of this capacity. The following facts may also be of use to you.

• Turkey has the biggest boron reserves in the world. Unfortunately, Turkey exports this important substance in the form of raw material. Exporting it in the form of semi-finished or finished materials/goods is expected to be a national strategy in the near future. • Turkish people are very fond of golden jewellery and Turkish jewellery industry is about to overtake Italy in terms of trade volume. Gold reserves in Turkey are significant enough and are worth exploring / extracting. However, gold production / exploration initiatives have not been sufficient yet except for few examples such as the one in Bergama region. • It seems that the Government is keen to construct nuclear power plants. In this regard, Turkey's significant thorium reserves are worth assessing in relation to the selection of the most appropriate nuclear power plant technologies. • As suggested by some scientific researches, in some regions within the Turkish territories such as Eastern Black Sea, Southeastern Anatolia and zones near border-line with Syria there may be significant oil or gas reserves. Oil giants such as BP, Chevron Texaco and others are exploring oil in those regions.

g) Agriculture

Turkey has always underutilised its agricultural potential although it has a very rich cultivable lands. Especially, organic production and bio-fuel plant production are worth assessing. The agricultural reform which is underway is expected to transform Turkey to one of the important global suppliers. Livestock raising in Turkey, with a population of 72 million, is inadequate. Thus, appropriate investments to raise livestock (integrated to dairy facilities) may be beneficial.

h) Transportation

Turkish transport system has been heavily based on land-transport. However, the more the Turkish economy integrates to the global economy, the more diversified the transport systems will be. Taking into account the Government's announced priorities, use of railway networks and airways is expected to have a significant share in the overall transport system. In this regard, some low-budget- European airliners are keen to invest in Turkey. Many EU companies are keen to participate in the tenders to be held for the renovation of the railway networks. In addition, as the foreign trade volumes are being rocketed, Turkey’s ports and freight-forwarding fleets become very important (www.ulastirma.gov.tr)

i) Telecoms

Telecoms sector is regulated and supervised by the Telecommunications Authority and the rules are in line with the EU norms as are in other economic sectors (www.tk.gov.tr).

Furthermore, 55% stake of the fixed-line operator, Turk Telekom, has recently been privatised and the company needs investment of billions of Dollars in few years to come.

In addition, there are 3 private mobile phone operators: Turkcell (the largest mobile phone operated owned by Turkey's Cukurova group and small investors, Swedish-Finnish Telia-Sonera and Russia's Telecom Alfa), Avea ( a company owned jointly by Turk Telekom and Italy's Telecom Italia) and Tel-Sim (Tel-Sim has been recently acquired by Vodafone).

Phone calls within and from Turkey are very expensive compared to the international figures. There is a very big room for internet-based cheap-phone call companies

The ADSL and cabled TV infra-structures are currently not sufficient.

Increasing numbers of tourists visiting Turkey and foreigners residing in Turkey are also important stimulants for telecoms businesses.

Taking into account the above and the fruits to be enjoyed on the way to full EU membership, the sector is very highly likely to encounter a severe competition and the ones which will outsource their activities well and supply creative/stunning services will do much better than the others.

In this regard, there are big opportunities for the potential investors who would provide those companies with necessary services.

Finally, Turkey is a very big cellular phone importer. The market potential is big. The market is subject to radical changes due to imminent fierce competition and emergence of new players such as Vodafone and the foreign shareholder of Turk Telekom. Researchers who analyse Turkish market and opportunities well may manage to sell their ideas to phone producers abroad and make them persuade to invest in Turkey.

j) Public procurement

In coming years, EU companies are expected to have a significant share in providing public sector organisations with goods and services worth tens of billions of dollars per year (www.kik.gov.tr ). Investors analysing how to benefit from creating synergy through establishing partnerships with Turkish companies and to win public auctions will be of use.

k) IT and Technology

IT awareness of the Turkish society increases significantly. Hundreds of thousands of small and medium sized organisations are now keen to make use of IT tools when appropriate services are supplied. The IT and computer engineering departments of universities provide their students with excellent knowledge and most of successful graduates prefer working abroad. Brain-drain may be reversed when the number of robust IT companies and their market share increase significantly.

Here are some IT-based business hints/opportunities:

• The social security reform introduces very radical changes in social insurance organisations, contribution collection mechanisms, healthcare services etc. as of this year. Thus, IT-based business opportunities in this field are very great.
• The electricity market reforms and privatisations will lead to very radical changes in the current practices and the need for IT-based services will be great. Tackling the high losses & thefts in electricity distribution networks, watching the interaction between suppliers and consumers and measuring energy flow on a real-time basis, automating many transactions including printing invoices, collecting receivables, tackling overdue debts, enforcements, optimisation of the settling mechanism and balancing of the demand and supply, creating the least-cost electricity generation schedules for generation portfolios, creating emergency management modules etc. are some of the potential fields worth analysing.
• The draft Commercial Code envisages that joint -stock companies are to have their own web pages. • The companies registrar (www.tobb.org.tr) or its local offices do not provide people/companies with effective web-based company search engines (In this context, the Companies House of the UK does an excellent job).
• The current business-information sources in Turkey are inadequate (A web-site similar to www.kompass.com of the UK would be excellent).
• There are no world-wide famous business-match-making companies in Turkey. • There are no street-maps-web pages in Turkey (Having something similar to www.streetmap.co.uk would be wonderful )
• Turkey needs commercial companies having expertise/detailed database on the creditworthiness of small-and-medium sized companies in Turkey. Foreign investors are keen on such information.
• Municipalities do not make use of the internet effectively. Many of their transactions may be web-based and they may enjoj the customer-oriented facilities.
• Although the legal framework is robust enough, patent awareness in Turkey is very low. Many European companies adopt Turkey-specific products as if those were their.
• Many state organisations' web pages need improving.
• Turkey lacks some profession-based services. For example, having prestigious sites in relation to legal offices (similar to www.legal500.com ), accountancy and audit firms, interpretation bureaus, insurance intermediaries, company detectives (people who can provide information on companies and their personnel etc) would be perfect.
• English version of most of the regulations does not exist. Foreign investors have difficulty in finding the proper and up-to-date English versions when needed. Creating a database on regulations in English language and keeping it up-to-date would be of use.

On the other hand, scientific research and development works are to be encouraged by the State. In this regard, Technology Development Zones are of importance.

Techno-parks

Techno-parks similar to the Silicon Valley of the US are on the way. In the near future, Microsoft-and other giants-pioneered investments are expected.

Electrical and electronic appliances

Electrical and electronic appliances (TV, fridge-freezer, VCR/DVD/DWR, hi-fi systems, computers etc) producers of Turkey have had significant market shares in the world, especially in Europe. Vestel, Arçelik, Beko, Profilo are the national champions and are expected to invest in creative business solutions. Foreign investors who are keen to provide them with complementary/side/outsourcing services are expected to benefit from mutual-fruits. Turkish furniture producers such as Istikbal, Bellona, Kelebek, Tepe most of which are big exporters are also doing well and expected to expand their investments.

Environmental investments

During the adoption of the EU rules, the most costly item for Turkey is expected to be the environmental issues. Some researchers estimate that Turkey will need to spend tens of billions of Dollars to transform the country from its current state to the EU-defined one.