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	Turkey AKA Europe's Factory We've all heard about China and India, will Turkey be next? Turkey is becoming a major manufacturing export center, for both international companies targeting Europe and Turkish companies alike. As Turkey emerges on to the global manufacturing scene they will need more inputs for their burgeoning automotive, textile and electronic industries. Virginia companies familiar with these industries are ideal suppliers. To help Virginia companies meet with potential buyers, the VEDP Division of Trade will lead a Trade Mission to Turkey from October 3 -5, 2005. (Click here to download the Mission Flyer) Why Turkey? There are myriad factors contributing to Turkey's recent increased productivity that make it an attractive emerging market for Virginia exporters. Location, Location, Location Turkey is strategically positioned at the crossroads of Europe, Asia and the Middle East. The country's complex mix of modern industry and commerce continues to attract a diverse set of global and American companies ranging from mining to high technology to energy. According to a recent article in the Wall Street Journal, Turkey is becoming a major manufacturing export center for both international companies looking to sell into Europe, and Turkish companies alike. In fact, some refer to Turkey as Europe's factory. Turkey now produces more than one-half of Europe's television sets, with most coming from Turkey's Vestel Electronics. Europeans are also more likely to own cars made in Turkey these days. French auto maker Renault's Turkish joint venture leads the pack of international car companies that have set up shop in Turkey. In 2003, they exported over $1 billion worth of cars to over 100 countries. European Union (EU) Accession In 2004, the EU agreed to begin accession negotiations for Turkey in the fall of 2005. Turkey has adopted a number of European Union directives, regulations and laws to bring it more in line with the EU. Turkey has completed all requirements by the EU and is on track to begin negotiations this fall for full accession by 2015. Improving Economy According to the CIA, economic initiatives that Turkey has adopted as they vie for a spot in an expanded EU seem to have brought its recent battle with hyper inflation under control. This accomplishment has been made possible, in part, by a series of International Monetary Fund programs that have encouraged economic reforms. In 2004, interest rates continued to go down, the currency stabilized, and the inflation rate was relatively low, remaining below 10%. The Turkish government is aiming for inflation rates of 8% in 2005, and below 5% over the next few years. Public debt, which had been a problem for the Turkish government in recent years, also appears to be under control. Under a new IMF program, Turkey has been able to maintain a primary budget surplus of almost 7% of gross national product (GNP) in 2004, which has encouraged investment to return to the country. Growing Trade According to the Turkish government, their GNP of almost $300 billion now ranks them among the world's top 20 largest economies. In 2004, Turkey's impressive economic growth (estimates range between 5 - 7%) and the strong Turkish Lira (TRL) motivated investments and spurred imports. In 2004, Turkish foreign trade reached nearly $160 billion, up from only $67 billion just five years ago. Exports rose 32.8%, to $62.8 billion. The top three exports include: Vehicles, ready-to-wear items, and iron and other metals. Imports, more important to Virginia exporters, also rose 40.1% to $97.2 billion in 2004. Industrial & Service Sector Growth Buoyed by Turkey's strong stable economy, recent industrial investments have generated higher quality outputs. Higher quality outputs spurred growth in Turkey's exports. In-turn, this fuelled demand for industrial inputs primarily sourced from imports. According to FXStreet.com economists, strong growth in exports plus surging private sector consumption and investment yielded double-digit growth rates in the industrial sector, which looks particularly promising. Turkish expenditures on machinery and equipment reached a new peak in the first half of 2004, constituting 18.2% of GDP. This figure was up from a mere 10.5% in the same period of 2003. The services sector also expanded due to growth in trade, transportation and tourism. Privatization Another force driving increased productivity in Turkey is their aggressive privatization efforts. The Turkish Government indicates that privatization is one of the key elements of their economic program and the pace of privatization is expected to hit historic records in Turkey in the near term. Many giant state-owned assets/enterprises including Türk Telekom (telecoms), TEKEL (tobacco/cigarette), TÜPRAS (petrol refinery), PETKIM (petrochemicals), iron and steel company ERDEMIR, the distribution assets of TEDAS (electricity distribution and retailing) and its affiliates, the power plants of EÜAS (electricity generation), natural gas distributors, Milli Piyango (National Lottery), public Banks (Turkish Ziraat Bank and Halk Bank), and Turkish Airlines will be privatized in 2005. And, the pace of the privatization will be accelerated in the coming years. Strong Future Growth Turkey's macroeconomic and trade picture should continue to improve as it prepares for a possible accession to the EU. In addition to developing sound economic policies to support positive economic indicators, their accession efforts include accelerating the pace of privatization, which will yield even greater productivity, imports and exports. With all this in mind, it is now easy to see why Morgan Stanley predicts much faster growth in the foreseeable future - 7.2% in 2005 and 6.8% next year, following a cumulative increase of 24.3% in the past three years. And, the latest actual figures support their estimates. The industrial production index, for example, increased by 8.2% year-on-year in the first quarter 2004, and the capacity utilization rate in the manufacturing sector remains on an upward trend, rising to 80.1% in April, from 76.5% a year ago. U.S. Exports U.S. exports to Turkey in 2004 were up 15% from 2003, and were valued at US $3.36 billion. Industrial machinery was the largest export sector, followed by textile inputs. Turkey is a major importer of machinery, chemicals, semi-finished goods, fuels, and transport equipment. Best prospects for exports to Turkey are: telecommunications equipment and services, electrical power systems, information technology, building products, defense industry equipment, automotive parts & service equipment. Virginia Exports Virginia exported over $79 million in products to Turkey in 2004, making it Virginia's largest export destination in Central & Southeastern Europe. Coal, which is used extensively in Turkey's power plants, became the top commodity exported to Turkey via Virginia in 2004. Up over 350% from 2003, coal replaced tobacco, which decreased over 90% in 2004. Pharmaceutical products and paper/paperboard experienced positive annual growth of 88% and 9%, respectively. The sector that increased the most in 2004 was arms and ammunitions, mainly in the form of rockets and bombs for Turkish combat aircraft. Turkey requested almost US $4 billion in weapons upgrades from the U.S. in 2004 and remains a strong market for American defense contractors. Turkey: Will Airplanes Be Far Behind Cars? Now that Turkey's automotive sector has the largest share of the country's exports, what's next? Recent reports from the Paris Air show also indicate Turkey is increasingly involved in the global defense and aerospace industries. On the import side, Turkey agreed with the U.S. Skorsky company to purchase 12 helicopters worth $389 million. Turkish National Defense Minister Vecdi Gonul told reporters in New York that Turkey is Skorsky's second largest helicopter buyer after the U.S. army. Skorsky company has sold 125 helicopters to Turkey so far. On the export side, Turkey's TUSAS Aerospace Industries signed a $100 million agreement with U.S. aviation giant Northrop Grumman Corporation to contribute to the new F-35 Joint Strike Fighter project. Under the agreement, signed Monday during the Paris Air Show, Tusas will be providing composite parts and subassemblies for center fuselage of the F-35 Joint Strike Fighter. According to Janis Pamiljans, vice president of Northrop Grumman, the Ankara-based Tusas was chosen for its best-value approach and exemplified "Northrop Grumman and the entire F-35 team's objective to bring unprecedented and innovative technologies to the armed forces". With increased aerospace manufacturing in Turkey, imports of machinery, inputs and services which support advanced manufacturing will continue to rise. Suffice to say, the future looks bright in Turkey. The emerging manufacturing center creates potential sales opportunities for Virginia exporters. Virginia companies interested in pursuing new business in Turkey are encouraged to join the VEDP Division of Trade's mission Turkey from October 3 - 5, 2005. (Click here to download the Mission Flyer) This mission will visit Ankara, the capital, and Istanbul, the largest commercial center in Turkey. The VEDP will pre-arrange appointments with companies selected to best suit our Virginia companies seeking to establish business relations. VEDP Trade Missions are a great way to enter new markets. But, don't take our word for it. Here is what Ms. Verda Kosnett, President VPC Solutions, Inc. had to say about participating in the 2004 Trade Mission to Turkey: "We made our first attempt to export our services by participating in the VEDP's Trade Mission to Turkey. The VEDP provided us access to very influential persons in Turkey in a well coordinated and planned environment. Thanks to their help, we were successful in finding a distributor and there is good potential for future sales. The VEDP staff is more effective than most U.S. Trade Attachés. Thanks for the great service." If you are interested in participating in the Turkey Trade Mission click here to register online for this event. If you would like to learn more about the Turkey Mission, please contact Tom Garnett by phone at (804) 371-8242 or by e-mail at TGarnett@YesVirginia.org. Article Sources: "Turkish Surprise" Wall Street Journal, September 7, 2004 CIA World Fact Book Turkey Turkish Embassy UK Fxstreet Morgan Stanley World Trade Atlas (subscription) Turkish Weekly