Doing Business in Turkey Funda Güngör Koç Holding A.Ş.
Why Turkey ? Source: Investment Support and Promotion Agency of Turkey
Contents Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Indust...
Unique Geographical Location… <ul><li>Unique geographical location… </li></ul><ul><ul><li>Turkey enjoys a very special loc...
International Associations – Commitment to Global Standards Bilateral Investment Treaties with 79 countries   Double Taxat...
Large and Young Population – Increasing Urbanization The Changing Nature of Turkish Urbanization, Large (around 70 million...
Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Industry Import...
From Boost & Bust Cycles to Sustainable Growth Source: T urkstat GNP Growth Rates Before 2002: Boost and Bust Cycles Conse...
Low Penetration Levels Organized Food & Retail Market Share, % Ownership per Thousand Penetration, % Per capita consumptio...
Sustainable and High Growth Potential Source: PricewaterhouseCoopers estimates (rounded to nearest percentage point) Proje...
19th Largest Economy of the World as of 2005 Expected to become the 17th largest economy by 2008* * World Economic Outlook...
EU Membership – An Economic and Political Anchor… <ul><li>Customs Union since 1996 </li></ul><ul><li>Full membership proce...
Increasing Share of Value-added Sectors Sector Output Shares  (%) 11.2 29.8 59.0 45.0 13.5 41.5 Employment by Economic Act...
Fiscal Prudence & Sustainable Disinflationary Trends Consolidated Budget  (% of GNP) -2.5% -17% Source: Ministry of Financ...
Declining Sovereign Risk YTL Billion, % Source: Treasury Maastricht Criterion 93 58 358 Euro Zone Average External Debt 20...
Stronger Integration to World Markets Foreign Trade  (US$ Billion) Source: Turkstat 100 160 Exports by Country Groups – Ja...
Already Increasing Levels of FDI  Better Means of Financing the C/A Deficit  Foreign Direct Investment  (US$ Billion) Offi...
Source: Privatization Administration and local media Privatization Revenues  (US$ mn) Growing Opportunities for the Privat...
Financial Markets The resilience of the financial markets against global shocks increased significantly Interest Rates % 2...
2007-2008 Expectations 1.85 1.44 1.41 10.0 6.0 400 2006 1.59 1.34 1.35 7.7 7.6 361 2005 2008 2007 E 1.72 1.31 1.23 6.9 5.0...
Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corridor Strong...
Strategically Located on Critical Energy Corridors Kirkuk – Ceyhan Iraq’s largest export line Capacity: 70 mn tons p.a. Ba...
Opportunities in Energy Sector : Gas & Oil <ul><li>Gas </li></ul><ul><li>New distribution networks  </li></ul><ul><li>Priv...
Opportunities in Energy Sector : Electricity <ul><li>Privatization of 20 electricity distribution regions  </li></ul><ul><...
Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Industry Import...
Low Penetration Levels - High Growth Prospect Banking System in Turkey No of Banks 81 79 61 53 51 51 51 47 4 6 Banking Hig...
Restructuring in the Banking System  Stronger Risk Management, Higher Capitalization, Higher Profitability Capital Adequac...
Total Loans Lending Penetration –  Total Loans to GNP,  % Developed Countries Developing Countries (Europe&S.Africa) Latin...
Mortgage Loans Mortgage Penetration  – Mortgage Loans to GNP,  % Source: Merrill Lynch Developed Countries Developing Coun...
Contents Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corrid...
Strong Competitive Advantages <ul><li>Opportunities </li></ul><ul><li>Growing markets in the surrounding geography </li></...
Strong Competitive Advantages Source:  Investment Support and Promotion Agency of Turkey
Increasing Emphasis on R&D R&D Expenses/  GDP - % Private Sector Support for Technology & Innovation, YTL mn R&D Support b...
Special Investment Zones Technology Zones  (14 + 8) Organized Industrial Zones  (93) Free Zones  (20) •  Offices ready to ...
Contents Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corrid...
Main Export Sectors  Sectoral Composition of Exports –  Largest 500 Companies,  % 3 . 5 7 . 5 10 . 9 13 . 3 17 . 3 17 . 7 ...
Examples to Most Attractive Export Sectors Most Attractive Export Sectors Source: WTO 0% 10% 30% 20% 40% 50% 60% 0% 1% 2% ...
Thank you… www.ito.org.tr invest.gov.tr www.yased.org.tr www. treaury .gov.tr www.igeme.org.tr www.tusiad.org.tr www.forei...
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Examples To Most Attractive Export Sectors

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  • Examples To Most Attractive Export Sectors

    1. 1. Doing Business in Turkey Funda Güngör Koç Holding A.Ş.
    2. 2. Why Turkey ? Source: Investment Support and Promotion Agency of Turkey
    3. 3. Contents Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Industry Important Sectors at a Glance
    4. 4. Unique Geographical Location… <ul><li>Unique geographical location… </li></ul><ul><ul><li>Turkey enjoys a very special location at the crossroads between East and West, overlapping Europe and Asia geographically </li></ul></ul><ul><ul><li>Turkey occupies an area approximately equivalent to the quarter of the size of the EU </li></ul></ul><ul><li>Favorable economic and political environment… </li></ul><ul><ul><li>Democratic parliamentary regime </li></ul></ul><ul><ul><li>Open market economy </li></ul></ul><ul><li>Strong ties with Caucasia and Central Asia…. </li></ul><ul><ul><li>Turkey is the leading investor in Caucasian and Central Asian Turkic Republics </li></ul></ul><ul><ul><li>Turkey provides privileged access and a perfect base to develop business with these countries </li></ul></ul>
    5. 5. International Associations – Commitment to Global Standards Bilateral Investment Treaties with 79 countries Double Taxation Prevention Treaties with 68 countries Social Security Agreements with 22 countries Free Trade Agreements with 11 countries
    6. 6. Large and Young Population – Increasing Urbanization The Changing Nature of Turkish Urbanization, Large (around 70 million) and Young Population Present New Opportunities for Growth Poland Turkey Portugal Romania Belgium Holland Spain Italy France Germany Poland Turkey Portugal Romania Belgium Holland Spain Italy France Germany Population & Labor Growth Rates, % Population Breakdown (%)
    7. 7. Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Industry Important Sectors at a Glance
    8. 8. From Boost & Bust Cycles to Sustainable Growth Source: T urkstat GNP Growth Rates Before 2002: Boost and Bust Cycles Consecutive High Growth Rates Contribution of Private Sector Investments – % pps Avg GDP Growth 3.1% Avg GDP Growth 7.1%
    9. 9. Low Penetration Levels Organized Food & Retail Market Share, % Ownership per Thousand Penetration, % Per capita consumption toe Loans + Deposits / GDP, % Vehicles Passenger Cars Automotive Consumer Durables Food & Retail Finance Energy
    10. 10. Sustainable and High Growth Potential Source: PricewaterhouseCoopers estimates (rounded to nearest percentage point) Projected real growth in GDP and income per capita: 2005-2050 (%pa) 2.1 0.1 2.2 1.9 France 2.0 0.3 2.2 1.9 UK 2.2 0.0 2.2 2.3 Spain 1.8 0.6 2.4 2.4 USA 2.0 0.7 2.7 2.6 Australia 1.9 0.6 2.6 2.6 Canada 2.6 -0.1 2.4 3.3 South Korea 3.3 -0.5 2.7 4.6 Russia 3.3 0.6 3.9 4.8 Mexico 3.2 0.7 3.9 5.4 Brasil 3.4 0.7 4.2 5.6 Turkey 3.8 0.1 3.9 6.3 China 4.2 0.6 4.8 7.3 Indonesia 4.3 0.8 5.2 7.6 India 1.9 -0.3 1.6 1.2 Japan 1.9 -0.1 1.8 1.5 Germany 1.6 GD P in domestic currency or PPPs 1.5 GDP in US $ terms 1.9 -0.3 Italy GDP per capita at PPPs Population Country
    11. 11. 19th Largest Economy of the World as of 2005 Expected to become the 17th largest economy by 2008* * World Economic Outlook, IMF 689 644 9,544 9,075 Iran 716 672 18,018 17,062 Argentina 756 718 35,707 34,359 Australia 758 708 10,177 9,629 Turkey 782 735 33,432 31,692 Taiwan 1,129 1,038 4,955 4,616 Indonesia 1,275 1,215 38,150 36,821 Canada 1,307 1,229 26,958 25,403 South Korea 1,306 1,237 12,292 11,761 Mexico 1,342 1,276 29,444 28,445 Spain 1,912 1,805 9,966 9,531 Brasil 1,916 1,852 32,718 31,694 Italy 2,032 1,877 14,368 13,210 Russia 2,110 2,020 33,124 31,873 France 38,131 33,346 35,377 4,336 9,431 47,050 2008 36,568 32,179 34,011 4,031 8,486 45,176 2007 GDP per Capita (based on PPP) GDP (based on PPP) 2,327 2,225 UK 2,738 2,645 Germany 4,519 4,346 Japan 4,973 4,555 India 12,518 11,207 China 14,385 13,675 USA 2008 2007 %
    12. 12. EU Membership – An Economic and Political Anchor… <ul><li>Customs Union since 1996 </li></ul><ul><li>Full membership process since October 2005 </li></ul>FDI/GDP, Annual Average ( % ) Average Growth Rate (%)
    13. 13. Increasing Share of Value-added Sectors Sector Output Shares (%) 11.2 29.8 59.0 45.0 13.5 41.5 Employment by Economic Activity (%) 62.5 72.7 37.5 27.3 Source: Turkstat
    14. 14. Fiscal Prudence & Sustainable Disinflationary Trends Consolidated Budget (% of GNP) -2.5% -17% Source: Ministry of Finance Inflation (%, YoY) Source: Central Bank 2001 2002 2003 2004 2005 35.9 2006 2007 28.3 73 92 7.4 3.7 -0.7%
    15. 15. Declining Sovereign Risk YTL Billion, % Source: Treasury Maastricht Criterion 93 58 358 Euro Zone Average External Debt 2002 : US$ 130 bn 2007 1Q : US$ 213 bn Domestic Debt 2001 : US$144.0 bn 2007 August : US$194.9 bn Maturity (months): 12.8 24.8 249.1 264.0 305.9 320.2 337.7 330.8 Net Public Debt (at 2007-1Q prices) 249.1 259.2 269.1 274.4 250.8 215.7 Net Public Debt (Nom) 45.0 2006 40.7 55.3 64.0 70.3 78.4 Net P. Debt / GNP (%) 2002 2003 2004 2005 2007 2Q YTL Billion YTL - Floating YTL- Fixed FX & FX-linked
    16. 16. Stronger Integration to World Markets Foreign Trade (US$ Billion) Source: Turkstat 100 160 Exports by Country Groups – Jan-July 2007 (%) Imports by Country Groups – Jan-July 2007 (%) 31 41
    17. 17. Already Increasing Levels of FDI Better Means of Financing the C/A Deficit Foreign Direct Investment (US$ Billion) Official Reserves (US$ Billion) 38 62 2001 2002 2003 2004 2005 72 2006 2007 19 12.1 20 Growth vs Current Account Deficit, % The New FDI Law The main principles are as follows: • Equal Treatment for domestic and foreign capital companies • No pre-entry or pre-establishment screening requirements • No need to notify to the Undersecretariat of Treasury • No obligation to choose a specific company name • Unrestricted foreign ownership Rights of International Investors • Free Transfer of Funds • Acquisition of real estate • Dispute settlement either in local courts or international arbitration bodies • Valuation of non-cash capital • Work permits for expatriates • Opening a liaison office Source: Central Bank, Investment Support and Promotion Agency of Turkey
    18. 18. Source: Privatization Administration and local media Privatization Revenues (US$ mn) Growing Opportunities for the Private Sector and Foreign Players Privatization & SDIF Sales, 2008-2009 1,300 TEKEL 2,040 Petkim 2,600 Motorways & Bridges 600 Sugar Factories 1,000 National Lottery 5,000 Halk Bank 15,000 Power Generation 4,000 Electricity Distribution US$ Million (expected)
    19. 19. Financial Markets The resilience of the financial markets against global shocks increased significantly Interest Rates % 2004 2005 2006 16.33 2007 YTL / $ 2004 2005 2006 1.1757 2007 Trigger: Start of FED rate hikes Duration:3 months Dev. Rate: 28% Trigger: Expectation of strong FED rate hikes Duration:2 months Dev. Rate: 7% Trigger: Japan’s interest-rate hikes & Global liquidity Duration:2 months Dev. Rate:29% Interest Rates Inc: 7.65 bp Interest Rates Inc.: 0.17 bp Interest Rates Inc.: 7.35 bp Trigger: Mortgage Crisis in US Duration:3 months Dev. Rate:8% Interest Rates Inc.: 1.80 bp Source: Reuters, Koç Holding
    20. 20. 2007-2008 Expectations 1.85 1.44 1.41 10.0 6.0 400 2006 1.59 1.34 1.35 7.7 7.6 361 2005 2008 2007 E 1.72 1.31 1.23 6.9 5.0 498 1.89 1.28 13.5 5.5 6.0 560 Koç Holding Assumptions YTL / € (year-end) YTL / $ (avg.) YTL / $ (year-end) 4.0 CPI (year-end, %) 5.5 GNP Growth (%) 520 GNP (US$bn) Government Program
    21. 21. Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corridor Strong Manufacturing Industry
    22. 22. Strategically Located on Critical Energy Corridors Kirkuk – Ceyhan Iraq’s largest export line Capacity: 70 mn tons p.a. Baku – Tbilisi – Ceyhan Decreasing transportation and financial costs Capacity: 50 mn tons p.a. Samsun – Ceyhan Ceyhan to become an energy hub Capacity: 70 mn tons p.a. Nabucco Major alternative route for gas to EU to be partially operational by 2012 Construction will end in 2017 (max capacity: 31 bcmy) Turkey – Greece – Italy Turkey – Greece part is in the final stages of construction Construction of the “Italy-Greece” section : 2008 - 2011 Estimated capacity: 8-10 bcm p.a. Oil Pipelines Natural Gas Pipelines
    23. 23. Opportunities in Energy Sector : Gas & Oil <ul><li>Gas </li></ul><ul><li>New distribution networks </li></ul><ul><li>Privatization of major gas distribution companies </li></ul><ul><li>International gas transit projects passing through Turkey </li></ul><ul><li>Gas import contracts of BOTAS - 16 lots of 250 mcm have already been sold </li></ul><ul><li>Oil </li></ul><ul><li>New oil pipeline projects such as the Samsun-Ceyhan Project offers opportunities for construction and engineering companies. </li></ul><ul><li>New Petroleum Law is expected to stimulate exploration and production activities </li></ul><ul><li>Collaboration opportunities with the American companies regarding hydrocarbons in Iraq. </li></ul><ul><li>Black Sea as an offshore region – need for deep water-related services </li></ul>Turkey annually exports 35-40 billion m3 of natural gas to Europe and 250-300 million tons of petroleum to world markets
    24. 24. Opportunities in Energy Sector : Electricity <ul><li>Privatization of 20 electricity distribution regions </li></ul><ul><li>Sale of 16,000 MW of state generating plants (12,200 MW thermal and 3,800 MW hydro) </li></ul><ul><li>Additional generating capacity of 54,000 MW to be created by 2020. (1/3 in hydro) </li></ul><ul><li>Construction of over 600 HEPPs ( High Energy Particle Physics ) with a capacity of 11,000 MW (2007). Hydro facility of 12,578 MW are in operation and it is projected that 35,000 MW capacity will be reached by 2020. </li></ul><ul><li>Investment opportunities in Renewable Energy </li></ul><ul><li>Wind turbines (The installed capacity to reach up to 3,000 in 2020) </li></ul><ul><li>Solar energy thermal potential (61 million Toe) </li></ul><ul><li>Creation of nuclear capacity of 5,000 MW by 2020. </li></ul>According to the Ministry of Energy and Natural Resources, Turkey requires energy investments of $128 billion through 2020 in order to sustain its economic growth
    25. 25. Growing Economy Strengthening Financial Sector Demographic Advantages Energy Corridor Strong Manufacturing Industry Important Sectors at a Glance
    26. 26. Low Penetration Levels - High Growth Prospect Banking System in Turkey No of Banks 81 79 61 53 51 51 51 47 4 6 Banking Highlights 10,099 171 Euro Mortgage Loans Per capita 24,279 2,125 Euro Loans Per capita 29,464 1,317 Euro Deposits Per capita 71,120 3,470 Euro Assets Per capita 23,402 4,046 Euro Income Per capita 43 3 % Share in GNP Mortgage Loans 126 31 % Share in GNP Total Loans 104 50 % Share in GNP Total Deposits 304 82 % Share in GNP Total Assets 2,297 11,536 Population Per branch Turkey EU-25
    27. 27. Restructuring in the Banking System Stronger Risk Management, Higher Capitalization, Higher Profitability Capital Adequacy Ratio – % Non-performing Loans – % Net NPLs (0.4%) RoE - % Open FX Position – US $bn Source: Banking Association of Turkey
    28. 28. Total Loans Lending Penetration – Total Loans to GNP, % Developed Countries Developing Countries (Europe&S.Africa) Latin America Developing Countries (Asia) Source: Merrill Lynch
    29. 29. Mortgage Loans Mortgage Penetration – Mortgage Loans to GNP, % Source: Merrill Lynch Developed Countries Developing Countries (Europe&S.Africa) Latin America Developing Countries (Asia)
    30. 30. Contents Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corridor Strong Manufacturing Industry
    31. 31. Strong Competitive Advantages <ul><li>Opportunities </li></ul><ul><li>Growing markets in the surrounding geography </li></ul><ul><li>Efforts to increase efficiency </li></ul><ul><li>Strengths </li></ul><ul><li>Geographical location </li></ul><ul><li>Customs Union with the EU </li></ul><ul><li>A large export base </li></ul><ul><li>Product development capability </li></ul><ul><li>Competitive and flexible manufacturing </li></ul><ul><li>Strong and competitive domestic supply base </li></ul><ul><li>Low labor costs </li></ul><ul><li>High quality standards </li></ul><ul><li>High domestic demand versus comparable Eastern European countries </li></ul><ul><li>Highly educated, young, dynamic and qualified workforce </li></ul><ul><li>Flexible and long working hours </li></ul>
    32. 32. Strong Competitive Advantages Source: Investment Support and Promotion Agency of Turkey
    33. 33. Increasing Emphasis on R&D R&D Expenses/ GDP - % Private Sector Support for Technology & Innovation, YTL mn R&D Support by Tubitak (Scientific and Technological Research Council of Turkey) R&D Investment at Koç Group– € mn R&D Personnel at Koç Group
    34. 34. Special Investment Zones Technology Zones (14 + 8) Organized Industrial Zones (93) Free Zones (20) • Offices ready to rent and infrastructure facilities provided. • Profits derived from software and R&D activities are exempt from income and corporate taxes until 2014. • Deliveries of application software produced exclusively in TDZ’s are exempt from VAT until 2014. • Wages of researchers, software and R&D personnel employed in the zone are exempt from all taxes until 2014. • A VAT exemption during the exemption period of income and corporate taxes is provided for IT specific sectors. • Exemption from customs and duties as well as fund levies. • %100 exemption from custom duties and other assorted duties • %100 exemption from corporate income tax for production companies • %100 exemption from the value added tax (VAT) & sp. Cons. taxes • Companies are free to transfer profits from Free Zones abroad as well as to Turkey without restrictions. Investors operating in the zones located in 54 selected provinces benefit from the following advantages: • 100% exemption from income tax for employed workers. • 100% exemption from the employer’s share of social security costs. • Free land allocation. • Up to 50% support for electricity costs. • Exemption from real estate tax, waste water charges, building construction duties and the use-of-building. Source: Investment Support and Promotion Agency of Turkey
    35. 35. Contents Growing Economy Strengthening Financial Sector Important Sectors at a Glance Demographic Advantages Energy Corridor Strong Manufacturing Industry
    36. 36. Main Export Sectors Sectoral Composition of Exports – Largest 500 Companies, % 3 . 5 7 . 5 10 . 9 13 . 3 17 . 3 17 . 7 26 . 9 0 5 10 15 20 25 30 Automotive Iron&Steel Machinery&Equipm. Te x til es&Leather Oil and Coal derivatives Food&Tobacco Mining 3 . 5 7 . 4 7 . 5 8 . 4 10 . 5 11 . 7 46 . 5 0 10 20 30 40 50 Textiles&Leather Machinery&Equipm. Food&Tobacco Iron&Steel Autıomotive Mining Oil and Coal derivatives Source : ISO Source : ISO Sectoral Composition of Exports – 2nd Largest 500 Companies, %
    37. 37. Examples to Most Attractive Export Sectors Most Attractive Export Sectors Source: WTO 0% 10% 30% 20% 40% 50% 60% 0% 1% 2% 3% 4% 5% 6% Telecom & Audio Iron & Steel Textile Fruit & Vegetables Apparel Metallic Goods Electrical machinery Motor Vehicles Market Share in Global Exports, 2005 % Export Growth, 200-2005 % … the 6th largest vehicle producer in EU-25 and 15th largest worldwide; the 3rd largest producer in light vehicles in EU-25 and the largest producer in bus in EU-25; … the largest producer and exporter of agricultural products in the Near East and North Africa …the largest hazelnut and apricot produce…Agricultural production is equivalent to 40% and 20% of EU-25 production of fruits and vegetables … the 2nd largest white goods producer in Europe, following Italy and producing about 16% of total European production …the 1st TV manufacturer in Europe … the 7th largest apparel, 3rd largest home textile and 15th textile exporting country internationally …the 2nd largest supplier of the EU after China, meeting 12% (in volume) and 15% (in value) of the textile and garment requirement of the EU. …the 7th largest apparel, 3rd largest home textile and 15th textile exporting country internationally … among the top countries who export construction services … the world’s 6th largest producer of cement and cotton Motor Vehicles Agricultural Products White Goods & Electronics Textile & Apparel Cement & Cotton Construction
    38. 38. Thank you… www.ito.org.tr invest.gov.tr www.yased.org.tr www. treaury .gov.tr www.igeme.org.tr www.tusiad.org.tr www.foreigntrade.gov.tr www.deik.org.tr Further information on business environment and trade & investment opportunities in Turkey can be reached at: Istanbul Chamber of Commerce Investment Support and Promotion Agency of Turkey International Investors Association Undersecretariat of Treasury Export Promotion Center Turkish Industrialists’ and Businessmen’s Association Undersecretariat of Foreign Trade Foreign Economic Relations Board

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