Turkey: Investment ConferenceOctober 19, 2012Mehmet ŞimşekMinister of Finance
OutlineGlobal Economy• Short and Medium Term Outlook and Challenges• Long Term Outlook and ChallengesTURKEY2
GLOBAL ECONOMY3
Growth Rates in 2012 for AMsSource: IMF3,32,2 2,21,3-0,4-101234World Japan USA Advanced Economies Euro AreaGrowth(%)
GDP in Advanced EconomiesSource: Eurostat(2007-Q4=100)91939597991012007-Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2...
Unemployment in Advanced EconomiesSource: Eurostat, BLSUnemploymentRates(December2007=100,%,s.a.)8010012014016018020022020...
Growth Rates in 2012 for AMsSource: IMF3,32,2 2,21,3-0,4-101234World Japan USA Advanced Economies Euro AreaGrowth(%)
Growth Rates in 2012 for EMsSource: IMF, MTPGrowth(%)5,34,13,2 3,22,01,52,02,53,03,54,04,55,05,5Emerging Asia exclChina & ...
Source: IMF, OECDDebtStock/GDP(%)Government Debt Stock67,2 66,474,5107,293,6107,6111,794,9109,360708090100110120USA Eurozo...
Real GDPSource: IMFGreat Depression (1929=100) Current Crisis (2008=100)World vs USA70809010011012020002001200220032004200...
UnemploymentSource: Karl Aiginger, (2009), Comparing the Current Crisis to the Great Depression, IMF, ILOGreat Depression(...
Budget DeficitSource: Karl Aiginger, (2009), Comparing the Current Crisis to the Great Depression12
Eurozone Debt CrisisFiscal Cliff USAHard Landing in Emerging MarketsGeopolitical RisksRisk to the Global Outlook13
TURKEY: SHORT AND MEDIUM-TERMOUTLOOK14
Managing a Soft Landing15
Strong Post-Crisis Recovery, butModerating GrowthSource: TURKSTATRealGDP(s.a,2007Q4=100)96,1101,688,2114,18085909510010511...
Turkey: Growth ProjectionsSource: MTP3,24,05,0 5,03,03,54,04,55,05,52012 2013 2014 2015RealGDPGrowth(%)17
Rebalancing is well underwayContributiontoGrowth,%Source: TURKSTAT17,313,59,52,21,0-2,0-5,6-5,10,53,24,65,7-6-14914Q1-11 Q...
PMI & Capacity UtilizationPurchasingManagersIndexSource: CBT, HSBCCapacityUtilizationRate55606570758085303540455055602007-...
UnemploymentRate(SeasonallyAdjusted,%)89101112131415162008-12009-12010-12011-12012-1Source: TURKSTATUnemployment is Fallin...
Unemployment Rate ProjectionsSource: MTP9,08,98,88,78,68,78,88,999,12012 2013 2014 2015(%)21
Employment Supporting the GrowthSource: TURKSTATAdditionalEmploymentsinceEnd-2007(MnPeople,s.a.)2021222324252008-12009-120...
Job Creation hitting Record HighAnnualAverageEmploymentGrowth(%,2007-11)Source: WEO, TURKSTAT3,9-4-3-2-101234IrelandSpainG...
Unemployment at Decade Low,24801001201401601802002202008-12009-12010-12011-12012-1USAEU-27TurkeyUnemploymentRate,s.a.(Dece...
Inflation RatesSource: TURKSTAT(%)0481216202428322003-1592004-1592005-1592006-1592007-1592008-1592009-1592010-1592011-1592...
Inflation ProjectionsSource: MTP(%)7,45,35,0 5,0456782012 2013 2014 201526
A Rough Spot: Current Account Deficit27
Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing-80-60-40-20020402002-14...
Current Account Deficit: Next Three YearsSource: MTP7.37.16.96.56,46,66,877,27,42012 2013 2014 2015(%,GDP)29
Financing Quality is ImprovingSource: CBRT(12MonthRolling,USDbn)-100102030405060708090 2007-13579112008-13579112009-135791...
REER is still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)85909510010...
Europe56.6%Other43.4%Exports 2002Diversifying away from Europe?Europe38.2%Other61.8%Exports Jan-Aug 2012Source: TURKSTAT32
Source: TURKSTATExports to US (% Total Exports)339,33,701234567891020022012Jan-Aug
Source: TURKSTATExports to Asia (% Total Exports)14,535,912182430362002 2012Jan-Aug34
Source: TURKSTATMENA: a life saver?ExportstoMENA(%ofTotal)12,132,91015202530352002 2012Jan-Aug35
Exports by Destination(2007=100)Source: TURKSTAT601201802403003602007-13579112008-13579112009-13579112010-13579112011-1357...
832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion37
530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billionExport Diversification -II38
Share of Largest Five in Total Exports (%)Source: TURKSTAT2002 2011Germany 16.3 Germany 10.3USA 9.3 Iraq 6.2United Kingdom...
Current Account Deficitas a Structural Problem40
Massive Savings-Investment Gap(%)10121416182022242002 2003 2004 2005 2006 2007 2008 2009 2010 2011Gap Investment/GDP Savin...
Fall in Private Savings-505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011Public Savings/GDP Private Savings/GDP...
High Dependency on Energy Imports72%Total Energy92%Oil98%Natural Gas43
Source: Ministry of Development, Bloomberg*2012 May 12 Month RollingEnergy Import Bill(BrentType,Dollar/Barrel)EnergyImpor...
Fiscal Performance45
Lower Fiscal DeficitSource: Ministry of DevelopmentGen.Gov.BudgetDeficit-to-GDP,%Achieved Maastricht Criteria except 20091...
Fiscal Deficit ProjectionsSource: Ministry of FinanceGen.Gov.BudgetDeficit-to-GDP,%1,61,51,20,90,81,01,21,41,61,82012 2013...
Lower DebtMaastricht Criteria fulfilled since 2004Source: TreasuryDebt/GDP,(%) 74,067,759,652,746,539,9 40,046,142,439,2 3...
Public Sector Primary BalanceSource: TreasuryPublicSectorPrimaryBalance(ProgramDefined)/GDP(%)0,34,75,54,84,53,21,6-1,00,8...
Source: Ministry of FinanceInterest Payments85,716,715,243,213,1 12,202040608010020022003200420052006200720082009201020112...
Public Invesment ExpendituresPublicInvesmentExpenditures(BillionTL)Source: Ministry of Finance,510152025303540455020022003...
88.4-3.5-5515253545556575852002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q2(BillionTL)Zeroing Net External Debt of...
2012 August200344%47%9%Fixed Floating CPI Indexed52%30%18%Fixed Floating CPI IndexedLower Interest Rate RiskSource: Treasu...
41.972.858.127.2203040506070802002 2011TL Stock Döviz StockFX SockLower FX RiskCentralGovernmentDebtStock(%)Source: Treasu...
Source: TreasuryNote: As of August 2012, the average maturity of domestic cash borrowing is 60.8 months.9.444.751015202530...
Privatizations56
International Recognition of Turkey’s Privatization SuccessTurkey ranked number5 in the top 10 list withits total privatiz...
Administrationleadsprivatization ofkey enterprisesin TurkeyMajor Companies in the Privatization Program of PABanking Sugar...
Privatization in 2013(Toll Roads and Bridges)About 2,000 km of toll roadsBridges in Istanbul(Bosphorus & FSM)59
Privatization in 2013(Electricity Generation & Distribution Assets)13 out of 21 electricity distribution networks already ...
Privatization in 2013(Gas Distribution Networks)Başkent Natural GasDistribution Company• Turkey’s 2nd largest naturalgas d...
Privatization in 2013(Halkbank and Telecoms)Public Secondary Offerings forHalkbank (20.8% shares)Turkish Telecommunication...
Privatization in 2013National Lottery63
Putting Our House in OrderCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness64
Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilM...
Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItaly...
Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 125 countries)38454...
Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(43rd among 144 countries)Sourc...
6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndone...
5371 72808790 91100113120126129132152020406080100120140160MexicoTURKEYRomaniaCrotiaItalyUruguayChinaGreeceArgentinaRussiaB...
International Companies Operating in Turkey(1000s)Source: Ministry of Economy5,66,78,811,715,016,119,222,025,329,630,70510...
Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8118.50204060801001201401980-2002 2003-2012 August72
REER AppreciationSource: CBRT(2003=100)55657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-171997-...
Strong Long-Term Prospects74
2011Population: 75 mnGDP: $774 bn2050 (projections)Population: 94-97 mnGDP: $3.9 tn-$5.3 tnTowards 2050…Source: Turkstat, ...
Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. Fran...
Favourable DemographicsSource: EurostatShareof15-24yearsinTotalPopn(%)16,879111315171921 AndorraItalyGreeceSpainPortugalGe...
71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTATRoom...
Priorities & Reform Agenda79
Priorities & Reform AgendaEducationTransportation and InfrastructureEnergyDeepening financial marketsEnhancing investment ...
Education81
11.368.10102030405060702002 2013Source: Ministry of FinanceResources Allocated to EducationBillionTL82
Source: Ministry of DevelopmentSchooling ratio is Improving (Gross Rate)11.296.580.835.845.3107.693.372.51030507090110pre-...
Transportation and Infrastructure84
1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(Janu...
Our RailwaysPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 k...
High Speed Railway ProjectsİSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST lines to be completed until 2...
AIRPORTS AVAILABLE FORCIVIL AVIATION TRAFFIC IN TURKEY20032012Airports serving ScheduledFlight (48)Airports under Construc...
Energy89
When all construction process is completed, the share of the renewableenergy resources within the total energy capacity wi...
Electricity Generation from Renewable Energy33,68448 105 17434,01152,0784,726668 45057,922-2000800018000280003800048000580...
Source: European Wind Energy Association (EWEA)Wind Energy Capacity2002 2011Rising from # 35 to # 10 in Europe.35.10.92
Energy DemandWorld energy demand is projected to grow by 40 % until 2030.Turkey’s energy demand is projected to grow by 14...
Investment in Energy SectorWe invested $ 25 billion in energy over the last 9 years.We need to invest $120 billion by 2023...
Deepening Financial Markets95
Strengthening the legal frameworkImproving physical infrastructureProviding financial educationNew Incentives forIstanbul ...
Strengthening the Legal FrameworkEnhancing regulatory and supervisory frameworkAdopting the best global practices & the EU...
Revising Capital Markets LawA new law with amarketperspectiveRestructuring ofISE•Regional Leadership•Raising MarketCap/GDP...
Improving Physical InfrastructureIstanbul is a 24-7 living city• An exciting place to live & work• Largest city in Europe•...
Improving Financial LiteracyState run programs in countrieslike Australia, Japan, USA & UKIt is all about perception• Stoc...
Increasing Private Pensions25% State ContributionPenalty for Early Withdrawals101
Incentives for Global Fund ManagersA tax free environment for Global FundsMaking it easier to manage assets in Turkey102
Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate...
Incentives for Business Angels75% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withholdi...
SukukGlobal issuance: $170 bnSimilar to euro bonds, international holders of Sukukwill not be subject to withholding taxSe...
Enhancing Investment Climate106
Public and private sectorrepresentatives107
New Investment Incentive SchemeObjectives:- Reduce regional development gaps- Reduce current account deficit- Promote effi...
YENİ TEŞVİK SİSTEMİRegional Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s share ofinsur...
Supporting Strategic InvestmentsStrategic Investments will be supported regardless of locationCustoms Duty ExemptionVAT Ex...
Simplifying Tax SystemBuilding a Simple and Effective Tax system• Boosting competitiveness• Widening tax base• Increasing ...
New Turkish Commercial CodeTransparencyAccountabilityInstitutionalizationImprovement in investmentand business environment...
Improving Business ClimateStarting a business is less costly byeliminating notarization feesTax burden is lower after lowe...
Labor Market Reforms114
National Employment Strategy4 Main ObjectivesReducing labor market rigiditiesIncreasing employment of women, youth and the...
Average Weekly Hours Worked on the Main JobSource: OECD50,2303234363840424446485052TurkeyKoreaMexicoGreeceCzechRepublicSlo...
Share of Part-time Employment (%, 2011)Source: OECD11,30510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingdom...
R&D and Innovation118
Brand Turkey, moving up the LaddersSource: Brand - FinanceWith a brand value of$487bn, Turkey ranks inthe top 20.119
Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain120
Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoos...
•0.842010•0.532002Source: The Scientific and Technological Council of TurkeyR&D Spending122
Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI123
Trademark Applications• 117,7232011• 36,4292002Source: Turkish Patent Instıtute124
THANK YOU…125
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Turkey: Investment Conference

  1. 1. Turkey: Investment ConferenceOctober 19, 2012Mehmet ŞimşekMinister of Finance
  2. 2. OutlineGlobal Economy• Short and Medium Term Outlook and Challenges• Long Term Outlook and ChallengesTURKEY2
  3. 3. GLOBAL ECONOMY3
  4. 4. Growth Rates in 2012 for AMsSource: IMF3,32,2 2,21,3-0,4-101234World Japan USA Advanced Economies Euro AreaGrowth(%)
  5. 5. GDP in Advanced EconomiesSource: Eurostat(2007-Q4=100)91939597991012007-Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q2USA Eurozone Japan5
  6. 6. Unemployment in Advanced EconomiesSource: Eurostat, BLSUnemploymentRates(December2007=100,%,s.a.)801001201401601802002202007-122008-122009-122010-122011-12USAEuro AreaJapan6
  7. 7. Growth Rates in 2012 for AMsSource: IMF3,32,2 2,21,3-0,4-101234World Japan USA Advanced Economies Euro AreaGrowth(%)
  8. 8. Growth Rates in 2012 for EMsSource: IMF, MTPGrowth(%)5,34,13,2 3,22,01,52,02,53,03,54,04,55,05,5Emerging Asia exclChina & IndiaEmerging Economiesexcl China & IndiaLatin America Turkey Emerging Europe
  9. 9. Source: IMF, OECDDebtStock/GDP(%)Government Debt Stock67,2 66,474,5107,293,6107,6111,794,9109,360708090100110120USA Eurozone OECD2007 2012 20139
  10. 10. Real GDPSource: IMFGreat Depression (1929=100) Current Crisis (2008=100)World vs USA7080901001101202000200120022003200420052006200720082009201020112012WorldUSA7080901001101201301925192619271928192919301931193219331934193519361937193819391940WorldUSA10
  11. 11. UnemploymentSource: Karl Aiginger, (2009), Comparing the Current Crisis to the Great Depression, IMF, ILOGreat Depression(1929-32)Current Crisis(2007-11)3 3912243005101520253035World USA Germany1929 19325 5 569805101520253035World USA Advanced Economies2007 201111
  12. 12. Budget DeficitSource: Karl Aiginger, (2009), Comparing the Current Crisis to the Great Depression12
  13. 13. Eurozone Debt CrisisFiscal Cliff USAHard Landing in Emerging MarketsGeopolitical RisksRisk to the Global Outlook13
  14. 14. TURKEY: SHORT AND MEDIUM-TERMOUTLOOK14
  15. 15. Managing a Soft Landing15
  16. 16. Strong Post-Crisis Recovery, butModerating GrowthSource: TURKSTATRealGDP(s.a,2007Q4=100)96,1101,688,2114,1808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q2 16
  17. 17. Turkey: Growth ProjectionsSource: MTP3,24,05,0 5,03,03,54,04,55,05,52012 2013 2014 2015RealGDPGrowth(%)17
  18. 18. Rebalancing is well underwayContributiontoGrowth,%Source: TURKSTAT17,313,59,52,21,0-2,0-5,6-5,10,53,24,65,7-6-14914Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12Domestic DemandNet Export18
  19. 19. PMI & Capacity UtilizationPurchasingManagersIndexSource: CBT, HSBCCapacityUtilizationRate55606570758085303540455055602007-13579112008-13579112009-13579112010-13579112011-13579112012-13579Purchasing Managers IndexCapacity Utilization Rate19
  20. 20. UnemploymentRate(SeasonallyAdjusted,%)89101112131415162008-12009-12010-12011-12012-1Source: TURKSTATUnemployment is Falling20
  21. 21. Unemployment Rate ProjectionsSource: MTP9,08,98,88,78,68,78,88,999,12012 2013 2014 2015(%)21
  22. 22. Employment Supporting the GrowthSource: TURKSTATAdditionalEmploymentsinceEnd-2007(MnPeople,s.a.)2021222324252008-12009-12010-12011-12012-122
  23. 23. Job Creation hitting Record HighAnnualAverageEmploymentGrowth(%,2007-11)Source: WEO, TURKSTAT3,9-4-3-2-101234IrelandSpainGreeceIcelandDenmarkPortugalEstoniaUSASloveniaJapanItalyFinlandCyprusFranceUnitedKingdomSlovakRepublıcCzechRepublicNetharlandNewZealandHongKongAustriaCanadaGermanyKoreaBelgiumTaiwanNorwaySwitzerlandAustraliaLuxembourgMaltaIsraelSingaporeTurkey23
  24. 24. Unemployment at Decade Low,24801001201401601802002202008-12009-12010-12011-12012-1USAEU-27TurkeyUnemploymentRate,s.a.(December2007=100)
  25. 25. Inflation RatesSource: TURKSTAT(%)0481216202428322003-1592004-1592005-1592006-1592007-1592008-1592009-1592010-1592011-1592012-15925
  26. 26. Inflation ProjectionsSource: MTP(%)7,45,35,0 5,0456782012 2013 2014 201526
  27. 27. A Rough Spot: Current Account Deficit27
  28. 28. Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing-80-60-40-20020402002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147Current AccountCurrent Account without Energy ImportCurrent Account + Net FDI + Net Errors and Omissions28
  29. 29. Current Account Deficit: Next Three YearsSource: MTP7.37.16.96.56,46,66,877,27,42012 2013 2014 2015(%,GDP)29
  30. 30. Financing Quality is ImprovingSource: CBRT(12MonthRolling,USDbn)-100102030405060708090 2007-13579112008-13579112009-13579112010-13579112011-13579112012-1357FDI Inflows and Long-Term Portfolio and Short-Term Current Account Deficit30
  31. 31. REER is still Supportive of AdjustmentSource: Central Bank of TurkeyCPI-DevelopingCountries-BasedREER(2003=100)8590951001051101151201252003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-14731
  32. 32. Europe56.6%Other43.4%Exports 2002Diversifying away from Europe?Europe38.2%Other61.8%Exports Jan-Aug 2012Source: TURKSTAT32
  33. 33. Source: TURKSTATExports to US (% Total Exports)339,33,701234567891020022012Jan-Aug
  34. 34. Source: TURKSTATExports to Asia (% Total Exports)14,535,912182430362002 2012Jan-Aug34
  35. 35. Source: TURKSTATMENA: a life saver?ExportstoMENA(%ofTotal)12,132,91015202530352002 2012Jan-Aug35
  36. 36. Exports by Destination(2007=100)Source: TURKSTAT601201802403003602007-13579112008-13579112009-13579112010-13579112011-13579112012-1357AB-27 MENAEU 2736
  37. 37. 832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion37
  38. 38. 530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billionExport Diversification -II38
  39. 39. Share of Largest Five in Total Exports (%)Source: TURKSTAT2002 2011Germany 16.3 Germany 10.3USA 9.3 Iraq 6.2United Kingdom 8.4 United Kingdom 6.0Italy 6.6 Italy 5.8France 5.9 France 5.0Largest five 46.5 Largest five 33.439
  40. 40. Current Account Deficitas a Structural Problem40
  41. 41. Massive Savings-Investment Gap(%)10121416182022242002 2003 2004 2005 2006 2007 2008 2009 2010 2011Gap Investment/GDP Savings/GDPSource: Ministry of Development41
  42. 42. Fall in Private Savings-505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011Public Savings/GDP Private Savings/GDP(%)Source: Ministry of Development42
  43. 43. High Dependency on Energy Imports72%Total Energy92%Oil98%Natural Gas43
  44. 44. Source: Ministry of Development, Bloomberg*2012 May 12 Month RollingEnergy Import Bill(BrentType,Dollar/Barrel)EnergyImports(BillionDollars)9,248,354,158,82397111 111,80204060801001200102030405060702002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AugustEnergy Import Oil Prices44
  45. 45. Fiscal Performance45
  46. 46. Lower Fiscal DeficitSource: Ministry of DevelopmentGen.Gov.BudgetDeficit-to-GDP,%Achieved Maastricht Criteria except 200910,87,94,1-0,11,3-0,21,65,53,00,4-20246810122002 2003 2004 2005 2006 2007 2008 2009 2010 2011Maastricht Criteria: 3%46
  47. 47. Fiscal Deficit ProjectionsSource: Ministry of FinanceGen.Gov.BudgetDeficit-to-GDP,%1,61,51,20,90,81,01,21,41,61,82012 2013 2014 201547
  48. 48. Lower DebtMaastricht Criteria fulfilled since 2004Source: TreasuryDebt/GDP,(%) 74,067,759,652,746,539,9 40,046,142,439,2 36,535,0 33,031,030354045505560657075802002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Maastricht Criteria: 60%48
  49. 49. Public Sector Primary BalanceSource: TreasuryPublicSectorPrimaryBalance(ProgramDefined)/GDP(%)0,34,75,54,84,53,21,6-1,00,81,20,50,81,0 1,1-2,0-1,00,01,02,03,04,05,06,01993-20022003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20152003-10 Avg: 3%49
  50. 50. Source: Ministry of FinanceInterest Payments85,716,715,243,213,1 12,202040608010020022003200420052006200720082009201020112012201320142015Interest Payments/Tax Revenues (%)Interest Payments/Budget Expenditures (%)50
  51. 51. Public Invesment ExpendituresPublicInvesmentExpenditures(BillionTL)Source: Ministry of Finance,5101520253035404550200220032004200520062007200820092010201120122013201420157,9 8,08,7 11,714,716,521,724,432,837,641,338,642,246,651
  52. 52. 88.4-3.5-5515253545556575852002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Q2(BillionTL)Zeroing Net External Debt of the Public SectorSource: Treasury52
  53. 53. 2012 August200344%47%9%Fixed Floating CPI Indexed52%30%18%Fixed Floating CPI IndexedLower Interest Rate RiskSource: TreasuryNote: Central Government Domestic Debt Stock53
  54. 54. 41.972.858.127.2203040506070802002 2011TL Stock Döviz StockFX SockLower FX RiskCentralGovernmentDebtStock(%)Source: Treasury54
  55. 55. Source: TreasuryNote: As of August 2012, the average maturity of domestic cash borrowing is 60.8 months.9.444.751015202530354045502002 2011Lengthening Maturity of Domestic BorrowingMaturityofDebt(Months)55
  56. 56. Privatizations56
  57. 57. International Recognition of Turkey’s Privatization SuccessTurkey ranked number5 in the top 10 list withits total privatizationimplementation figurefor years 2004-2008among OECD membercountriesWorld Bank: Turkey accords with the best internationalprivatization practices World Bank, CEPDL REPORTTender processes were open,transparent and competitiveand tender pre-conditionsappropriatePA pursued a broadlytransparent process, whichwas consistent withacceptable competitivepracticesPA’s use of financial advisorshas resulted in an open,transparent and competitiveprivatization processPA showed professionalismand good practices in all ofthe 20 transactions57
  58. 58. Administrationleadsprivatization ofkey enterprisesin TurkeyMajor Companies in the Privatization Program of PABanking Sugar industriesElectricitydistributionNatural gasdistributionTurkish AirlinesMaritimetransportationImmovables RetailFloor tiles & cementpipes75 100 100100 49 100100 100 56Companies to beprivatized underspecial legislationNational lotteryToll roadsTelecomsElectricitygenerationTCDD Ports31,68% of shares belongingto Privatization Admin.Major Companies & Entities in Privatization Portfolio58
  59. 59. Privatization in 2013(Toll Roads and Bridges)About 2,000 km of toll roadsBridges in Istanbul(Bosphorus & FSM)59
  60. 60. Privatization in 2013(Electricity Generation & Distribution Assets)13 out of 21 electricity distribution networks already in private handsOffering 8 for sale
  61. 61. Privatization in 2013(Gas Distribution Networks)Başkent Natural GasDistribution Company• Turkey’s 2nd largest naturalgas distribution companyIGTASDistribution CompanyTurkey’s largest naturalgas distributioncompany
  62. 62. Privatization in 2013(Halkbank and Telecoms)Public Secondary Offerings forHalkbank (20.8% shares)Turkish Telecommunications Company
  63. 63. Privatization in 2013National Lottery63
  64. 64. Putting Our House in OrderCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness64
  65. 65. Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilMexicoChinaTURKEYArgentinaIndiaRussiaIndonesiaSource: Transperancy Intenational65
  66. 66. Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItalyBrazilChinaRomaniaGreeceIndiaArgentinaIndonesiaMexicoRussiaUkraine(61st among 183 countries)Source: Transperancy Intenational66
  67. 67. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(71st among 125 countries)384547 48535457 59697130354045505560657075ItalyIndiaGreeceChinaRussiaArgentinaBrazilMexicoIndonesiaTURKEYSource: World Economic ForumGlobal Competitiveness Index (2005)67
  68. 68. Within the period of 2005-2012, Turkey has ranked higher than Russia, Argentina and Greece.(43rd among 144 countries)Source: World Economic ForumGlobal Competitiveness Index (2012)294142 434849505359 6067717378942030405060708090100ChinaPolandItalyTURKEYBrazilPortugalIndonesiaMexicoIndiaHungaryRussiaSlovakRepublicUkraineRomaniaArgentineMoved up 16 places in a year2nd fastest rising country68
  69. 69. 6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndonesiaIndia(84th among 175 countries)Source: World BankEase of Doing Business (2006)69
  70. 70. 5371 72808790 91100113120126129132152020406080100120140160MexicoTURKEYRomaniaCrotiaItalyUruguayChinaGreeceArgentinaRussiaBrazilIndonesiaIndiaUkraine(71st among 183 countries)Source: World BankEase of Doing Business (2012)70
  71. 71. International Companies Operating in Turkey(1000s)Source: Ministry of Economy5,66,78,811,715,016,119,222,025,329,630,7051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012August71
  72. 72. Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8118.50204060801001201401980-2002 2003-2012 August72
  73. 73. REER AppreciationSource: CBRT(2003=100)55657585951051151251351989-171990-171991-171992-171993-171994-171995-171996-171997-171998-171999-172000-172001-172002-172003-172004-172005-172006-172007-172008-172009-172010-172011-172012-17Linear Trend73
  74. 74. Strong Long-Term Prospects74
  75. 75. 2011Population: 75 mnGDP: $774 bn2050 (projections)Population: 94-97 mnGDP: $3.9 tn-$5.3 tnTowards 2050…Source: Turkstat, HSBC, PricewaterhouseCoopers 75
  76. 76. Ambitious TargetsSource: IMF, PricewaterhouseCoopers1. USA2. China3. India4. Japan5. Germany6. Russia8. UK7. Brazil9. France10. Italy11. Mexico12. South Korea13. Spain14. Canada15. Indonesia16. Turkey17. Iran18. Australia19. Taiwan20. Poland2011 (GDP-PPP) 2050Top 10in the WorldTop 3in Europe6th in Europe16th in the World76
  77. 77. Favourable DemographicsSource: EurostatShareof15-24yearsinTotalPopn(%)16,879111315171921 AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzechRepublicAustriaLiechtensteinSerbiaHungaryNetherlandsFinlandFranceDenmarkUnitedKingdomNorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandFormerYugoslavRepublic…GeorgiaTurkeyMoldovaAzerbaijan77
  78. 78. 71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTATRoom for improvement with further education78
  79. 79. Priorities & Reform Agenda79
  80. 80. Priorities & Reform AgendaEducationTransportation and InfrastructureEnergyDeepening financial marketsEnhancing investment climateLabor market reformsR&D and innovation80
  81. 81. Education81
  82. 82. 11.368.10102030405060702002 2013Source: Ministry of FinanceResources Allocated to EducationBillionTL82
  83. 83. Source: Ministry of DevelopmentSchooling ratio is Improving (Gross Rate)11.296.580.835.845.3107.693.372.51030507090110pre-primary education primary education secondary education higher education2002-2003 2010-201183
  84. 84. Transportation and Infrastructure84
  85. 85. 1,714 KmTotal of Motorways4,387 KmTotal of State andProvincial DualCarriagewaysTotal: 6,101 KmDual CarriagewayNetwork(January 1, 2003)2,236 KmTotal of Motorways19,565 KmTotal of State andProvincial DualCarriagewaysTotal: 21,801 KmDual CarriagewayNetwork(October 4, 2012)Motorway Network: 63,143Motorway Network: 65,35485
  86. 86. Our RailwaysPRE-REPUBLIC RAILWAY NETWORK 4,136 km MAINLINEEARLY YEARS OF THE REPUBLIC (1923-1950) 3,764 km MAINLINE (134 km on annual average)1951-2003 945 km MAINLINE (18 km on annual average)2003 DEN GÜNÜMÜZE KADAR (2010 dahil) 1.076 km ANAHAT (Yılda Ortalama 135 km)UNDER CONSTRUCTION 2,047 km MAINLINE2003-2011 1,076 km MAINLINE (135 km on annual average)İSTANBULEDİRNEESKİŞEHİRPOLATLIANKARAKONYAİZMİRSİVASAFYONKAYSERİBURSA ERZİNCANERZURUMKARSMERSİNADANA GAZİANTEPDİYARBAKIRELAZIĞMALATYAZONGULDAKSAMSUNBANDIRMAVANTATVAN2010 : 11.940 km ( Konvansiyonel + Yüksek Hızlı )AdapazarıSource: Ministry of Transport2010:12,000 km (Conventional+High Speed)86
  87. 87. High Speed Railway ProjectsİSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST lines to be completed until 2015Completed High Speed Train (HST) Lines: ANK-Eskişehir and ANK-KonyaYerköyHST lines being under-construction in 2015AFYONİZMİRMANİSA 624kmBURSABİLECİK124 km235km ERZİNCANSource: Ministry of Transport 87
  88. 88. AIRPORTS AVAILABLE FORCIVIL AVIATION TRAFFIC IN TURKEY20032012Airports serving ScheduledFlight (48)Airports under Construction (6)Airports being Planned(2)The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=26The number ofairports servingscheduledflights=26Airports serving ScheduledFlight (26)88
  89. 89. Energy89
  90. 90. When all construction process is completed, the share of the renewableenergy resources within the total energy capacity will rise to 47%.Energy ResourcesEnergy MWInstalled Energy Capacity until 2011 52,911Renewable Energy Capacity until 2011 19,095Power plants under construction 26,118Renewable Energy Capacity under construction 17,747
  91. 91. Electricity Generation from Renewable Energy33,68448 105 17434,01152,0784,726668 45057,922-200080001800028000380004800058000Hydroelectric Wind Geothermal Other Total2002 20112023 Target: Raising the share of the renewableenergy in the electricity generation by 30%Source: Ministry of Energy and Natural Resources(GW/H)
  92. 92. Source: European Wind Energy Association (EWEA)Wind Energy Capacity2002 2011Rising from # 35 to # 10 in Europe.35.10.92
  93. 93. Energy DemandWorld energy demand is projected to grow by 40 % until 2030.Turkey’s energy demand is projected to grow by 146 % until 2030.Source: Ministry of Energy and Natural ResourcesTurkey ranks second following the China in terms of the World energy demand.93
  94. 94. Investment in Energy SectorWe invested $ 25 billion in energy over the last 9 years.We need to invest $120 billion by 2023.94
  95. 95. Deepening Financial Markets95
  96. 96. Strengthening the legal frameworkImproving physical infrastructureProviding financial educationNew Incentives forIstanbul as a Finance CenterMain Objective: Deepening Financial Markets96
  97. 97. Strengthening the Legal FrameworkEnhancing regulatory and supervisory frameworkAdopting the best global practices & the EU acquisBuilding institutionsNo need to re-invent the wheel97
  98. 98. Revising Capital Markets LawA new law with amarketperspectiveRestructuring ofISE•Regional Leadership•Raising MarketCap/GDP to 80%•1,000 newcompanies98
  99. 99. Improving Physical InfrastructureIstanbul is a 24-7 living city• An exciting place to live & work• Largest city in Europe• History of 8000 years• Work in progress to tackle the trafficPurpose-built financial center• 2.5 million m2 area in Atasehir99
  100. 100. Improving Financial LiteracyState run programs in countrieslike Australia, Japan, USA & UKIt is all about perception• Stock market – not a casino?• Financial education is key to making informed andeffective decision100
  101. 101. Increasing Private Pensions25% State ContributionPenalty for Early Withdrawals101
  102. 102. Incentives for Global Fund ManagersA tax free environment for Global FundsMaking it easier to manage assets in Turkey102
  103. 103. Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate & Personal Income Tax Base, up toTax Relief from Dividends103
  104. 104. Incentives for Business Angels75% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withholding TaxRelief on divestment of stocks104
  105. 105. SukukGlobal issuance: $170 bnSimilar to euro bonds, international holders of Sukukwill not be subject to withholding taxSep-12: First Sukuk issued for $1.5bnOct-12: Sukuk denominated in TL issued for TL1.6bn105
  106. 106. Enhancing Investment Climate106
  107. 107. Public and private sectorrepresentatives107
  108. 108. New Investment Incentive SchemeObjectives:- Reduce regional development gaps- Reduce current account deficit- Promote efficient allocation of resources to high value-added investmentsGeneralIncentivesRegionalIncentivesIncentives forLarge-ScaleProjectsIncentives forStrategicInvestments108
  109. 109. YENİ TEŞVİK SİSTEMİRegional Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s share ofinsurance premium Allocation of Land Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support Customs DutyExemption VAT Exemption Customs DutyExemption VAT Exemption Lower CIT rate Support for theemployer’s shareof insurancepremium Allocation ofLand Interest Support VAT RebateGeneralIn the 6th Region, additional support for The employee’s share of insurance premium Income tax stoppageIncentivesLarge-Scale Strategic109
  110. 110. Supporting Strategic InvestmentsStrategic Investments will be supported regardless of locationCustoms Duty ExemptionVAT ExceptionSupport for the employer’s share of insurance premium for 7 years (10years in the 6th region)90% tax reduction, of which contribution rate to investment is 50%Interest Support (Minimum 50 million TL, on condition that it does notexceed 5% of the fixed investment)Allocation of Investment LocationVAT Retubate for the building construction costs (For the investmentsamounting to 500 Million TL and above)Income Tax Stoppage Support (Only for the investments in the 6th regionfor 10 years)110
  111. 111. Simplifying Tax SystemBuilding a Simple and Effective Tax system• Boosting competitiveness• Widening tax base• Increasing tax predictability• Reducing tax rates on financial transactions &intermediation• Unifying tax burden on similar financial transactions111
  112. 112. New Turkish Commercial CodeTransparencyAccountabilityInstitutionalizationImprovement in investmentand business environmentAdoption of institutionalmanagement principlesOpportunity to perform legalprocesses electronically112
  113. 113. Improving Business ClimateStarting a business is less costly byeliminating notarization feesTax burden is lower after lowering CITand social security contribution ratesIt is easier to pay taxes by allowing forself-assessmentIt is easier to trade across borders byusing electronic data interchange113
  114. 114. Labor Market Reforms114
  115. 115. National Employment Strategy4 Main ObjectivesReducing labor market rigiditiesIncreasing employment of women, youth and the disadvantageousStrengthening the link between education and employmentStrengthening the link between employment and social protection115
  116. 116. Average Weekly Hours Worked on the Main JobSource: OECD50,2303234363840424446485052TurkeyKoreaMexicoGreeceCzechRepublicSlovakRepublicPolandIcelandHungarySloveniaPortugalChileEstoniaSpainFranceAustriaItalyNewZealandFinlandLuxembourgBelgiumSwedenUnitedKingdomAustraliaGermanySwitzerlandIrelandNorwayDenmarkNetherlandsHighest among the OECD countries!116
  117. 117. Share of Part-time Employment (%, 2011)Source: OECD11,30510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingdomGermanyNewZelandJapanNorwayCanadaDenmarkAustriaBelgiumMexicoChileIcelandItalyLuxembourgSweedenIsraelFranceKoreaSpainFinlandUnitedStatesPortugalTurkeyGreeceEstoniaSloveniaPolandHungarySlovakRepublicCzechRepublıc8th lowest among the OECD countries.117
  118. 118. R&D and Innovation118
  119. 119. Brand Turkey, moving up the LaddersSource: Brand - FinanceWith a brand value of$487bn, Turkey ranks inthe top 20.119
  120. 120. Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain120
  121. 121. Why is R&D so significant for us?The share of high and medium-hightechnology sectors in production and inexport is lowBoosting R&DSource: Ministry of Development27.672.435.664.401020304050607080High and Medium-High Low and Medium-LowProduction Export121
  122. 122. •0.842010•0.532002Source: The Scientific and Technological Council of TurkeyR&D Spending122
  123. 123. Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI123
  124. 124. Trademark Applications• 117,7232011• 36,4292002Source: Turkish Patent Instıtute124
  125. 125. THANK YOU…125

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