Turkey's role in the ECA Region

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Turkey's role in the ECA Region

  1. 1. Turkey’s Role in the ECA RegionKnowledge-Sharing, Investments, and Foreign AssistanceMehmet ŞimsekMinister of FinanceOctober 18, 2012
  2. 2. OutlineECA RegionGrowing LinksTurkeyShort-Term Outlookand ChallengesLong-Term Outlookand Challenges2
  3. 3. Europe and Central Asia (ECA)3
  4. 4. Europe and Central Asia (ECA)• 30 Countries• 481 million people• $4,725 bn GDP• $3,286 bn foreign tradeSource: IMF, World Bank 4
  5. 5. ECA: Economic GrowthGrowth(%)Source: IMF7.24.3-5.24.6 4.82,9-6-4-2024682007 2008 2009 2010 2011 20125
  6. 6. ECA: GDP (bn $)1.2381.5291.9522.3972.8623.6614.4933.5884.0764.725 4.76501.0002.0003.0004.0005.0006.0002002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: IMFMost countries in ECA have restored theoutput levels6
  7. 7. ECA: Current Account Balance (bn $)Source: IMF4.4-5.6 -2.819.3-3.1-81.2-65.8-13.0-17.0-7.020.6-100-80-60-40-20020402002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20127
  8. 8. Growing Links in the Region8
  9. 9. Europe and Central Asia (GDP, 2011)Iran$475 bnAlgeria$183 bnYemen$58Syria$183 bnIraq$109 bnECA: $4,725 bnTurkey: $774 bn, 16.4% of ECA9Source: IMF
  10. 10. Europe and Central Asia (ECA)201110Source: IMFTotal Imports of ECA: $1,600 bnOf which from Turkey: $17.1 bnTotal Exports of ECA: $1,686 bnOf which to Turkey: $32.8 bn1.1 % of ECA imports1.9 % of ECA exports
  11. 11. ECA: Investments11Source: UNCTAD2002-11 ECA FDI Flows:Inflows: $1,108 bnOutflows: $471 bn
  12. 12. ECA & Turkey: Regional InvestmentsTurkey12Source: CBRT, 2002-102002-11 FDI from ECA to Turkey: $5.3 bn2002-11 FDI from Turkey to ECA: $4.8 bnGrowing, and there is more upside
  13. 13. Business Environment: Global Competitiveness (2012)Source: World Economic Forum1271009589888782818078777372717067626056555146454341393310 20 40 60 80 100 120 140Kyrgyz RepublicTajikistanSerbiaAlbaniaBosnia and HerzegovinaMoldovaArmeniaCroatiaMacedonia, FYRRomaniaGeorgiaUkraineMontenegroSlovak RepublicREGİONAL AVERAGERussian FederationBulgariaHungarySloveniaLatviaKazakhstanAzerbaijanLithuaniaTURKEYPolandCzech RepublicEstoniaSwitzerland13
  14. 14. Business Environment: Corruption Perception (2011)Source: Transperancy Intenational1771771641521521431431431291201121129591868676776966666664616157545041352910 20 40 60 80 100 120 140 160 180UzbekistanTürkmenistanKyrgyz RepublicUkraineTajikistanRussian FederationBelarusAzerbaijanArmeniaKazakhstanKosovaMoldovaAlbaniaBosnia and HerzegovinaSerbiaBulgariaREGİONAL AVERAGERomaniaMacedonia, FYRCroatiaMontenegroSlovak RepublicGeorgiaTURKEYLatviaCzech RepublicHungaryLithuaniaPolandSloveniaEstoniaNew Zealand14
  15. 15. 16615214712512011792828180777271706966646259565551484737272422211610 20 40 60 80 100 120 140 160 180UzbekistanUkraineTajikistanBosnia and HerzegovinaRussian FederationKosovaSerbiaAlbaniaMoldovaCroatiaREGİONAL AVERAGERomaniaTURKEYKyrgyz RepublicBelarusAzerbaijanCzech RepublicPolandBulgariaMontenegroArmeniaHungarySlovak RepublicKazakhstanSloveniaLithuaniaEstoniaMacedonia, FYRLatviaGeorgiaSingaporeSource: World BankBusiness Environment: Doing Business (2012)15
  16. 16. Turkey: Short-Term Outlook & Challenges16Managing a Soft Landing
  17. 17. Very Strong Post-Crisis Recovery, butGrowth is ModeratingSource: TURKSTATRealGDP(s.a,2007Q4=100)1796,1101,688,2114,1808590951001051101152007-Q1Q2Q3Q42008-Q1Q2Q3Q42009-Q1Q2Q3Q42010-Q1Q2Q3Q42011-Q1Q2Q3Q42012-Q1Q2
  18. 18. Rebalancing is way underwayContributiontoGrowth,%Source: TURKSTAT1817,313,59,52,21,0-2,0-5,6-5,10,53,24,65,7-6-14914Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12Domestic DemandNet Export
  19. 19. PMI & Capacity UtilizationPurchasingManagersIndexSource: CBT, HSBC19CapacityUtilizationRate55606570758085303540455055602007-13579112008-13579112009-13579112010-13579112011-13579112012-13579Purchasing Managers IndexCapacity Utilization Rate
  20. 20. Employment is Supportive of GrowthSource: TURKSTATAdditionalEmploymentsinceEnd-2007(MnPeople,s.a.)202021222324252008-12009-12010-12011-12012-1
  21. 21. Record Level of Job Creation21AnnualAverageEmploymentGrowth(%,2007-11)Source: WEO, TURKSTAT3,9-4-3-2-101234IrelandSpainGreeceIcelandDenmarkPortugalEstoniaUSASloveniaJapanItalyFinlandCyprusFranceUnitedKingdomSlovakRepublıcCzechRepublicNetharlandNewZealandHongKongAustriaCanadaGermanyKoreaBelgiumTaiwanNorwaySwitzerlandAustraliaLuxembourgMaltaIsraelSingaporeTurkey
  22. 22. 801001201401601802002202007-122008-122009-122010-122011-12Kaynak: TÜİK, Eurostat, BLSTURKEYUnemploymentRate,s.a.(December2007=100)EU-27USAUnemployment at Decade Low,22
  23. 23. Current Account Deficit23
  24. 24. Current Account Deficit is Large, but(12MonthRolling,USDbn)Source: Central Bank of TurkeyNarrowing24-80-60-40-20020402002-147102003-147102004-147102005-147102006-147102007-147102008-147102009-147102010-147102011-147102012-147Current AccountCurrent Account without Energy ImportCurrent Account + Net FDI + Net Errors and Omissions
  25. 25. Current Account Deficit: Next Three Years25CurrentAccountDeficit/GDP(%)Source: MTP7.37.16.96.566,577,52012 2013 2014 2015
  26. 26. Quality of Financing is Improving26Source: CBRT(12MonthRolling,USDbn)-100102030405060708090 2007-13579112008-13579112009-13579112010-13579112011-13579112012-1357FDI Inflows and Long-Term Portfolio and Short-Term Current Account Deficit
  27. 27. Europe56.6%Other43.4%Exports 200227Diversifying away from Europe?Europe38.2%Other61.8%Exports Jan-Aug 2012Source: TURKSTAT
  28. 28. 28Source: TURKSTATExports to Asia (% of Total)14,535,912182430362002 2012Jan-Aug
  29. 29. Source: TURKSTATMENA: life saver?29ExportstoMENA(%ofTotal)12,132,91015202530352002 2012Jan-Aug
  30. 30. Exports by Destination(2007=100)Source: TURKSTAT30601201802403003602007-13579112008-13579112009-13579112010-13579112011-13579112012-1357AB-27 MENAEU 27
  31. 31. 832051015202530352000 2011Source: TURKSTATExport Diversification - INumber of Products over $1 billion31
  32. 32. 530051015202530352000 2011Source: TURKSTATNumber of Export Markets over $1 billion32Export Diversification -II
  33. 33. Share of Largest Five in Total Exports (%)Source: TURKSTAT332002 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 33.4
  34. 34. Current Account Deficitas a Structural Problem34
  35. 35. Massive Savings-Investment Gap35(%)10121416182022242002 2003 2004 2005 2006 2007 2008 2009 2010 2011Gap Investment/GDP Savings/GDP
  36. 36. Falling Private Savings36-505101520252002 2003 2004 2005 2006 2007 2008 2009 2010 2011Public Savings/GDP Private Savings/GDP(%)
  37. 37. Source: Ministry of Development, Bloomberg*2012 May 12 Month RollingEnergy Import Bill(BrentType,Dollar/Barrel)EnergyImports(BillionDollars)379,248,354,158,82397111 111,80204060801001200102030405060702002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012AugustEnergy Import Oil Prices
  38. 38. Turkey: Long-Term Outlook & Challenges38Strong Growth Potential
  39. 39. GDP more than Tripled in $ TermsSource: TURKSTAT200220112002 GDP,$ 230 bn2011 GDP,$ 774 bn39
  40. 40. GDP Per CapitaSource: TURKSTAT200220112002Income perCapita$ 3,4922011 Incomeper Capita$ 10,46940
  41. 41. Source: TURKSTAT4,53,05,201234561924-2002 1993-2002 2003-2011Average Growth RatesA Rapidly Growing Economy41
  42. 42. Turkey: Growth ProjectionsSource: MTPRealGDPGrowth(%)423,24,05,0 5,0234562012 2013 2014 2015
  43. 43. Putting Our House in OrderCombattingcorruptionCreating a levelplaying fieldImprovinginternationalcompetitiveness43
  44. 44. Corruption Perceptions Index (2002)(65th among 102 countries)3144 4558 59657073 74962030405060708090100 ItalyGreeceBrazilMexicoChinaTURKEYArgentinaIndiaRussiaIndonesiaSource: Transperancy Intenational44
  45. 45. Corruption Perceptions Index (2011)6166 66 697375 758095100 100 100143152406080100120140160TURKEYCrotiaSlovakRepublicItalyBrazilChinaRomaniaGreeceIndiaArgentinaIndonesiaMexicoRussiaUkraine(61st among 183 countries)Source: Transperancy Intenational45
  46. 46. 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)46
  47. 47. 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)47294142 434849505359 6067717378942030405060708090100ChinaPolandItalyTURKEYBrazilPortugalIndonesiaMexicoIndiaHungaryRussiaSlovakRepublicUkraineRomaniaArgentineMoved up 16 places in a year2nd fastest rising country
  48. 48. 6269 707184939710811112213113860708090100110120130140MexicoItalyUruguayRomaniaTURKEYArgentinaRussiaChinaGreeceBrazilIndonesiaIndia(84th among 175 countries)Source: World BankEase of Doing Business (2006)48
  49. 49. 5371 72808790 91100113120126129132152020406080100120140160MexicoTURKEYRomaniaCrotiaItalyUruguayChinaGreeceArgentinaRussiaBrazilIndonesiaIndiaUkraine(71st among 183 countries)Source: World BankEase of Doing Business (2012)49
  50. 50. International Companies Operating in Turkey(1000s)Source: Ministry of Economy505,66,78,811,715,016,119,222,025,329,630,7051015202530352002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012August
  51. 51. Foreign Direct Investment InflowsSource: CBRTBilliondollar14.8118.50204060801001201401980-2002 2003-2012 August51
  52. 52. Strong Long-Term Prospects52
  53. 53. 2011Population: 75 mnGDP: $774 bn2050 (projections)Population: 94-97 mnGDP: $3.9 tn-$5.3 tnTowards 2050…53Source: Turkstat, HSBC, PricewaterhouseCoopers
  54. 54. 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 Europe546th in Europe16th in the World
  55. 55. Favourable Demographics55Source: EurostatShareof15-24yearsinTotalPopn(%)16,879111315171921 AndorraItalyGreeceSpainPortugalGermanySloveniaIrelandBulgariaLuxembourgSwitzerlandCroatiaCzechRepublicAustriaLiechtensteinSerbiaHungaryNetherlandsFinlandFranceDenmarkUnitedKingdomNorwaySwedenEstoniaUkraineMaltaPolandLatviaSlovakiaMontenegroLithuaniaIcelandFormerYugoslavRepublic…GeorgiaTurkeyMoldovaAzerbaijan
  56. 56. 71,930,383,468,82030405060708090Male FemaleOverall Higher EducationLabor Participation Rate2012July(%)Source: TURKSTAT56Room for improvement with further education
  57. 57. 57Priorities & Reform Agenda
  58. 58. Priorities & Reform Agenda58EducationTransportation and InfrastructureDeepening financial marketsEnhancing investment climateLabor market reformsR&D and innovation
  59. 59. Education59
  60. 60. 11.368.10102030405060702002 2013Source: Ministry of FinanceResources Allocated to EducationBillionTL60
  61. 61. 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 2010-201161
  62. 62. Transportation and Infrastructure62
  63. 63. 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)63Motorway Network: 63,143Motorway Network: 65,354
  64. 64. 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 MAINLINE2003-11 1,076 km MAINLINE (135 km on annual average)İSTANBULEDİRNEESKİŞEHİRPOLATLIANKARAKONYAİZMİRSİVASAFYONKAYSERİBURSA ERZİNCANERZURUMKARSMERSİNADANA GAZİANTEPDİYARBAKIRELAZIĞMALATYAZONGULDAKSAMSUNBANDIRMAVANTATVAN2010 : 11.940 km ( Konvansiyonel + Yüksek Hızlı )Adapazarı64Source: Ministry of Transport2010:12,000 km (Conventional+High Speed)
  65. 65. High Speed Railway Projects65İSTANBULESKİŞEHİR POLATLIANKARAKONYASİVAS212km533km405kmYOZGATHST lines to be completed until 2015Completed High Speed Train (HST) Lines: Ankara-Eskişehir and Ankara-KonyaYerköyHST lines being under-construction in 2015AFYONİZMİRMANİSA 624kmBURSABİLECİK124 km235km ERZİNCANSource: Ministry of Transport
  66. 66. AIRPORTS AVAILABLE FORCIVIL AVIATION TRAFFIC IN TURKEY6620032012Airports serving ScheduledFlight (48)Airports under Construction (6)Airport Projects (2)The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=48The number ofairports servingscheduledflights=26The number ofairports servingscheduledflights=26Airports serving ScheduledFlight (26)
  67. 67. Deepening Financial Markets67
  68. 68. Strengthening the legal frameworkImproving physical infrastructureProviding financial educationNew Incentives forIstanbul as a Finance Center68Main Objective: Deepening Financial Markets
  69. 69. Strengthening the Legal FrameworkEnhancing regulatory and supervisory frameworkAdopting the best global practices & the EU acquisBuilding institutions69No need to re-invent the wheel
  70. 70. Revising Capital Markets Law70A new law with amarketperspectiveRestructuring ofISE•Regional Leadership•Raising MarketCap/GDP to 80%•1,000 newcompanies
  71. 71. 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 Atasehir71
  72. 72. Improving Financial LiteracyState run programs in countrieslike Australia, Japan, USA & UK72It is all about perception• Stock market – not a casino?• Financial education is key to making informed andeffective decision
  73. 73. Increasing Private Pensions25% State ContributionPenalty for Early Withdrawals73
  74. 74. Incentives for Global Fund ManagersA tax free environment for Global Funds74Making it easier to manage assets in Turkey
  75. 75. Incentives for Venture Capital• 10% of VC Revenues• 20% of VC CapitalAllowing Venture Capital to be deducted fromCorporate & Personal Income Tax Base, up to75Tax Relief from Dividends
  76. 76. Incentives for Business Angels7675% income tax relief onAngel Capital100% tax relief forR&D and InnovationIncome & Withholding TaxRelief on divestment of stocks
  77. 77. 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 TL1.6bn77
  78. 78. Enhancing Investment Climate78
  79. 79. Investment Advisory Council & YOIKPublic and private sectorrepresentatives79
  80. 80. New Investment Incentive SchemeObjectives:- Reduce regional development gaps- Reduce current account deficit- Promote efficient allocation of resources to high value-added investmentsGeneralIncentivesRegionalIncentivesIncentives forLarge-ScaleProjectsIncentives forStrategicInvestments80
  81. 81. 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 Strategic81
  82. 82. 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)82
  83. 83. 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 transactions83
  84. 84. New Turkish Commercial CodeTransparencyAccountabilityInstitutionalizationImprovement in investmentand business environmentAdoption of institutionalmanagement principlesOpportunity to perform legalprocesses electronically84
  85. 85. 85Improving 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 interchange
  86. 86. Labor Market Reforms86
  87. 87. 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 protection87
  88. 88. Average Weekly Hours Worked on the Main JobSource: OECD8850,2303234363840424446485052TurkeyKoreaMexicoGreeceCzechRepublicSlovakRepublicPolandIcelandHungarySloveniaPortugalChileEstoniaSpainFranceAustriaItalyNewZealandFinlandLuxembourgBelgiumSwedenUnitedKingdomAustraliaGermanySwitzerlandIrelandNorwayDenmarkNetherlandsHighest among the OECD countries!
  89. 89. Share of Part-time Employment (%, 2011)Source: OECD8911,30510152025303540NetharlandsSwitzerlandIrelandAustraliaUnitedKingdomGermanyNewZelandJapanNorwayCanadaDenmarkAustriaBelgiumMexicoChileIcelandItalyLuxembourgSweedenIsraelFranceKoreaSpainFinlandUnitedStatesPortugalTurkeyGreeceEstoniaSloveniaPolandHungarySlovakRepublicCzechRepublıc8th lowest among the OECD countries.
  90. 90. Severence Pay Burden*Source: Doing Business* For a worker with 20 years of tenure, salary in weeks9086,7050100150200250ZimbabweSierraLeoneGhanaZambiaSriLankaLaoPDRMozambiqueEquatorialGuineaEgypt,ArabRep.SudanEcuadorIndonesiaGuatemalaBangladeshTurkeySpainGermanyGreeceBrazilFranceHungaryCanadaCzechRepublicUnitedKingdomIrelandRussiaRomaniaPolandUSA15th highest among 181 countries.
  91. 91. R&D and Innovation91
  92. 92. Brand Turkey, moving up the LaddersSource: Brand - Finance92With a brand value of$487bn, Turkey ranks inthe top 20.
  93. 93. Boosting R&D InnovationCreatingBrand NamesMoving up the Value Chain93
  94. 94. 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 Export94
  95. 95. •0.842010•0.532002Source: The Scientific and Technological Council of Turkey95R&D Spending
  96. 96. Industrial Design Applications36,578 applications in 2011Up by 80 % since 2002Ranking 3rd in EuropeSource: TPI96
  97. 97. Trademark Applications• 117,7232011• 36,4292002Source: Turkish Patent Instıtute97
  98. 98. THANK YOU…98

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