Exporting to Turkey

A bridge between Europe, Asia, and the Middle East, Turkey’s geographic location and booming economy should be inspiring Australian exporters to investigate business opportunities. Nukte Ogun reports.

Export eyes are now on Turkey. As the country enters a modernisation process to boost its economic prosperity and impress the European Union (EU) during accession talks, trade opportunities are opening up for Australia.

Strikingly, Turkey’s annual growth rate is 7.5 percent, far ahead of the EU’s major economies, and even those of fast-growing China and Russia. As a result, Turkey’s 73 million-strong population has seen increased purchasing power.

“I would say that Turkey’s economy is in its best shape in 40 years. We have experienced strong levels of economic growth, low inflation, and reasonable fiscal discipline in the past few years. The Government is reform-minded and is committed to raising productivity levels and undertaking essential privatisation programs,” says Tevfik Aksoy, Deutsche Bank’s chief economist for Turkey.

Yet, while Turkey has become a magnet for European exporters, Australians are still not being drawn in. According to the Australian Bureau of Statistics, less than 300 Australian businesses export to Turkey, making it a medium range market. Turkey imports 60 percent of its energy requirements, including a majority of coal from Australia. Non-monetary gold, aluminium, and raw hides and skins, are also imported from Australia in large numbers.

Our economic relationship with Turkey was strengthened during Prime Minister Recep Tayyip Erdogan’s 2005 visit, the first such visit by a Turkish Prime Minister. An Invest Promotion and Protection Agreement was signed, a bilateral agreement protecting investments and giving both countries most favoured nation status.

Turkey is a democratic and secular nation, but the governing AK Party’s (Justice and Development Party) religious roots have caused political instability in the past. However, AK Party defines itself as liberal conservative, and its investments in economic modernisation have brought durability to the Turkish market.

The political situation appears to have stabilised, according to Ben Ford, senior economist at Export Finance and Insurance Corporation, since the AK Party was re-elected with an astounding majority last July. “That said, there will probably continue to be periodic skirmishes between secularists and religiously-inclined conservatives, and the army remains watchful for signs of a retreat from Turkey’s secular foundations.

“There is little doubt about the Government’s commitment to create a western-style free market economy. It is moving the policy climate towards EU convergence and, even though membership doesn’t seem imminent, this should have many positive spill-overs,” says Ford. “The Government also appears to have renewed its emphasis on privatisation and is keen to attract further FDI by bolstering the investment climate.”

Political stability is necessary for Turkey’s emerging market, which is dependant on external financing, and economic disaster could occur if financial market support is lost. But Turkey has shown unprecedented resilience during the past six years, because of improvements to the economy’s fundamentals, says Ford.

Furthermore, investors also trust the Government’s economic policies. According to IMF, “The authority’s commitment to maintaining prudent monetary and fiscal policies and renewing impetus to structural reform in the coming months deserves the support of the international community.”

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Markets & Industries

Many Australians with export plans in the Middle East target Dubai, not considering the hardships they’ll face jumping into an overly competitive market. “Often their initial opportunities are in the older markets of the Middle East, such as Turkey,” says Geoffrey Rea, Istanbul-based senior trade commissioner for Austrade. “The biggest positive we’ve got going for us in Turkey at the moment is the strong ethnic connection in Australia.” Currently there are more than 50,000 Turks living in Australia, and most still have strong links with Turkey.

Exporters keen to benefit from this connection are encouraged to invest in key growth industries, including infrastructure, ICT products, agribusiness, environmental technologies, and health and wellbeing, especially cosmetics. There are also opportunities to help develop Turkey’s mining sector, says Rea.

Interestingly, another key sector is education services. As a result of Turkey’s rapid population growth, around 50 percent of the population is under the age of 25. While the ‘Young Turk’ factor is pushing the need for enhanced education, it also affects Turkey’s EU accession. Europe needs young blood to fund its ageing population’s pension programs. Turkey in return has scores of young people looking for employment opportunities.

But the news for some of our most successful exports is less promising. Turkey is one of the few countries self-sufficient in producing agricultural products. “We haven’t seen much success in the food side and I don’t think we will,” says Rea. However, there was a recent shipment of 4,500 live dairy cows from Australia, to enhance breeding stock in Turkey. “We hadn’t exported live animals to Turkey in a long, long time, so that was an interesting development,” says Rea.

When it comes to purchases, quality is a top concern for Turkish shoppers. “It’s a very brand conscious market,” says Rea. “People would be shocked by the level of retail development.” But Turkey does have a skewed distribution of wealth, and those in the lower income bracket usually choose to purchase cheaper bulk textiles produced by Turkey’s strong textile industry. “Not everyone is brand conscious, but certainly there is growing affluence there.”

To make the most of this growing affluence, having someone on the ground who speaks the language and can promote the product locally is recommended. “Australia is a long way away, and in the first stages we’re not as well-known as suppliers from Europe,” says Rea. “I don’t think that means you necessarily have to set up your own office or your own presence, it just depends what your product is.”

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Culture & Etiquette

Successful trading in Turkey relies on building personal relationships. Turks begin their meetings slowly, first drinking tea and exchanging pleasantries. Using the evenings to entertain potential business partners can greatly enhance relationships, and while the majority of the population is Muslim, liquor is widely available. Toasting before drinks is a simple matter, and generally ‘şerefe’ (cheers) will suffice. Hospitality is deeply embedded in the culture, and letting a guest pay the bill is not acceptable. The bill is never shown, nor is the amount discussed with guests. And finances will only be addressed at the end of a business meeting–Turks are known for their subtle negotiation skills.

Shaking hands is common when greeting associates, as is a kiss on each cheek, though the latter is not expected of foreigners. While the dress code is quite liberal in major cities it is more formal than Australia’s, and conservative outfits are recommended in rural areas.

Turkish business people value punctuality, so leaving early for meetings is advisable, especially in winter. Flying is the easiest form of transport between cities, but Ulusoy and Varan coach services are a comfortable alternative. For inner city travel there are buses, minibuses, and ferries. Alternatively, taxis are readily available and cheap.

Importance is also placed on first impressions, and going into a meeting without an idea of business and cultural norms is a bad step. “You need to be very prepared,” says Rea, who explains that while Turkey is a market with great opportunity, exporters rarely come organise
d.

Australian Turkish Business and Industry, and Sydney Businessmen Association are bi-lateral Turkish-Australian associations that provide support and information about the Turkish market. “Even if you don’t have a Turkish background or a Turkish connection, they could be very good groups for you to network with and to make connections in Australia before you even come to Turkey,” says Rea.

Turkey has been strongly committed to free markets for decades, and while accession to the EU may take years the modernisation process is creating countless opportunities for Australian exporters. “There’s great potential in the Turkish market. Potential is the key word,” repeats Rea. “In more recent years Turkey has been looking very stable and very attractive.”

 

FACT FILE

Population: 73 million (2007).

Official language: Turkish.

Main Australian exports to Turkey (2005-06): $386 million (key sectors: coal, non-monetary gold, aluminium, raw hides and skins.

Key growth sectors: educational services, mining, infrastructure, ICT products, agribusiness, environmental technologies, and health and wellbeing.

* Sources: DFAT and Austrade.

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