Turkish - U.S. Trade &
Investment Alliance

Turkey has deep-rooted ties of friendship and a long-standing partnership with the United States. For years, this alliance has been based on security issues as Turkey was a cornerstone of the West in thwarting communism, and most recently was the first nation to side with the U.S. in the Gulf War. Today, the relationship is evolving into more of an economic alliance - witness the U.S. Department of Commerce's recent recognition of Turkey as one of the 10 "Big Emerging Markets" in the world.

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Quick Facts

Quick Facts

U.S. Exports to Turkey : Over $3.4 billion in 1993 U.S. Imports From Turkey : Over $1.1 billion in 1993 Turkish World Imports : $22 billion - expected to be $60 billion by the year 2000 U.S. Authorized Direct Investment: $2,694.14 million between 1980-November 1998 Turkish Economy : 5% average growth since 1981 Market Potential : "Big Emerging Market" status -- Department of Commerce

Business Opportunities:Build-Operate-Transfer &Privatization Projects

 

 

Table of Contents

• Turkish U.S. Economic Relations
• Growth of U.S. Exports To Turkey
• U.S. Companies Operating in Turkey
• Leading 1994 U.S. Exports to Turkey
• Leading 1994 Turkish Exports to the U.S.
• U.S. Direct Investment in Turkey
• "Big Emerging Markets"
• "Big Emerging Sectors"
• Business Development Service for Turkey
• Major Business Opportunities


 

Turkish U.S. Economic Relations

In the last decade, the Turkish economy underwent drastic structural changes. It was transformed from a highly subsidized, inward-looking economy based on import substitution into an outward-looking, liberal economy driven by market forces.

Turkish-U.S. bilateral trade has shown an unprecedented increase in the last decade. Compared with 1980, by 1993 Turkish exports had increased six-fold, amounting to $1.2 billion, while imports more than quadrupled to $3.4 billion.

Although there has been a decline in the last year, Turkey suffers a chronic trade deficit with the U.S. Between 1980 and 1993, the accumulated trade deficit was more than $11 billion.

Between 1980-November 1998, foreign investments flowing to Turkey have been reached to $23,546.67 million. $2,694.14 million out of the total is the FDI of the American firms.

In 1998 (as of November), total investment permits are $1,342 million, of which $273.18 million have been issued to the American companies. This figure represents 20.3% of the total foreign investment permits.

In the period mentioned above, the number of foreign firms permitted have been reached to 1071, of which 80 are American firms.

The breakdown of the investment permits, amounted to $273.18, which are issued to American firms is as follows:

New investments : $19.75 million

Renewed investments : $69.20 million

Capital increase : $52.18 million

Portfolio investments: $132.04 million

Turkey is a lucrative market for U.S. businesses, in terms of both trade and foreign investments

U.S. firms, along with their Turkish partners, are looking beyond the traditional Middle Eastern and North African markets, aiming to seize the opportunity to reach markets in the former Soviet Union and Eastern Europe.

Turkey initiated the Black Sea Economic Cooperation Zone (BSECZ) as a new and elaborate model of multinational economic cooperation. The BSECZ created a powerful regional market of 400 million people from countries bordering or near the Black Sea. This region, rich in untapped natural resources and vital industries, is ready for economic and commercial growth

The U.S.-Turkish Bilateral Investment Treaty went into effect in April 1990. A double-taxation agreement, initialed in 1986, has been signed.

The US-Turkish Bilateral Tax Treaty has been ratified by the Council of Ministers of Republic of Turkey on December 17, 1997 and publiched in the Official Gazette dated December 31, 1997.

The U.S. Commerce Department designated Turkey as one of the ten Big Emerging Markets, forecasting great potential commercial opportunities.

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Growth of U.S. Exports to Turkey

 

• U.S. exports to Turkey totaled a record $3.4 billion in 1993, rising from $540 million in 1980.
• The U.S. is Turkey's second largest trade partner.
• The U.S. Department of Commerce expects Turkish imports to grow an average of 15% per year through the year 2000, putting Turkey's turn-of-the-century imports at about $60 billion -- approximately twice today's level.
• Turkey's import market is over $22 billion annually and is growing steadily.
• The U.S. Department of Commerce has designated Turkey as one of the 10 "Big Emerging Markets," forecasting great potential for U.S. commercial opportunities.
• The growth of U.S. exports to Turkey is expected to increase for 1995.

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U.S. Companies Operating in Turkey

         Abbott Laboratories                American Airlines
         American Express                   American Home
         American Life                      AMOCO
         AMWAY Corporation                  ARCO
         Arthur Anderson                    AT&T
         Bank of New York                   Baskin Robbins
         Bausch & Lomb                      Brown & Williamson
         Cargill                            Chase Manhattan Bank
         Chemical Bank                      Chevron
         Chiquita Brands International      Cigna                         
         Citibank                           Coca-Cola
         Colgate Palmolive                  Comsat
         Conrad Hotels                      Continental Dairy Queen 
         Crown Cork & Seal                  Deloitte Touche
         Delta Airlines                     DHL Airways
         Digital Equipment                  Dow Chemical
         Du Pont                            Education Services International
         Ernst & Young                      Eveready Battery Company
         Ferro Corporation                  Futurekids, Inc.
         General Electric                   General Motors
         Gillette Company                   Golden West
         Goodyear International             Halliburton Geophysical Services 
         Harvard Educational Services       Hewlett Packard
         Hilton Hotels                      Holiday Inn
         Honeywell                          IBM
         J. Walter Thompson                 Johnson & Johnson
         Johnson Wax                        Kentucky Fried Chicken
         Kodak                              Kwik-Kopy Corporation
         Levi Strauss                       Litton
         Lockheed Martin                    Mail Boxes Etc.
         Marway Steel Company               McCann Advertising
         McDonald's Corp.                   Merck
         Merrill Lynch                      Metallurg, Inc.
         McCormic Co.                       Microsoft Corp.
         3M                                 Mobile
         Monsanto Corp.                     Montgomery Watson Corp.
         NCR Corporation                    National Lead Industries
         Northern                           Oakite Products, Inc.
         Oracle                             Otis Elevator Company
         Packard Electric                   PepsiCo
         Parsons & Brinckerhoff             Pizza Hut
         Pfizer                             Phillip Morris
         Pillsbury                          Price Waterhouse
         Proctor & Gamble                   Ralston Purina
         Ramada Inns, Inc.                  Raychem Corp.
         R.J. Reynolds                      Rockwell International
         ServiceMaster                      Sheraton
         Singer Sewing Machine Co.          Texas Instruments 
         Time/Fortune Magazine              Union Carbide
         United Airlines                    United Parcel Service
         Warner Brothers                    Wendy's International
         Westinghouse                       White & Case
         Xerox

 

Leading 1994 U.S. Exports to Turkey

• Aircraft & Equipment : Over $758 million
• Defense Products : Over $128 million
• Engines & Motors : Over $180 million
• Ferrous Waste & Scrap : Over $160 million
• Telecommunications Equipment : Over $275 million
• Tobacco (unmanufactured) : Over $75 million
 

 

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Leading 1994 Turkish Exports to the U.S.

• Articles of Apparel and Clothing Over $537 million
• Iron and Steel Over $148 million
• Textile Yarn, Fabrics Over $182 million
• Tobacco Over $208 million
• Vegetables and Fruit Over $67 million
• Miscellaneous Manufactured Articles Over $46 million

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U.S. Direct Investment in Turkey

Turkey and the U.S. implemented a bilateral investment treaty in May 1990 to facilitate mutual investments. This treaty guarantees that Turkish investors in the U.S. and American investors in Turkey receive reciprocal treatment.

• Over $23 billion total foreign investment flowed to Turkey between 1980-Nov.,1998
• In 1998 (as of November), total investment permits are $1,342 million, of which $273.18 million have been issued to the American companies.. This figure represents 20.3% of the total foreign investment permits.In the period mentioned above, the number of foreign firms permitted have been reached to 1071, of which 80 are American firms.
• No discrimination against foreign investors at any stage of investment.
• Almost all areas which are open to the Turkish private sector are open to U.S. participation and investment.
• Turkey grants U.S. businesses the same rights, incentives, exemptions and privileges that Turkish businesses receive.
• U.S. firms can participate in government-financed and/or subsidized research and development programs.
• Investment incentives include subsidized credit facilities and exemptions on corporate and value-added tax, customs fees and duties.

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Major Business Opportunities

Business prospects for U.S. firms selling to Turkey remain very promising. Turkey's current economic climate has spurred action on two relatively new opportunities for U.S. companies: privatization and Build-Operate-Transfer projects (BOT's).

Build-Operate-Transfer (BOT's)

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"Big Emerging Markets"

Over the next two decades, the markets that hold the greatest potential for dramatic increases in U.S. exports are not the U.S.'s traditional trading partners in Europe and Japan. The greatest commercial opportunities for the future will be found in the 10 "Big Emerging Markets" (BEMs). Turkey has been identified by the Department of Commerce as one of these BEMs.

• Turkey is the most significant market in Eurasia, with a population of over 60 million and a GDP of $220 billion purchasing power equivalent.
• U.S. exports to Turkey have increased significantly, rising from $540 million in 1980 to $3.4 billion in 1993.
• Turkey is one of Europe's largest markets for major infrastructure development. Build-Operate-Transfer projects (BOTs) and other revenue-sharing projects offer good opportunities for U.S. firms. These methods are being used to finance major infrastructure projects where revenues can be used to repay investment operating costs.
• Turkey is strategically located, serving as a bridge between Europe, Asia and the Near East, with Russia and the Newly Independent States to the north, Middle Eastern countries to the south and east, and Balkan states to the west.
• Healthcare technology represents a "Big Emerging Sector," as Turkey continues to develop a private health insurance system. In 1993, Turkey imported $50 million worth of medical equipment from the United States.

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"Big Emerging Sectors"

Several industry clusters have been identified by the Department of Commerce as "Big Emerging Sectors": information technology, environmental technology, transportation, energy technology, health care technology and financial services. Opportunities for American companies in these sectors are significant -- and expanding rapidly:

• Electrical Power Systems - exceeding $2.1 billion
• Telecommunications Equipment - exceeding $650 million
• Telecommunications Services - exceeding $3.3 billion
• Industrial Chemicals - exceeding $8.8 billion
• Pollution Control Equipment - exceeding $240 million
• Computers & Peripherals - exceeding $630 million
• Medical Equipment - exceeding $310 million
• Major Infrastructure Projects - exceeding $15 billion

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Turkey: Strategic Ally Important to the United States

"Nothing can be more important to the political stability of all of Europe than having a strong, democratic Turkish government anchoring that dangerous region between the Balkans on one side and, on the other, the Middle East and the Turkic peoples of the former Soviet empire."
--George Melloan, The Wall Street Journal, April 10, 1995

Turkey's strategic importance to the United States cannot be overlooked or jeopardized. Turkey has consistently supported U.S. foreign policy objectives throughout the world, and continues to do so.

• Played a key role in Operation Desert Shield and Operation Desert Storm. Turkey enforced the economic embargo against Iraq and positioned troops on its southern borders, keeping in check seven Iraqi divisions.
• Hosts Operation Provide Comfort, the multinational humanitarian effort, by allowing planes to use Turkish air bases to protect the Iraqi Kurds and others in northern Iraq.
• Supports Partnership for Peace, NATO's efforts to integrate former Soviet-bloc countries.
• Actively supports the Middle East Peace Process. Turkey was the first Moslem country to recognize Israel in 1948 and was the only Moslem country to do so until the Camp David Accords in 1979.
• Works with the United States to resolve the six-year Azerbaijani-Armenian conflict and is setting up a logistic support center in Turkey for international monitors. Until the Armenian Kalbajar offensive, Turkey facilitated humanitarian assistance to both Armenia and Azerbaijan.
• Assists neighboring Central Asian republics and Azerbaijan in their transition to democracy and free market economies.
• Is the only NATO ally which has consistently supported U.S. policy in Bosnia.
• Served as a bulwark against Communism for over 45 years, defending NATO's longest border with the Soviet Union.
• Promotes U.S. and Western interests -- Turkey, (a pro-Western secular democracy of 63 million citizens on a national territory three times the size of Italy) prospers, and remains stable at the junction of the turbulent Middle East, Caucasus, Central Asia, the Balkans and the Black Sea region (Ukraine and Russia).

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Business Development Services for Turkey

by Samuel H. Ticknor, Project Officer for Turkey,
 

International Executive Service Corps. The International Executive Service Corps (lESC) is a private not-for-profit organization funded in part by the United States Agency for International Development (USAID). The Project Office for Turkey is within IESC's Business Development Services (BDS) division.

The IESC has been in existence for about 30 years. IESC's initial involvement in Turkey revolved around its core business, sending retired executives from US business to Turkey to work with companies requesting technical assistance projects. with its data base of over 13,000 retired executives in the USA, lESC is able to address a broad range of projects within a variety of industries. The projects are generally short-term (between one and three months) and address specific issues such as implementing new cost accounting or production systems. Examples of projects include recommending a new production process for a food products company in Adana and making specific recommendations for a manufacturing company in Kayseri to become more efficient.

Given Turkey's economic growth and development over the last ten years, USAID decided to shift its emphasis from short term technical assistance projects to longer term business linkages between US and Turkish firms. The Business Development Services program for Turkey was started about three years ago with the objective of assisting small and medium sized Turkish companies in a variety of areas including technology transfer, distribution agreements, strategic alliances, and licensing agreements among others. The method of assistance was matching US companies with their Turkish counterparts to satisfy the needs of the Turkish company.

The IESC program works with the Turkish Chamber of Commerce and Industry (TOBB) in Ankara Turkey. TOBB undertakes all of the financial support for its office and the travel and operations of the program in Turkey. The TOBB office is staffed with multi-lingual business professionals. The Director has US business experience. TOBB works with the Turkish companies to develop a company profile that describes the Turkish company and its business objectives. The profile is then forwarded to IESC where outreach is conducted to identify interested US firms. The 13,000 US retired executives are a great assistance in the outreach. It is important to note that the program is really "demand-driven"; that is, all projects originate from Turkey.

The BDS program for Turkey provides services to facilitate the transaction, including translation services and conference calls Services that can help to reduce transaction costs may be significant for small to mid-size companies. The TOBB staff can also help by working with appropriate support institutions such as the Turkish Treasury to secure government approvals, and the banking community to identify sources of financing. The IESC/TOBB Turkey program works primarily with qualified small to mid-size companies that prepare to enter a joint venture relationship. The typical Turkish company seeks new products and technology rather than capital. The program works in virtually all industries in Turkey including automotive, plastics, food processing, irrigation, manufacturing, electronics and chemicals, etc. USAID finances the operations of the IESC in the program. Such financing includes a resident executive advisor in TOBB who is fluent in Turkish and has US-Turkish and multi-national business experience.

USAID also finances surveys of the sectors TOBB believes are potentially most worthwhile in the Turkish economy. An expert US IESC Volunteer Executive spends a period of time in Turkey thoroughly analyzing up to twenty companies in a sector identified by TOBB. The companies with the best prospects are then matched with appropriate US companies.

Two recent examples illustrate the services of the program. The program is currently working with US and Turkish companies to establish a new food-products company in the Kayseri region. In addition to identifying a US partner for the Turkish company, TOBB has helped direct the project feasibility study through Treasury and to identify Turkish banks that can guarantee financing through the US Export-Import Bank.

In another project, the program recently signed a distribution contract between a producer of plactic pipes for the construction industry, based in Adapazari, and the US's leading producer of reinforced plastic plywood. The distribution contract will be the first step leading to a joint venture to produce the product in Turkey. In addition to being marketed in Turkey, the plywood will be exported to surrounding markets including Europe, the Middle East, North Africa, and the republics of the former Soviet Union.

The program is just beginning to develop a portfolio of environmental companies in Turkey. An example of possible projects is a Turkish manufacturer interested in licensing the rights to manufacture US air filtering technology in Turkey.

IESC and TOBB charge a nominal fee to both the US and Turkish companies which undertake a venture together. This requirement is an attempt to make the program self-sustaining, as USAID support of the program will be limited. The program is now at its take-off point, and looks to 1995 as the year it may start to become self-sustaining.

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