Tapping into Turkey
Driven by the private sector, Turkey has one of the strongest construction and export industries in the region; those with a foot in the door give their tips on how to tap it More famous for its EU ambitions, coffee and historical sites such as the first known human settlement in Catalhoyuk, few are aware […]
Driven by the private sector, Turkey has one of the strongest construction and export industries in the region; those with a foot in the door give their tips on how to tap it
More famous for its EU ambitions, coffee and historical sites such as the first known human settlement in Catalhoyuk, few are aware that Turkey is also home to the world’s second largest construction export industry.
According to UK Trade and Investment statistics, in 2009 over 30 Turkish contractors made it into the Engineering News Record’s (ENR) Top 225 International contractors; second only to China.
The country is in the top 12 producers of building materials in the world, supplying both the international and domestic market; which in turn contributes 4% towards Turkey’s GDP, employing more than one million people.
Official literature from the body states that Turkish contractors have been active in 81 countries since the 1970s; diversifying into areas such as industrial buildings, oil refineries, road-tunnel-bridges, international airports and urban rail transport systems.
“The prime factor driving this growth is the increased contribution of the private sector,” says Yusuf Akcayoglu, Gulf regional director of Tepe Akfen (TAV) a local contractor with international operations and particular experience in airport developments; having been awarded contracts by the Turkish government for projects including Ankara Esenboga, Izmir Adnan Menderes and Alanya Gazipasa in Antalya, TAV’s 11th airport contract was announced last month for Medinah Airport, Saudi Arabia.
But while their current strategy is to expand into western and central African markets, including South Africa and India – while simultaneously increasing presence in Russia, North Africa and Gulf – there are also significant opportunities within the country.
“Unlike the countries severely affected by the financial crisis, Turkey’s banking has successfully implemented the lessons learnt from the 2001. With efficient and effective regulations in place, confidence in the economy remains stable,” he adds, further saying that a significant proportion of activity in the domestic market comes from private real estate developments, public infrastructure projects and complex financial models such as PPP and Build- Operate-Transfer (BOT).
It is a sentiment echoed by general manager at YEM – The Building Information Centre, Baris Onay PhD.
- General Manager at YEM Baris Onay
“Although housing projects attract more attention, a sense of economic stability – with the help of solid financial system that was restructured in 2000 – motivates both public and private sector investments in infrastructure, transportation and energy.”
YEM is an information centre on construction materials and technology and also the umbrella organisation responsible for YAPI – TURKEYBUILD Exhibitions and business publications. The company recently launched materials research portal, Material ConneXion Istanbul.
“The challenging part is that foreign players have started losing their presence in the market due to increased capabilities of local players. FDI’s, joint ventures and consortiums are what foreign players should look for if they want to have a stake in Turkey,” Onay adds (see charts overleaf).
Attraction
Resilience to global economic – and political – conditions and the ambition of the private sector supported by a stable and equally ambitious government means many of the projects initiated in Turkey are done so under PPP finance models.
Onay details Turkey’s geographical position and combination of both eastern and western influenced culture as providing opportunity and flexibility in business relationships.
“This prompted expert foreign companies to enter into the market and establish long-lasting relationships by undertaking prestigious and profitable projects,” Akcayoglu explains.
“Moreover, Turkey has a young and very well educated population, which means that the foreign companies have a vast pool of resources available to utilise in their business operations. Last but not least, Turkey is a wonderful place to live and work. Bridging two continents, it has many historic, cultural and touristic attractions,” he continues.
But the increased competition has not affected operations for aerial platforms and machinery suppliers Paksan.
“Nowadays in Turkey we can observe the phenomenon of high-speed urbanization,” export sales representative Olga Erdogan observes.
“Each year thousands of new houses, administrative buildings and recreational centers are being built across the country. Electrification and maintenance of new built up districts creates opportunities to produce more special equipment including fire fighting trucks and platforms,” she adds.
Adding that there is plenty of work for all, Erdogan also observes that buying materials and machinery from outside Turkey isn’t as attractive as it may seem.
“Our business is not influenced by the presence of foreign countries in Turkey,” Erdogan continues.
“On one hand, there are a number of European manufacturers producing quality products but their prices are too high in comparison to the prices we offer to our clients. On the other hand, the quality of Chinese products is several indicators below,” she adds.
Breaking into turkey
Combining diverse cultural influences, economic stability and ambition, Turkey is reaching a pivotal point in its development.
“Before we go into detail about recent developments, we need to understand the macro economic drivers that have created a higher multiplier effect in the past 10 years,” reports Onay, who continues to relay that strict correlation exists between Turkey’s GDP growth and that of its construction industry.
In 2010 the country experienced a 17.1% growth, when many countries – all perceived as wealthier – faced recession.
“Contracting Services have become a key export item, and the building materials industry as a whole has generated a trade surplus of approximately US $10 billion,” Onay continues.
“Not only have numbers been growing for the last 10 years but also the complexity of projects and contracts undertaken is notable,” he says.
In conclusion, Onay comments that it is a combination of industrial capabilities and economic outlook that justify the existence of mega projects and large developments in Turkey and that it is the domestic contractors that are best positioned to take advantage of such opportunities.
While UKTI offers a range of advice for companies looking to break into the market (see column), Akcayoglu maintains that construction’s relevance to the national economy means that breaking into the industry is no easy feat.
“There are numerous successful Turkish construction companies having international experience,” he says.
“Therefore, especially now as the Turkish construction companies grow substantially, competition for the domestic projects is fierce and even these companies are teaming up between themselves to win contracts.
“However, as some projects require a high-level of engineering and expertise, Turkish companies are forming alliances with specialised international companies, which are globally renowned for their experience at those particular projects.
“Therefore, I would highly recommend any company that is interested in Turkey to analyse the market in detail and to team up with a Turkish company,” Akcayoglu adds.
Beyond the borders
The lucrative Turkish companies that leverage their domestic success, and manufacturing strengths, to successfully tap markets around the world generate 91% of their business from those markets, according to Onay.
Yet that doesn’t mean to say they have been immune to the impact of external forces.
Contracting services and the supply of building materials may give the country an upper hand in the Middle East, but several government-led campaigns to buoy the machinery industry with funding incentives, haven’t been as successful.
Additionally, Onay says the current situation in North Africa and the threat of further political unrest means the Middle East is increasingly – and potentially even disproportionately – significant for exporters.
“When you export more than you sell locally, losing your international markets is only bad news,” he says.
Akcayoglu maintains such a threat is not as strong as others faced in the Middle East, namely economic diversity.
“Most of the economies in the Middle East are driven by the hydro-carbon revenues. They are turning this income into massive infrastructure investments in order to build or re-shape their countries,” he says.
Continuing to observe that despite the situation, regional governments are proactively facing the challenge head one, he says: “The major concern of these countries is their economy’s dependence on the oil and gas revenues.
“This eventually makes the economy vulnerable against the price fluctuations in the market; resulting in collateral effects to the overall economy.
“At this point, Turkey’s major strength is its more diversified economy, when compared with the Middle Eastern countries.”
WHERE TO BEGIN…?
A PROFILE FOR SUCCESS FROM UK TRADE AND INVESTMENTS
WHAT IS THE RIGHT APPROACH TO TURKEY?
THE FOLLOWING POINTS ILLUSTRATE THE TYPE OF APPROACH THAT COMPANIES DOING BUSINESS SUCCESSFULLY IN TURKEY OFTEN TAKE:
- Leave your preconceptions at home.
- It’s all too easy to be overawed by the challenges, but keep hold of your business sense as tightly as you would anywhere else.
- Do your homework on the market and on potential partners.
- Patience is a virtue. Some things may take longer to set up than you think (especially if they involve bureaucracy), so allow for this in your preparations.
- Take a long-term approach, but don’t stick rigidly to your plans. Things often change rapidly and unexpectedly in Turkey.
- Obtaining good quality independent legal and professional advice is essential.
- If your product is in danger of being copied or counterfeited, seek specialist legal advice on how best to protect your intellectual property rights (IPR).
- Don’t forget to carry out due diligence
- Take account of social and business customs in Turkey.
