Emerging Country Analysis - Turkey

TURKEY
EMERGING COUNTRY ANALYSIS

SUBMITTED BY
GROUP 6, SECTION B
AJAY KUMAR

14009

BHAVESH SOBHANI

14033

GAYATHRI SATISH

14055

MIRZA MOHAMMAD ZEESHAN BAIG

14081

PRATEEK JAIN

14107

RUCHI JAIN

14128

SHREYAS K G

14147
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Table of Contents
1. INTRODUCTION .............................................................................................................................. 3
2. MACRO ECONOMIC DATA ........................................................................................................... 3
3. DEMOGRAPHICS ............................................................................................................................. 4
4. ENVIRONMENT ANALYSIS........................................................................................................... 3
4.1 POLITICAL .................................................................................................................................. 3
4.2 LEGAL ......................................................................................................................................... 3
4.3 ECONOMY .................................................................................................................................. 3
4.4 SOCIAL SYSTEM AND CULTURE .......................................................................................... 4
5. INFRASTRUCTURE, NATURAL RESOURCES & INDUSTRY SCENARIO .............................. 5
5.1 INFRASTRUCTURE ................................................................................................................... 5
5.2 TURKEYS NATURAL RESOURCES ....................................................................................... 5
5.3 TURKEYS INDUSTRIES .......................................................................................................... 6
6. SWOT ANALYSIS ............................................................................................................................ 6
7. RECOMMENDATIONS .................................................................................................................... 7
REFERENCES ....................................................................................................................................... 9

1. INTRODUCTION
Turkey, strategically located in the Eurasia region, is a dynamic country with a robust economy
and a young population, often described as the China of Europe. It is a nation steeped in rich
history and cultural life; a realm of sprawling cities and vast rural areas; of coastal towns and
tiny fishing communities. It is a mountainous country with mist hidden plateaus, combined
with enormous steppes and fertile river valleys. Sixty percent of the country is located at
altitudes of 3,300 feet above sea level or higher. Located in eastern Turkey, Ar Da (Mount
Ararat) at 16,976 feet is the nations highest peak and the biblical resting grounds of Noahs
Ark. More than 99% of Turkeys population is Muslim, but the nation is a secular state with a
definite western perspective. Christian and Jewish communities also exist in the big cities like
Istanbul, zmir and Adana. Conservative Sunni Muslims make up the large majority of the
countrys Muslim population. But about a sixth of Turkeys population is Alevi, an Anatolian
offshoot of the Shiite branch of Islam. Turkey is in the EU accession process to be a full
member. Accession negotiations started in October 2005.

2. MACRO ECONOMIC DATA

Turkey's dynamic economy is a complex mix of modern industry and commerce along with a
traditional agriculture, fisheries and farming sector. It has a strong and rapidly expanding
private sector, yet the state still plays a serious role in basic industry, banks and financial
institutions and financial services, transport, and communication. The largest industrial sector
is textiles and clothing, which accounts for one-third of industrial employment; it faces stiff
competition in international markets with the end of the global quota system. However, other
sectors, notably the automotive and electronics industries are rising in importance within
Turkey's export mix. Turkey has the worlds 17th largest economy by nominal GDP.
1. According to the IMF, in 2013, Turkeys GDP was USD 827.21 billion. Turkey's GDP
grew at 4.29% in 2013. Current GDP per capita, in purchasing power-adjusted dollar
terms, is USD 14,027.41.
2. The most recent figure for inflation in Turkey, as measured by the change in consumer
price index, was7.49% in 2013, versus 8.89% in 2012. The unemployment rate in
Turkey in Feb-2014 was 10.20%, versus10.10% in Jan-2014.
3. Turkey's economy is predominantly services-based. Agriculture accounts for 8.53% of
GDP and employs23.60% of the population. Manufacturing and industry accounts

for 27.06% of GDP and employs 26.00% of the population. The service sector accounts
for 64.41% of the GDP and employs 50.40% of the population.
4. Turkey's government revenue, in 2013, was 36.06% of GDP while its government
spending was 37.56% of GDP. Turkey's government debt, as of 2013, is 28.56% of
GDP.
5. Turkey's currency is the New Turkish Lira (TRY). The latest exchange rate, as of 03Dec-2014, is 2.22 TRY per 1 USD.

Fig 1. GDP of Turkey from 2003 3014 (US $ billions)

3. DEMOGRAPHICS

Population- 81,619,392

Age structure

Median age - Total 29.6 years

Population growth rate- 1.12%

Major cites Istanbul, Ankara, Izmir, Bursa, Adana, Gaziantep

Area- 783,562.38 km

Life expectancy at birth- Total- 73.29 years Male 71.33 years Female 75.35 years

Male- 29.2 year

Female 30 years

Nationality- Turkish

Religions - Muslim 99.8% (mostly Sunni), other 0.2% (mostly Christians and Jews)

Languages Turkish (official), Kurdish, other minority language

Literacy rate - Total population 94.1% Male - 97.9% Female 90.3%

Neighbouring countries- Bulgaria, Greece, Syria, Iraq, Iran, Azerbaijan, Armenia,

Georgia

4. ENVIRONMENT ANALYSIS
4.1 POLITICAL
Turkey is a supporter of liberal trade and investment policies which allow open trade between
different countries in the EU. Turkey forged a custom union agreement in 1996 to allow many
Turkish firms to get bigger and more successful in the global economy. Exports have been
rising on average at a rate of 10% every year.
One of the current political challenges in Turkey is the series of violent terrorist attacks that
have happened in the country due to Islamic extremist, Kurdish radicals, Turkish militants that
may have link with Al-Qaeda. This is a disadvantage for companies trying to invest in Turkey.

4.2 LEGAL
One of the legal strength's in Turkeys is the comprehensive legal structure they have. The
judicial system is made up of general courts, heavy penal courts, military courts and the
Constitutional Court which is essential in the Turkish government. This is an advantage for the
companies planning to invest in Turkey as this shows that the Turkish government are strict on
the law and will enforce the law.
Another legal advantage in Turkey would be the robust framework for the business entities, as
the company who is looking to invest into Turkey will not need to go through a very long and
lengthy business registration process as there is a freedom to start, operate and close a business
by the Turkish regulatory environment.
One of the current legal challenges in Turkey is the judicial inefficiencies as there are some
delays in the Turkish judicial system which can cause some serious issues.

4.3 ECONOMY
As of last year, almost all parts of the world economy, including Turkey, have fallen into
recession. Extensive fiscal and monetary policies, implemented all over the world but

particularly in major economies like the USA, China and Japan, have stopped the free fall of
economies and increased the hopes of recovery in the second half of the year and 2010.
One of the current economic strengths in Turkey is that there is a high flow of foreign
investment coming from abroad. In Turkey there is a privatisation program which started in
2008 that will allow the sale of major bridges, highways, electricity grids and a share in the
partly commercial bank.
One of the current economic challenges in Turkey is the current account deficit for Turkey.
The declining current account has been was delayed the economic stability. Turkey has
borrowed $2 billion out of an expected $5.5 billion from international capital markets this year
so far.

4.4 SOCIAL SYSTEM AND CULTURE

One of the social system strengths in Turkey is that they have growing proportion of young
population as they have more than half the population being aged below 30. This will allow
Turkey to increase their employment rate by getting the most out of the young labour force.
This is an advantage for new companies being brought into Turkey as it shows there is a healthy
supply of young population willing to work.
The social system challenge in Turkey is that they have a high level of unemployment. Turkey
unemployment level rose by 38,000 in that year to 2.3 million in 2007 but then in 2008 it rose
again by 737,000 from the previous year so this shows that there was a substantial increase
from the previous year. Turkey has a culture of tolerance for all religions and languages living
together in peace, spread from Istanbul (which was the capital of empires) to Anatolia. But
there are three main cultural issues, namely, religion, location and gender equality that should
be tackled by companies planning to invest in Turkey.

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5. INFRASTRUCTURE, NATURAL RESOURCES & INDUSTRY

SCENARIO
5.1 INFRASTRUCTURE
As an emerging market, Turkey has a competitive commercial infrastructure. However, the
government faces a continual challenge to meet the demands of a rapidly growing economy,
and gives special priority to major infrastructure projects, particularly in the transport and
energy sectors.
Airports: In 2013 there were 98 airports in Turkey, including 22 international airports, with
Istanbul Atatrk Airport being the 13th busiest airport in the world, serving 31,833,324
passengers between January and July 2014.
Roadway: As of 2014, the country has a roadway network of 65,623 kilometres (40,776 mi).
Railways: The total length of the rail network was 10,991 km in 2013, including 2,133 km of
electrified and 457 km of high-speed track. Ankara Konya railway line and Ankara Istanbul
railway line are two recently introduced high speed rail roads, which drastically reduces
travelling time between cities. Turkey also has railway connection with neighbouring countries
such as Azerbaijan, Armenia, Bulgaria, Greece, Georgia, Iran, Iraq, and Syria.
Waterways: Shipping plays an important role in the Turkish economy, since over 70 percent
of Turkey's boundaries consist of 4 seas. The country's 8,430-kilometer coastline is covered
with several large and small ports, 21 of them international.

5.2 TURKEYS NATURAL RESOURCES

Petroleum and Natural Gas: Turkey is an oil and natural gas producer, but the level of
production by the state-owned TPAO isn't large enough to make the country self-sufficient,
which makes Turkey a net importer of both oil and gas. However, the recent discovery of new
oil and natural gas fields in the country, will help Turkey to reach a higher degree of selfsufficiency in energy production.
The pipeline network in Turkey included 1,738 kilometres (1,080 mi) for crude oil, 2,321
kilometres (1,442 mi) for petroleum products, and 708 kilometres (440 mi) for natural gas in
2012.
Geothermal Energy: Turkey has the fifth highest direct utilization and capacity of geothermal
power in the world

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Minerals: Turkey is the tenth ranked producer of minerals in the world in terms of diversity.
Around 60 different minerals are currently produced in Turkey. The richest mineral deposits
in the country are boron salts, Turkeys reserves amount to 72% of the world's total.

5.3 TURKEYS INDUSTRIES

Industries accounts for 89.4 percent of Turkey's total export earnings. The key industries in
Turkey are textiles, iron and steel, chemicals, cement, food processing, motor vehicles,
construction, glass and ceramics, and mining. The industrial sector in Turkey has been the
primary focus of government policies since the early 1950s. Industrial policy until 1980 was
based on an import-substitution strategy. This protectionist approach was very successful for
several decades, and the sector grew at an average rate of 8.6 percent annually until the late
1970s. By the end of the 1970s, capital goods and high-technology products had become the
primary focus, but the rapid industrialization was taking its toll on the sector. The liberal
economic policies introduced in 1980 were designed to address these issues by using market
signals to identify un-competitive industries, transfer their resources to those industries where
Turkey enjoys a comparative advantage, and thus compete in world markets.

6. SWOT ANALYSIS
Strength:
1. Young and large population (average age 29.7 years)
2. Geographic location
3. Strong and structural banking sector
4. Membership of custom union with the EU
5. Tax treaty which reduces tariffs on exports
Weakness:
1. High current account deficit
2. Poor infrastructure
3. Lack of private sector R&D
4. High special consumption tax and VAT
5. Gender inequality
6. High corruption

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Opportunity:
1. Great potential for car market
2. Support by Government for R&D activities
3. Population and labour force growth
4. Government push for taxation reforms
Threats:
1. Dependence on EU market
2. Rapid growth in China
3. Trade disputes with Russia
4. Terrorism

7. RECOMMENDATIONS
From the above analysis we have come across some sectors in which Indian industries can
enter and earn profit.
1. Dairy sector: Turkeys domestic dairy market is expected to grow from EUR 5.2
billion in 2013 to EUR 9.7 billion in 2018. Increasing urbanisation together with
growing disposable incomes has seen value added products grow with a high level of
local branding evident. However, traditional dairy products and processing structures
sit alongside this leading to a high degree of fragmentation. Therefore, consolidation
through M&A activities will be possible although doing so without investing in a
Turkish brand, which are highly respected, may be somewhat challenging.
2. Engineering: The machinery and engineering industry in Turkey has been growing at
a rate of nearly 20 percent per year since 1990, and 30 percent per year since 2009. This
sector can be attributed to Turkeys competitive advantages; including its qualified
human resource, enhanced technical knowledge, wide business experience, strong
discipline, ability of adaptation to new technologies and innovations alongside its
strong political relations and cultural proximity to the neighbouring countries, and its
determination to sustain coordination and cooperation between public institutions and
private sector. M&A or stake acquisition can be done by the Indian industries to
effectively foray into this sector.

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3. Energy: Turkeys needs an amount of approximately US$130 billion by 2020. A total

of 51 thousand MW new capacity investments have to be added to the system. This is
apart from the 7385 MW projects under construction. The oil consumption is expected
to increase two folds and gas consumption four fold by 2020. A total of 4500 MW
nuclear plants need to be put into operation. Indian industries should foray into this
sector through FDI because of favourable policies.

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REFERENCES
1. http://www.tradingeconomics.com/turkey/gdp
2. http://data.worldbank.org/country/turkey#cp_gep
3. http://www.economywatch.com/economic-statistics/country/Turkey/
4. https://www.quandl.com/c/turkey/turkey-economy-data

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