Business
Doing Business in Turkey: 2011 Country Commercial Guide for U.S. Companies
International Copyright, U.S. & Foreign Commercial Service and U.S. Department of State, 2011. All Rights Reserved Outside of the United States.
- Market Overview
- Market Challenges
- Market Opportunities
- Market Entry Strategy
Market Overview
Turkey’s rapidly expanding economy, political and economic stability, and the possibility of EU membership has attracted the attention of a variety of American companies. US exports to Turkey have grown in most of the past ten years. The U.S. exported over $ 7 billion in 2009 and over $10 billion in 2010 to Turkey, an over 40% year on year increase. That trend is expected to continue. In the past few years Turkish exports to the United States have stagnated, hovering at about $4 billion per year. Over 250 American firms now have offices in Turkey. Turkey’s financial sector is stronger than that of many other countries, in part due to a series of reforms in the wake of the 2001 financial crisis, which left Turkish banks better leveraged than many of their U.S. and European counterparts. However, banks here remain hesitant to extend trade and project credit.
Turkey is a long-term ally of the United States and a charter member of NATO with the second largest military – after that of the United States – in that organization. Turkey has a key role to play in most of the major regional issues facing the United States. Despite this, bilateral relations have been occasionally difficult. Under the administration of President Obama, continued high-level government contacts have created a constructive atmosphere, with a special emphasis on building bilateral commercial relations. Both the United States and Turkey have created government-to-government and business-to-business institutions to increase bilateral trade and investment. Major U.S. companies are active in Turkey, including Exxon Mobil, General Electric, Citibank, Pratt and Whitney and Chevron. U.S. companies conducting business development in Turkey should utilize the resources of the U.S. Mission’s Commercial Service in Ankara, Istanbul and Izmir.
U.S. exporters have excellent medium-term prospects in this diverse market. Perhaps the most important sector for the next decade will be energy. Electricity demand had been growing at 8 percent a year, and will continue to grow, albeit at a slower rate. Turkey realizes it must prepare for continued economic recovery by adding now to its generating capacity to meet that demand. U.S. suppliers and service companies should look into the sector as it relates to electricity and gas distribution, power generation and renewable energies (wind and hydro, particularly).Among many other sectors where opportunities exist are: telecommunications services and equipment; safety and security equipment and services; automotive aftermarket, medical equipment, and higher education services where Turkey sends the largest number of students among all European countries – around 12,000 each year – to U.S. colleges and universities.
In recent years, Turkey’s market reforms, strong growth and economic and political stability attracted Foreign Direct Investment (FDI). Despite a decline in FDI inflows as a result of the global economic crisis, cumulative FDI in Turkey now stands at $ 84 billion, and the Turkish government seeks to attract more. Cumulative American investment in Turkey is officially about $6 billion – a number which is understated because of U.S. company investments through third countries. However, an area of concern is the relatively low level of green-field investment. This reflects continuing concerns by foreign companies about excessive bureaucracy, an unpredictable legal system and weak intellectual property protection.
In 2005, the EU and Turkey began formal EU accession negotiations. Turkey has adopted many European Union directives, regulations and laws in anticipation of accession. While continued delays have cooled popular interest in EU membership, Turkey’s political and business leadership remains committed to joining the EU, and understands that the process itself contributes to Turkey’s global competitiveness.
Market Challenges
The Republic of Turkey is a complex and challenging market requiring adaptability and persistence.
U.S. exporters face many of the same challenges that exist in other semi-developed countries, such as contradictory policies, regulations and documentation requirements, lack of transparency in tenders and other procurement decisions, and a time-consuming, unpredictable judiciary and legal and regulatory framework.
A strong streak of protectionism and mercantilist focus on trade balances still exist in many ministries and in the courts and this has been exacerbated by the recent global economic slowdown.
Careful planning and patience are the keys to success in Turkey.
Market Opportunities
The Republic of Turkey’s movement toward membership in the European Union is creating momentum to adopt European business regulations and standards in Turkey, thereby ultimately making it easier to sell and conduct business in this market. Similarly, reforms since 2001 have created a strong and stable economy that attracts foreign investment, which in turn will be followed by needed capital improvements and demand for new products and services.
The U.S Commercial Service in Turkey has identified a number of market opportunities, described below, for U.S. firms and continues to work with companies to either enter the Turkish market or expand market share.
Turkey is also the commercial hub of the region, so companies should consider using Turkey and Turkish partners to access business opportunities throughout Central Asia,
the Caucasus, the Middle East and even Africa. Turkish partners know these neighboring markets well, and are ready to take risks to make sales.
Market Entry Strategy
While there are many significant opportunities for U.S. companies in Turkey, there are also obstacles accessing them. Any market entry strategy for Turkey should begin with a thorough understanding of the costs and benefits in the market.
One of the most successful proven ways to access the market quickly is to work with an experienced local partner. This partner could be in the form of a local representative, liaison office, agent, distributor, stocking distributor, etc. The local partner brings their knowledge of the local regulatory framework, language and contacts to the table. As the business develops, companies may open subsidiaries and make further local investments to expand their market share and control.
The U.S Commercial Service in Turkey has a number of programs and services available to assist American business people establish a presence in this market and make the right contacts.
The U.S Commercial Service in Turkey employs experienced Commercial Specialists with industry sector expertise that can tailor your business approach to the right audience, and advise on business strategy in Turkey. To find out more about how we can assist you in access this interesting but challenging market, please visit our web site at: