Business In Istanbul 2012

SPECIAL REPORT 2012

BUSINESS IN ISTANBUL

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Turkey in 2041

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Investor Trends: Real Estate

17 The Best Airline in Europe PUBLISHED BY GLOBAL INVESTMENT I LIMITED AND DISTRIBUTED WITH THE SUNDAY TELEGRAPH

A Prime Market ISPAT highlights the opportunities for foreign investors in Turkey.

As the world economy is faltering in recovering from the recent global financial crisis and facing a second recession due to the Euro zone sovereign debt problem, investors are looking for safe havens where they can find growth, confidence and stability with lucrative opportunities.

Turkey, with its robust economy as well as a bright future, is offering investors a secure investment environment with great business opportunities. The Turkish economy has been set on strong fundamentals. For example, in regards to the sovereign debt problem, which is now threatening the global economy let alone the EU, Turkey reduced its gross public debt stock ratio to 39% of GDP in 2011 down from 74% in 2002 (Average of the 27 EU countries was more than 82% in 2011). Similarly, the budget deficit is another problem creating a pessimistic economic outlook. While many countries are unable to rein in their widening budget deficits, Turkey managed to reduce its budget deficit to 1.4% of GDP in 2011 down from 10% in 2002. Therefore, Turkey is one of the few countries which meet the EU public finance criteria, namely the Maastricht Criteria; 60% for public debt and 3% for budget deficit.

As such, the Turkish economy expanded by a phenomenal 9.2% in 2010 and 8.5% in 2011, standing out as one of the fastest growing economies in the world. Such a sound economy is encouraging experts and international institutions to make confident projections about the future of the Turkish economy. According to the OECD, Turkey is expected to be the fastest growing economy among the OECD members during 2011-2017, with an annual average growth rate of 6.7%.

While Turkey has been implementing structural reforms on the one hand, it has taken various initiatives in close cooperation with the private sector, to improve the investment climate. One of these initiatives is the establishment of the Coordination Council for the Improvement of the Investment Environment (YOIKK), which is a key structure where the private sector makes contributions to the process of improving the investment climate and has already been recognized as a success story of public-private platform by international economic authorities.

The council has rationalized the regulations on investments in Turkey, developed policies by determining the necessary arrangements that will enhance the competitiveness of the investment environment, and generated solutions to the administrative barriers encountered by the local and foreign investors in all phases of the investment process including the operating period. Moreover, the government has taken an exclusive measure to provide a more business-friendly environment for foreign investors in Turkey.

In addition to the Coordination Council for the Improvement of the Investment Environment, the government has established the Investment Advisory Council (IAC) with the participation of senior executives from prominent multinational companies in order to address the administrative barriers to investment, improve

Editor: Joseph Bove Country Consultant: Mert Tuglan Design: Kuljit Kaler

the positive image of Turkey as an attractive investment destination and provide a global perspective to the ongoing investment climate reform agenda. The results have been By İlker Aycı President impressive, for example it used Republic of Turkey Prime Ministry Investment to take 38 days to establish a Support and Promotion Agency (ISPAT) company in Turkey, whereas now it takes only 6. Additionally, the Turkish government works hard for the betterment of the investment environment. A recent incentive package, introduced in April 2012, provides investors with a wide range of options to benefit from. The new system drastically reduced the cost of production by offering tax deductions and exemptions; land provisions as well as paying social security premiums for both employers and employees.

As part of this new system, various strategic investment areas are determined to balance the country’s account deficit and the investments in these sectors will be strongly supported.

Impressed by such an attractive and improved investment climate, European investors and predominantly UK investors have been flocking to Turkey. That is why around 80% of FDI inflows to Turkey come from Europe. Similarly, the UK has been one of the top investors with around USD 15 billion of FDI stocks in Turkey.

Moreover, Turkey’s geographical proximity to export markets is supported by a legal framework through the free trade agreements and the customs union. Turkey has a customs union with the EU and free trade agreements with 22 countries. So companies not only have a logistical advantage but also a benign legal framework, which enables investors to export their products to different markets without customs duties. Moreover, the legal framework is reinforced with double taxation prevention treaties with 75 countries and bilateral agreements with 72 countries for the promotion and protection of investment.

There is ample opportunity in many sectors ranging from energy, finance, automotive, ICT, food and beverage, agriculture, renewable energy, iron and steel, to petrochemicals and real estate. More opportunities will come with the realisation of Turkey’s grandiose targets for 2023, the centennial celebration of the founding of the Republic. The country has several aims: to become one of the top 10 economies in the world with a GDP of USD 2 trillion, to increase its exports volume to USD 500 million, to upgrade the country’s energy, transportation, and health infrastructure through the construction of hospital cities, to more than double electricity generation, and to build new bridges on the Bosphorus and Dardanelles straits. It is also a national target for Turkey to make Istanbul an international financial centre. Foreign investors can always count on the Investment Support and Promotion Agency of Turkey for investment opportunities in Turkey. ISPAT is at their disposal in every stage of their investments. It is the perfect time to invest in Turkey; don’t miss the opportunity!

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The Views expressed in Business in Istanbul Special Report 2012 are not necessarily those shared with the publisher, Global Investment I Limited. Wishing to reflect the true nature of Istanbul, Turkey, the editor has included articles from a number of sources, and the views expressed are those of the individual contributors. No responsibility or liability is accepted by Global Investment I Limited for any loss to any person, legal or physical, as a result of any statement, fact or figure contained in Business in Istanbul Special Report 2012. This publication is not a subsititue for advice on a specific transaction.

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Business in Istanbul

A Business Perspective: Prospects for a Stronger Turkish-British Economic Partnership and Turkish-British Business Council (TBBC).

As co-chair of the body which is working to forge stronger business ties between Turkey and Britain, mine is not an impartial voice.

However, it is because I believe so strongly that our two countries complement each other so well that I make time from my day job as head of Turkey’s main high street bank to make this friendship work.

Since the global criBy Suzan Sabancı Dinçer sis in 2008-2009, Turkey Chairperson DEiK/Turkish-British Business Council has become the fastest growing economy in Europe and will be one of the engines of global growth in the coming decades. Deepening economic cooperation means greater prosperity for both the UK and Turkey. Together, we can force the pace of the European recovery. Prime Minister Cameron put his finger on the reason why, when he said, “Turkey can be a great unifier. Because instead of choosing between East and West, Turkey has chosen both.” Turkey is now the economic powerhouse of an expanding region – a nation that exercises influence not through a single commodity but through the maturity of its industrial and service sectors. However, we remember where we are coming from and where our allegiances lie. Turkey is a member of the Euro-Atlantic community and of NATO, as well as an accession country of the European Union.

Turkey historically and geographically is a part of Europe, the Middle East, North Africa and the Caucasus. It is also an active member of G-20 and plays a vital role in shaping and coordinating global policies. Turkey offers strong long-term growth potential, equal to any of the BRIC economies. The International Monetary Fund (IMF) and other international financial institutions estimate that Turkey will continue to grow strongly due to its youthful population. A recent PricewaterhouseCoopers’ report, ‘The world in 2050’ names Turkey as one of the ‘E7’ economies -China, India, Brazil, Russia, Indonesia, Mexico and Turkey- surpassing the current G7 countries. A very recent HSBC study also forecast that Turkey would become the world’s 12th biggest economy by 2050 with a GDP of $2.149 trillion and a per capita GDP of $22,063. These ambitious projections are based on hard evidence about Turkey and the Turkish economy. There are multiple indicators pointing to Turkey’s competitive advantage: • Turkey’s foreign trade volume grew to $300 billion in 2011, • Its dynamic population has an average age of 28, • Well-educated productive labour force, • An urbanised society with a growing middle class, • Low debt-to-GDP ratio, • Stable interest rates, inflation and Turkish Lira FX rates, • Turkey’s proximity to the newly emerging markets, CIS, ME and Africa; as well as to big markets such as the EU and Russia, • Turkey’s position as a gateway to global energy resources.

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These healthy macro-economic fundamentals mean Turkey stands out as a solid long-term investment choice among the emerging market economies. The approximate $90 billion of foreign direct investment Turkey received in the last 10 years is further proof of confidence in the country’s record.

Turkey’s Foreign Economic Relations Board (DEİK), was founded in 1988 to monitor and develop Turkey’s economic, commercial, industrial and financial relations with foreign countries and international organisations. It is the gateway of the Turkish private sector to the world. DEİK’s services include providing consultancy services to public institutions and organisations; helping companies identify new markets, organising international business events, representing and lobbying for the Turkish private sector in the international arena, executing strategies for foreign economic relations of Turkey, attracting global capital to Turkey, and assisting Turkish companies to invest abroad. For this mission, DEİK relies on its 109 Business Councils, which are established by a cooperation agreement signed with foreign counterparts. The Business Councils have two sides; one on the Turkish side and the other a counterpart organisation in the relevant country. The Turkish-British Business Council (TBBC) working under the umbrella of DEİK focuses on the development of bilateral economic relations between Turkey and the UK, which have already gained very positive momentum in recent years. Prime Minister Recep Tayyip Erdoğan spoke during a recent visit to London of a “Golden Era”, in the relations between our two countries.

TBBC’s primary goal is to allow Turkey and Britain’s economic relationship to reach its true capacity. Even though the trade volume between Turkey and Britain adds up to 12 billion USD a year, there is still much potential for growth. In this respect, the Business Council prioritises to; • Develop balanced economic and trade relations between the two countries, • Specify the potential areas of cooperation, • Create the necessary environment for stronger cooperation, • Identify problems in bilateral economic relations and offer solutions, • Promote the cooperation of Turkish and British companies in third markets, • Organise economic, cultural, political and social events and activities to complement bilateral economic relations.

Within this framework, TBBC actively promotes the Istanbul Finance Centre Project at home and abroad in the attempt to further enhance Istanbul’s role as a regional and global finance hub.

The Council also works to strengthen cooperation between small and medium sized enterprises (SMEs) and attract more direct investment from the UK to Turkey. TBBC is focused on infrastructure, contracting, construction, ICT, defence industry, aviation and healthcare sectors as fertile areas for bilateral expansion.

For the upcoming period, TBBC will be co-organiser of the Turkish-British Tatlıdil Forum with the Ministry of Foreign Affairs of Turkey on October 12-14, 2012. Turkish-British Tatlıdil Forum is a high-level, but intimate gathering of representatives from both countries in the world of politics, media, business, and academia - convened to discuss the issues, global and in particular, which matter most to our important friendship.

Business in Istanbul

Turkey in 2041 PwC recently released a special report to mark the 30th anniversary of the firm in Turkey.

The report “Turkey in 2041: Looking to the future” is an economic study looking at the growth capabilities of five sectors striving to achieve the standard of “regional centres of excellence.” The five sectors include Food & Beverage Processing, Agricultural R&D Services, Alternative Energy, Automobile Production, and Tourism. According to the projections developed by PwC using a long-term growth model, Turkey’s GDP per capita is expected to double by 2041 compared to its current level and exceed USD 35,000. The expected growth means Turkey will significantly narrow the income gap between it and developed countries over the next 30 years. Furthermore,Turkey is expected to become the 12th largest economy in the world by 2041.

Although the report focuses on five key areas of the Turkish economy there are other significant topics discussed. For example the section entitled “Turning challenges into opportunities” emphasises the importance of structural reforms to boost Turkey’s global competitiveness. Improving transport infrastructure, legal framework, and tax collection efficiency are cited as priorities for fostering sustainable growth over the longer-term.

To sustain long-term economic growth and development, the report focuses on Turkey’s ability to draw from its growing skilled labour force and favourable climate, as well as geographical location at the crossroads of a number of wealthy regions. It continues to state, the success of the Turkish economy over the next 30 years will depend on Turkey’s ability to develop an international competitive advantage, to attract foreign direct investment, and to develop industries into “international centres of excellence” that can help the country export goods and expertise to its region and beyond.

The following are highlights from the report by PwC, in which the firm shares their views on the prospects of the five key sectors identified for long term growth within Turkey.

Food & Beverage Processing Over the next thirty years Turkey’s food and beverage market has the potential to continue to expand as it is well positioned to meet rising demand, both domestically and internationally. Growing populations, rising incomes, urbanisation and the increased coverage of organised retail should present particular opportunities in the processed, packaged and frozen food sectors as consumer tastes shift toward convenience products and supermarkets proliferate.

Agricultural R&D and Services Over the next thirty years, there is opportunity for foreign R&Dintensive companies to enter the Turkish market and for local companies to emerge, benefiting from Turkey’s increasingly educated population and from the favourable policy initiatives to foster innovation. A centre of excellence could be strengthened by the arrival of foreign high-technology firms. The establishment of a centre of excellence in agricultural R&D will help improve productivity in the local agricultural sector, providing a potential boost to other related centres of excellence such as food and beverage processing.

Once the industry is more established, regions such as the Middle East and Africa could become fertile grounds for exports of R&D and related services for the agriculture industry. Africa in particular, with its vast stock of under-farmed fertile land, could become an attractive export market for this industry.

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Alternative Energy Turkey’s hot climate and natural waterways allow a third of its installed capacity to be made up from renewable sources. It is particularly strong in hydroelectric and solar technologies and is expected to use these renewable sources to serve a large part of the rising domestic demand for energy.

There will be plenty of opportunities for growth; around half of the nation’s potential hydroelectric capacity has yet to be constructed. And whilst Turkey had the second highest solar hot water installed capacity in the world after China in 2009, its high radiation levels make it more suited than most European countries for largescale generation in the future.

Automobile Production Turkey is particularly specialised in the manufacture th of light-commercial vehicles (LCVs). This has been fuelled by their advantageous tax treatment at home, which has boosted domestic consumption, and by the requirement for more labourintensive techniques in the production of these models, where Turkey can offer lower wages relative to developed European economies. LCVs now make up half of total automobile production in Turkey, up from a quarter in 2000.

There is the potential for this segment to grow and become a key centre of excellence for Turkey over the next thirty years, as more foreign carmakers partner with Turkish companies to benefit from existing production knowledge and a more competitive labour market, as well as establishing their own independent operations.

Along with LCVs, the sector as a whole is looking forward to strong growth and is expected to become a fundamental centre of excellence for the Turkish economy.

Turkey is expected to become the 12 largest economy in the world by 2041.

Tourism Over the next thirty years, Turkey is well positioned to tap into a growing travel-hungry middle class in emerging markets. Currently, a larger proportion of visitors to Turkey come from emerging markets than can be found in established destinations in some developed countries. Approximately 43% of Turkey’s overseas visitors come from emerging economies whilst this segment accounts for less than 22% of visitors in the US and less than 10% in Italy.

PwC UK Chief Economist John Hawksworth said of the report: “Turkey has seen a remarkable turnaround in its economic fortunes over the past decade, and we see this strong performance continuing over the next three decades, pushing Turkey up to 12th in the global GDP league table by 2041. This reflects Turkey’s dynamic, relatively youthful labour force and strategic location at the cross-roads between Europe and Asia.” Turkey’s future is promising and the continued push to develop ‘centres of excellence’ amongst several business sectors will be one of the country’s most important strategic initiatives to date in attracting foreign firms and keeping the economy on a sustainable growth path.

Business in Istanbul

Growth Trajectory The Borsa Istanbul strives to raise the profile of Capital Markets in Turkey.

The Borsa Istanbul (IMKB), Istanbul’s stock exchange was established in 1985 and began operations shortly thereafter.

Currently, there are three markets operating at the IMKB: the stock market, the bonds and bills market and the international market.

The IMKB provides a fair and transparent environment for trading of a wide variety of securities, namely stocks, exchange traded funds, government bonds, “The Borsa Istanbul Treasury bills, money mar(IMKB) is the region’s ket instruments (repo/ largest and most devel- reverse repo), corporate and foreign securioped stock exchange. bonds ties as well as foreign exWhen we look at the change futures contracts. market’s capital, it is There are a total of 389 more than $250 billion listed companies on the and comprises 30 per- IMKB and that number is expected to continue cent of Turkey’s GDP.” growing in line with the general economy. The majority of the companies listed are in the manufacturing sector while the financial institutions account for the highest amount of market capitalisation of any sector listed. While Agriculture, Forestry, and Fishing industries are represented by only one company, the sectors market capitalisation represents 6% of the total exchange. The fact that so much Foreign Direct Investment flows into Turkey on an annual basis allows for more small and medium sized businesses to consider listing, benefiting not only the exchange but the whole Turkish economy.

The IMKB’s integration with international markets, like any exchange, is a key attribute of their success. IMKB to date has cooperation agreements with the World Federation of Exchanges (WFE), Federation of European Securities Exchanges (FESE), Federation of Euro-Asian Stock Exchanges (FEAS), Organisation of the Islamic Cooperation (OIC), The Islamic Financial Services Board and the International Islamic Financial Market. The rate of foreign investment in the exchange as a percentage of free float market capitalisation is near the 2007 high of 72% at 63% to date. This is far above the 2000 low of 41% when Turkey had one of the lowest valued currencies in the world.

Last month, at the 7th Turkish Arab Economic Forum, the Borsa Istanbul President ibrahim Turan, emphasized his plans to integrate the Istanbul Stock Exchange with neighbouring stock exchanges. “The Borsa Istanbul (IMKB) is the region’s largest and most developed stock exchange. When we look at the market’s capital, it is more than $250 billion and comprises 30 percent of Turkey’s GDP.” According to Turan, the IMKB 100 Index has performed better than the world’s developed economies. “We are looking for opportunities to expand our partnerships. We are participating in the region’s stock exchanges. In the future this list is going to become even longer,” said the President, noting that Turkey had signed agreements with the Macedonian, Casablanca, Kazakhstan, Egyptian and South Korean stock exchanges.

Currently the main task for the IMKB’s executive team is to grow the exchange from the current amount of listed companies.

Surprisingly less than 90 of Turkey’s top 500 companies, rising to 130 for the top 1000 companies are represented on the exchange, representing a huge opportunity for growth. As small medium

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sized enterprises continue to receive encouragement to join the exchange and overall revenues increase the number of companies going public could triple within a few years. Similar to sectors like manufacturing and tourism the exchange will naturally benefit from geographic position as it continues to develop Turkey as a regional centre. It is expected that the Capital Markets Law of 1992 will undergo significant changes so that the IMKB can implement international standards and European Union directives. When the changes to the law occur more products including Islamic banking instruments like Sukuk rental bonds and trading in commercial products will be opened to investors.

The priority in 2012 is on completing the IMKB’s demutalization process and becoming a joint stock company that will provide a platform to serve as an access point to exchanges worldwide.

The key objective is to attract and connect Euro-Asian Exchanges to the world through the new platform. There would be large scale benefits in developing an efficient network through which all capital market institutions will communicate with each other and increase total liquidity in the markets. As proposed the plan would reduce transaction costs in the market, implement an integrated risk management and surveillance system, and centralise collateral management at Takasbank, Turkey’s main clearing house. The IMKB aims to create an environment where the capital and commodities markets grow together by supporting each other. The exchange is also expected to be working towards allowing investors to access/ invest in global stock exchanges via the IMKB. Another widely anticipated move is the horizontal and vertical integration of capital market institutions. Horizontal integration would mean the integration of the whole value chain,including settlement and custody. In terms of vertical integration, the IMKB proposes a merger with The Turkish Derivatives Exchange and Istanbul Gold Exchange. The IMKB also wants to be the operator and technology provider of any commodity or energy exchange to be established in Turkey. This integration will take place once the new legislation on Capital Markets Law comes into effect.

As Istanbul continues to evolve into a Global Financial Centre it is recognised that to achieve this feat there must be an independent publicly owned stock exchange. These steps would help launch a publicly traded IMKB, an achievement Turkey feels is needed to attract new listings, raise capital and increase liquidity in the exchange, and overall increase the profile of Istanbul as serious contender to become an international financial centre. In a crowded market and competitive world of funds and securities, especially with the increasing dominance of foreign exchanges in Singapore, Hong Kong and even Russia, this is really the first step to becoming a truly international financial hub. “Perhaps one of the most important upsides of the global financial crisis, which began in 2007, is the increasing role that developing countries play in the world economy as well as more favourable perception of these economies’ risk” notes Mr. ibrahim Turhan.

Whilst a certain amount of chaos still exists in many countries, Turkey is finding a way to compete and take advantage of growth verticals across many industries. Turning Istanbul into an international financial centre places the country in a strong and enviable position; and could provide the right mix of Eastern prudence and Western philosophy to compete on the global stage.

Business in Istanbul

Investor Trends: Real Estate International leader Jones Lang LaSalle provides an inside look at the Istanbul real estate market.

By Dr. Kıvanç Erman, MRICS, Director, Capital Markets & Advisory, Jones Lang LaSalle Turkey Office Investor demand for existing office assets has remained very strong.

However, the lack of institutional assets seriously undermines the investment potential. JLL continues to see that “strata traditional” sale tends to be strongly preferred by the vendors, as they can generate higher sale receipts on unit basis compared to the block sale. However, the strata sale seriously damages the sustainability of the product as it makes the asset and property management difficult. This will also limit the number of institutional assets entering the market.

Part of the pipeline development to enter the market in the CBD (Central Business District) and in major sub-markets, is expected to qualify institutional investment requirements, increasing the possibility of transaction in the office market. The asking yields, however, might be an obstacle in the way of potential transactions, as they are likely to be aggressive, reflecting the limited number of opportunities. On the basis of this, JLL sees investors considering development projects via joint venture with local developers as Retail well as forward purchase opporBased on market intelligence, tunities. However, joint ventures negotiations continue on a few are not very common as the local transactions in the retail market, developers are reluctant to share with strong potential to be closed their development profit, relying during the remainder of the year. on their experience in the wider It is certain that negotiations take geographical region. The lack of a long time, partly due to the Zorlu Centre project in Istanbul - A mixed use development pre-lease practice in the office slow internal processes of some investment funds, but also longer due diligence stemming from lim- market also acts as a barrier for forward purchase transactions by investment funds, as most of them have a pre-lease requirement of ited transparency in the market.

The Code of Obligations, which became effective on 1 July 50% minimum. Jones Lang LaSalle strongly encourages multina2012 and includes a few controversial articles related to FX-de- tional and Turkish corporates who are owner-occupiers to consider nominated rent contracts, has had an impact on delays. The law the sale and leaseback option, which will enable them to generate has caused uncertainty regarding rental growth in foreign curren- cash proceeds that can be utilised in their core business. This opcy-linked contracts, impacting the future rental income potential tion is increasingly being considered by multinational companies, of commercial assets. The Professional Associations had strongly while Turkish corporates are less inclined, due to cultural reasons. lobbied against the government to amend the controversial articles However, the belief is they will realise the benefits in time, and that and some of the potential investors are known to have delayed deal sale and leaseback opportunities will become more available in the closure in order to see the outcome of the lobbying activity. The medium term. government positively responded to this, passing a piece of legislation in June that postponed the implementation of the controversial Outlook articles until 2020. This is expected to restore confidence in the The Law of Reciprocity, which came into effect on 17 May 2012, Turkish market, and the negotiations on the suspended deals are lifts the condition of reciprocity for foreign legal and private persons to buy property in Turkey. The new law is expected to particularly expected to resume.

The closure of the potential deals will re-establish the yield affect residential sales by individual investors, especially from the level in the Turkish market. This will be an important step for the Gulf countries. As the foreign legal parties can easily buy property improvement of market transparency. The remainder of the year via a company established in Turkey, the law is not expected to might also see deals involving solo shopping centre disposals in make a major impact on the commercial real estate market. the secondary cities, which will be a major milestone in showing In the medium to long term, Jones Lang LaSalle believes there global investor interest in the secondary cities, but also providing a will be more institutional investors entering the Turkish market, with yield indicator for the secondary markets. The successful closure of possible intervals due to the pricing gap and legal challenges. Onthe deals on which negotiations continue will, therefore, show that going economic uncertainty in the Euro zone and possible deterioif the assets are rightly priced the market becomes liquid, providing ration in the future will, on the contrary, trigger more investment to Turkey as Istanbul’s strength will be more underlined. a track record for yield.

Investor interest in Istanbul’s real estate market has strongly revived in 2012, with negotiations continuing on a few potential transactions. These are largely in the form of existing assets in the retail market but development projects are also on the agenda.

Jones Lang LaSalle has seen interest from all sorts of investors, including sovereign wealth funds, investment funds and private equity funds. Retail remains the priority market for investors, with interest not just limited to solo shopping centres, but also shopping centre portfolios covering the secondary cities.

The lack of transactions over the past three years has caused the market to remain illiquid. This has made pricing difficult, particularly for global investors, as they seek transactional evidence to back their pricing calculations. However, it is observed (based on on-going negotiations) that the gap between the asking and offered yields has narrowed. The institutional vendors have more realistic yield expectations; equally global investors have become keener to enter the market, reflecting this on their yield offers.

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Business in Istanbul

Creating a Global Financial Centre Istanbul prepares to build an International Financial Centre to bridge the East and West.

Istanbul, Europe’s largest megacity with a population of over 15 million has always been home to Turkey’s financial sector and the heart of the economy, contributing 25% of the country’s total GDP. Levent and Maslak are Istanbul’s two financial districts and the headquarters of Turkey’s largest companies and banks, including Turkey’s two leading publicly traded banks; Isbank and Akbank. It is also home to global giants of the financial sector including Citibank, JP Morgan, HSBC and Deutsche Bank.

In 2007, as part of their long term economic growth plans, the Government set about developing Istanbul into a fully-fledged international financial centre, where large international banks are based and investment decisions made. The goal is to make Istanbul one of the top 10 financial centres in the world by 2023, the centennial celebration of the country. At the heart of this ambition is Istanbul’s new financial district which is being built in the Eastern part of the city in the Ataşehir neighbourhood on the Asian side of the Bosphorus. Spanning over a staggering 2,500,000 square metres, the Istanbul IFC will create a financial centre larger than London or New York’s in size when completed.

The project, which has already began construction, will encompass office space, residences, a conference hall, a shopping mall and a hotel and generate over 30,000 jobs. It will house the country’s financial regulatory agencies and state owned banks, many of whom will be relocating from Turkey’s capital Ankra. The Banking Regulatory and Supervision Agency (BDDK), the Capital Markets Board (SPK), the Turkish Bankers Association (TBB) and the Borsa Istanbul (IMKB) will all be relocating to the new site. There are also talks to move the Central Bank to the new centre to provide the essence of a truly integrated financial services community.

State owned banks including, Ziraat Bank, VakifBank and Halkbank will also make the move once the project is complete along with other financial firms and related businesses.

Istanbul ranks amongst the world’s top cities in economic growth and has a vibrant and growing financial and commerce sector. According to an extensive study completed by Deloitte in 2007, creating a successful IFC in Istanbul would generate $20 billion GDP, adding over 150,000 jobs by 2025. However creating a world class financial centre that provides integrated financial services in all major financial market segments, including foreign exchange, money, capital (equities and bonds), banking and insurance is no easy task. There is still a need to further enhance transparency and regulation, improve tax policies and address the human capital needed to support an IFC. The Government is already working to address these challenges with a much anticipated legislative package that will act as a conduit for Istanbul to become a leading global financial centre. It will include tax and regulatory changes, specialised courts, an arbitration chamber, and the implementation of the new commercial code which is also due to be enacted very soon and intended to improve corporate transparency and governance.

The Government has also been working to improve the investment climate and further integrate the capital markets to grow the size and liquidity and improve the competitiveness and attraction of the market for both local and foreign investors which they realise will help to strengthen Istanbul as an international financial centre.

Turkey’s financial sector is highly liberalised and the sector is ready for further expansion, driven by solid economic growth along

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with declining interest rates and inflation. According to the Turkish Banking Regulation and Supervision Agency, the Turkish financial sector increased by approximately 20% year on year between 2002 and 2010. The sector is dominated by the banking industry which controls about 77% of the total assets. The Turkish insurance sector is also developing rapidly with 25 % of CAGR (Compound Annual Growth Rate) during 2002-2010, and has gained new momentum after the social security reform that has introduced universal health insurance. Furthermore, increasing the countries profile in non-conventional financial services and banking, including Islamic banking practices is also adding to the sector’s attractiveness and global reach. Turkey at present has four Islamic banks, which accounted for 5% of Turkey’s 1-trillion-lira ($559 billion) banking sector in late 2010, according to data from the Participation Banks’ Association of Turkey.

Although Turkey has seen phenomenal growth over the last decade and has been resilient to domestic and external financial fluctuations, this was not always the case. Since 2001, when the Turkish economy suffered a crisis of their own, due to a miscalculated currency devaluation that led to some of the banks needing bailouts, the Government embarked on a series of banking reforms. In an effort to avoid repeating the crisis of 2001, the Central Bank raised capital adequacy requirements for all financial institutions and as a result the number of banks operating in the market significantly reduced. There was an increase of mergers and acquisitions which subsequently led to stronger balance sheets and improved capitalisation of the banks, creating an overall more sustainable and stronger banking sector. According to the BDDK, the banking sector had a sound capital adequacy ratio of 19% in 2010, far above the European Basel requirements of 8%. Turkey’s banking sector remains sturdy and profitable. It is this combination of prudent regulation and avoidance of toxic financial instruments that has helped Turkish banks avoid the effects of the global recession and European debt problem. Today Turkish banks are in a much stronger position, with seven of the top banks controlling about 80% of the sector’s assets.

Turkey’s financial sector and particularly the banking sector represents great opportunity for investors. Enjoying strong growth rates due to high levels of credit growth and a low level of market penetration even in basic products. Additionally with the rise of Islamic finance and privatisation plans for state owned banks expected soon the future is promising. The Turkish banking sector has enjoyed a wave of foreign investment in the last 5 years from international banking groups including; Citigroup, Dexia and BNP Paribas. There are now more than 20 banks with foreign capital and the sector will continue to be observed by investors around the world looking for strong performance and returns. According to figures released by the BDDK, The Turkish banking sectors net profit in the first five months of 2012 rose 14.1% on the year to 9.62 billion lira (5.32 billion USD) and banking sector loans increased by 22% to 730.2 billion lira (404 billion USD).

Whilst challenges remain to Istanbul becoming a global financial centre, the resilience the Turkish economy has shown, coupled with Government reforms and an advantageous geographic location, place Istanbul in a good position to become a strategic destination in world financial markets.

Business in Istanbul

A Historic Charter The British Chamber of Commerce of Turkey celebrates 125 years.

Established as the British Chamber of Commerce of Turkey and the Balkans, the BCCT was only the second chamber established outside of the UK. For economic victories of countries, strong international trade relations are an important element for success. The BCCT has significantly contributed to the recent increase in trade relations between the UK and Turkey. In the last 18 months, they created a platform for face to face networking for more than 3,000 businessmen at approximately 70 events.

Through introduction of a special purpose electronic portal, businessmen have been able to explore opportunities between the two countries since the beginning of this year.

Jonathan Beard, Chairman of the British Chamber of Commerce said in a speech celebrating the Queen’s Diamond Jubilee: “Being the representatives of a historical journey from the 19th century to 21st century is giving us excitement as the members of the Board of Directors. The Chamber was established as Turkish and Balkan British Chamber of Commerce in 1887 and was the biggest Chamber of Commerce outside England at that time with its two thousand members. At present, we are trying to provide new business development opportunities to companies with the commercial and cultural bridge we established between our two countries. The British Chamber of Commerce contributed to the rapid increase in commercial relations between England and Turkey recently.”

In order to contribute to investment traffic between the UK and Turkey, a primary focus of the BCCT is business fairs and conferences. In fact, the organisation directs members to fairs which

have high business development potential in both countries. Always keeping in perspective, the diversity of trade and the benefits of open dialogue are key factors of success for many participants.

BCCT has recently started to assist in the promotion of a major new fair organisation called Power Industry Turkey, which is being organised by the ITE Group, the 4th largest exhibition company in the world. The Power Industry Turkey Conference and Showcase in September 2012*, aims to bring together over 30 local and international senior-level power industry executives, along with government officials, who will explore key issues impacting Turkey’s power and energy market. Some of the topics include assessing Turkey’s investments into nuclear power, opportunities for wind, hydro, and solar energy, and effects of privatising generation and distribution on the wider industry. Power Industry Turkey’s overall goal is to connect local and international power companies to identify, discuss and implement new business opportunities in the Turkish power market; one of the fastest growing power markets in the world.

The British Chamber of Commerce of Turkey is the official host of the Power Industry Turkey 1-2-1 matchmaking meetings and is working to develop and implement a marketing campaign that will help British businesses find new opportunities and partners in the fast-growing Turkish power market. *The Power Industry Turkey Conference and Showcase will be hosted at the Sheraton Hotel, Istanbul on September 26-28, 2012.

Quality Exports = Growth The Turkish Exporters Assembly sets a strategy for success.

Political stability and a sound macroeconomic strategy have integrated the Turkish economy into the globalized world, while transforming the country into one of the major recipients of FDI in the region. Exports have been the main engine of the Turkish economy. The Turkish Exporters Assembly (TIM) represents the export part of the Turkish economy. As an umbrella organisation of exporters associations, the assembly has 55,000 active members who are pioneers of competitive Turkish sectors and work globally.

With the stability of its economy and its dynamic, productive, and active population, Turkey continues to be the star of the region with its growth potential. Last year, Turkey became a centre of stability, trust, and production with $722 billion in national income, $135 billion in exports, and a foreign trade volume of $375 billion.

Turkey has moved from receiving resources from the IMF to transferring resources to the IMF. To great effort the country has also been implementing serious structural reforms. The main objectives of these reforms are to increase the role of the private sector in the Turkish economy, to enhance the efficiency and resiliency of the financial sector, and to place the social security system on a more solid foundation.

With the foreign trade figures it has attained recently, and an enduring rough time for global trade, production, and investment - like most countries, Turkey is decoupling in a positive direction

from the world’s other economies. Despite negative developments in world trade, Turkish exports in the first half of this year exhibited quite a successful performance. Over the first half of the year, Turkey’s exports rose by 11.2%. The economy grew a further 3.2% in the first quarter.

Thanks to enterprises in new export markets, exports to the Middle East, Africa, the CES (Common Economic Space States), and other Asian countries increased significantly. Current account deficit, too, continued to fall with the reduction in imports. When the steps taken to solve the current account deficit problem influenced the economy, increasing Turkey’s credit score entered the agenda. The international rating organisation Moody’s raised Turkey’s credit rating toward a positive outlook.

Started by TIM, the 2023 Export Strategy is a visionary study that will change Turkey’s economic outlook. Focused on innovation, skilled human capital, information technologies, R&D, and entrepreneurship, all recognised sectors of the future, the Turkey Export Strategy places great importance on the innovative and sustainable growth of exporting companies in order to reach the $500 billion exports target for 2023.

With a skilled workforce delivering on the 2023 Export Strategy, Turkey is advancing toward a much brighter future by the great efforts of 55,000 dynamic exporters who are committed to growth and excellence.

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Business in Istanbul

Growing hand-in-hand with Turkey Turkcell Group CEO Süreyya Ciliv shares how the firm evolved into a regional giant.

The story of Turkey’s Turkcell evolving into a leading communications and technology company, and the resilience of the Turkish economy to external shocks over the past decade go somewhat hand in hand; both ranking among the champions of the global arena. Turkcell, due to its network supremacy, is recognised globally by independent institutions including INSEAD and the World Economic Forum, as well as for its superior service quality and cutting-edge applications, some marking global firsts.

Süreyya Ciliv Turkey, with its successful Group CEO Turkcell economic model, stable policies, healthy financial sector, and robust public debt dynamics, ranked as the third fastest growing economy in 2011 after China and Argentina with 8.5% GDP growth; this despite a global economic slowdown and the worst economic crisis ever faced by the European Union. With its tech-savvy, young population of 75 million and remarkable GDP performance over the past 9 years, Turkey has become the world’s 16th largest economy and the 13th most attractive foreign direct investment (FDI) destination. Meanwhile, as the first and only Turkish company listed on both the New York and Istanbul Stock Exchanges, Turkcell has evolved into a regional player, serving 65.3 million customers across nine countries, in five of which Turkcell operations are the market leader.

Within the markets in which we operate, Turkcell sets trends in Turkey, from which we derive the bulk of our revenues. This said, Turkcell has also improved Turkey’s competitiveness in the global arena, particularly through strenuous efforts regarding the 3G launch. This new era, defined by the integration of communication, information and entertainment is all about “mobility, internet, smartphones, and applications” differentiated by network quality, speed, customer experience and innovation.

Turkcell is clearly differentiated from our competitors in all these aspects. Our significant investments in our mobile network, with mobile internet speeds reaching 43.2 Mbps, ranked us first in Turkey and 13th globally, with data speed targeted to double to 84 Mbps by the end of 2012. Additionally, our high-end niche player in the fibre broadband market, Turkcell Superonline, offering speeds of up to 1,000 Mbps on its fiber network, ranks Turkey among the top-five countries in the world by data speed, while transforming the historic Silk Road into a “Fiber Road”, with Istanbul positioned as a regional traffic exchange centre.

We also differentiate Turkcell by providing our customers with cutting-edge technology of exceptional quality that makes their lives easier. These technologies developed by our R&D and innovation base, Turkcell Teknoloji, have also earned the recognition of international firms and are being exported. Most recently, Turkcell further enriched its telecom services through the integration of cloud computing, data centres and advanced security solutions,

while building Turkey’s first machine to machine (“M2M”) platform, uniting all machine to machine solutions provided to our corporate customers under the “M2M Umbrella”. Our innovative total telecom solutions, especially in location-based services and Near Field Communication (“NFC”), such as mobile payment, mobile signature, mobile education, telemetry applications, e-government applications and various products and services, have elevated Turkey to a country of first. Another of our differentiators conTurkcell, due to its netcerns the smartphone. work supremacy, is recSince 2010, we have ognised globally by inbeen providing our subscribers the best smartdependent institutions phone internet experiincluding INSEAD and ence at affordable prices the World Economic with our own branded T series handsets. These Forum, as well as for smartphones, featuring its cutting-edge applimobile services and applications, plus NFC cacations and superior pabilities, serve our core service quality, some objective of increasing marking global firsts. smartphone penetration, and thereby raising mobile internet usage. We ensured our leadership of the smartphone market in Turkey with Turkcell’s T20, which became the best-selling NFC supported android phone in 2011.

We also set Turkcell apart by contributing greatly towards Turkey becoming an information society, prioritising equal opportunities in information access and closing the digital divide. Having emphasized equality of opportunity in all aspects of life, we have assisted Turkey’s progress with projects boosting the welfare and growth of the local economy. For example, we employ 13,000 people through Turkcell Global Bilgi’s call centres and have established an eco-system of over 80,000 people, including Turkcell dealers and business partners.

Turkcell has also championed the sphere of corporate social responsibility. Notably, our “Snowdrops” project, acknowledged by the United Nations, has granted 85,000 scholarships to female students since 2000. Meanwhile, our “Bridge of Hearts” project which offers cultural exchange opportunities to children from across Turkey, as well as our “Runners to the Future” project, supporting the training of young athletes, are aimed at investing in future generations. Last but not least, in the aftermath of earthquakes in Van in late 2011, we combined our knowledge, experience, and love for our people in the spirit of compassion by initiating the “Turkey Money-box for Van” project, a campaign in support of local education.

With the customer at the heart of our operations, and by facilitating their lives with the latest technologies, Turkcell was named “Company of the Decade” by World Finance Magazine, confirming that our achievements are indeed acknowledged internationally.

Turkcell will remain on the top rung of the communications and technology ladder, a rising star in the growing Turkish economy, and one of the most valuable international brands. In this light, we will greatly contribute towards Turkey realising its vision for 2023, the 100th anniversary of the Republic.

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Business in Istanbul

A Global Turkish Brand One of the worldwide leaders in glassware reinforces the opportunities for Turkey’s export driven manufacturing sector.

The Turkish manufacturing sector has all the attributes to be Pursuing its sales & marketing organisation outside Turkey in a world leader in the export of high quality goods. The strate- order to strengthen its position in the world and forming logistics gic location of Turkey coupled with a young, highly educated and warehouses in Europe, Paşabahçe also initiated in recent years its motivated workforce help make Turkey’s manufacturing sector ro- investment leaps for production purposes abroad. In line with this bust, but what really drives production in this country of just under initiative, Posuda Ltd., a glass tableware plant was bought in Rus75 million people is the expectation, desire, and pride of producing sia in 2003 and was fully modernised with new equipment in 2004. quality goods. While there are many destinations for the outsourc- The factory has attained full capacity production with its new proding of goods at a fair and sometimes even low price, the Turkish uct range and Paşabahçe quality control requirements, and as a remanufacturing sector is built on a different foundation. The sector sult reached the intended leadership position in the market. Trakya believes in selling the features of Turkey, whether it is proximity to Glass Bulgaria-EAD, the glassware plant investment launched in large external markets, access to quality materials, human capital, mid-2004, commenced production in 2005, has also become a sufficient energy supplies, a large internal market, or the sense of strategic location and important production facility for the compride the Turkish export community has in their craftsmanship. pany. With its competitive positioning Paşabahçe Company has successfully minimised the impacts of cy To date Turkey has enjoyed an excelclical risks, accelerated activities focused lent start to 2012 with the country attracton product development, promotion and ing 78.6 percent of its FDI in the Januarypositioning, and improved capacity utilisaMay period from the EU alone. During this tion in production and workforce efficienperiod foreign companies invested mainly cies. With sales mainly in Turkey, Europe, in Turkey’s manufacturing sector, espethe CIS and Middle Eastern countries, the cially food and beverages, at $2 billion company grew its total sales volume sigof FDI. This figure proves that Turkey has nificantly, despite the damaging effects of become a critical manufacturing centre. It the Arab Spring and the European debt is also expected that Turkey’s new highly spiral. Effective marketing activities in Turattractive investment incentive scheme, key and Russia were further bolstered by launched at the beginning of the year to the improved logistics centres in Spain reduce dependency on imports and cut and France. Product development for the country’s account deficit and boost both domestic and international markets investment from both local and foreign has continued. investors into the countries vital strategic Paşabahçe notably grew total sales sectors, will further encourage FDI flow into the country and manufacturing secin 2011 compared to 2010. Production tor. The scheme includes exemptions on continues in domestic plants in Kırklareli, customs duties and VAT, reduced tax liaEskişehir and Mersin, as well as abroad, bilities and support with interest payment and in Bulgaria and Russia. The company and social security. In fact, besides food has succeeded in growing its foreign sales Glassware by Denizli, a Paşabahçe brand. and beverage the manufacturing sector volume by an impressive 20% compared has seen signs of growth in automobile production, alternative en- to 2010. In 2012, with its competitive price approach and sales, ergy materials like solar cell panels, and quality goods like leather marketing and distribution strategies, Paşabahçe is going to congoods and glassware. tinue operations aimed at winning a larger share in targeted mar A shining example of this growth lies in the Paşabahçe Glass kets. The Company plans to position its brands strongly, increase Co., part of the Şişecam Group. Paşabahçe started production its brand sales and reinforce its marketing power through efficient of soda glass tableware by manual production method in 1935. product management and marketing communication.

Paşabahçe Company’s brands include; Paşabahçe, automated Although there has been a slight downturn in Turkish manusoda glass products; Denizli, the hand-made and automated crys- facturing output in 2012, the market remains buoyant especially talline products’ brand; Borcam, the brand for heat resistant items. with robust opportunities in a few key sectors. The Turkish governThe products are developed to cater to three different segments; ment has also implemented policies to encourage domestic pronamely household, catering and industry. Presently Paşabahçe duction and enhance the competitiveness of its exports by making has about 13,000 products grouped under the mentioned brands, legislation investor friendly and providing incentive schemes which and the number is increasing every day. Thanks to the continuous improve tax liabilities for foreign firms to set up operations and prodevelopment and investment policies it has been pursuing since duction facilities. To date this legislation has helped win over large its foundation; Paşabahçe is one of the three largest “glassware” companies like Coca-Cola and GE Healthcare and it is expected manufacturing & sales firms worldwide. The company is the market that more will follow. Already Istanbul is displacing centres like leader in Turkey. Exporting to 130 countries, Paşabahçe captures Dubai as the leading place in the region to operate a multi- national in advance the new trends and requirements of the present time in business from, and with healthy companies like Paşabahçe who world markets, and increases its market share in the world on an have managed to achieve a winning global brand from Turkey the ongoing basis thanks to technological developments. business case for international companies only becomes stronger.

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Business in Istanbul

The Enlightened City Istanbul offers visitors old city charm with a modern flare.

Istanbul has rejuvenated itself from an old city with labyrinth (IBB) taking care of all the districts in general, having duties such as like alleys and ancient mosques, to one of the ‘hippest’ cit- coordinating and controlling the activities of the District Municipaliies in the world. Of course the alleys, markets and mosques are ties, selecting solid waste disposal sites, building and maintaining still very popular and attract millions of visitors every year to the city roads, bridges, operating a public transport system, and so on. city; looking to immerse themselves in Turkish culture. However it Districts like Kadiköy, on the Asian side of the city, has been one of the fastest growing districts in is also now attracting just as many Istanbul for 25 years now, it has areas tourists for its restaurants, bars, of fashionable designer retails shops, and clubs as for the Blue Mosque. fine dining and entertainment making Istanbul is a thriving city offering it popular especially for wealthy locals something for everyone. Strolling and visitors. Developed promenades and people watching in Istanbul is along the water, especially around not a hobby but a lifestyle, whether the marinas and yacht clubs, add exyou fancy a trip to Topkapi Palace treme value to the district and make to get a glimpse of how the Sultans it very desirable for Turks and foreignused to live, a day of shopping and ers alike. While Beyoğlu on the Euronegotiating at the Grand Bazaar, or a cruise down the picturesque Bospean side of Istanbul, is littered with porus, the city is built for exploraancient ruins and remnants of history. tion. At the same time, digging into It was here that in 1348 the Genoese the rich culinary tastes or enjoying a built the famous Galata Tower, one of The Blue Mosque - Istanbul, Provided courtesy of the Turkish Culture and Tourism Office local beverage whether it be a tradithe most prominent landmarks in Istional Turkish coffee or a glass of the local anise flavoured aperitif tanbul. Today Beyoğlu thrives as a culture hub with many museums Raki and people watching the day away also offers a pleasant time and art galleries offering tourists and locals a contemporary and in Istanbul. trendy feel that is on par with Paris, London or New York. Each one Istanbul is a big city and the plethora of districts each with it’s of Istanbul’s districts has culture and history to discover. Picking own charm, means that the city is hard to conquer for a tourist. Is- one over another may never be easy, but the chance to lounge in tanbul province is divided into 39 districts; each of them has a local a traditional Raki tavern or enjoy afternoon tea at one of the many municipality elected by the people living in the neighbourhoods be- beautiful neighbourhood tea houses the city offers is never far, no longing to that district. There is also the Metropolitan Municipality matter what district you find yourself in.

Istanbul, A Developers Paradise Rapid urbanisation and a rise in leisure and MICE tourism is paving the way for new developments.

Turkey is playing a continually important role in the international political arena, particularly as a bridge between Europe and Asia. It’s geographically strategic location has fostered investment interest in the country in general and in particular, the hotel industry. Istanbul remains the focal point for foreign developers to enter the Turkish hotel market. Still characterised by a dominance of small to medium sized unbranded hotels, the number of developments carrying an international brand are increasing rapidly. Brands from all categories will be entering the Istanbul hotel arena in the coming years, including luxury brands such as Shangri-la as well as mid range brands such as Hilton Garden Inn and Courtyard by Marriott. Considering two of the top external markets for tourism arrivals are the UK and USA it is no wonder that Anglo hotel groups are looking closer at Turkey. Istanbul is also seeing a growth in the number of arrivals from the Gulf Countries which will only add to the need for more foreign brands and luxurious hotels.

Istanbul has managed to build its reputation as one of the world’s major conference destinations and is an increasingly popular choice for the world’s leading international associations. Istanbul was ranked 9th in 2011 by the International Congress and Conven-

tion Association (ICCA) for the number of meetings held with a total of 113 large events. The move from 14th to 9th in just two years represents a high average number of participants per meeting.

The ICCA statistics do not reflect the full picture as they exclude the non-rotating meetings, so the total amount of MICE (Meetings, Incentives, Conferences and Events) tourism is in fact higher. According to the Istanbul Convention Bureau, the average length of stay is between three and four days. The numbers are expected to increase in 2012, which is why Istanbul is a prime market for hotel developers worldwide.

Istanbul welcomes about 7.5 million visitors a year and as such is clearly the major market in Turkey for hotel growth. Whether visitors are coming from within Turkey, by sea, or by air, domestic and international tourists agree on one major point; 31% of both prefer 5 star hotels. Istanbul being the crossroads at which cultures traditionally meet will continue to see increased business and trade from Asia and Europe for generations to come, which will garnish growth in Istanbul’s tourism and conference industry. With that in mind, many hotel groups will have the opportunity to prosper with sound investments in a growing and robust destination.

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Business in Istanbul

The Best Airline in Europe A look at how Turkish Airlines have achieved global success and recognition by setting themselves apart from the rest.

Turkish Airlines has come a long way since its inception in 1933. The airline will be celebrating its 80th anniversary next year and should be extremely proud of its achievements. It has transformed itself from a small national airline to a truly global leader in the airline industry.

However, the rise to worldwide success did CEO, Temel Kotil, Ph.D. receiving the SKYTRAX award for not happen over-night Best Airline in Europe for Turkish Airlines.

While many enviable European counterparts are quietly wondering how Turkish Airlines became Europe’s leading carrier, the strategy set by the executive team in Istanbul is clearly a globally winning recipe, emphasized by the numerous accolades awarded to the company in recent years.

With a geographical area of about 300,000 square miles (775,000 square kilometres), and a population of 75 million, Turkey is a large aviation market and houses 43 domestic airports. Nearly half of Turkish Airlines customers are travelling within the country.

While their neighbours simply do not have the advantage of a large local market, Turkey enjoys a strong point-to-point market, as well as additional transfers. Since deregulation in 1996 Turkish Airlines has been impacted by competition within the market although it continues to stand as the dominate player with 50% of the market share domestically and 47% of the international market share.

Continuous redevelopment opportunities and the aggressive economic growth rates in line with the need for new markets have created increased demand for air transportation services between the EU, the Americas, Asia and Turkey. At the same time the Turkish aviation industry has a wide range of segmentation opportunities and executions. The industry outline enables different companies to create different segments to reach the desired profits.

Recent developments of the airline industry have moved the segmentation from being only geographically oriented to a much more sophisticated and detailed level. Today’s industry considers the markets behavioural segmentations as ´business´, ´leisure’ and ´visiting friends and relatives’ (VFR), also price segmentation is a major consideration point for airlines. Turkish Airlines, amongst others, are able to analyse market information including the demographics, income levels and disposable incomes of potential airline passengers which are taken into consideration before setting the price intervals for every network an airline has to offer.

With increased domestic competition and many low cost airlines already operating within Turkey, Turkish Airlines has elevated itself by offering superior services and privilege programs. They are wide ranging, impressive, and completely distinguished from the offerings of most airlines. The Turkish Airlines experience could be anything from an in-flight chef to superior executive lounges with total amenities. These standards are leading contributors to being

voted Europe’s Best Airline by SKYTRAX (a traveller based website in the UK) in 2011 and 2012.

Not only is Turkish Airlines the country’s largest passenger carrier, it is also the largest cargo carrier. The company leads in total export and import cargo in Turkey. Cargo carried in international lines has been increasing over the last two years. As of 2011, 90% of cargo carried was from international business. It is expected that with growth of the Turkish manufacturing sector and regional economic growth, cargo will continue to increase.

Clearly this puts Turkish Airlines in a leading position as the company enjoys the most routes, planes, and domestic hubs and is one of the fastest growing international carriers worldwide. Meaning there is no shortage of planes for cargo to be sent on and a continuous increase of new routes to open trade doors.

A major source of pride and future business for Turkish Airlines is Turkish Technic. The fully owned subsidiary of the airline Turkish Technic provides maintenance services to more than 100 clients, including international airlines such as Lufthansa, KLM, and British Airways as well as a majority of domestic airlines. Increased demand has led Turkish Technic to set up a new international Maintenance, Repair, Overhaul centre, expected to be the largest MRO Centre in the region through the HABOM project located at Sabiha Gökçen International Airport, 70km from Istanbul’s main airport.

The new international maintenance centre will be a full service provider for both narrow body and wide body aircraft, by performing heavy maintenance, engine and components maintenance. The maintenance centre will be established as a centre-of-excellence having full capacity for some specific types of aircraft for which the projections indicate quick fleet growth and increasing outsourcing rates, like the Airbus A380. The HABOM project plans to provide not only maintenance service to around 400 aircraft per annum, but also training and other services to the civil aviation industry in Turkey and the surrounding region. The total estimated investment requirement for the airframe and component maintenance centres is around 500 million USD. By the year 2022, HABOM is estimated to generate a 6.5 billion USD share from airframe and component maintenance segments alone.

Along with the unique service and gourmet menus Turkish Airlines has gone to great extent to build a global brand. Currently engaged in sponsorship agreements with Manchester United FC, Barcelona FC, and Kobe Byrant of the NBA, the airline is attracting many new international customers. In the first quarter of 2012 revenues were up 20% over the same time last year. Turkish Airways is proving the best way to brand a country, grow its economy, and increase trade is through a well-run flagship carrier. The lessons learned in the past have been identified as strengths in the future, while the mandate to get tourists into Turkey and business people out still remains strong. As Turkish Airlines picks up the SKYTRAX award for the Best European carrier for the second year in a row, there is great excitement around the company’s future and global growth prospects.

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Turkish Airlines voted Europe’s Best Airline, a second year in a row by SKYTRAX.

5 Great Things To Experience ın Istanbul istanbul is one of the most beautiful and exciting cities in the world. you could easily spend weeks there and still not see everything. but you must experience 5 things before you leave istanbul.

1. Taste the Perfect Couple: Turkish Coffee & Turkish Delight Turkish coffee spread to the rest of the world by the tradesmen and statesmen visiting Istanbul and it became a popular Turkish taste all over the world. Remember that Turkish coffee should be served foamy. Turkish coffee is served very hot and with a glass of cold water to freshen the mouth to better taste the coffee. It is traditionally served with Turkish delight “lokum”.

2. Visit One of The Largest & Oldest Marketplaces ın The World: The Grand Bazaar The Grand Bazaar first opened in 1461. It currently has over 4000 shops, selling everything from oriental rugs and antiquities, to waterpipes, jewelry, souvenirs and ceramics. It’s customary to bargain for the best price, sometimes close to half of the initial offer. Probably, you’ll get lost in there-it’s a veritable labyrinth. If you find something you like, buy it because you’ll never find the same vendor again.

3. See The Panoramic View of Istanbul From Galata Tower The Galata Tower was constructed in 1348 in the Genoese quarter and was the tallest structure of the city when it was built. Today, it offers a magnificent view of the fairytale city as well as oriental belly dance performances and authentic shows.

5. Get A Taste Of 500 Years Old Culture: Turkish Raki & Meyhane The British down pints in pubs, the French guzzle wine in brasseries and the Greeks smash plates in tavernas, the Turks? Turks make merry in the meyhane, the age-old Istanbul version of a tapas bar, a place to indulge in meze... You’ll not find menus in many meyhanes, it’s common practice to order on the waiter’s recommendations. Istanbul’s most famous meyhane district is Nevizade, located just off İstiklal Street.

The Taste You’ll Never Forget Rakı is a distilled alcoholic beverage that has existed in Anatolia for the past 500 years. Rakı is an indispensable part of the Turkish entertainment and dining culture.

Yeni Rakı is the world’s most consumed anise spirit and Turkey’s most renowned global trademark. Yeni Rakı is the best-selling product in Turkish duty-free shops and is available in all international key accounts.

The Way to Experience Rakı

• Drink rakı by first adding water and then a couple of ice cubes.

• Always drink your rakı chilled or with ice.

• Rakı should be consumed slowly, with hot and cold traditional Turkish mezzes, while being surrounded with cheerful conversations.

Board a ferry at the terminal adjacent to the Galata Bridge (in Eminönü) and cruise up the strait toward the Black Sea. The ferry chugs along the waterway, passing beautiful mansions, the mostphotographed Ortaköy Mosque, passing beneath the Bosphorus Bridge which connects Europe with Asia and along the Rumeli Hisarı Fortress.

The Spirit of Istanbul

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4. Take A Cruise Along The Bosphorus