July/August 2016 Volume 15, Issue 4 www.sbrchina.com
Regenerative Medicine Boom Time! Country Report Germany Takes the EU Helm
TURKEY’S Silk Road Dream
President Recep Tay yip Erdogan Forges Ahead ISSN: 1813-310X
COVER STORY Turkish Cargo's Share of World Air Cargo 1.78% 1.56% 1.41% 1.13% 0.80% 0.61% 0.42% 0.42% 0.42% 0.42%
0.47%
0.59%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
World Air Cargo
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Turkish Cargo
July/August 2016
Battle for Logistics Dominance Turkish Airlines Chairman Mehmet İlker Aycı is ready to play a high stakes chess game to win the Silk Road logistics battle.
Turkey is well positioned to win the day as a key logistics center on the Silk Road, but the competition is fierce. by David Lake
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very two years the Air Cargo China event comes to the sprawling exhibition center in the Shanghai Pudong District with all the fanfare and excitement that such an international crowd always attracts. This June there was a certain tension in the air as participants wandered the exhibition floor gazing at the models of the front-loading Boeing 747-8 series and the impressive two-story booths of the world’s biggest air cargo carriers. One reason for the sense of anticipation evident at the Air Cargo China show is the changing nature of the market. This has always been a high stakes game that only those nations and carriers with the deepest pockets and the greatest commitment can afford to play. However, the stakes have further increased since the Belt and Road initiative hit full stride. Tens of billions of dollars are pouring into logistics-related infrastructure across the Silk Road, earmarked by China and its partners to forge and re-establish trade routes across the continent with new highways, airports and express rail lines. The world’s air cargo leaders on hand in Shanghai know exactly what is happening in terms of the Silk Road logistics sweepstakes. The most aggressive players are working feverishly to make sure they can capture as large a piece of the cargo pie as possible. In an industry where supply of air cargo handling capacity far outweighs the demand for service, competition has been augmented further as economic crises hurt trade flows from China to the world. With even more elevated economic woes in parts of the developed world, tapping the demand side to fill massive cargo hubs and holds is the challenge of the day. China remains central to this supply/demand equation. China’s economy may be contracting, but it is still growing. Meanwhile, China’s commitment to bolster trade across the Silk Road has many wondering which transshipment hubs are best placed to win business. Turkey is front row center in the battle to emerge as the dominant Silk Road cargo hub once Belt and Road
July/August 2016
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COVER STORY infrastructure is solidified and operational. Facing off against Middle Eastern cargo carriers, many of which have bet heavily on their own logistics prowess by pumping massive investment from resource-laden war chests into freighters and airports, Turkey stands strong on its location and traditional strengths as the bridge between Europe and Asia.
High-stakes Chess Halit Anlatan, Vice President of Marketing & Sales of Turkish Cargo, has been to his share of Air Cargo events over his decade-long career. At this stellar Shanghai event his exhibition booth is teeming with interested Chinese customers eager to hear the Turkey transshipment story. Anlatan is pleased to oblige their requests as he casts an eye around at the booths of his competitors hungry for Silk Road business. “Look at this crowd of players, all eager to snap up business and make their play as the hub for China trade to the world,” Anlatan remarks. “It is just like a chess game between Grand Masters. We sit at the global logistics and trade table, each with our own strategy and vision. The power in the logistics business is not determined anymore solely by one’s network and capacity. It is all about operational capabilities, such as e-awb, and operational flexibility, like tailor-made cargo. These are the major factors that
Turkish Cargo's Dr. Temel Kotil believes the Silk Road logistics dynamic is changing.
make a difference in this chess match. ” For Anlatan it all comes down to service quality and the ability to deliver goods faster and better than the competition. He sees a Silk Road logistics future based on intermodal transport, as goods speed across Central Asia to markets in the West and across Africa on planes, trains and truck. The ability to manage this intermodal equation in the most cost efficient and timely fashion is
The intermodal world of trade transport is rapidly becoming a Silk Road reality. www.sbrchina.com
the best move Turkish Cargo has to play. It is also the gambit that Turkey believes will win its place as the transshipment hub for the Silk Road bloc of nations in Central Asia. “The logistics dynamic is changing, and it is hard to say where it is headed,” states Dr. Temel Kotil, General Manager and Vice Chairman of the Board of Turkish Airlines. “The playing field is shifting fast. Look at what is happening in Kazakhstan, a country emerging as a central logistics hub in the Silk Road network. Goods enter that country from a rapidly improved rail and road network, and air cargo centers are being set up to facilitate trade to the main cargo hubs in the fastest manner possible.” Turkish Cargo believes it has a major advantage as the development of Central Asian logistics centers, like that in Kazakhstan, emerge to play a leading role in the movement of goods. Turkey shares a similar culture and language with the Central Asian republics, and there has always been a close affinity between these nations and the former Ottoman Empire. That is one reason why Turkish Cargo invests to develop its capacity in the thriving Kazakh cargo cities of Almaty and Astana. Another reason is the development of the best intermodal route from China July/August 2016
to Turkey can shave days off the time it takes to move goods via rail and air. For instance, through the usage of rail and ships, cargo can move to logistics hubs in the Gulf in about 14 days. Turkish cargo analysts calculate that those same goods can be delivered in six to seven days, with the direct lines across Central Asia in place. That is a time difference few companies can ignore in an e-commerce world where the movement of goods must take place at a faster and faster clip.
and much appreciated products were taken to Europe and vice versa. When it comes to the Turkish logistics world, perhaps no group is more powerful and influential than the Association of International Forwarding and Logistics Service Providers (TİKAD). Founded in 1986 and boasting over 400 members, the Association covers all areas of intermodal transport. The Chairman of TİKAD, Turgut Erkeskin, is working tirelessly to make sure that Turkey is a central Silk Road trade hub. Turkish Trade Hub “The rapid rise in infrastructure inOn the very western edge of Asia, Turkey vestment is allowing us to improve all has always been an important gateway forms of intermodal transport in and out to Europe. The country enjoys a straof Turkey,” notes Erkeskin. “Our proxtegic significance due to this unique imity to the European Union is a great location. For centuries, the country has advantage, one that the Chinese invesbeen a vital hub connecting China with tors can well benefit from by partnering West Asia, and from there to Europe. with us on the logistics front in the comThe ancient Silk Road brought economic ing years.” Erkeskin believes the current prosperity to Turkey in ancient times, Agreement on the Customs Union with making the West of Turkey the most the EU provides the right legal frameimportant transfer station and port for work and conditions to facilitate the pastransshipment in East-West trading. It sage of goods from China to Europe. was via the Silk Road that China’s fine Erkeskin is pleased that China is willing to revive the new Silk Road Central Corridor. “We know that more than a trillion US dollars are going to flow into Central Corridor infrastructure and Turkey has taken initiatives to pave the way for this investment. The most important steps taken in this direction happened recently. The first is the creation of a US$40 billion budget for infrastructure, of which nearly US$1 billion will be spent by the Turkish government in the coming year alone.” Erkeskin notes the second major step in the equation was the signing of a most important general agreement between Turkey and China on the Silk Road Economic Belt, 21st Century Maritime Silk Road and Central Corridor in late 2015. This led to the all-imporTIKAD's Turgut Erkeskin sees China as a logistics partner. July/August 2016
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tant Turkey-China Railway Cooperation Agreement Bill passed by the Turkish Parliamentary Foreign Affairs Commission. “The development work is continuing on many projects to improve intermodal transport between China and Europe,” adds Erkeskin. “With the new railway routes that are now in the works we will have chance to transship goods from China to Europe more quickly and at less cost than ever before.”
New Transport Modes Turkey is leveraging the age-old trade advantages in a modern context. Turkish Airlines, the holding company of Turkish Cargo owned 51% by public and private investors and 49% by the Turkish government boasts one of the youngest f leets amongst the European carrier community. With the fourth largest air cargo network in the world, Turkish Cargo travels to more international destinations – some 290 – than any of its peers. Its spanking new air cargo facility in Istanbul, which handled over 1.2 million tons per year, provides a state of the art cargo option. Turkish Cargo’s f leet includes eight next generation, wide-body and longhaul Airbus A330-200F aircrafts, and three A310-200F aircrafts. With the Airbus A330-200F cargo aircrafts included in the fleet, Turkish Cargo has the capability of conducting direct cargo flights on the long haul lines. Backed by Turkish Airlines, considered as the fastestgrowing international airline that flies to the highest number of countries, Turkish Cargo has the financial backing and ability to invest in capacity to compete with the biggest players. “The architecture of our new cargo terminal is an indication of how much importance we place on air cargo transportation, including state of the art facilities and a top class operating environment,” concludes Kotil. “Within the short time since its establishment, our new cargo terminal has considerably increased our overall efficiency. We believe this new facility simplifies and redesigns the operational processes and maximizes the service quality. In this way we can ensure sustainable development, increase operational efficiency and deliver customer satisfaction.”
COVER STORY
Turkish Cargo Challenge Turkish Cargo has watched its air cargo business grow in leaps and bounds this decade. Now it is time to prepare for the next step.
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urkish Cargo began its first major freighter flights to Shanghai just five years ago when it added a weekly flight to its schedule. Prior to that, Turkish Cargo provided service daily via its regular Boeing 777 widebody aircraft, but with the addition of freighter f lights the equation began to change. From 30 tons daily, Turkish Cargo now ships 100 tons a day from its centers in Shanghai, Beijing, Guangzhou and Hong Kong. Plans are afoot to add another two or three points as soon as approvals can be arranged. “The potential for the market is big. How can it not be? This is the biggest producer of goods in the world, and the business all flows from here,” explains Mehmet İlker Aycı, Chairman of the Board and Executive Committee of Turkish Airlines. “You need to know your niche if you want to succeed. Since we are in the process of increasing our capacity, we tend to focus on the high yield products, the more value added cargo.” Aycı points out that cargo yields have been under pressure over the last five years, even with the continuously increased volumes. At the moment, about 2,000 tons a month of high yield products are imported to Turkey from China, primarily electronic goods, toys and raw materials for electronic instruments and automobile components. Still, Aycı feels the nature of the air cargo business is about to go through major changes in this Belt and Road era, and Turkish Cargo is preparing for this. “The capacity is getting bigger and bigger. While demand is growing the growth in demand is not matching the growth in capacity,” explains Aycı. “Supply is particularly huge on the ship and
Turkish Airlines Chairman Mehmet ilker Aycı is closely watching Silk Road developments.
air sides. Every major shipping company is getting larger ships and all the airlines are increasing their fleets. That means competition will be more fierce. Though there are still limits in train capacity that may change as well.”
Intermodal Future Turkish Cargo works with some of Turkey’s top manufacturers to find the fastest way to ship their raw materials from China. Electrical product components from Shanghai, for example, usually travel to Kazakhstan by train. When they arrive in the Central Asian republic after about five days, they are transferred to another train to the Caspian seaport of Baku. From there, they either head across to Europe or are loaded into a train to Turkey where a ship transports www.sbrchina.com
them to their final destination. The entire process typically takes about 14 days. What interests Turkish Cargo is the future development of Kazakhstan as an air cargo hub. The combination of air and train can reduce shipment time to Europe and Turkey to just six days. Turkish Cargo already has deep relationships in Central Asia’s largest and richest economy and is exploring ways to invest in the regional hub. Currently, freighters are flying six times a week from Shanghai and Guangzhou into Almaty with other flights headed to the capital of Astana. “The Middle East has an intermodal shipping solution with sea plus air,” notes Aycı. “It takes 14 days to reach Europe compared to the six-day train and air option we can provide. That is a major benefit. The advantage of transshipment July/August 2016
of train and air is the time. If you go the with the support of more capital. its goods by ship to Dubai, and then on other way towards the Gulf it takes a lot Listed on the Istanbul Stock Exchange to the US and Europe, when problems longer. In the time game we are tops if with a market capitalization hovering arise air is an option. Three years ago we can solidify these kinds of intermodal around the US$3 billion mark, Turkish there was a Bangladesh port strike for links. Intermodal is an important buzzAirlines Group is eager to grow the eqthree months and Turkish Cargo had to word for us at Turkish Cargo.” uity side of its balance sheet to better quadruple its weekly freighter flights in Taking the lead on the development of capture Silk Road logistics opportunities. what was a stellar financial year for the Silk Road infrastructure is critical. In this Senior financial managers are constantly carrier. Shippers were impressed by the context, Turkey is more concerned about on the road in world financial capitals quick time to market, and many are conAzerbaijani competitors than the Middle explaining the opportunity to foreign insidering new air options. Eastern cargo giants. Currently, China vestors interested in taking a slice of the Now What? goods are flowing through Azerbaijan and Silk Road marketplace. the infrastructure planners are considering “We are in a position to win the loAycı is closely watching the trends to positwo major shipping options: one that ships gistics game and we expect the capital tion his cargo business in the future. When European bound cargo across the Caspian markets will come to our side to support asked what the biggest change has been in Sea in a boat from Azerbaijan Bulgaria and our expansion initiative,” notes Aycı. the last decade of growth, Aycı remarked another that trucks cargo “time value”. “Though time into the northern Turkish value was important a rail network to catch trains decade ago, it is even more bound for Istanbul. important now,” Aycı notes. Turkey prefers to see “E-commerce has made the the goods f low through time equation even more its network, but matters pressing and changed the were made difficult as the nature of the cargo supply road connection to the rail chain significantly.” line was not of high qualAycı remembers that ity. To make sure Turkey a decade ago consumers does not lose out on this used to go to the retailer, major cargo flow, the new see the goods, compare Turkish Prime Minister t he qu a l it y a nd t he n Binali Yildirim quickly apmake a choice. Now they proved a project to rebuild search for their favorite the road to necessar y brand online and order standards. As the former d irec t ly. China is t he Minister of Transport, center of this e-commerce Yildirim is lauded for revolution, and Turkish The shift in the supply value chain is to e-commerce companies. his work to complete the Cargo is adapting to the multi-billion dollar Boschanges it is already seephorus Rail Tunnel and the development “Istanbul’s third airport is going to give ing in the supply chain. of important road routes in Anatolia. It is us even more capacity to be the best Silk As for the future, Aycı is not making this kind of infrastructure commitment Road hub. We will consider deploying any bets as to where things will be in the that is important in the battle to domicapital to support the intermodal area world of air cargo trade. “It is not clear how nate logistics markets in the key Silk in the form of trucks and trains. We are the global trade scenario will play out and Road hubs. studying that area closely.” what consumer trends are on the horizon. Turkish Cargo is also preparing to Where will e-commerce be five years from Coming Plans secure more business from the Maritime now and what else is coming on the techTurkish Cargo and its parent Turkish Silk Road countries. Vietnam and Bangnology front to surprise us? Where will Airlines have expressed their total comladesh are growing more important for the cost of oil be five years from now, and mitment to the air industry on both the the Turkish Cargo business prospects. how will that impact air cargo carriers? All passenger and cargo side. With TurkFor instance, Bangladesh is the second these are good questions. The only thing ish Airlines considered to be the fastest biggest producer of textiles after China, certain is that Silk Road infrastructure growing passenger carrier with one of with many foreign brands building opwill dramatically improve and that does the region’s biggest f leets, and Turkerations there. Turkish Cargo has daily have a positive impact for our operations ish Cargo growing at a rapid pace year widebody air cargo flights to Dakka and in Turkey and around the world.” over year, the focus in on the next step. weekly freighters on the move. Clearly, this step would be made easier Though Bangladesh favors moving – David Lake July/August 2016
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COVER STORY
President Recep Tayyip Erdoğan faces challenges as he works to implement Turkey’s Silk Road vision.
Turkey’s Silk Road Dream Turkey and China are eager to form a strong bond to link one end of the Silk Road with the other. by Esra Tekil
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uly seems to be an excellent month for Turkish-China relations. Last July, China President Xi Jinping and Turkish President Recep Tayyip Erdoğan addressed the high profile China-Turkey Business Forum in Beijing. In front of an illustrious audience composed of leading Silk Road businessmen and politicians, Xi put the Turkish relationship with China into a clear and concise perspective. “Standing at the east and west ends of the Eurasian continent respectively,” Xi remarked, “China and Turkey were the starting and ending points of the ancient Silk Road and made important contributions to exchanges and the prosperity of human civilization.” That day Xi Jinping honoured Erdoğan with an elaborate welcome ceremony with full colour guard outside the East Gate of the Great Hall of the People in Tiananmen Square. Xi Jinping’s wife Peng Liyuan, Vice Chairman of the Standing Committee of the National People’s Congress Chen Changzhi, State Councilor and Minister of Public Security Guo Shengkun, Vice Chairman of the Chinese People’s Political Consultative Conference Luo Fuhe were all on hand for the occasion. That afternoon, Erdoğan laid a wreath at the Monument to the People’s Heroes. The solemn ceremony and diplomatic exchange was a show of great respect for the Turkish leader and underlined the commitment to an important Silk Road partner. In the July previous to that, Erdoğan celebrated one of China’s and Turkey’s greatest business achievements: the inauguration of the long-awaited high-speed rail link between Istanbul and Ankara. The line cut the over 500km journey in half, from 7 to just 3.5 hours. Erdoğan was on board for the maiden voyage and hailed the link, which cost US$4.1 billion, as a victory for China’s efforts to establish itself as the world’s premier high-speed rail constructor. The Ankara-Istanbul link was built by a Chinese-Turkish consortium which won the bid in 2005. China Railway Construction Corp., China National Machinery Import Export Corp. joined with Turkish firms Cengiz Construction and IC İçtaş Construction. China lent Turkey US$750 million to help make the project possible and the success paves the way for Chinese
COVER STORY munications, trade and transportation industries. Around the same time as the inauguration of this Association, the Bank of China was granted a license in March 2016 by Turkey’s Banking Regulation and Supervision Agency (BRSA) to formally operate in the country. As China’s most internationalized and diversified bank, Bank of China’s entry into the country is of significance.
Strategic Investment
Turkey is working hard to bring stability to the market at a time when the region is in turmoil.
companies to win other big infrastructure projects in Turkey, or at least collect a share of the US$45 billion Turkish State Railways plans to allocate for rail up to 2023. “The relationship between Turkey and China is important for both countries and the region as a whole,” remarks Kemal Simsar of SBB Capital Partners, a financial consultant engaged in bringing projects to China. “As one of the world’s fastest growing economies, Turkey faces challenges, but the country is filled with opportunity and great companies. It is an attractive destination for Chinese investment and benefits from a strategic location as well as a dynamic and skilled workforce. We have the population and manpower to make a difference and have shown we can deliver economic results. It is only a matter of time before we resume our former level.”
Enterprise Association In a vote of confidence for Chinese and Turkish business cooperation, the powerful Chinese and Foreign Entrepreneur Alliance made an important statement in May 2016. This group, working with the Consul General of China in Istanbul, formed the Turkey-China Enterprise Association. Xu Ke En, Head of the Turkey Branch of the Industrial and Commercial Bank of China, the world’s largest
Prior to the events in March, Turkey’s new Minister of Energy and Natural Resources Berat Albayrak, paid his first visit to China seeking investment in renewables, nuclear energy and coal industry. Albayrak met the China giants of the wind power and coal mining sectors in Beijing and solar power representatives in Shanghai. During his four-day visit to China, Albayrak shared Turkey’s goals and projects with Chinese counterparts and discussed opportunities for collaboration and investment in these most strategic of sectors. Despite the geographic distance, the economic and cultural relationship between China and Turkey has a long history. At the start of the millennium, Turkish trade with China was a mere US$1 billion. Last year, the amount reached US$27 billion, with a stated goal of reaching US$100 billion by 2020. The volume of trade has increased remarkably along with the rapidly rising interest displayed by Chinese and Turkish companies to invest in one another’s
bank, was elected the Association’s first president. This timely appointment celebrated the ICBC purchase of a 75.5% stake in Tekstilbank from Turkish GSD Holdings in April 2015 for US$316 million, making ICBC the first Chinese bank to formally operate in Turkey. Chinese Consul General Gujing Qi attended the opening ceremony along with 24 Chinese business leaders of the highest order. Qi noted that, “In the long run, once economic growth is back on track, Turkey has huge potential and the opportunities outweigh the challenges.” Qi expressed his hope that Chinese companies play an important role in trade and economic cooperation to develop bilateral strategic and cooperative relations between China and Turkey. The Association’s mission is to serve e nt e r pr i s e s a nd develop a strong strategic platform. Its founding members are composed of businesses in the f ina nce, energ y, construction, comSBB’s Kemal Simsar is in favour of Chinese investment flows. www.sbrchina.com
July/August 2016
Arçelik, Garanti Bankası, Şişe Cam and Demirdöküm of Koç Holding encourages other companies to enter China.
Turkish Forays
The Chinese and Turkish leaders enjoy a moment with the next generation.
countries. Current trade flows between these two prominent Silk Road countries is mostly based on the importation of goods from China to Turkey. There are many reasons for the growing trade numbers and increased presence of Chinese enterprises in Turkey. With its unique geopolitical status connecting the East and the West and its preferred status on the edge of the EU, not to mention the ever-pending subject of EU membership, Turkey offers attractive investment opportunities to Chinese investors trading with Europe. In addition, Turkey has become an important source for providing Chinese industry with goods, such as raw materials, chemicals, industrial and healthcare equipment.
Presidential Diplomacy Xi Jinping visited Turkey as the Vice President of China in February 2012. On that occasion, the two nations signed 28 agreements comprising mostly joint investment projects amounting to US$4.3 billion. The investment fields were first outlined in the October 2010 framework agreement on The Improvement of Mutual Commercial and Economic Cooperation. Under this framework Turkey hopes Chinese companies create employment and provide technology transfer by adding value to the manufacturing process. Following President Erdoğan’s 2015 visit to China, investment activity began July/August 2016
to accelerate. Hattat Holding and China Avic International signed an agreement worth US$1.5 billion for the construction of a thermic power station in the Amasra region. Turkey’s well-known construction group Ağaoğlu also reached an agreement with China’s Sinovel for the construction of electric power stations with an investment of some US$1 billion. Meanwhile, Turkish Akfel Group and Sun Energy of China will produce solar panels with a total investment of US$350 million. With the support of a positive financial atmosphere the investment interest of the Chinese companies in Turkey is accelerating. Currently, China General Technology Holding Ltd. (Genertec), which is amongst the top ten companies in China, is planning to invest US$1 billion in Turkey in the fields of energy, health and spare parts for trucks, buses and commercial vehicles. Likewise, Dongfeng Motor has decided to invest US $250 million in Turkey and Chinese energy companies are interested in establishing mining and renewable energy in Anatolia. With its population exceeding 1 billion, China is an attractive market for both large Turkish companies and SMEs. Today, Turkish companies are more conscious of the importance of this market than ever before, and with confidence comes a willingness to invest. The success of business groups such as Zorlu, www.sbrchina.com
The Turkish banking sector has led the way into China. Garanti Bankası, one of the largest banks, was the first to open a Representative Office in 1999. Türkiye İş Bankası, another well known bank, set up a Shanghai Representative Office to provide consulting services to Chinese companies willing to invest in Turkey and vice versa in 2009. Akbank of Sabancı Group, a leading holding company, and state bank Ziraat Bankası, are opening offices very soon. The objective of these banks is to improve relations with China to better understand the market opportunities and support trade. Leading Turkish groups are active through their own companies or Chinese joint ventures. Koç and Sabancı Group, the kings of the Turkish business world, have invested in China since the start of the millennium and look to invest further. Sabanci’s Kordsa acquired 99.5% of IQNE Qingdao Nylon Enterprise from US-based Invista Group as far back as 2006. The following year, Koç’s Arçelik BEKO, the leading household appliance maker, bought washing machine maker Changzhou Casa-Shinco. In 2014, FIBA Group, which owns franchise rights for Marks & Spencer in Turkey, Ukraine and Russia as well as Gap and Banana Republic brands in Turkey and Russia, opened Star Mall, a US $300 million shopping center in northeastern China. Starmall Shenyang Plaza has become a major attraction for entertainment and shopping in Shenyang and remains the biggest Turkish investment in China to date. With the positive effects of these investments, companies are encouraged to invest and cooperate with Chinese companies. The Turkish priority sector of defense and security is another area of cooperation and transfer of know-how. “We can create mutual value given China is our biggest Asian commercial partner and second biggest in the world,” says Bora Doğualp, General Manager of Tepe Defence and Security Systems. “Cooperation can be established in specialized areas, such as security consulting,
COVER STORY electronic and physical security services or training and plant management.” Based on the long common history between the two important Silk Road markets, Turkish and Chinese executives can cooperate and create long-term partnerships. “China has been an important foreign trade and investment market for a long time,” says Dr. Zehra Güngör of Stage Communications Consultancy and World President of International Public Relations Association (IPRA) for 2014. “In the last few years, the communication network has naturally enlarged as the cooperation between China and Turkey has. The interest of Chinese investors in Turkey has increased substantially as well.” Güngör emphasizes that communications supported by investment and trade has enlarged the mutual cooperation. “It does not seem difficult to strengthen communication between the two ends of the Silk Road,” she says. “We share a kind of togetherness based on past trading relations and cooperation in terms of language, culture and arts. From this perspective communication management is most necessary.” Turkey has a huge interest in information and communication technologies, especially high-tech telecom services, due to the needs of a large population. The government allocated a considerable
part of its budget to IT infrastructure to support ongoing and future projects to improve the quality and efficiency of ITbased public services. Turkey is eager to make a leap forward in technological innovations and as such adopted the R&D and Innovation Support Law in 2008. The R&D Law supports the development of technological innovations, improvement of product quality and standards, and eases access of foreign direct investments focused on R&D and innovation. For this purpose, the Law provides technology centers, R&D projects supported by public enterprises or foundations, cooperation projects and techno-enterprises with a tax discount of 100% for expenditures incurred until 2024. In addition, the R&D Law provides tax incentives for withheld income tax, stamp tax exemption and social security premium support for R&D-related activities. Investments concerning the transfer of industrial know-how and new technologies are particularly supported with special tax advantages and incentives in the Technology Development Zones, Industrial Zones and Free Zones.
Sectors of Interest In terms of renewable resources, such as geothermal, solar, wind and biomass
Times have changed since the Ottoman Empire ruled the region with an iron hand. www.sbrchina.com
energy, Turkey has a huge potential for foreign investment. The rapid industrialization and urbanization of Turkey makes environmental technology investments more interesting, especially in the areas of waste management, water supply and management and air pollution control. All environmental projects, particularly investments in technologies, are supported by special incentives. For that reason, the Turkish energy sector offers good investment opportunities through the means of future privatization of state-owned electricity and distribution companies. Turkey has an advantageous position in the field of maritime and land transportation. Logistics is one of the fastest developing sectors over the last few years. Foreign investor interest in the sector is visible, as clearly indicated by recent acquisitions. The geographic proximity to emerging markets enables Turkey to offer combined transportation opportunities to these markets. Turkey is expected to become an important logistics center in the coming years through infrastructure investment, incentives, privatization opportunities and its easy access to trade routes. “Turkey is a crossroad in the logistics field as the country is on the Western end of the Silk Road and links Europe to the Middle East,” says Neşe Güneş, General Manager of Exova BM Trada. “In this context, important investments concerning transportation lines have been done in the last ten years. Investments concerning transportation infrastructure will remain on Turkey’s agenda. The new Turkish government has incorporated many plans related to transportation in its economic program.” In terms of the Silk Road dream, it is essential that Turkey remain at the forefront of the initiative. SBB’s Simsar goes on to explain that Turkish companies want to become more international and are eager to expand their businesses abroad. “These companies watch all possible investment and partnership opportunities outside Turkey very closely,” adds Simsar. “The desire to grow and become an important part of the Silk Road economic community is something no one can ignore.” July/August 2016
Investment Climate Rules
Turkey has created a positive investment platform for investors interested to take a stake in the Western side of the Silk Road.
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avoids discriminative approaches against urkey has become one of the become “the production base of Eurasia foreign companies,” Neşe Güneş commost attractive emerging marin medium and high-tech products”, by ments, based on her experience as the ket investment destinations by increasing the competitiveness of its Turkish shareholder of EXOVA BM TRADA, enhancing its business environment for private sector, the quality of its labor a Turkish-British joint venture in the certififoreign investment and making strucforce and supporting manufacturing cation sector. “Foreign firms are treated the tural reforms to improve the framework. of high-tech products. This policy was same as Turkish ones. By creating ventures Up to date, over 40,000 international highlighted in the Industrial Strategy with Turkish partners, foreign investors companies have invested in Turkey and of Turkey announced by the Ministry of gain access to market data and local experiforeign investor interest continues to Industry and Trade back in 2010. Before ence. Turkey’s economic power in the reincrease. the formation of this strategy, 27 sectors gion, the market size, speed Relative stability on of progress and potential the economic and political make the country a good front creates trust on the destination for foreign inside of foreign investors vestment.” to make sustainable and The new Commercial long-term business inCode enables the formavestment decisions in key tion of a company with sectors. Though the couna single shareholder and try is affected by the Syrthe online performance of ian situation and conflict almost all essential legal with Russia, the f lows proceedings of a comof long-term investment pany. The Code ensures have been maintained a reliable, transparent and increased. and wel-regulated investIn terms of its investment climate for foreign ment climate, Turkey is a investors by preventing business-friendly country double taxation, simplifyfor Chinese investors. Market rules and regulations have made foreign investment much easier for ing company formations, The country has an exall companies to come and go as they please. prov iding compliance perienced private sector of financial reporting system with EU backed by an investment system simpliwere analyzed and the problems in the standards, and strengthening provisions fied by recent legislative changes. From regulatory framework, and business enconcerning unfair competition. The digithe business perspective, in addition to vironment re-evaluated. talization of corporate proceedings, such being an emerging trade corridor in EuTo enhance the business climate to atas General Assemblies, has a positive imrope, Turkey offers Chinese companies tract foreign investment, Turkey initially pact on the reduction of red tape and its an advantageous location to reach imrevised its legal, industrial and service associated operational costs. portant markets in Europe, Eurasia, the infrastructure to replace bureaucratic According to new regulations, foreign Middle East and North Africa. Turkey’s barriers with a welcoming environment. investment companies are allowed to membership to the EU’s customs union Laws were adopted assuring compliance own immovable properties subject to loand its logistical advantage makes the with the EU legal system. The FDI law now cal regulations. The permission process country an attractive destination for forallows the formation of a company with is easier compared to former procedures eign direct investment (FDI). 100% foreign investment – with exceptions and the ownership claim may only be In line with the EU’s Lisbon Strategy, such as media, where foreign shareholders rejected in cases where the immovable Turkey focused its industrial developcan own up to 50% – and guarantees equal property is located in a military or other ment policy on “knowledge” and “intreatment to foreign investors. special security zones. novation”. The country is targeted to “Turkey’s investment environment July/August 2016
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COVER STORY
Queen of Stone
Zuhal Mansfield is one of Turkey’s most successful and respected businesswomen – thanks in part to China and Hong Kong.
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uhal Mansfield has never backed away from a challenge in the high-powered world of business. Perhaps that is why the Government of Turkey declared this founding member of the Women Entrepreneurs’ Association of Turkey and Chairperson of the influential Bilecik Women Entrepreneur Association as “the country’s most successful businesswoman”. Interestingly enough, it was Hong Kong that first gave a leg-up to the woman known for creating the multi-billion dollar Turkish marble export industry. Mansfield still recalls her first visit to Hong Kong in 1991. She was greatly affected by this bustling South China metropolis at first sight. “It was almost too much for me to take in,” remembers Mansfield, Chairperson of TMG Natural Stone Mining and Construction Co., Turkey’s leading marble exporter. “The crowds, the people, the hustle and bustle,
the high purchasing power, the intensive way of doing business – I loved it all.” After years of experience in living and dealing with China, Mansfield has clear and concise insights on this important Silk Road partnership. “For improving the economic ties that form the basis of our relationship, it is essential to maintain the existing friendship between the two countries and enlarge communication by developing cultural interaction and increasing tourism volume. Meanwhile, it is most positive that China is willing to execute megaprojects under the 2023 vision and targets of Turkey. These large scale opportunities will further enhance economic relations.” Still, Mansfield believes the status quo between China and Turkey has produced a deficit in the balance of trade that should be addressed if the relationship is to strengthen. “In order to constitute a beneficial win-win relationship for both
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countries,” she adds, “the initial step should be to avoid the trade of low quality products from China to the Turkish market and ensure an importation discipline that adds value to both economies. In terms of the exports from Turkey to China, the product variety should be increased through a well-planned and coordinated sector-based endeavor.”
Hong Kong Home Mansfield decided to settle in Hong Kong after stops in Sweden, Botswana and Australia. Dazzled by the vast amount of construction in Hong Kong, she decided to invest in the mining business, selling Turkish marble to developers in the growing city. Widely considered as the first person to export fine Turkish marble, Mansfield was instrumental in the creation of an industry that now exports more than US$1 billion a year to China. Nearly a decade after landing in Hong Kong, Mansfield (now in Istanbul) received an award from the President of Turkey as the “most successfull Turkish enterpreneur in China.” “People laughed at me when I wanted to sell Turkish marble to China, and then laughed when I opened a marble stockyard in Hong Kong, then a quarry and finally a factory,” recalls Mansfield of her road to the top of the marble business. “Even now they laugh at me, but I am making money.” Today, Mansfield has assumed the mantel of one of Turkey’s most international and successful entrepreneurs. She has been a member of the Foreign Economic Relations Board (DEIK)since 2000, Chairperson of the Turkish-Egyptian Business Council and Vice-Chairperson of the Turkish African Business Council, both since 2009. Mansfield spent over a decade in Hong July/August 2016
zakhstan and China to assist in Kong, where she launched the establishment of Khorgos TMG as an industrial supplier International Frontier Coof Turkish marble, travertine, operation Centre and in the limestone and granite. When construction of Aktöbe Logistic she opened her Hong Kong Centre and Aktav Maritime office in the early 1990s, there Harbor Enlargement Project. were 6,000 men registered in Furthermore, Turkey became a the Turkish mining business, founding partner of the Asia InMansfield was the only womfrastructure Investment Bank an. Not much has changed (AIIB) to support the region and since then in the male-dommake use of finance facilities. inated world of mining, but Mansfield is pleased with her Investment success. Climate Since the early days of expanding the business in Hong Mansfield strongly feels that Kong, Mansfield has forged for Turkey to play a role in the markets for marble exports in future development of the some 18 countries as TMG has Silk Road the country must become one of the country’s become more attractive for most successful stone suppliinvestment. She believes this ers. Extracting over 25,000 is happening as a result of cubic meters of rock blocks the recent foreign investment annually from its Anatolia incentive policy. In 2015, Chiquarries, TMG’s 350 workers na’s direct investment in Turprovide cut marble for prokey exceeded US$1.6 billion, jects, wholesalers and dealers double the annual amount worldwide with high quality prior to implementation of TMG's Zuhal Mansfield made her name by learning the ropes in finishing, perfect dimensionreforms and foreign investthe construction sector of Hong Kong and China in the 1990s. ing and squaring. In addition, ment policy. TMG’s raw materials are proBetween 2003-2015, total Turkey will play an active role in the incessed with the latest Italian technology foreign investment in Turkey rose by frastructure, energy and transportation to produce 350,000 sq. m. of finished US$163 billion and more than 44,000 local sectors through the development of close products. companies have benefited in some way cooperations with many countries along from foreign capital. Huang Songfeng, Silk Road Future the Silk Road. Commercial Consul at the Consulate With regards to Turkey’s ongoing role Mansfield is well aware that Anatolia – General of China in Istanbul, recently in the Belt and Road initiative, Mansalso known as Asia Minor or Asian Turemphasized the importance of the Turkfield cites a speech by Yu Hongyang, the key – was an important crossroad on the ish market for Chinese investors. FollowChinese Ambassador to Ankara, in April historic Silk Road trade route. “No one ing the Industry and Commerce Bank of 2015. Yu affirmed that the objective of forgets that the Silk Road was essential China (ICBC) acquisition of Tekstil Bank the Silk Road initiative was to bring opfor the Turkish nation from both a comin late 2015, three Chinese companies portunities to all nations of the regions mercial and cultural aspect,” she says. “It bought the third biggest container harthrough development, cooperation and was an immense revenue source for the bor for US$1 billion, the biggest investpeace. “It should not be forgotten the Ottoman Empire as well as a roadway ment by Chinese companies in Turkey. Silk Road project is a win-win initiafor culture, science and art in addition “Lately, the negative political developtive for all,” concludes Mansfield. “In to its trade tradition. For all these reaments in the Middle East have had some this framework, Turkey will create and sons, Turkey is certainly in favor of the impact on Turkey, like other countries of bring important value when it comes to One Belt, One Road project.” the region,” remarks Mansfield. “Trade regional development by cooperating in Mansfield notes the Belt and Road and investment are affected by this uncommon projects with the Middle Asian project aims to bind countries through pleasant process. However, each crisis countries.” infrastructure such as highways, railcreates opportunities. We can ensure Mansfield adds that Turkey has already ways and seaways. This vision provides stability despite the disadvantageous made its intention to cooperate clear to opportunities to Turkish contractors conditions of the region by using our various Silk Road partners. For instance, in infrastructure and logistics. It is expast experiences and the opportunities Turkey has expressed its interest to Kapected that over the mid- and long-term, created by this crisis.” July/August 2016
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