Select Committee on Trade and Industry Ninth Report


35. Turkey has land borders with eight countries and direct sea links to eight more. Historically it has acted as a trade link between Europe and the Near and Middle East. There is no reason to relinquish that role now. Over the last ten years Turkey has found new markets in the former Soviet Union, and has the highest number of companies at work in the region, although not the largest market share. When Turkey accedes to the EU it will be uniquely placed to channel trade from the Caucasus countries to Europe. The Middle East is a traditional trade market for Turkey. We heard estimates that the cost to Turkey of observing sanctions to Iraq runs into billions of dollars a year.

36. A principal focus of Turkish activity in the Middle East is the oil and gas pipelines in development. These would not only help solve Turkey's energy supply problems but would bring much needed revenues and investment to the country. International relations between Caucasus countries, Russia and the Middle East are creating obstacles to the realisation of some these pipeline plans. There will be valuable opportunities for UK involvement once construction is underway. We heard that one company is already monitoring the possibilities for contracts arising from construction of a natural gas pipeline from Iran, due to commence deliveries in May 2001.[14] We encourage BTI to publicise all upcoming energy construction work to UK companies.

37. UK trade with Turkey has grown substantially over the last eight years. Exports to Turkey have doubled, increasing from £690m in 1992 to £1,215m in 1999. Imports have nearly trebled from £446m in 1992 to £1,214m in 1999. The UK trade surplus with Turkey in 1999 was therefore just £1m. The UK is the fifth largest importer to Turkey and its third largest export market in world terms; in the EU it is placed fourth in the table of importers of Turkish goods. The UK is the largest recipient of Turkish direct investment; at the end of 1999 cumulative investment equalled $523m.[15]

38. Foreign direct investment into Turkey is low. Since 1980, only $27.5 billion has been received as FDI[16]. The sky high interest rates have made it deeply unattractive to investors, and until recently the Turkish parliament had not agreed a free market policy. There are 370 UK businesses in Turkey, 40 of which started in 2000. Although UK inward investment has risen in cash terms, it has fallen proportionately from 11% of total inward investment in 1996 to 6% in 2000. The Istanbul Stock Exchange has no restriction on foreign portfolio owners and reported to us a steady growth of international investors.

39. Turkey is one of Trade Partners UK's ten priority emerging target export markets. In June 1998 the Minister for Trade launched the Turkey: Positioned for Business campaign. The campaign focusses on sectors which seem most promising for UK business. New targets are healthcare, construction, engineering and environment. Within environment is water and wastewater treatment. We noticed that since this initiative was set up, exports to Turkey have fallen from $2,683,000 in 1998 to $2,214,000 in 1999. We were told by YASED, the Foreign Investors' Association that this was due to the repercussions of the economic crisis in the FSU. The value of Turkish imports and exports did indeed fall across the board. However the UK's percentage share of EU exports to Turkey also fell, from 10.9% in 1998 to 9.3% in 1999. We hope that the 2000 figures, when available, do not show a similar decline. Those we spoke to praised the campaign. We were told that the initiative had encouraged 120 UK businesses to carry out trade missions who had had no previous contact with Turkey.

40. In our meeting in Ankara with the Minister for Foreign Trade we raised the issue of Turkish barriers to the import of spirits, including gin and vodka. We were told that excise legislation had been fully EU compliant since February 2000. However, we have heard from the Scotch Whisky Association that measures are still in place to protect Tekel, the national spirits producer.[17] UK spirits exports to Turkey are now lower than before the implementation of the Customs Union. The European Commission has made the removal of import barriers in the spirits industry its top trade priority in Turkey. A new Monopoly Bill, intended to amend the Alcohol Act, was adopted in January 2001. This should have made legislation in line with the Customs Union, but in fact has created further restrictions on the free movement of goods. Companies trading less the a volume of one million litres will be obliged to do so through Tekel.[18] We encourage the Government to make a representation to the Commission on the issue of spirit exports to Turkey on behalf of UK spirit producers.

41. The Publishers' Association informed us that book piracy is a great problem in Turkey. Four major publishers have taken legal action against smaller retailers but this has been of little long lasting effect. The English Language Textbook (ELT) sector is the most severely affected. It is worth approximately £16 million, but publishers estimate that around 50% of this market is supplied by pirate editions. This percentage rises to 90% in some areas at certain times.[19] This situation acts as a disincentive to UK publishers who may have otherwise wished to expand trade to Turkey.

14  Ev p 8 Back

15  Http:// Back

16  Ev p 2 Back

17  Ev pp 34-35 Back

18  The Scottish Affairs Select Committee is currently inquiring into the Scottish drinks industry. Back

19  Ev p 34 Back

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