Select Committee on Trade and Industry Appendices to the Report

Annex A




  1.  The Turkey: Positioned for Business campaign was launched in June 1998 by the then Minister for Trade, Lord Clinton-Davis, at a major conference in London.

  2.  Turkey's selection as a Target Market coincided with increased attention from the international business community—the US had made Turkey its second most important developing market behind China. Aside from the continued growth of Turkey's economy three key factors increased the need for special attention and additional resources:

    (a)  Customs Union with EU in January 1996—industrial goods allowed into Turkey duty free—this gave a major boost to bilateral trade with Turkey.

    (b)  Turkey's size (3rd largest country in Europe) and young dynamic population (fastest population growth in Europe—with 70 per cent under 35 years).

    (c )  Turkey's geopolitical position makes it a gateway to the new and dynamic countries around the Black Sea and the Central Asian Republics.

  3.  Turkey is a long-term market which, over the last 10 years before the earthquakes, had been growing at an average 5 per cent. Much needed economic reforms and financial packages from international organisations like the IMF should see the Turkish market returning to growth this year. The importance of Turkey can only continue to grow with their confirmed EU candidate status and the benefits this will bring in political and economic terms.


  4.  The aims and objectives of the Campaign are as follows:

    (a)  Promotion of Turkey to SMEs. Direct assistance to interested companies.

    (b)  Encouraging links between British & Turkish organisations.

    (c )  Assistance to the British Chamber of Commerce in Turkey.

    (d)  Increased participation in missions and exhibitions.

    (e)  To work with Business Links and other multipliers to develop centres of expertise on Turkey.

    (f)  Increase the involvement and number of major British companies in Turkey.

    (g)  Roadshow programmes outside the major centres of Istanbul and Ankara.

    (h)  Promote Turkish companies as potential partners for tackling the new emerging markets of Central Asia and the South Caucasus.


  5.  There are business opportunities in most sectors in Turkey. The campaign has focussed on those in which we believe we can add most value. Some of the sectors targeted include automotive components, construction (including building materials), Energy, Infrastructure, Environment (water & wastewater treatment), Healthcare, Security and Food Processing and Packaging. The new targets are healthcare, construction, engineering and the environment sectors.


  6.  The nature of the campaign has changed since it was launched.

A.   General Awareness

  7.  When the campaign was launched it was decided the first objective should be to raise the level of awareness of Turkey amongst small and medium sized enterprises (SMEs). Many British companies had tended to overlook Turkey either because of lack of information and/or having a negative perception. The Turkey Trade Unit (TTU) of Trade Partners UK in partnership with our commercial posts in Turkey has worked hard since the launch to address this situation. There have been numerous seminars and workshops including eight regional seminars. These alone attracted more than 250 SMEs. This promotional campaign was backed up by an intensive publicity campaign at national and regional level. An estimated 140,000 people received information on the opportunities in Turkey through adverts and articles in the trade and regional press.

  8.  Although it is difficult to quantify the success of such efforts (apart from attendees at seminars) increases in the number of enquiries received and in the interest from the multiplier organisations like Trade Associations and Business Links was observed.

  9.  This in turn led to an increase in the number of multiplier organisations bidding to run missions to Turkey. This is clearly demonstrated by the figures below (which include outward missions supported under the target market programme budget):

    1997  3 missions. No exhibitions.

    1998  6 missions. No exhibitions (campaign launched in June 1998).

    1999  15 missions. 3 exhibitions.

    2000  9 missions so far—another 4 planned. 1 exhibition.

  10.  Whilst the main focus has been SMEs, large companies have not been ignored. A focussed exercise has been conducted into ascertaining which major (FTSE) UK firms are not engaged in Turkey, but would have potential to exploit the opportunities that exist. These companies have been targeted for specialised outward missions and invited to accompany UK Ministers visiting Turkey so that they can see first hand the opportunities available. This exercise is ongoing.

B.   Sector Development

  11.  Having raised the general level of awareness the second stage in the campaign was to develop the opportunities in certain target sectors (listed above). Detailed strategy plans were developed in some sectors. These included items like the provision of information and inward and outward missions.

  12.  For example in 1999 the TTU commissioned a major report on the opportunities in the construction sector. The information that was derived from the development of this report, combined with the efforts of a sector dedicated Export Promoter led to significant activity in this sector. Events included a larger than ever delegation at the Turkeybuild exhibition plus an outward mission, an UK seminar and two inward missions.

  13.  We have also run a number of events in the automotive sector the results of which illustrate how we have worked to increase contacts between business facilitators in UK and Turkey. We have witnessed two separate agreements between the SMMT and their Turkish counterparts.

  14.  This process will continue in existing sectors and will be expanded to include new target sectors.

C.   Trade Development

  15.  This year whilst continuing to have a sector approach we have looked at the campaign from a trade development point of view. Current initiatives include the creation of an export club based on e-mail technology and match making following a SME roadshow in Turkey.


  16.  An increased number of high level visits have been witnessed during the campaign. Brian Wilson MP then Minister for Trade visited in May 1999 and signed a government to government MOU on infrastructure projects and SME partnerships.

  17.  HRH the Duke of Kent visited in June 1999 and witnessed the signing of a co-operation agreement between the London Stock Exchange and the Istanbul Stock Exchange. In September of the same year Nick Raynsford MP, Minister of State, DETR visited Turkey at the head of a construction delegation. During this visit they toured the sites of the recent earthquake and following this visit a major initiative dealing with regeneration after the earthquake has been launched.

  18.  This year has seen a visit by the Lord Mayor of London and British Invisibles. Nick Raynsford returned to Turkey in September to hand over the British Earthquake Consortium reconstruction plan and explore new opportunities. There are plans for John Battle, Minister of State, FCO to visit Turkey 6-8 November. There have also been inward visits by Turkish Ministers, Governors, Mayors and other VIPs to the UK.



  19.  The British Airports Group Trade Association (BAG) took a mission to Ankara from 1-3 November 2000.

  20.  There is a need for substantial development at a number of airports and any Turkish partner is likely to be a stepping stone to the surrounding region, Central Asia and parts of Russia. As to privatisation there is still no pressure from the Turkish private sector for airport privatisation and it is not yet on the political agenda. Persistence, patience and time will be needed for this particular sector. The case needs to be sold to Government departments (such as Turkish Ministry of Aviation, the State Airport Administrator), agencies and Turkish conglomerates and there will be a need to develop the right local partners.

  21.  Including an element of privatisation in the BAG mission seminar will be one of the ways of achieving this. It is anticipated that it will take place in Ankara covering areas such as airport equipment, privatisation/finance, management/operations, etc, the exact details and contents of which will be planned in the coming weeks. In addition a follow-up inward visit to the UK by Turkish Government officials focused on privatisation will be organised.


  22.  In 1998 Alstom Drives and Controls Ltd (Rugby) won two orders from the Turkish Ministry of Aviation for the supply of taxiway signs to Istanbul and Trabzon airports. The contracts are worth over £250,000. In early 1999 Alstom won another order for airfield ground lighting fittings to Nevsehir and seven other airports in Turkey: Bursa, Agri, Canakkale, Erzincan, Sivas, Tokat and Izmir Korfez worth over £1 million. This makes the company one of the leading suppliers of airfield lighting fittings to Turkey.


  23.  The Turkish Ministry for Public Building and Works has waived the preferred bidder status of the Anglo-Japanese Turkish Consortium AJTC for the Izmit Bay crossing project and announced a rebid. Quite separately, following the restructuring of Kvaerner Plc their Corporate Development subsidiary which was a member of the AJTC has been sold to an overseas company. Kvaerner have also sold Cleveland Bridge who would have supplied much of the specialist steelwork for the bridge from the UK. The successor company intends to fabricate outside of the UK. Finance for the project is uncertain and British interest is now peripheral.


International Arbitration

24.  The absence of international arbitration provisions had held up progress on a number of power project contracts worth around US$13 billion. There were legal challenges to the involvement of foreign companies in public infrastructure projects, notably in the provision of public utilities. The Turkish Parliament amended the constitution to permit international arbitration in the summer of last year.

Gas Distribution Concession Contracts

  25.  Botas, the Turkish gas company, has forecast a five-fold increase in Turkish gas demand over the next decade. Gas deliveries to Turkey from Iran are due to commence in May 2001 and AMEC Utilities are currently assessing the possibilities of gas distribution concession contracts for various Turkish cities along the route of the natural gas pipeline. The cities targeted are Erzerum, Kayseri, Gazientep and Kutahya. AMEC have completed the studies on the potential gas demand for Erzerum and Kayseri and are now drawing up "Memorandums of Understanding" to be agreed with the local authorities on the way forward.

  The introduction of natural gas to these cities will bring significant environmental benefits as existing energy supplies are mainly lignite and fuel oil which cause bad pollution problems.

  26.  This represents a major opportunity for AMEC to assist the Turkish Municipalities in township gasification. Total value of the projects is estimated at £100 million with an anticipated UK content of around £60 million. There will be particularly good opportunities for UK companies who produce end-user equipment like gas fires, central heating boilers, cookers etc.

Power Investors

National Power

  27.  International Power (as from 3 October 2000—formerly National Power) has an office in Ankara. They won a tender in 1997 to operate three power plants and associated lignite mines on the Aegean coast for twenty years (Yenikoy, Kemerkoy and Yatagen). However, since winning the project, International Power has made slow progress on concluding the privatisation process because of concerns over the workforce. But there is pressure from the World Bank to get the transfer of operating rights (TOR) for these stations in place by the end of the year. International Power think that a resolution of these problems could mean that the project could be a flagship for privatisation of the electricity industry in Turkey.

  28.  International Power are seeking the support of Turkish Government bodies for the privatisation of the power plants by "incentivising unions and workers to embrace the principle and way forward for privatising the power plants (this could be via continued job security elsewhere, share options in the new privatised plants or other incentives provided by the state)".

  29.  International Power won the operations and maintenance contract for the 480 MW Combined Cycle Gas Turbine (CCGT) Marmara Ereglisi Build Operate Transfer (BOT) project in which International Power has a 33.3 per cent equity share holding. The project continued generation throughout the earthquakes last year and availability has remained good despite switching to back-up fuel oil during recent gas shortages. They also have a 45 per cent holding in the Ankara 700 MW Combined Cycle Power Plant with Indian partners, Bayindir, valued at £66 million. The implementation of these projects, along with those detailed above, will bring International Power's investment in Turkey to around US$300 million.

Other UK interests

  30.  Midlands Power has a 31 per cent share in the Trakya Electric 478MW Marmara 1 CCGT plant for which Enron was the turnkey contractor. Rolls Royce (RR), is active in exploring opportunities in the market. It has an office in Istanbul and has been working with Bilkent Holding on the Bilenerji 33MW combined cycle power plant project. RR and Bilkent formed the joint venture company, Idel Enerji, which was awarded a diesel project to drive pumps serving a crude oil pipeline in eastern Turkey. There is potential to supply industrial Trent gas turbines for co-generation projects.


  31.  Hydro generation will remain a priority for Turkey. Following a highly successful Power Sector Working Group conference and exhibition in 1998, British Trade International were instrumental in aiding the formation of a UK consortium. Led by Knight Pie«sold, the consortium included HSBC, GE Hydro, Balfour Beatty and Alstom, to pursue the possibility of establishing a protocol with the Turkish authorities, aimed at "ring-fencing" hydro-electricity projects, valued at around $200-$300 million. Although Knight Pie«sold has since been informed by the Turks that Turkey has more than enough protocols to cope with and have no intention of signing new ones, they have also been told that the UK is at the top of the waiting list for a second generation of similar protocols if and when the time comes.


  32.  Turkish Railways embarked upon restructuring in 1996.

  33.  British companies, including those in the services sector, recognise Turkey as an important market that is expanding and UK companies have made significant contributions to the realisation of a number of projects such as the Ankara Metro (Coppee Ltd). They hope to participate in the new transport projects currently planned in Turkey, including the Bosphorous Tunnel project (see para 16) and in any plans Turkey makes for the commercialisation/privatisation of the sector.

Bosphorous Rail Tunnel

  34.  There are plans to build a rail tunnel under the Bosphorous. This would form part of the Ankara-Istanbul High-Speed Rail Link. Planning is at an early stage and funding options are being investigated. Estimated cost is about £800 million. There are some doubts about the commercial viability of the project. A number of UK firms have expressed an interest.

Ankara-Istanbul High Speed Rail Link

  35.  This project involves the consultancy, supervision and construction of an electrified, double track, high-speed railway (including signalling), and it is tied in with the proposed Bosphorous rail tunnel. The £2.6 billion rail link will be 430km long and estimated timescale will be six years following signature of construction contract. A number of UK companies are showing interest, and reports from the Overseas Market Team suggest that the project could move forward in 2000. The Turkish Treasury has approved the project.


Izmit Domestic & Industrial Water Supply Project

36.  Thames Water, in a joint venture with the Greater Izmit Municipality, the Turkish companies Gama Endestri and Guris Insaat, and Japanese companies Sumitomo Corporation and Mitsui & Co, have developed Turkey's first BOT for water supply (valued at £560 million) in the municipality of Izmit on the north east of the Sea of Marmara about 100km east of Istanbul. The scheme draws water from the Kiazdere spring and involved the construction of a new 400 metre wide—110 meter high dam (Yuvacik) by Gama in the mountains to the south of Izmit for a reservoir with a capacity of 60 billion litres of raw water, a water treatment plant with a capacity of 480m litres a day (designed by Thames and built by Guris) and a 90km pipeline to deliver the water to the Izmit area. It is the largest privately financed water supply project in the world.

  37.  The Izmit water treatment plant has been designed to produce 389,000m3/day of treated water (about 50 per cent of the water produced will be used by the 1.2 million people in the catchment area with local industry using the remaining 50 per cent). Thames Water will operate and maintain the project for 15 years before handing over to the Greater Izmit Municipality. The original equity participants in the project were Thames (35 per cent), Gama (23 per cent), Guris (12 per cent), Izmit Municipality (15 per cent), Sumitomo (7.5 per cent) and Mitsui (7.5 per cent).

  38.  The quality of the water produced by the project has been a significant factor in minimising health problems which could have arisen as a result of the earthquake in the region in 1999. The dam and the water treatment plant suffered no significant damage (even though the nearby towns were devastated) and, in the aftermath of the disaster, the Izmit plant was even able to supply some additional townships who had previously obtained their water from other sources which had been severely damaged.

  39.  One year after the earthquake all of the repairs to the plant have been completed and throughout this time the population of Izmit has been supplied with good clean drinking water.

  40.  Thames' confidence in this project was recently demonstrated by their acquisition of the shares in the BOT joint venture company from one of the local partners. Thames Water now owns a 48 per cent share of the project company.

  41.  Taylor Woodrow was project manager for the project.

  42.  Other UK companies currently active in the market include WS Atkins, Babtie Group, Balfour Beatty, Sir Alexander Gibb & Partners, Halcrow, Mott MacDonald, Paterson Candy and Severn Trent Water International.


  43.  The Development Business Team in Trade Partners UK was set up in 1998 to help UK companies, and particularly UK SMEs, to win contracts from Multilateral Development Agencies to implement their development projects. There are two full time members of staff and one Export Promoter working on helping UK SMEs identify and bid for work implementing the European Commission's external development programmes. Their role includes providing individual tailored advice to UK companies, preparation of off the shelf publications on the Commission's programmes and tendering procedures, and briefing on the Commission's external development programme. Both the MEDA programme for signature countries of the Barcelona Declaration (which previously governed the European Commission's development programme with Turkey) and the pre-accession process (which will govern Turkey's process towards meeting the acquis communautaire) are priorities for their work.

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