Annex A
BRITISH TRADE INTERNATIONAL ACTIVITIES
TURKEY: POSITIONED FOR BUSINESS
BACKGROUND TO
THE CAMPAIGN
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.
AIMS AND
OBJECTIVES
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.
TARGET SECTORS
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.
THE CAMPAIGN
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.
KEY EVENTS
IN THE
CAMPAIGN
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.
MAJOR PROJECTS
AIRPORTS
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.
ALSTOM AIRFIELD
LIGHTING CONTRACTS
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.
BRIDGES
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.
POWER
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.
HYDRO CONSORTIUM
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.
RAILWAYS
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.
WATER
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.
TRADE PARTNERS
UK BUSINESS DEVELOPMENT
TEAM
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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