APPENDIX 3
Memorandum submitted by Major British
Exporters
Major British Exporters is an informal grouping of
some of the principal UK based companies who are engaged, either
through manufactured exports or contracting, in carrying out major
projects overseas.
Some of our members will have made independent
submissions to you in response to your announcement of 4 July
that you were undertaking an inquiry into trade relations with
Turkey.
Equally, due to the nature of their particular
business, although some of our members may only carry out limited
direct business with Turkey, their products can end up with Turkish
users. Thus, a Turkish airline could very well use American aircraft
with Rolls-Royce engines.
The purpose of this memorandum is therefore
to outline briefly to you how we see prospects in the Turkish
market, particularly in those sectors which are of direct current
and potential interest to a number of our members.
You will already be aware of the general economic
background of Turkey. It can, perhaps, be briefly summarised as
having a large (65 million) and rapidly growing population with
an economy which is expanding well, if somewhat erratically. Although
it is rapidly industrialising, the infrastructure is seriously
deficient in many ways and will require very large investment
over a long period of time. It is this situation which makes Turkey
a very important and attractive potential market for a number
of our members and other UK companies generally.
UK companies have, of course, been active in
major projects in Turkey. An outstanding example was the Bosporus
Bridge which was built by Cleveland Bridge, a subsidiary of one
of our members. Other projects include the Adapazari water treatment
plant (built on a BOT basis), the Ankara to Istanbul motorway,
the passenger transit railways of both those cities, and a number
of power generation and transmission projects.
Specific areas in which opportunities lie for
our member companies include:
(a) Water supply and water and sewage treatment.
This market is very large and the current infrastructure is not
only generally inadequate, but is under additional pressure from
the growth in population; increasing industrialisation; the irrigation
requirements from local agriculture; and tourism. Good quality
water and proper waste treatment is essential if tourism is to
flourish, and thus numerous coastal towns have a particular need
for improvement.
This market is, therefore, not only
important, but it is one which some of our members, particularly
Biwater, are fully competent to attack and it is also one which
could potentially benefit other UK based suppliers, many of them
SMEs who benefit from supply to the main contractors.
The problem in the water market is
that although there is no shortage of planned projects—some
of them very large—the limiting factor is finance. The financing
demands of Turkey's infrastructure as a whole on its domestic
financing capability are such that many of the projects in the
water market can only proceed with foreign financial support.
In this context, UK companies are considerably disadvantaged,
particularly in comparison to their active and competent German
competitors. Our members, such as Biwater, cannot compete where
the Germans have access to KfW finance. This financing is dressed
up as private sector finance to avoid accusations of German government
support and subsidy, although in truth KfW is not a private sector
financial institution at all, being owned by the Lander or German
regional governments.
Thus, our companies often cannot compete
at all, or, if they do, have to make co-operative arrangements
with German firms which result in a much reduced UK content compared
to undertaking the job as a whole.
(b) Power generation and transmission. There
is a large potential market here, and evidence that industrial
growth and improvements in living standards will be prejudiced
unless more investment is made soon in hydro-electric and thermal
power plant and in much improved transmission. Some of this requirement
may be met by schemes on a basis similar to PFI, where UK firms
have a good background, although Turkish official attitudes need
to change somewhat to realise the full potential of this route.
Competitive ECGD support will be essential for UK firms.
(c) Rail. Modernisation and upgrading of
the mainline system is essential, as is development of light rail
transit and subway systems given the serious congestion in major
cities and in the access to them. This offers considerable opportunities
for some of our members. Adequate export credit and other financial
support is essential in this field. In past submissions to various
parts of government we have repeatedly made the point that several
of our members, although UK based, are not UK owned and are part
of multinational businesses. They therefore may have the option
of carrying out a project from a location other than the UK, and
this naturally reduces the UK export content. This applies to
an increasing extent to some UK owned companies. One of our members,
for example, which is UK owned today has an easy option of carrying
out overseas rail business under the German flag with the access
to German finance, and the loss of work to the UK, which that
implies.
Competitive ECGD and other financial
support is therefore essential.
(d) Other fields. General construction, airports,
harbours and ports, highways and bridges are all markets of substantial
potential. Although the capability of indigenous Turkish companies
to carry out such projects has developed significantly, in projects
of this kind where specialist expertise is required there are
excellent opportunities for contractors, equipment suppliers and
consulting engineers to obtain a valuable and important part of
the work, as indeed there are for those in the financial sector.
CONCLUSIONS
(1) Before making any detailed suggestions,
a word of caution is required on what might best be described
as the psychology of the Turkish market, particularly as many
major projects in Turkey involve an interface with their government.
It has to be recognised that the strongly nationalist legacy of
Attaturk is a continuing factor. It is not simply a matter of
being a widely and proudly held sentiment. It still colours attitudes
to the outside world, for example in such things as the whole
principle of concessions to foreigners, and even such smaller
things as the jurisdiction of contract arbitration. Again, the
Turkish definition of what are entirely domestic matters, and
what are issues of general international concern is quite different
from ours. It is thoroughly stupid and self-defeating not to recognise
this, and in the last analysis, Turkish attitudes are just as
legitimate a reflection of their distinctly unique history as
our own are. Those single issue groups who so easily, and doubtless
quite sincerely, criticise Turkey in various ways not only forget
this, but also forget that Turkey, at its present stage of development,
often has to take decisions for the general good of the whole
country which are not as sensitive to some sections of the community
as the decisions we would have the luxury of making in similar
circumstances.
(2) We hope your Committee will urge HMG
to do everything it can to develop and promote business with Turkey,
not only to the benefit of UK companies but for the benefit of
Turkey and its citizens.
(3) The UK should take a very positive long-term
view and commitment to the undoubted potential of the country.
(4) The market is very competitive, as our
rivals like Germany clearly recognise its potential. It is, therefore,
essential that ECGD, both in premium rates and in the overall
amount of cover available, is competitive with the ECAs of the
countries with whose companies the likes of ourselves need to
compete.
(5) Organisations like the Turkish British
Business Council should be supported more strongly and directly.
3 October 2000
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