Memorandum submitted by the British Chambers
of Commerce in Turkey
OVERALL POLITICAL
RELATIONSHIP, BI
-LATERAL BUSINESS
ENVIRONMENT
The fact that the UK has long been a firm and
outspoken supporter of Turkey's entry in to the EU continues to
generate a good business climate for trade and investment. It
is obvious that political support results directly in trade opportunities.
The have been no backlashes suffered by the French and Italians
for various perceived wrongs.
However, it is probably fair to say that competitors,
such as France, Italy and Germany, tend to take more space in
the press, and this must have an impact. High level visits to
Turkey by British Ministers or senior civil servants are few and
far between, and due to a lack of time do not lend themselves
to a PR exercise. A rushed visit to Ankara, without a stop-over
in Istanbul and meeting business leaders and getting some column-inches,
is a waste of resources.
The lingua franca in the Turkish business
environment is English; 30 years ago French and German were used
more, but there may not have been immediate and obvious benefits
to the UK from this change.
OPPORTUNITIES FOR
BRITISH COMPANIES
IN TURKEY
When doing business in Turkey, as in any other
country, the businessman should look not at comparing the business
environment between Turkey and other countries, but in comparing
his own strengths and weaknesses with the competition, as the
business environment is the same for all. In fact Turkey is trying
hard to improve conditions for those intending to invest in or
sell to Turkey, although there still can be obstacles.
While major UK companies have taken the plunge
in the past five to 10 years, such as Vodafone, HSBS, Aviva, to
name but a few, there are not enough SME's coming to Turkey.
Opportunities in a country like Turkey must
be long term. Over the short term it is possible to get ones fingers
burnt. The "over 5% growth rate" since the financial
crisis is a partial result of the major drop in GDP during the
crisis, and an important part of the growth is catching up. There
is no guarantee that there will not be another correction in the
future.
Turkey is not a "low cost" producer
at the moment, but is certainly "lower than the UK cost".
It makes sense for British companies to move part of their manufacturing
from the UK to Turkey, retaining R&D, marketing and head office
functions in the UK.
UK companies who are threatened by Turkish competition
(see the reference to Ford Transit parts below) should make a
conscious effort to buy into their competitors in Turkey. This
makes for sense when one takes into account the fact that most
Turkish SME's are under capitalised.
IMPEDIMENT FOR
BRITISH COMPANIES
IN TURKEY
Naturally there are a number of obstacles to
doing business in Turkey. The proportion of the black economy
is so high, whether it be from professionals such as dentists
and lawyers declaring only a small part of their income, or whether
it is the large farming community with tax breaks and an environment
that cannot be policed easily, that the tax burden falls on those
parts of the economy which cannot escape the net. As well as VAT,
"luxury" tax is imposed not only on drinks and luxuries,
but also mobile telephony, fuel and other basics.
This leads to a black economy in unexpected
areas, such as fuel (diesel is smuggled in from Iraq) and even
mobile telephones (the company subsequently bought by Vodafone
was issuing unregistered pay-as-you-go cards in the hundreds of
thousands!).
Overall the tax imposition is comparable to
the UK and other OECD countries, but one should take care if competing
domestically in an industry that has undeclared and unregistered
operators, as they will have a lower cost base.
While there has been a Customs Union working
effectively for many years now, discrepancies and irritating obstacles
can arise. Normally they can be overcome with diligence and patience,
but in the case of a ban on the importation of certain drinks
by (especially) Diageo, intervention at a high level (Ambassadorial,
Prime Ministerial) may be necessary.
Ex-pat living conditions are good overall, although
the cost of living in Turkey has increased, exagerrated by the
strong TL, and the number of schools is limited (but probably
adequate).
OPPORTUNITIES FOR
TURKISH COMPANIES
IN THE
UK
Turkey has the human resources from a base of
skilled labour, whether it be in engineering, construction, computing,
software, medical, or whatever. While some Turkish companies are
world players in their own right, some are missing the bit "at
the top", whether it be access to the top and best international
connections, design teams or whatever.
Turkish car factories work efficiently, with
a high quality of product, and economically, but (despite there
being accomplished designers in top car companies overseas) there
is no independent Turkish car company, software engineers proliferate,
but there is no Microsoft; bridges can be built but not designed;
hosptials can be manned; airports can be built and run, but again
better with outside assistance.
Turkish companies should seek out this "missing
link" in the UK, and there have been examples of this happening
successfully.
IMPEDIMENTS FOR
TURKISH COMPANIES
IN THE
UK
There is a lack of understanding about how business
in an economy such as the UK runs on a day-to-day basis. An example
was brought to me at the recent Turkey Awareness day at BERR.
A Turkish supplier to Ford Turkey for Transit vans was unable
to supply Ford in the UK; the reason given was that the number
of SKU's was too small, and Ford UK needed a wider range of parts
to be supplied in order to consider the Turkish company as a supplier.
I suggested that they join forces with other suppliers in Turkey
and sell their products together, as a single supplier, single
invoicer. I do not yet have feedback if this suggestion was taken
up, or if it was successful, but in a world where systems are
less important such as Turkey, the UK becomes a slightly alien
environment.
Then there is the vexed Visa system. Unfortunately
with the UK intending to issue ID cards to all nationals and residents,
any softening of the visa regime for Turkish nationals is not
on the cards, but the UK needs to be seen to be listening to visitors,
especially business visitors (and is doing its best to do so).
A great deal has been done to simplify visa
applications for Turkish citizens, but the recent change to a
biometric visa (ie fingerprinting) will certainly lead to frustrations,
despite a commitment to simplify applications, as it means the
presence of the applicant at a visa centre, and this will not
go down well with those Turkish businessmen who have little time
or are in a hurry. The Turks are a proud people and can easily
take a decision based on feeling, and could decide to do business
in what they perceive as a more "friendly" business
environment. Luckily for the UK, while Schengen visas are easier
to obtain, they are of a limited duration, and so one fingerprint
in 10 years can be compared to 10 applications (even 20 applications)
in 10 years.
The fact that the FCO is seen to be doing their
best to assist, is important, and I hope that they are given the
opportunity to make life easier for genuine Turkish businessmen
to visit the UK.
FINALLY, EU MEMBERSHIP
Today it is unclear what the future will bring
with regard to Turkish membership of the EU, and I feel that it
is becoming increasingly unimportant, as the EU has no choice
but to increase business with Turkey. The EU needs the working
population (some countries more than others) and the resources
that Turkey has; one is reminded of the board game "Risk"
where the "Turkey" of the board game is the most important
area. Whether it has been drugs, or now energy, Turkey is the
conduit from East to West, and increasingly from West to East
with contracts in the "stan" countries, with Western
capital or know-how, and Turkish management, engineers and workers.
As I mentioned, British support for Turkish
membership is important. Britain genuinely recognises the advantages
of Turkish membership, even if the advantages are more for the
UK than other EU members, and should continue to vociferously
support Turkish application.
Even if Turkey does not join the EU, getting
itself into a position economically and politically where it could
join were it not for obstacles placed by present members, will
be almost as important as joining.
December 2007
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