Examination of Witnesses (Questions 83-99)
CBI
1 APRIL 2008
Q83 Chairman: Welcome both of you to
this evidence session on our economic relations with Turkey. We
are very grateful to you for coming to give evidence; we always
value what the CBI does. I think you know that we visited the
country the week before last, before Easter; it was a very interesting
visit and we met your opposite numbers there. Thank you for what
you have already contributed to the Committee. Can I ask you,
as I always ask, to introduce yourselves for the record?
Mr Campkin: Thank you, Chairman.
My name is Gary Campkin and I head up the International Group
of the CBI.
Ms Shearman: I am Pauline Shearman;
I am responsible at the CBI for Europe and Eurasia.
Q84 Chairman: Can I begin by asking
you a rather general overarching question about the scale of the
opportunity in Turkey and the scale of the risk? We were told
in Turkey, I think by a number of our interlocutors, if I remember
rightly, that it was a high reward, medium risk place to do business—not
a low risk but a medium risk place. Do you agree with that analysis
and what kind of companies do you think should be taking advantage
of those opportunities?
Mr Campkin: I think, Chairman,
that that is a fair analysis. It is certainly not the easiest
market in the world but it is certainly not the most difficult.
There are some good opportunities for companies in a range of
sectors; we would particularly identify areas like engineering,
financial services and certain types of manufacturing. But, as
your trip to Turkey highlighted, there are also some risks and
some issues that companies need to think about in terms of strategic
access. Pauline might want to add something in terms of her experience.
Ms Shearman: I should probably
have mentioned that I am also a member of the Turkish-British
Business Council and was at the meeting yesterday with member
companies. The overarching feeling there was that the level of
business possible in Turkey was not really reflected over here
accurately enough and that there was plenty of scope for possibly
even the Turkish side to make companies more aware here, and I
know that from our colleagues in UKTI that they will be setting
out a programme of road shows to alert companies of the opportunities.
Q85 Chairman: We will look at those
questions in more detail later, so thank you for those comments;
and I think this Committee was certainly struck by the kinds of
things you are saying when it was in Turkey. Just the kind of
companies—not the sectors—what size companies should
be doing business in Turkey?
Mr Campkin: I think, Chairman,
if you are looking at a market with these dynamics it is probably
not suitable for the very small companies; you are probably looking
at mid-caps and upwards—people who have experience of dealing
with some of the issues of a market with some of the complexities
and some of the barriers that we identified in our written evidence.
So I think it is probably mid-caps and above.
Chairman: Thank you very much. We want
to look at some sectoral issues in more detail now.
Q86 Mr Hoyle: You have just touched
on sectors and I was wondering what do you think are the biggest
opportunities and where are they for us?
Mr Campkin: I will ask my colleague,
Pauline, to deal with some of that but in general terms, as I
have already outlined, they are areas like engineering, areas
like energy, financial services—
Q87 Mr Hoyle: Transit of energy as
well, do you think?
Mr Campkin: Yes, I do and that
goes to the heart of the issue of Turkey as an energy hub and
some of the political dynamics which the Committee may want to
pick up in further questioning.
Ms Shearman: Certainly other areas
that we have identified are particularly power generation—British
companies who are already working in Turkey on that; general infrastructure
development, which obviously in the pre-accession phase and any
post-accession will be subject to considerable funding from the
EU, and there are, we feel, probably significant opportunities
there; and education and training is another key area—there
is a very lively appetite for British education and language skills.
Q88 Mr Hoyle: Why do you think that
we have already seen a rollout of privatisation, and we have seemed
in general to have shied away—British companies not taking
advantage? If we look at some of the power companies that became
available; if we look at infrastructure the Australians are trying
to do business out there, they are getting involved, why is it
that we are not there?
Ms Shearman: We look after a number
of developing markets at the CBI and there is obviously huge excitement
about other markets, particularly China and India and there is
a possible case for saying that there is a lack of awareness of
opportunities in Turkey, but, nevertheless, there are also some
issues with companies having difficulties with bureaucracy fundamentally
and with processing any disputes.
Q89 Mr Hoyle: Just as a matter of
interest, in telecommunications we are meant to be a world leader—there
we are and who gets it, the Italians.
Mr Campkin: If I could just add
a comment to that; traditionally Turkey has not been seen as a
classic slam-dunk British market in the way that some others have,
and I think it goes back to some of the comments about which Pauline
was talking earlier, about information availability, familiarity
with the market and also a trade-off against opportunities elsewhere
in the world.
Q90 Mr Hoyle: We went to Turkey—absolutely
fascinating and telling us a very good story. They were telling
us that it is a gateway country—a gateway to the Middle
East, whether it is Iraq or wherever, that you can go through
Turkey and they do business that way. Do you think that British
business is using that route? Do you think that it is actually
a viable way to open into other markets? If so, do we have companies
doing it? And if we have not, why not?
Mr Campkin: Again, Pauline can
pick up on some of the detail, but in general terms I think our
view is that there is a lot of capacity and scope for increasing
those links, increasing those dynamics within the market place.
As we said in our written evidence, Turkey has a very strong presence
not just within its immediate region but with the broader region
in which it operates, and certainly if you look at some of the
dynamics of the Turkish business community, the contracts that
they are winning and the way that they are accessing markets,
it should make sense for British companies to partner with them
in joint ventures and other business arrangements and bring in
the particular dynamics of British expertise. We do know from
our contacts with our Turkish colleagues that they are keen and
anxious for British companies to do more and certainly it is an
important part, we believe, of the UKTI strategy to highlight
those opportunities and to help companies find a better balance
of doing business and accessing the market in the region.
Ms Shearman: I was going to add
to that that we are organising this afternoon with our Turkish
counterparts a seminar to explore exactly that, which is based
on opportunities for working with Turkish companies.
Q91 Chairman: A seminar you said?
Ms Shearman: Yes, this afternoon
with our Turkish counterparts, to look at that very issue looking
at opportunities not only in Russia and the CIS but also in the
Middle East.
Q92 Mr Hoyle: So there is hope, that
is what you are telling me?
Ms Shearman: We are hopeful that
this will be fruitful this afternoon.
Q93 Chairman: Will there be an outcome
from that meeting or is it just an information exchange?
Ms Shearman: Certainly we would
be happy to provide you with some output.
Chairman: You anticipated my question;
thank you very much, we would welcome that.
Q94 Mr Hoyle: The other thing is
that Turkey keeps saying, "We are the hub, we are going to
be the energy hub; this will be the conduit. Across to our country
ports are going to be established and that is how we are going
to get energy out." Is that really the case?
Mr Campkin: Energy politics is
remarkably complicated and I apologise for stating the very obvious.
There have certainly been a number of significant moves which
have allowed Turkey to develop itself as part and parcel of the
energy nexus in the region. There are a number of other plans
which would require significant amounts of funding which, if carried
through, would enhance Turkey's role. Pauline has done quite a
lot of work in terms of the CBI on energy hubs, so maybe I could
ask her to give a little more detail.
Ms Shearman: We are very keen
to support any initiatives in this area. We realise that obviously
the geo-political position of Turkey is very important, not only
for southeast Europe but for the Middle East as well, and we believe
that pipelines going through Turkey will help to diversify energy
supply routes to the EU. I think one of the main issues for us
is working with our EU Member partners to ensure that those sorts
of initiatives are looked at—clearly there is quite a lot
of diversity of interest within other EU Member States as to how
these things should proceed, and we clearly will be, through our
umbrella organisations, business organisations in Europe putting
our thoughts forward.
Q95 Mr Hoyle: So to get it right
you actually feel that Turkey is going to be the hub because some
of the evidence we have had is that people will bypass Turkey
and Turkey may miss out on that. Just suppose that you have it
right and it is going to be the hub, you think that there are
opportunities for British companies, but what are the risks for
British companies?
Mr Campkin: Just to clarify the
hub or a hub, it certainly will be a hub whatever happens as we
move ahead.
Q96 Mr Hoyle: You can only have a
hub if people are going to put their energy through your country.
If they are going to bypass you and go to Greece you have a bit
of a problem, do you not agree?
Mr Campkin: That is right but
you can have multiple routes and access to the market and that
is why I said that what will be critical in terms of developing
the full potential of Turkey will be whether some of these other
projects come on stream and whether the funding for these other
projects come through. It is quite clear that the British energy
majors are involved in the market already and they are doing a
lot of work in terms of exploring the various projects, and certainly
we believe very strongly that if those projects come on stream
UK companies will be part of it and will contribute greatly to
the realisation of the reserves in both oil and gas within the
broader region.
Q97 Mr Hoyle: My final question,
the thing that worries me that it may not quite happen is that
Turkey are looking to nuclear to ensure that they have supply
for their range of requirements, so that shows to me that maybe
there is not quite the confidence that all this energy is going
to come into Turkey if they moved into nuclear. What can we do
to ensure that British companies are involved in that programme—we
know that the French are already, we know that discussions have
taken place—is there anything that you think we should be
doing to ensure that the British are not missing out once again?
Mr Campkin: I think the key thing,
as with all of these market opportunities, is to make sure that
the British Government through UKTI, through the Foreign Office
and through BERR, ensure that they have a handle on the opportunities,
make sure that they get information out to companies and to make
sure that they have effective dialogue and liaison with the energy
companies, and to ensure that they help the process as much as
possible. A lot of it is getting information out; a lot of it
is helping through some really quite difficult layers of bureaucracy
and regulation, to deliver large-scale big ticket projects like
this.
Q98 Mr Weir: We have heard a lot
about the complexity of the Turkish legal system, particularly
with regard to restrictions on foreign ownership of land. Are
local representatives in Turkey essential for UK companies that
want to invest in it?
Mr Campkin: Again, I will ask
Pauline to answer in more detail on the practical side, but in
general terms the use of local market representatives in countries
like Turkey where things are not always easy does make sense.
I think you have to be very careful how you pick your local representative;
I think it has to make real business sense to do so; but in general
terms it can be an asset to the business. Pauline, you may have
something to add.
Ms Shearman: On the legal system
I think there are still quite a number of challenges. It was perfectly
clear from our discussions yesterday at the Turkish-British Business
Council that a number of companies have cases long outstanding
for maybe two or three years and the process of resolving them
is extremely slow. So disputes are handled at the administrative
courts and not only is the process slow but sometimes the outcomes
are inconsistent and the interpretations of local legislation
differ from region to region. So with the average case taking
between 12 and 18 months there is a great deal of variance in
some of the regional courts between the understanding of the issues
and the way the law is implemented. Our experience in talking
to our counterparts at the end of last year was that companies
feel that cases are being dealt with but it is a very, very slow
process.
Q99 Mr Weir: I have heard about legal
systems all over the world, including our own! But is there any
evidence that it is improving for British companies as negotiations
continue for EU accession?
Ms Shearman: Just judging from
the experience of the companies I was talking to yesterday, there
was still a certain degree of frustration.
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