Turkey – export market

Economic problems make exporting more challenging
While US exports to Turkey in 2000 reached an all-time high, the Turkish economy began to stumble by the end of last year. Turkey had undertaken an ambitious program to combat inflation and to put into place structural economic reforms, but delays in enacting those measures, particularly in the banking sector, eroded market confidence.
In February, a political crisis led to a major outflow of investment funds totaling about $7.6 billion in a single day. Overnight interest rates temporarily soared to 1,500% and the Turkish currency, the lira, experienced a sharp depreciation in value. As a result of these financial shocks, the Turkish government forecasts a 3.1% decrease in real GNP growth in 2001, which will result in more challenging times for US firms in search of export opportunities.
Turkish imports in 2000 consisted of semi-manufactured goods (65%), consumer goods (13%), and raw materials (21%). US exports to Turkey reached nearly $4 billion, placing America fourth among Turkey’s largest trading partners, behind Germany, Italy, and Russia.
Based on a customs union that Turkey formed with the European Union in 1996, goods move freely between the EU and Turkey without being subject to customs duties or quantitative restrictions. That means that Turkey applies the EU’s common external customs tariff on products imported from third countries, such as the United States. However, the Turkish government estimates that the average duty rate has dropped from 10% to approximately five percent. According to the Turkish government, as of March 2001, almost 5,500 foreign firms had invested or were operating in Turkey.
Turkey’s energy demand continues to grow rapidly, though at a slower pace than before the recent economic crisis. The country will continue to depend on imported sources of fuel and require as much as $4 billion in annual investment in the electricity generation, transmission, and distribution sectors. While the growth of the information technology sector has slowed to ten percent from 25-30 percent in recent years, it has been less affected by the crisis than other sectors and is expected to rebound in 2002. Despite the economic slowdown, Government investment in the transportation sector (highways, ports, airports, and railways) continues to move ahead. Other sectors offering good opportunities for US exporters include automotive parts and auto service equipment; franchising; architectural, construction, and engineering services; medical equipment; building products; and pollution control equipment.
Marketing of most imported products in Turkey is done through agents or distributors acting on behalf of the foreign supplier. Depending on the location of the consumers or end-users, most distributors have a dealer network throughout the country or in areas where the product is most used. Commission agents, on the other hand, periodically visit their customers together with their foreign principals in order to maintain strong personal contacts, a very important marketing tool in Turkey.
Unless a US firm’s interests are large enough to warrant opening an office in the country, the most effective means of selling in Turkey is through a reliable and qualified local representative. When dealing with sales to the government, an agent is an absolute necessity in view of complicated bureaucratic procedures and the language barrier.
An American firm should carefully investigate the reputation and any possible conflicts of interest of prospective agents before signing an agreement. Agency agreements under Turkish law are private contracts between two parties and their stipulations vary according to mutual consent. There are no fixed commission rates. It is recommended that sole agents/distributors be appointed either for a particular sales territory, for a specific product line, or for a particular market niche. If a large volume of government business is expected, it is essential to appoint a firm located in the capital city of Ankara or a firm located in Istanbul with a branch office in the capital.
Although the Turkish people are devoted to their traditions and culture, most people in major cities have adopted a western lifestyle. An American visiting any of the larger cities will find an atmosphere similar to that of a modern western city. Personal relationships are an important basis for doing business successfully in Turkey. It is important to allow time for friendly conversation before settling down to business. Business cards are almost always exchanged and visitors are usually offered a non-alcoholic beverage such as tea or Turkish coffee.
This article is based on information provided by the U.S. Commercial Service in Turkey. For more information on doing business with Turkey, contact the U.S. Export Assistance Center in Milwaukee at 414-297-3473. The Commercial Service’s website on Turkey is located at: http://www.usemb-ankara.org.tr/COMMERC/BUSNSS.HTM
TURKEY AT A GLANCE
National capital: Ankara
Form of government: Republican parliamentary democracy
Languages: Turkish (official), Kurdish, Arabic
Population: 64.6 million (1998 est.)
Population growth rate: 1.6%
GDP per capita: $6,100
Literacy rate: 82% of people age 15 and over can read and write
Major industries: Textiles, food processing, mining, steel, petroleum, construction, lumber, paper
Exports to: Germany 20%, United States 8%, Russia 8%, United Kingdom 6%, Italy 5%
Imports from: Germany 16%, Italy 9%, United States 9%, France 6%, United Kingdom 6%
Source: CIA World Factbook
Best prospects for US exports
1. Electrical Power Systems
2. Franchising
3. Telecommunications Equipment
4. Information Technology
5. Oil and Gas Pipelines
6. Medical Equipment
7. Telecommunications Services
8. Pollution Control Equipment
9. Architectural, Construction, and Engineering Services 10. Building Products
11. Defense Equipment
12. Automotive Parts and Service Equipment
Source: U.S. Embassy, Commercial Service, Ankara, 2001