A new vision of Turkey: partner for innovation

1
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A new vision of Turkey partner for innovation
Dott. Riccardo Monti
Rome, October 19th 2005
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Contents of the document
Macroeconomic scenario RD and high-tech in
Turkey

For the conditions of use of this document please
refer to the front page
3
Macroeconomic status A potentially high growing
country
2004
Growing population with a strong urbanization
trend
-
Macroeconomic overview
Turkey
Italy
High GDP growth
-
Population
72 million
57,9 million
The country real GDP expanded by approximately
25 on a cumulative basis in the last 3 years
.
Population below poverty threshold
30
12
General Consensus forecast GDP growth to slow
down to 5 - 6 in 2005
.
Number of Businesses
1,8 million
4,2million
Decreasing inflation rate
-
Number of Households
15,1 million
22,8 million
Turkeys inflation rate, measured by CPI,
declined from an average of 77,5, in the 90s and
18,4 in 2003 to 9,3 at the end of 2004
.
GDP (PPP Adjusted)
530 Bln Euro
1.360 Bln Euro
Real GDP Growth
8,5
1,2
Analysts expect inflation to fall further in the
near future
.
GDP per capita (PPP Adjusted)
7.358 Euro
23.500 Euro
Strong local currency
-
10,6
2,3
Inflation (Average)
.
The Turkish Lira has performed extremely well in
2004 rising both against Euro (4Q 2004) and
against the dollar
TLC Services Penetration
Residential Fixed phone (on HH)
94
80
.
Analysts expect a modest depreciation of the Lira
in the coming years
Mobile phone (on population)
54
102
Turkish unemployment rate, now at 9,7, is
expected to decrease to 9,1 in 2006
-
Internet subscribers
10,3 million
22,6 million
4
Turkey is fully recovering after the 2001
economic crisis
CAGR
2005
Real Turkish GDP growth, to previous year
GDP by country in USD billion (not adjusted for
PPP)
10,875
US
4,190
Japan
8,9
7,9
7,5
7,2
2,384
Germany
5,9
1,779
UK
4,5
1,705
France
3,1
1,462
Italy
1,372
China
860
Canada
615
Mexico
573
India
-4,7
515
S. Korea
-7,4
16,0
4.1
493
Brazil
1997
1998
1999
2000
2001
2002
2003
2004
2005E
300
TURKEY
Source Turkish Ministry of Economy, Is
Investment
5
Where consumption is increasing thanks to
under-control inflation and growing income
Consumer Price Inflation index,
Income distribution
86,0
84,7
64,8
56,4
53,5
48,0
25,3
10,6
9,5
1997
1998
1999
2000
2001
2002
2003
2004E
2005E
GDP per capita (USD)
Private consumption growth
4.307
4.110
9,2
3.382
3.062
6,6
2.681
5,2
2.194
4,5
2,1
2002
2003
2004E
2005E
2006E
2000
2001
2002
2003
2004E
2005E
Source Turkish Ministry of Economy, State
Institute of Statistics, Is Investment, Garanti
Investment, Value Partners analysis
6
while the country is becoming much more
attractive for foreign investors
2005
Sectoral breakdown of FDI
Total Turkish FDI, USD billions
Major foreign acquisitions in Turkey (2000-2004)
Acquirer (country)
Sector
43.895
40.310
Agriculture
TIM (Italy)
Telco
37.018
Ford (USA)
Automotive
33.995
31.752
Unicredito (Italy)
Financial
29.027
44,0
25.550
Toyota (Japan)
Automotive
53,0
Danone (France)
Food
Manufacturing
Mining
1,3
1,8
Services
1999
2000
2001
2002
2003E
2004E
2005E
Rank in FDI Confidence Index
Starting of negotiations with EU is expected to
further stimulate FDI inflows to Turkey
23
29
24
Turkey is the most attractive FDI destination in
Near East Middle East region
Source Turkish Ministry of Economy, Value
Partners analysis
7
Italy, although being late in direct investments,
still remains an important strategic partner
2004
Total accumulated FDI in Turkey, Between
1980-2Q/2003 by country of origin
Turkish foreign trade volume btw. Jan-Sept 2004
(Imports Exports)
100 35 Mld USD
Import
100 115 Mld USD
Belgium
1,6
Export
Total 11,4 mld USD
1,1
Luxemburg
Japan
France
Germany
ITALY
Other
6,0
44,9

• Equipment Machinery (40.0)
• Automotive(9.5)
• Chemicals (8.0)

18,7
6,2
13,4
Switzerland
6,8
7,6
ITALY
7,1
18,1
Holland

• Automotive (24.4)
• Equipment Machinery(14.6)
• Texztiles and cotton (11.3)

12,5
6,6
UK
Russia
4,6
6,4
Holland
13,2
2,5
France
14,9
6,3
3,7
6,1
3,0
USA
USA
China
Germany
Spain
UK
Source ICE
8
reaching top values in 2004
Turkeys foreign trade evolution (Billion USD)
Import
Export
Italys weight on Turkish foreign trade
Italys share in Turkish foreign trade (Billion
USD)
11,4
8,5
6,1
5,8
6,3
3.1
2.2
1.8
2.3
4.6
6.8
5.4
4.3
3.5
4.1
2000
2001
2002
2003
2004
Source ICE, Value Partners Analysis
9
Italian companies operating in Turkey have
triplicated in number during the course of last
10 years
Millions USD, December 2004
Stock
Comp.
Source National Banks or Investment Agencies
10
by localising mainly in the western regions of
the country
Various projects
JV con Koc Group in Koc Financial Services
Various projects
40 of AVEA (3rd GSM operator)
Insurance Company
and a lot of small and medium sized firms in
food, consumer goods, services
Pharmaceuticals
ISTANBUL
Izmit
Rep. Offices
ANKARA
Asset Management
Bursa
Production of refirgerators
Total around 300 firms with Italian ownership
Various projects
Tyre Cable Production plant
Gaziantep
Manisa
Adana
IZMIR
Magnet production plant
Agricultural machinery production plant
JV con Koc Group in TOFAS
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Contents of the document
Macroeconomic scenario RD and Hi-Tech in Turkey

For the conditions of use of this document please
refer to the front page
12
Turkey has a weak track record on RD and
innovation but current efforts seems to be
promising
2005
Past
Present
Future
The Scientific and Technological Research council
of Turkey (TUBITAK) has defined a Vision 2023
of Turkey project with the aim of creation of a
society which
-
.
is competent in science and technology
.
is capable of developing new technologies
.
possesses the skill of converting technological
developments into social and economic benefits
Implementation is crucial in order to reach the
objectives of 5 year development plans and to
reach future Turkey vision
-
13
Currently overall RD penetration and private
sectors weight on RD remains low compared to
European average in terms of spending and
dedicated human resources
2005
RD employees by 1.000 employees
National RD spending over GDP
Number of Employees
Percent
13,77
4,27
1,98
2,00
6,00
5,68
0,64
1,10
EU-15 Max.
EU-15 Average
Turkey
Turkey 2013
EU-15 Max.
EU-15 Average
Turkey
Turkey 2013
Target
Target
Private sector RD empl. / Total empl. (public
priv.)
RD spending Private sector / Total (public
priv.)
Percent
Percent
66,10
71,90
49,70
50,00
56,10
56,10
42,90
16,50
EU-15 Max.
EU-15 Average
Turkey
Turkey 2013
EU-15 Max.
EU-15 Average
Turkey
Turkey 2013
Target
Target
Source TUBITAK (The Scientific and Technological
Research council of Turkey) - Vision 2023
14
but there are signs of increasing activity on
RD and innovation
2005
Automotive District
Textile District
Chemicals District
- - - - - - - -
Advanced Engineering (robotics) Biotechnology
Chemistry Electronics Environment Health Care
Medicine Nanotechnology ICT (software
Aerospace Defense District
Running RD Projects
CAGR
Number of Projects
2.600
ISTANBUL
25
Izmit
1.353
ANKARA
1.212
1.199
982
837
Bursa
2000
2001
2002
2003
2004
2005E
Manisa
Adana
IZMIR
Number of Tehcnoparks and running RD projects
are increasing thanks to industry-university coope
ration driven also by foreign investments but
commitment is needed to reach EU levels
15
Turkey has some unique strengths and
opportunities that can boost innovation if risks
are properly addressed
Strengths
Weaknesses
Young population open to adapt new technologies
-
-
Local scientific community with strong
international connections
Availability of resources with international
experience
-
-
Increasing presence of techno-parks,
company-university cooperation, RD incentive
mechanisms
-
Strongly developing IT and communications sectors
Highly developed consumer electronics, textiles
and automotive sectors focusing on RD to
increase competitiveness
-
Opportunities
Threats
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in collaboration with its strategic business
partners
Althoug there are signs of incresing RD and
Innovation activity, Turkey needs strong
collaboration from European countries to be able
to implement defined policies in terms of

Funding Know how education Cooperation in
international projects
- - -