Title: Turkey : An Emerging Market
1Turkey An Emerging Market
Industry Briefing
4th May , 2004
Burc Buyukonal, Business Development
Manager, Istanbul, Turkey
? Austrade, Istanbul, April 2004
2Agenda
- Country Overview
- Population GDP
- A Market In Transition
- Why Turkey Makes Business Sense
- A growing consumer base
- Households are increasing
- Industry is performing strongly
- Key Growth Sectors
- Education Training
- Automotive
- Wine
- ICT
- Telecoms
- Healthcare medical
-
3Country Overview
4Country Overview cont.
- Understanding the market, growth opportunities
implications - Turkey borders 8 countries both the EU, Middle
East Central Asian Republics - Second largest member of NATO
- In the Middle East and Central European region,
Turkey is one of the largest countries in terms
of population and economy - Customs Union with the EU since 1996
- Anticipated to have largest population in Europe
by 2014 - October 2004 EU leaders will decide whether to
proceed on accession negotiations - EU membership 2010 15?
5Country Overview cont.
- Turkey is one of the largest economies both in
terms of population and potential for growth in
the Middle East / Central European region - 12 million people hold 55 of GDP
- 50 under age of 25!
- Labour force 24.4 million
- Population growth 1.5 pa
- Unemployment 11.4
- Urban population 69
- Literacy rate over 86.5
- Turkey is also one of the few secular and
democratic Muslim nations - Turkey will play an important role in the
rebuilding - of Iraq
A growing market of opportunity
Source CIA website, various sources
6Population GDP
TURKEY
Land area
769,604 sq km
Population
69,603,927
Inhabitant per sq km
88.2
88.2
8.4 M
17.4 M
6.1 M
11.6 M
8.9 M
6.6 M
8.7 M
Source 2000 Census, State Institute of
Statistics (SIS), TUSIAD, April, 2004 World
Bank data, 2004
7Population GDP cont.
Turkey represents a large market when compared to
peers
Source World Bank website, April, 2004
8Population GDP cont.
GDP by regions sector
1990-1997
1998-2001
2002-2005
The market outlook is positive as the Government
undertakes planned reforms in liberalising and
restructuring the economy.
Source Sector Shares in GDP, period average, ,
In current prices TÜSIADs forecast, SIS,
TÜSIAD, March, 2004
9A Market In Transition
NATO
World Bank
IMF
- EU / IMF Structural Reforms
- Human Rights
- Privatization
- Legislative
- Transparency
- Bureaucracy cut
- Economic Improvements
- Banking Reforms
- Inflation Targeting
- Strict Fiscal Policy
- FDI Attracted
Developing Market Environment
EU
- Political Development
- Majority Party Leadership
- Strong market support
- Role of State and Military
- Electorate Maturity
- Key Milestones for 2004
- Iraq Conflict over with minimal impact
- Cyprus Issue must find a solution
- IMF - on track
- EU accession continuing structural reforms
- Government is fully committed
2010
2003
2004
2001
2002
20
2001
2002
2005
2004
Citibank, Turkey April 03
Source Adopted from Citibank, Turkey, 2003,
Austrade analysis
10Why Turkey Makes Business Sense
Turkey
- Solid Government majority
- by AKP
- Municipal elections further
- strengthens grip in March 2004
- Focused on reforming major
- institutions economy
Stable Government
Stronger Economy
Location
- Strategically situated between the EU and Middle
East and Central Asia...
- Lowest inflation in 38 years!
- CPI anticipated to hit single
- digits year end
- Stronger TL gt appetite for
- imports
- Growing income levels
Attractive
Australian Exporters
- Customs Union since 1996
- 50 of Turkeys exports go
- to EU
- Changes in regulatory regime
- More liberal FDI environment
Prospective EU member
Growing Consumer Market
Market
Attractiveness
- Majority of population lt 35
- years old
- Strong growth demographics
- of 1.5 pa
- Worlds 19th largest economy
- Is the category economically attractive to
the average player? - What are the key issues and trends in each
category ?
- Is the category economically attractive to
the average player? - What are the key issues and trends in each
category ?
- Is in the channel creating value ?
High
Unattractive
Diversification
Weak
Strong
Competitive Position
Low
Source Austrade, Istanbul, analysis
11Why Turkey Makes Business Sense cont.
A growing consumer base
- 18 years
- population growing fast
- Turkey is on course to
- overtake Germany
- by 2014!
- Strong opportunities for
- Retailing, FMCG,
- Telecoms, Energy
- Utilities, Education
- Training, Healthcare.
Source Austrade, Istanbul, analysis
12Why Turkey Makes Business Sense cont.
Households are increasing
- Urbanization rate is increasing. In 1990, 34 of
population lived in urban areas in 2000 this
ratio reached 48 - Better economy has improved income levels,
especially in the 3 major cities e.g.. Istanbul,
Ankara Izmir - Cities that grew the most in the past few years
Antalya, Mugla due tourism Adiyaman, Hakkari,
Sanliufa, Sirnak due to GAP agribusiness project
Istanbul, Izmit, Izmir, Bursa and Tekirdag from
industrialization
13Why Turkey Makes Business Sense cont.
Industry is performing strongly
Source McKinsey Global Institute, Turkey
February, 2003
14Why Turkey Makes Business Sense cont.
Market Attractiveness Assessment
? low/marginal ?favourable ?high
????? ? ? ? ? ?
Source Austrade, Istanbul Analysis
15 Key Sectors Education Training
- Turkey ranked 11th in world for number of
students receiving an education abroad - 40,000 students go abroad annually ( USA UK)
- Less than 500 are choosing Australia
- Only one in five applicants secures a place in a
Turkish tertiary institution - GOT is heavily reliant on EU and World Bank
funding for reforming sector
Current Situation
- Huge when considering 40 of a population of
69.6m is under 18 - English language studies remains high priority
- Masters, skills upgrading VET
- Expansion of private sector universities
technical colleges - Big push by the Government to reach EU standards
via EC World Bank support
Future Prospects
- Turkey ranked DIMIA category 3
- Articulated courses not recognized by Turkish
education authorities - Regular market visits by institutions essential
and participation in Educational fairs highly
recommended - Next phase of market development will be
institution to institution linkages
Important Issues For Exporters
Source Austrade, Istanbul, analysis
16 Key Sectors Automotive
- The Turkish market is dominated by all the global
players as a basis for exporting to Western
Europe/Middle East/CIS and Africa - More than 150 foreign parts suppliers have JVs
in Turkey to capture business in the EU and tap
into global supply chains - Australian OEM and after market capability is
not well known in Turkey
Current Situation
- Industry is strong outlook due to increasing
consumer confidence major export success - Brake hoses, brake pads and lining, oil filter
systems, 4 WD parts and accessories are growing
segments
Future Prospects
- Australian companies already supplying into
Europe have best prospects - Average vehicle age in Turkey is 8 years compared
to 2 in the EU! - Companies need to consider MUL and technology
transfer as go to market strategies due to import
duties and logistics issues - Very important to appoint a agent / distributor
with strong end customer access in the OEM /
aftermarket segments
Important Issues For Exporters
Source Austrade, Istanbul, analysis
17Key Sectors Wine
- Opening up of market with privatisation of state
alcohol monopoly - Tekel - Tariffs still very high but should decrease over
next years with strong pressure exerted from the
EU and USA to open up market further - Foreign wines can now be sold in supermarkets
- Distribution/market coverage is highly
concentrated and fragmented
Current Situation
- Demand set to increase as consumers become more
discerning /aware of foreign wines - Turkeys 13 million tourists per year are large
consumers mainly from EU! - Duty Free Retail Supermarket segments will
continue to grow by value volume - Technology transfer opportunities set to
expand/upgrade local producers
Future Prospects
- The appointment of reliable and active importer /
distributor is critical to success - Market still very price sensitive but expected to
improve - Importation regime is exceedingly complicated but
recent legislation provides private companies
with more control over imports distribution - Restrictions on advertising alcohol but need for
Australian A P very important
Important Issues For Exporters
Source Austrade, Istanbul, analysis
18 Key Sectors ICT
- ICT sector growing, USD900m in HW, US313m PSW,
US479 million SC in 2003 - The top 5 IT companies have revenues of US100m
and 3/5 are multinational - 29 mobile penetration vs. 6 internet
penetration and 23.5 m mobile phone users - Telecom sector is going through major regulatory
changes will be fully liberalized by 2006
opening up new opportunities for products /
services
Current Situation
- Privatization of Turk Telecom, National Lottery
in 2004 will increase overall demand - Mobile and ISPs are developing / acquiring new
technologies competencies - Best prospects in POS segment which has grown
significantly Software (security applications,
mobile, database business application
software) Outsourcing Data recovery systems
call centre systems and applications, SMART Cards
E - Government is also scheduled to grow
rapidly in the short to medium term
Future Prospects
- Improved environment for protection of IPR but
industry believes that widespread violations are
taking place - CeBIT EuroAsia, Oct 2004 is the most important
ICT event for Australian companies to consider as
part of a market participation strategy for
Turkey and the region. - Localisation of software is very important and
reputable local partner critical to overall
success
Important Issues For Exporters
Source Austrade, Istanbul, analysis
19 Key Sectors Telecoms
- Turkcell dominant market leader in mobile
- Fast growing market but still under penetrated
- Penetration expected to exceed 50
- Aycell / Aria merger will create a viable third
operator - Aycell growing quickly in 2003 driven by
targeting public sector customers - Telsim recent performance / future unclear
- several members of Uzan family facing corruption
charges - number of large assets controlled by the family
seized by the Turkish Government - US court ordered Telsim to pay US4.3bn to
Motorola for fraud
Penetration
Mobile market share EOY 2002
SourcePrivatisation Administration, Ankara, 2004
20Key Sectors Telecoms Market
- Fully liberalised telecommunications sector by
2004
Fixed
Mobile
- Penetration 27.1
- TT monopoly ends 31 December 2003
- Penetration 32.9
- Liberalised market
- Four GSM operators
- 3G licences not yet available
Data
Cable / other
- Internet penetration 3.8
- Primary mode of internet access via dial up
using TT network - VAS liberalised e.g. more than 30 ISPs
- Commercial roll out of ADSL services by TT this
year - Cable internet services available over TTs CATV
network
- TT sole provider of CATV services
- CATV network operated and maintained by revenue
sharing partners - Satellite market liberalised
- Digitürk sole provider of DTH services
Source Privatisation Administration, Ankara, 2004
21Key Sectors Telecoms Market cont.
The mobile market
Turkcell
Telsim
- Ownership TeliaSonera (37),
- Cukurova Group, free float
- Launched 1994
- Subscribers 15.7m
- Technology GSM 900
- Ownership Uzan family
- Launched 1994
- Subscribers 5.6m
- Technology GSM 900
Aria
Aycell
- Ownership TIM (49), Is-Bank (51)
- Launched March 2001
- Subscribers 1.2m
- Technology GSM 1800
- Ownership Türk Telekom
- Launched December 2001
- Subscribers 0.5m
- Technology GSM 1800
- Operators
- Currently a four player market but in the process
of consolidation
SourcePrivatisation Administration, Ankara, 2004
22Key Sectors Healthcare Medical
- Turkey relies heavily on imports for a large
portion of its medical equipment needs - Health sector is under-performing in achieving
health outcomes - Min of Health is the largest single buyer of
medical products - MoH MoF is reforming and restructuring health
care system with the assistance of the World Bank
Current Situation
- Compulsory health insurance and optional private
insurance will drive additional expenditure in
medical products / services - Expansion of private sector health care will be
the new source of opportunity for suppliers
service providers - Services to strengthen institutional capability
and capacity for healthcare providers is
anticipated to grow
Future Prospects
- A large number of local medical/healthcare
distributors have strong linkages / networks in
surrounding markets esp. Central Asian
Republics - Single most important CSF is selecting reliable
and solid agent/distributor - Deferred payment terms are a very important
consideration in the buying decision - While US dominates market the EU origin goods
benefit from the EU/Turkey customs union
Important Issues For Exporters
Source Austrade, Istanbul, analysis