The Gateway to the East Is on the Move
The success story of modern Turkey began in the 1980s with a government-driven economic stabilization program. This was the beginning of a success story that continues today. After years of continuous growth, Turkey suffered heavily from the crisis in 2009. The automotive industry around Bursa and Istanbul was hit hard and the constant stream of foreign direct investment went suddenly dry. As hard as the crisis hit the country, the faster it went out again, experiencing strong growth through all verticals.
Many automotive manufacturers now produce in Turkey not just to service European markets, but also to access nearby Middle East markets. Turkey is increasingly becoming a link between Europe and the Arabic world, since it is part of both cultures.
“Doing business in turkey is challenging. It is a market that has everything: simple machines with only basic control demand as well as high end solutions for industries and line optimization. This creates a ‘hybrid’ market, which is based on solutions from suppliers as well as on products from catalogue distributors,” according to Analyst Florian Güldner, the principal author of ARC’s “Automation Systems Market Outlook for Turkey”. He continues, “But, of course, not only the technology make this country fascinating, business culture is everything from western to eastern and just when you think you know everything, along comes the next surprise.”
The Turkish Market and Doing Business
Turkey’s economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 30 percent of employment. An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middle-class entrepreneurs adds dynamics.
Business culture is different from the western world. When ARC performed this research, corruption and bribery were not mentioned but the problem exists. Perceptions of the pervasiveness of corruption in Turkey are mixed. ARC is convinced that companies can deal with this problem on a one-to-one basis.
The Turkish automation markets are in the midst of a structural change. In the 1960s to 1980s, barely any automation equipment was produced or sold in Turkey. Most capital goods and machines were imported from Western Europe and the overall level of automation in manufacturing was comparably low.
The discrete industries in Turkey represent a larger share of the total market than in most other economies. However, we see opportunities coming up in infrastructure markets such as water & wastewater or electric power. The most interesting automation markets are in textiles, electronics & electrical, and automotive.
Turkey’s famous carpet industry evolved to become a flourishing textile industry. Today, Turkey is a world leader in textiles and apparel, which together account for about one fourth of the country’s exports. The Turkish market for textile machinery is already exporting globally – its largest target market is Germany.
Looking at hybrid industries, the pharmaceutical industry has barely any presence in Turkey, but there is a thriving food & beverage industry. The Turkish food & beverage industry offers some interesting opportunities and has unique characteristics. The industry in general benefits from a favorable temperate climate. ARC expects the market for processed food to increase faster than overall food production.
Looking at the process industries, the electric power and oil & gas industry are certainly among the most interesting as they provide large volume in combination with good growth potential. Turkey is a huge market for electric power and is already the sixth largest market in Europe and the fastest growing power market in Europe. The oil & gas industry stands on two pillars in Turkey: local production, and Turkey as a transit country connecting the second largest consumer market (Europe), with the largest producer market (Middle East).