Doing Business in Turkey: 2012 Country Commercial Guide for U.S. Companies

• Market Overview
• Market Challenges
• Market Opportunities
• Market Entry Strategy

Market Overview

Turkey’s rapidly expanding economy, political and economic stability, and the possibility of EU membership has attracted the attention of a variety of American companies. In 2011, U.S. exports to Turkey reached a record $15 billion, a 34% increase from 2010. That trend is expected to continue, however an expected economic slowdown in Turkey in 2012 might give pause to some importers’ buying decisions. Turkey’s financial sector is stronger than that of many other countries, in part due to a series of reforms in the wake of the 2001 financial crisis, which left Turkish banks better leveraged than many of their U.S. and European counterparts. However, banks here remain hesitant to extend trade and project credit.

Across many sectors, U.S. exporters have excellent immediate and medium-term prospects in this diverse market. Perhaps the most important sector for the next decade will be energy. Electricity demand has been growing at 6.4 percent a year, and will continue to grow rapidly. Turkey realizes it must prepare for continued economic growth by adding now to its generating capacity to meet that demand. U.S. suppliers and service companies should look into energy sector as it relates to electricity and gas distribution, power generation and renewable energies, particularly wind and solar.

Opportunities exist in telecommunications services and equipment, safety and security equipment and services, automotive aftermarket, medical equipment, pharmaceuticals, R &D, transportation infrastructure and higher education services. Turkey sends the largest number of students among all European countries – around 12,000 each year – to U.S. colleges and universities. Turkish companies are eager partners for American firms, and seek technology and financing to grow their businesses.

In recent years, Turkey’s market reforms, strong growth and economic and political stability have attracted Foreign Direct Investment (FDI). Despite a decline in FDI inflows as a result of the global economic crisis, cumulative FDI in Turkey now stands at $ 88 billion, with a 74% increase FDI in 2011. Cumulative American investment in Turkey is officially about $6-7 billion – a number which is understated because of U.S. company investments through third countries. In 2011, U.S. green field investments by Cummins, Pratt and Whitney, AES and Dow signaled increasing U.S. interest in Turkey. Turkey requires further investment; however excessive bureaucracy, an unpredictable legal system and weak intellectual property protection impedes further FDI growth. Market access issues in pharmaceuticals and genetically-modified agricultural products make these two sectors particularly difficult for American firms in Turkey.

In 2005, the EU and Turkey began formal EU accession negotiations. Turkey has adopted many European Union directives, regulations and laws in anticipation of accession. While continued delays have cooled popular interest in EU membership, Turkey’s political and business leadership remains committed to joining the EU, and the current government understands that the process itself contributes to Turkey’s global competitiveness.

Turkey is a long-term ally of the United States and a charter member of NATO with strong links to global institutions. Turkey has a key role to play in most of the major regional issues facing the United States. Our two countries currently enjoy a close and vibrant partnership, extending into key issues such as Syria, Iraq, Afghanistan and Cyprus. However, bilateral relations have been occasionally difficult. Under the Obama administration, continued high-level government contacts have created a constructive atmosphere, with a special emphasis on building bilateral commercial relations. The governments Framework for Strategic Economic and Commercial Cooperation and the private sector led U.S.-Turkish Business Council are examples of intensified efforts to increase bilateral trade and investment. Over 1,000 American firms are registered in Turkey, ranging from large multinationals to small and medium size firms. While Turkey’s economic growth in 2012 is expected to slow, the longer-term prospects for many American firms in Turkey remain excellent.

Market Challenges

The Republic of Turkey is a complex and challenging market requiring adaptability and persistence.

U.S. exporters face many of the same challenges that exist in other semi-developed countries, such as contradictory policies, regulations and documentation requirements, lack of transparency in tenders and other procurement decisions, and a time consuming, unpredictable judiciary and legal and regulatory framework.

Careful planning and patience are the keys to success in Turkey.

Market Opportunities

The Republic of Turkey’s movement toward membership in the European Union is creating momentum to adopt European business regulations and standards in Turkey, thereby ultimately making it easier to sell and conduct business in this market. Similarly, reforms since 2001 have created a strong and stable economy that attracts foreign investment, which in turn will be followed by needed capital improvements and demand for new products and services.

The U.S Commercial Service in Turkey has identified a number of market opportunities, described below, for U.S. firms and continues to work with companies to enter the Turkish market, expand market share, or jointly enter third country markets.

Turkey is the commercial hub of the region, and U.S. companies should consider using Turkish partners to access business opportunities throughout Central Asia, the Caucasus, the Middle East and even Africa. Turkish partners know these neighboring markets well.

Market Entry Strategy

While there are many significant opportunities for U.S. companies in Turkey, there are also obstacles accessing them. Any market entry strategy for Turkey should begin with a thorough understanding of the costs and benefits in the market.

One of the most successful proven ways to access the market quickly is to work with an experienced local partner. This partner could be in the form of a local representative, liaison office, agent, distributor, stocking distributor, etc. The local partner brings knowledge of the local regulatory framework, language and contacts to the table. As the business develops, companies may open subsidiaries and make further local investments to expand their market share.

The U.S. Commercial Service in Turkey has a number of programs and services available to assist American business people in establishing a presence in this market and make the right contacts.

The U.S. Commercial Service in Turkey employs experienced Commercial Specialists with many years of industry sector expertise that can tailor your business approach to the right audience, and advice on business strategy in Turkey. To find out more about how we can assist you in entering this important market, please visit our web site at: www.export.gov/turkey

To conduct a more thorough search for market research reports on specific industries and sectors for Turkey please consult the Commerce Department’s Market Research Library: http://www.export.gov/mrktresearch/index.asp

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International Copyright, U.S. & Foreign Commercial Service and U.S. Department of State, 2012.  All Rights Reserved Outside of the United States.