Melis Metiner

Economist

HSBC Turkey

INTERNATIONAL BANKING FORUM 2011

Brescia, 13-14 June 2013

Turkey: Linking up with MENA

2 2

Over the past 12 years, Turkey has diversified its export destinations,

reducing its dependence on Europe and increasing its exports to MENA

Source: Turkstat

Turkey’s exports in 2000 Turkey’s exports in 2012

EU56%

Other Europe

7%

Americas13%

MENA13%

Asia5%

Other6%

EU39%

Other Europe

10%Americas

6%

MENA34%

Asia7%

Other4%

Turkey’s major trade partners (2012)

Export partners % in total Import partners % in total

1 Germany 8.6 1 Russia 11.3

2 Iraq 7.1 2 Germany 9.0

3 Iran 6.5 3 China 9.0

4 UK 5.7 4 US 6.0

5 UAE 5.4 5 Italy 5.6

6 Russia 4.4 6 Iran 5.1

7 Italy 4.2 7 France 3.6

8 France 4.1 8 Spain 2.5

9 US 3.7 9 India 2.5

10 Spain 2.4 10 South Korea 2.4

3 3 Source: Turkstat

1.7

5.7

13.3

-5

0

5

10

15

2006 2007 2008 2009 2010 2011 2012

Total gold production Net gold exports Gold exports

bn USD Turkey’s gold production and trade

In 2012, gold became a major export item to MENA

4 4

But trade with MENA is not just gold trade

Source: Turkstat

EU39%

Other Europe

10%Americas

6%

MENA34%

Asia7%

Other4%

EU42%

Other Europe

9%Americas

7%

MENA29%

Asia8%

Other5%

Turkey’s total exports in 2012

Turkish non- gold exports in 2012

5 5 Source: Turkstat

0

2

4

6

8

10

12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Petroleum products Iron and steelMotor vehicles Electrical machineryTextiles

bn USD Turkey’s main exports to MENA

Iraq Iran United Arab Emirates Egypt Saudi Arabia

1 Iron and steel Non-monetary gold Non-monetary gold Petroleum products Iron and steel

2 Electrical machinery and parts Iron and steel Petroleum products Iron and steel Textiles

3 Grain Textiles Iron and steel Textiles Electrical machinery and parts

4 Base metal equipment Motor vehicles Clothing Base metal equipment Clothing

5 Fruits and vegetables Electrical machinery and parts Electrical machinery and parts Electrical machinery and parts Construction materials

Turkey’s top five exports to MENA (2012)

Turkey’s exports to MENA are varied

6 6

0

20

40

60

80

100

1988 1992 1996 2000 2004 2008 2012

EU Other Europe Americas

MENA Asia

% total

Source: Ministry of Culture

Tourist arrivals by region

Tourist arrivals from MENA have been remarkably steady ever since

1990s, but at a relatively low level

7 7

Turkey is also an important provider of construction services in the

region

Source: Turkish Contractors’ Association

Total value of international projects by Turkish contractors

Regional breakdown of international projects

2.64.5

11.3 12.3

24.3 25 24.5

21.4 22.219.9

26.1

0

5

10

15

20

25

30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

bn USD

Turkmenistan

19%

Iraq17%

Russia14%

S Arabia9%

Iran7%

Ethiopia6%

UAE5%

Qatar3%

Morocco3%

Other17%

8 8

The challenge going forward: diversifying Turkey’s financing base,

just like its export partners. Investment from MENA is rising rapidly,

but from a low base. The existing stock of foreign direct investment

from the MENA region is low

Source: CBRT

EU78%

Other Europe

3%

Americas8%

MENA9%

Asia2%

Stock of foreign direct investment in Turkey (2001)

Stock of foreign direct investment in Turkey (2011)

EU83%

Other Europe

1%

Americas12%

MENA2%

Asia2%

9 9

The same is true for portfolio investment

Source: IMF

Stock of portfolio investment in Turkey (2001)

Stock of portfolio investment in Turkey (2011)

EU60%

Other Europe

4%

Americas21%

MENA2%

Asia12%

Other1%

EU53%

Other Europe

5%

Americas27%

MENA9%

Asia4%

Other2%

10 10

Conclusion

Source: HSBC Global Research

• Over the past decade, Turkey has diversified its export destinations, reducing its dependence on the

EU and increasing its exports to the MENA region. This shift was in part responsible for Turkey’s strong

export performance in 2012: exports were up by 13.1% in annual terms last year, primarily on the back

of higher exports to MENA. In Q113, exports to MENA were up by 11% y-o-y, while exports to the EU

rose by 2%.

• Tourist flows are not as diverse. More than half of the tourists visiting Turkey were from EU countries in

2012, while the share of visitors from MENA has been steady at around 12% of the total since the late

1980s.

• Also on the services front, Turkey is an important player in the construction sector, with activity in

MENA countries corresponding to 44.2% of all international projects. Here, though, there has been a

diversification away from MENA towards CIS countries.

• On the financing front, foreign direct investment and portfolio flows from the region are increasing at a

rapid pace, but from a low base. Between 2001 and 2011, the stock of FDI in Turkey from the MENA

region rose by an impressive USD12.4bn, but MENA’s share of total FDI stock in Turkey is still only

9.0%. Portfolio investment is similar.

• Linking up with MENA offers two distinct benefits, in our view. Diversifying its export partners should

help Turkey move up the value chain, while being able to draw financing from different geographies

(especially if that financing is long term) would make Turkey less vulnerable to potential balance of

payments shocks.

11 11

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