By Ryan Barnes
The world’s fastest growing economy is not China, not India, not Brazil, but Turkey. Yes, Turkey, with GDP expanding by a staggering 11 percent in the first quarter of 2011. This actually comes as no surprise to Turkey observers. The economy has made great strides in recent years, growing by more than $500 billion since 2001, and by nearly 9 percent in 2010.i And Ankara is not being complacent. The Turkish Government has set the ambitious economic goals of becoming the 10th largest economy in the world and reaching $500 billion in exports by 2023 – the 100th anniversary of the founding of the modern Turkish republic. These positive developments present a great opportunity for the United States to increase commercial ties with a strategic partner and growing economy.
Turkey was not always seen as an economic dynamo. In 2000 and 2001, it experienced its own financial crisis, with high inflation, frozen credit lines, and a banking sector in tatters. In 2001, GDP fell by nearly 6 percent. Finance minister Kemal Dervis subsequently oversaw a sweeping program to reform the banking system, allocating roughly 40 percent of GDP to recapitalize the faltering banks, as well as nationalizing 19 financial institutions.ii Following this radical restructuring, along with a devaluing of the Turkish Lira, the country quickly returned to growth, largely on the back of rising exports.
Further economic liberalization has since led to not only a consolidation of commercial expansion, but also to the emergence of entrepreneurs and capitalists from budding industrial cities in the Turkish heartland. These so-called “Anatolian Tigers” have reinvigorated the economy and opened it up to a flourishing middle class. Turkey, as stated above, is now the fastest-growing economy in the world and a haven for foreign investors, becoming a global economic player, especially in the following sectors: construction (second only to China), textiles, iron and steel, and chemicals. And while many are worried about an overheating economy, with a current account deficit of almost $8 billion, most economic indicators are very encouraging.iii
The market is ripe for trade and investment, particularly in renewable energy and transportation. With economic expansion, comes greater energy consumption. Turkey’s primary energy usage increased by nearly 10 percent in 2010, and will continue to expand, as the country maintains a young, growing population.iv To accommodate this growing demand, the Turkish government is due to invest roughly $130 billion by 2023, and has placed a great deal of emphasis on renewable energy.v Turkey has set the target of 30 percent renewable energy production by 2023, and has called for $40 billion in investment in this sector by 2020. Moreover, the government passed an updated renewable energy law in December 2010 that laid out feed-in tariff policies for various renewable energy resources, providing further incentives for investment.
While the renewable energy sector in Turkey is very attractive on the whole, the opportunities in wind and solar energy stand out. The wind energy market is the second largest in Central and Eastern Europe.vi While current wind capacity is only roughly 1,000 megawatts, Energy Minister Taner Yildiz recently declared, “As much as $30 billion worth of investment will come in to build 20,000 megawatts of wind power capacity. We expect this capacity to be built in four to five years.”vii Meanwhile, the solar market begs for investment, as Turkey is Europe’s sunniest country, next to Spain. Small-scale solar panels are frequently used for domestic water heating, but the country has enormous solar production capacity. Tanay Sidki Uyar, vice president of the European Association for Renewable Energy (EUROSOLAR) Turkey, notes, “The solar energy potential of Turkey itself is enough to meet Turkey’s overall energy needs threefold.”viii
Ankara is also due to heavily invest in transportation and infrastructure. The Ministry of Transportation maintains ambitious plans to allocate $100 billion by 2023 to various transportation infrastructure projects.ix Bridges, railways, and highways are due to be upgraded and new ones constructed, including a third bridge for Istanbul. These vast improvements in infrastructure will not only provide new business prospects but also contribute to economic growth.
This is great news for the United States, whose companies are well placed to take advantage of these burgeoning commercial opportunities. Historically, U.S.-Turkish relations were largely driven by political and military rather than commercial interests. Indeed, Turkey has been a stalwart NATO ally since the 1950s, and defense ties remain strong. However, with the economic rise of Turkey and the Obama Administration’s commitment to not only growing exports – the National Export Initiative (NEI) calls for the doubling of U.S. exports by the end of 2014 – but also bolstering ties with Turkey, commercial relations are becoming a bigger priority.
In fact, President Obama chose Turkey as the destination for his first overseas trip in April 2009, during which he agreed with Turkish President Abdullah Gul to elevate the U.S.-Turkish bilateral economic partnership. As follow-up to this commitment, President Obama and Prime Minister Erdogan launched the Framework for Strategic Economic and Commercial Cooperation (FSECC). The FSECC, co-chaired on the U.S. side by the Commerce Secretary and U.S. Trade Representative and on the Turkish side by the Deputy Prime Minister and Minister of Economy, is an annual, senior-level forum to discuss economic and commercial issues. The United States and Turkey have also agreed to establish another bilateral mechanism to boost trade and investment ties, the U.S.-Turkey Business Council. The council will bring together U.S. and Turkish business leaders to provide joint policy recommendations to the respective governments on ways to strengthen bilateral economic relations, adding a crucial private-sector component to the relationship.
Closer economic collaboration appears to be bearing fruit. Historically, trade between the United States and Turkey has been somewhat modest. But that is changing. In 2000, U.S.-Turkey trade stood at roughly $6.8 billion; in 2010, it amounted to nearly $15 billion.x And things are looking up, with bilateral trade flows projected to total over $20 billion for 2011, which would constitute annual growth of more than 25 percent.xi With a thriving Turkish economy, competitive U.S. companies eager to export and invest, and a joint commitment by both governments to work closely, the future of U.S.-Turkish commercial relations looks bright.
Ryan Barnes is an International Trade Specialist in the Central and Southeast Europe office of the U.S. Department of Commerce’s International Trade Administration (ITA). He holds a B.A. in Political Science from Ohio University and an M.A. in International Affairs from American University.
iInternational Monetary Fund (IMF) estimate.
iiSuzy Hansen, “Turkey’s Moment”, Business Week, June 19, 2011.
iiiCurrent account deficit figure is May 2011 estimate from Turkish Statistics Agency.
iv“Energy Consumption on the Rise in Turkey.” Hurriyet Daily News, July 8, 2011.
vInvest in Turkey: http://www.invest.gov.tr/en-US/sectors/Pages/Energy.aspx
viFrost and Sullivan Report: “Investment Opportunities in the Wind Energy Sector in Europe.”
viiErcan Ersoy and Ali Berat Meric. “Turkish Law May Spur Wind Investments of $30 Billion.” Bloomberg Businessweek, January 3, 2011.
viiiSule Kulu, “Turkey Yet to Harness Huge Solar Energy Potential.” Today’s Zaman, July 25, 2010.
ixErcan Yavuz, “$100 Billion in Transportation Projects Planned for Next 13 Years.” Today’s Zaman, October 17, 2010.
xFigures taken from the Global Trade Atlas (GTA).
xiBased on annual projections of May 2011 World Trade Atlas (WTA) figures.
