The Development of Economic Relations Between Turkey and The Netherlands

Although macroeconomic indicators of Turkey and The Netherlands differ from each other to some extent, both countries also have some similar characteristics. Turkey and The Netherlands can be considered as two countries which are strategically located along the boundary lines of Europe, one in the East and the other in the West. This gives them a unique position as being a distribution hub between Europe and other surrounding regions. However, the two countries have not yet been able to create a synergy from the advantages of their geopolitical locations and trading activities together.

Turkey has become a very attractive country for foreign investors in the last 5 years. Total FDI in Turkey between 2005 - 2007 has reached approximately $52 billion level. At the same period, The Netherlands provided the highest amount of FDI with $11.3 billion. As of March 2008, there were a total of 1,428 Dutch origin companies operating in Turkey. Dutch companies such as Philips, Unilever, Shell and ABN AMRO have decades of long presence in Turkey. In fact Philips started operations in Turkey back in 1930 under the name Türk Philips Ltd. As of June 2008, the total amount of Turkish investments in the Netherlands has reached $3.9 billion level.

The breakdown of Dutch companies in Turkey points out that “real estate and construction” (22% of total) is the most prominent sector for Dutch investments in Turkey. Large Dutch developers such as Corio, Redevco and Multi Turkmall are either undertaking new commercial projects or acquiring local companies and real estate in Turkey. Furthermore, there are a lot of smaller sized Dutch origin companies which are specialized in the construction and marketing of residential projects in resort regions. Wholesale and retail trade (11%), tourism & catering (8%), transport & communications (7%), machinery & metal/plastic processing (8%), textile & ready-to-wear (7%) and IT-media publishing & education (6%) are other popular sectors for Dutch origin companies in Turkey. 53% of all Dutch origin companies in Turkey are located in Istanbul and 35% are located in Antalya, Mugla, İzmir and Ankara. On the other hand, the breakdown of Turkish companies in The Netherlands points out that “financial services and banking” is the largest sector for Turkish investments. Major Turkish banks in The Netherlands can be listed as Koçbank, Garanti Bankası, Yapı Kredi Bankası, Demir-Halk Bank, Dışbank, Ziraat Bankası, İş Bankası and Akbank.

As mentioned above, despite geographic size, The Netherlands is one of the most important economies in Europe due to its unique role in international trade activities. The Netherlands is considered as the main port for entering the Europe and a major logistics center for the EU countries. Many foreign investors perceive The Netherlands as a distribution center for entering the European market. One of the similarities between Turkish and Dutch economies, is the fact that exports make up a considerable amount of the total GNP in both countries. In The Netherlands exports constitute almost 60% of the GNP making the country vulnerable to global economic volatilities.

Economic and trade relations between Turkey and The Netherlands started some 400 years ago. In the Ottoman era the economic relations between the two countries were based solely on the trade activities. Following the foundation of the Turkish Republic, Turkish – Dutch Foundation was established in 1934 in order to promote trade and economic relations between the two countries. In the years ahead various trade and economic agreements were signed between the two countries.

As of 2007, The Netherlands has a very strong economy with GDP per capita at $ 38,754 and a growth rate of 3.5%. Total GDP in The Netherlands is EUR 789.1 billion and the inflation rate is only 1.3% as of 2007. As of the same period the country has a trade surplus of $ 66.5 billion. Although main export and import items in The Netherlands are pretty much the same, re export is the driving force behind the trade surplus. However, in Turkey’s case, most of the export items depend heavily on imported raw materials and intermediary goods. Therefore Turkish economy is facing a widening trade deficit hovering around $ 46 billion as of 2007. The development of economic relations between the two countries is encouraging as the trade volume is constantly rising since 2002 and Turkey has a trade surplus in economic relations since 2004. As of 2007, Turkey’s exports to The Netherlands were EUR 2.2 billion and imports from The Netherlands were EUR 1,9 billion.

As far as the tourism sector is concerned, Turkey continues to be one of the most popular travel destinations for Dutch tourists. The total number of tourists coming from The Netherlands to Turkey in 2007 was 1,053,669. Due the increase in trade and passenger traffic with Western Europe, the demand for transportation services has increased and Dutch enterprises such as Den Hartogh and Corendon have established local subsidiaries in Turkey. Telecommunication and IT sectors in Turkey are also attractive for Dutch investors since Turkey offers valuable opportunities with its large consumer base and qualified technical staff in these areas. As a result, firms operating in these branches including GreenCat, TopTel and BitBrains consider Turkey as a location for their investments abroad.

Turkey and The Netherlands do not have any major political conflicts and the political relations between the two countries have been very consistent for years supporting a favourable trade and investment environment between the countries. The mutual understanding between the two countries on global balance of forces helps to build a partnership on political fronts. In this context, The Netherlands continues to be well aware of the geopolitical location and influence of Turkey in the region.

Turkey and The Netherlands have much to share in common from regional security to global trade and investment activities. The presence of Turkish community (approximately 380,000 people) in The Netherlands and presence of a considerable amount of Dutch visitors in Turkey each year, put another emphasis on the importance of partnership between the two countries. The trade volume between the two countries that currently stands around of EUR 4.1 billion should be increased since The Netherlands remains to be one of the important markets for Turkish exporters and the share of exports to The Netherlands remains relatively low among Turkey’s export markets. Current breakdown of goods and services exported to The Netherlands also points out that Turkish exporters should work harder to diversify their export items to The Netherlands. On the other hand, Turkish and Dutch firms still have many new areas for investments in both countries as investment climate between the two countries remains supportive and investor sentiment is high.

  

Hakkı Sunar

Prospects of the Energy Sector in Turkey

Energy is one of the main driving forces behind the growth of every country in the world. Despite economic crises and downturns in the global economy, global energy demand is very likely to remain strong for the foreseeable future. This surging demand is likely to put increasing pressure on the global energy prices regardless of new investments for the renewable energy sources and new explorations for additional fossil energy resources.

According to a recent “McKinsey Global Institute” analysis, global commodity prices (including energy) are expected to remain high and volatile for at least the next 20 years if current trends hold. One major reason of the volatility is that global demand is surging and supplies currently remain relatively inelastic. Approximately 87% portion of global energy is currently being produced from fossil fuels. In 2008, energy supply by power source was, oil 33.5%, coal 26.8%, gas 20.8%, renewable (hydro, solar, wind, geothermal power and biofuels) 12.9%, nuclear 5.8% and other 4%. Oil was the most popular energy fuel in the world. Oil and coal combined represented over 60% of the world energy supply in 2008. More importantly, approximately 46% portion of global oil production is currently being subject to regional energy trade and this amount is expected to rise in the near future.

As far as fossil fuels are concerned, long-term marginal costs are increasing for many fossil  resources as depletion rates accelerate and new investments are made in more complex and less productive locations. Therefore, like many other countries, Turkey is also considering to diversify its energy supplies and to increase the use of renewable energy resources.

Turkey currently imports almost 74% of its energy demand. Despite new energy pipeline projects (that are under development) and new exploration projects for additional fossil fuels, Turkey puts greater emphasis on the diversification of its energy resources as well as wider use of domestic energy resources. In the meantime, Turkey is also considering to increase the use of renewable energy resources including the use of biofuels. Clearly, there is a huge potential in Turkey for new investments especially in the wind and solar energy plants, small scale hydroelectric plants (low installation costs and suitable for regional energy demands), and geothermal energy power plants (as Turkey has 8% of the geothermal energy potential in the world which does not exist in most countries).

  

As far as global consumption trends are concerned, we are entering an era that, more efficient use of commodities (including energy) is on the rise. Most of the new “product development” activities in the world now aim efficiency and better energy consumption. New motor vehicles and transportation equipments, domestic appliances, industrial equipments, lighting equipments and even commercial aircrafts (such as Boeing 787 and Airbus A350 XWB) all aim less energy consumption and more efficiency. Countries constantly set new strategies for better use of energy resources and wider proportion of renewable energy resources in their total energy consumptions.

In the medium to long term, efficient use of energy resources will be the main focus point in the world rather than exploration of new fossil energy resources. With this in mind, Turkey  continues towards its strategy for wider use renewable energy resources not because of surging energy prices but also for the protection of its ecosystem and environment. On the renewable energy front, more research and development is essential in order to form scientific data sets. More importantly, data sets for the renewable energy resources should be carefully maintained and updated on a regular basis. The observations especially for solar and wind energy projects should be conducted regionally on a regular basis. The new energy policy and strategy of Turkey should aim efficient and eco-friendly use of domestic energy resources. By 2023, 3.43% of the total electricity consumption in Turkey is expected to be supplied from wind energy plants.

Turkey is currently not using its solar energy potential. Although this may be attributed to the expensive nature of high-tech solar energy equipments, Turkey is a country with a major solar energy potential compared with much of the northern Europe.  If needed, international cooperation for solar energy technology should be done with countries that own substantial solar energy technology such as the U.S., Canada and Germany. Besides, Turkey should also continue to support research & development and implementation activities for new domestic wind energy projects on a high scale.

In short, current energy policy and strategies show that Turkey is diversifying its external energy resources for a more stable and safer future. On the other hand, current energy sector strategies also suggest that more renewable energy resources (hydroelectric, wind, solar, biofules) will be on the agenda for new energy investment opportunities in Turkey. Nuclear power on the other hand, will remain to be a sensitive issue in Turkey’s overall energy strategy as most countries currently contemplate on the future of nuclear energy  based on the recent negative effects of global natural disasters.

HAKKI SUNAR