2022 is a rebranding year for Turkey, officially changing its name to Turkiye, and the country is taking many steps to project a new image abroad.
The recent weeks have been important for Turkey, as the security and stability of Europe and Turkey’s role in this picture have come to the forefront. Turkey’s geopolitical strategic location is ultimately giving the country more relevance as a bridge between the East and West.
Significant mega infrastructure investments are underway, the country opened the world’s largest suspension bridge, over the Bosphorus Strait between Europe and Asia in March. Istanbul’s new airport is now the busiest in Europe and has quickly risen to be arguably the best in the world. Many of the biggest corporations in the world have taken notice of Turkey’s strategic location.
“The government has created a vision to make Istanbul a global finance center. If you don’t have the right financial architecture, you cannot create a global class industry or investment,`` Burak Daglioglu, Head of Foreign Direct Investment for Turkey said in Istanbul, in a meeting with journalists in March.
Daglioglu says because of trade wars and countries are increasingly looking for diversification, Turkey feels it is strategically positioned to take advantage.
Recently, a group of Turkish politicians, businessmen and bureaucrats traveled to the US to hold talks with officials from the State Department, and the Department of Commerce to spur bilateral trade, particularly in the renewable energy sector.
According to Hurriyetdailynews, during the Turkish delegation’s visit, Turkish and U.S. officials discussed the prospects for establishing new logistics centers and upgrading the existing ones in order to increase the trade between the two countries and facilitate faster shipments of goods.
Turkey is well known for its logistics capabilities as companies like FEDEX Corporation (NYSE:FDX), United Parcel Service Inc. (NYSE:UPS) and DHL (Deutsche Post AG - ADR (OTC: DPSGY) are already benefiting from incentives offered in a relocation Turkey, says the Investment Monitor. Amazon.com, Inc. (NASDAQ:AMZN) has also announced it is building a $100 million logistics facility in Istanbul.
“Late stage companies in Turkey saw $3 billion in Foreign Direct Investment 2021. The United States plays an important role here as big funds in the US are investing in Turkish startups, and fund managers have been more active in Turkey in recent years,” Daglioglu said.
Foreign Direct Investment Program
Among the ultra-wealthy, it is becoming popular to purchase passports and Turkey has one of the easiest paths to citizenship.
Nuri Katz, Founder at Apex Capital Partners Corp., a firm that helps people get citizenship through investment (CIP), says his company is opening up an office in Turkey due to the demand.
Katz says it is a relatively easy program. “Turkey is going to take advantage of any opportunity because they are competing with every country when it comes to FDI, and a lot of Americans want to diversify.”
“Americans have become the next Klondike for citizenship by direct investment, because they are very interested in this. Europe is dysfunctional in many ways, it is incredibly expensive, the taxes are incredibly high, and Turkey, they are seeing it as an opportunity to promote their investment product. There are a lot of positives and negatives about Turkey but it is a pretty moderate Muslim country, and it is at the crossroads of a lot of different places,” Katz said.
Foreigners who purchase real estate in Turkey worth a minimum of $250,000 can get Turkish citizenship and a passport in less than 2 months, all while never having to set foot in the country.
According to Invest In Turkey, up until 2002, Foreign Direct Investment stood at $15 billion, but from 2003-2020, the country has garnered $225 billion. In 2021, FDI in Turkey hit $14.2 billion, exceeding pre-pandemic levels.
“Our economic growth story begins in the 1980s. In 2003, we saw a continuation of liberal free market policies. One of the first things Erdogan did was change the FDI law. Even more recent changes have Made Turkey one of the most liberal economies in terms of FDI attraction,” said Daglioglu.
As a member of NATO, Turkey is positioning themselves as a country that is decidedly Western and is aligning its values with the West. So why is Turkey a member of NATO but not the EU? Turkey's Deputy Minister says the country wants EU membership but it has been stalled due to political instability.
“Between 1971 and 1980 we had 3 military coups in Turkey that really disrupted democratization process and really created difficulties for us and our relations with the EU. That’s why we started all these radical reforms. From 1999 to 2006 we almost completely renewed our constitution, have legislated more than 200 new laws and amended 300 laws. We have tripled our GDP from new reforms that have really helped,” said Deputy Minister of Trade Riza Tuna Turagay.
As the country’s GDP grows, Turkey believes it is ready to take a bigger step towards being a global player.
"We are underperforming in the US compared to the world market so there is a huge potential over there and the United States wants to diversify its supply chain. In this regard, we have a competitive advantage.” the Deputy Minister of Trade said.
“Our main message from Turkey to the United States is don’t miss that opportunity because Turkey is a very attractive country for direct investors and we are trying to help foreign direct investors as much as we can, that is what we are trying to do.”
TOGG: The Turkish Tesla
But, policy cannot trigger the economy alone. Turkey needs to make something innovative. Turkey is a textile, manufacturing and tourism hub and has a thriving automobile industry, mostly known for supplying auto parts.
“There is a trend that started during the pandemic especially for European car manufacturers, that they are putting Turkish suppliers in their supplier base as an alternative to Far Eastern or other regions. They have seen China has put its internal market as a priority, even if they can get the product, they can’t get it in a competitive way,” said Albert Saydam, Chairman of TAYSAD, Automotive Suppliers Association of Turkey.
As the 13th biggest auto manufacturer in the world, Turkey has a long history of automotive production despite not having a well known brand. Turkey believes that its history as an automotive parts supplier will help give the country strategic positioning to finally export a luxury car.
TOGG, the country’s electrical car project, is an ambitious $3.6 billion project to create a global brand, something the country has been trying to do for over 60 years. Turkey took five of its largest manufacturers, all with a 19% stake, together to build the first car to ever be 100% made in Turkey.
TOGG made its world debut at CES in Las Vegas earlier this year and its design received favorable reviews. TOGG says what happened with smartphones will happen to mobility, where developers will be essential to the continual evolution of the product.
“We want to create an open and user centric mobility ecosystem. We cannot do everything ourselves in house, so we are a development platform, for the ones that want to join us and produce services and products, similar to the App Store,” said TOGG Chief Marketing Officer, Talin Yildiz.
The government is providing the land, incentives and has guaranteed to purchase 30,000 TOGG vehicles over the next 10 years. The company hopes to become the pride of the nation as the company’s first vehicle is expected to launch in 2023.
“This country has some wishful thinking, we have great aftermarket companies but still we don’t have a brand. With electric technology, this investment will be very important not just for Turkey but the region as well, because otherwise we will depend on China,” the CMO added.
Yildaz says TOGG hopes to be listed on NASDAQ in the future.
Former Deputy Prime Minister, Cevdat Yilmaz says he believes Turkey is not late to the EV rush and has aspirations on the impact a transformational company can have on the countries economic well-being.
"It is a public/private partnership that has created big enthusiasm. The government puts all its support to this sector as we believe Turkey has caught the EV trend. Historically we couldn’t produce (but) we are not late entering this market and we are expecting a lot. It is not just producing a car, it is a driving force for new software technologies for Turkey,” Yilmaz said.
“We are a middle income country and we are in a middle income trap. This is one of the projects that will help us surpass this trap as a middle income country to a high income country. We have moved from low technology to medium, and now it is time to move to medium technology to high technology. In some critical industries we are expecting our technologies to bring us to a higher level,” he said.
'One Of The Most Advanced Projects In The World'
Turkish automotive company Karsan Otomotiv Sanayii Ve Ticket A.S. (IST:KARSN) is another notable brand highly focused on electric, hybrid and connected public transportation. Shares of the company have already gained 50% year-to-date.
Karsan competed for a $6 billion USPS project to create electric and hybrid mail delivery vehicles, but the deal ultimately went to US manufacturer Oshkosh Corp (NYSE:OSK). Still the company is confident it can enter the US market, as it has a created a partnership with Michigan State University, for its level four autonomous e-atak bus. Karsan calls its autonomous car project one of the most advanced in the world.
“To be present in the United States, we know what to do. The real value we create is with our own brand and the concentration is on urban transportation. The main focus is to maximize our use of contract manufacturing with big brands to create value for our own technologies. For our own brand we create end-to-end products,” said Karsan CEO Okan Bas.
It remains to be seen whether or not we will see a Turkish brand finally reach the American market in a substantial or even noticeable way, but the country is adamant about the prospects it offers to companies and investors.
“We offer the perfect geographical location to reach Africa, Asia and Europe, these are fundamentals which we will continue for a long time,” Daglioglu said.
