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A new vision of Turkey:
partner for innovation
Dott. Riccardo Monti
Rome, October 19th 2005
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Contents of the document
• Macroeconomic scenario
• R&D and high-tech in Turkey
For the conditions of use of this document please refer to the front page
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Macroeconomic status: A potentially high growing country
2004
Macroeconomic overview
Population
Turkey
Italy
- Growing population with a strong
urbanization trend
- High GDP growth:
72 million
57,9 million
% Population below
poverty threshold
~30%
~12%
. The country real GDP expanded by
approximately 25% on a cumulative basis
in the last 3 years
Number of Businesses
1,8 million
4,2million
. General Consensus forecast GDP growth
to slow down to 5% - 6% in 2005
Number of Households
15,1 million
22,8 million
GDP (PPP Adjusted)
530 Bln Euro
1.360 Bln Euro
Real GDP Growth
8,5%
1,2%
7.358 Euro
23.500 Euro
10,6%
2,3%
GDP per capita (PPP Adjusted)
Inflation (Average)
. Turkey’s inflation rate, measured by CPI,
declined from an average of 77,5%, in the
90s and 18,4% in 2003 to 9,3% at the end
of 2004
. Analysts expect inflation to fall further in
the near future
- Strong local currency:
. The Turkish Lira has performed extremely
well in 2004 rising both against Euro (4Q
2004) and against the dollar
TLC Services Penetration
Residential Fixed phone (on HH)
94%
80%
Mobile phone (on population)
54%
102%
Internet subscribers
- Decreasing inflation rate:
10,3 million
22,6 million
. Analysts expect a modest depreciation
of the Lira in the coming years
- Turkish unemployment rate, now at 9,7%,
is expected to decrease to 9,1% in 2006
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Turkey is fully recovering after the 2001 economic crisis…
2005
CAGR
Real Turkish GDP growth, % to previous year
GDP by country in USD billion
(not adjusted for PPP)
US
Japan
8,9%
7,5%
7,9%
7,2%
10,875
4,190
Germany
5,9%
4,5%
3,1%
UK
1,779
France
1,705
Italy
1,462
China
1,372
Canada
-4,7%
2,384
860
Mexico
615
India
573
S. Korea
515
Brazil
493
-7,4%
+4.1%
1997
1998
1999
2000
+16,0 %
2001
2002
2003
2004
2005E
TURKEY
300
Source: Turkish Ministry of Economy, Is Investment
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Where consumption is increasing thanks to under-control
inflation and growing income…
Consumer Price Inflation index, %
Income distribution
86,0% 84,7%
Turkey, 2003
EU 15, 1997
% Total Income
50%
64,8%
56,4% 53,5%
48,0%
25,3%
10,6%
9,5%
50%
40%
38,4%
30%
23,2%
17,2%
20%
10%
13,1%
8,1%
21%
14%
10%
5%
1997
1998
1999
2000
2001
2002
2003
2004E 2005E
GDP per capita (USD)
1.
%20
% Population
2.
%20
3.
%20
4.
%20
5.
%20
Private consumption growth
4.110
4.307
9,2%
3.382
3.062
6,6%
2.681
2.194
4,5%
5,2%
2,1%
2000
2001
2002
2003
2004E
2005E
2002
2003
2004E
2005E
2006E
Source: Turkish Ministry of Economy, State Institute of Statistics, Is Investment, Garanti Investment, Value Partners analysis
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… while the country is becoming much more attractive for foreign
investors
2005
Total Turkish FDI, USD
billions
Sectoral breakdown of FDI
Major foreign acquisitions in
Turkey (2000-2004)
43.895
40.310
Agriculture
37.018
31.752
33.995
29.027
44,0%
25.550
53,0%
Acquirer
(country)
Sector
TIM (Italy)
Telco
Ford (USA)
Automotive
Unicredito (Italy)
Financial
Toyota (Japan)
Automotive
Danone (France)
Food
Manufacturing
Mining 1,3%
1,8%
1999
Rank in FDI
Confidence
Index
2000
2001
23
2002
2003E
29
24
2004E
Services
2005E
Turkey is the most attractive
FDI destination in Near East
& Middle East region
Starting of negotiations with EU is expected
to further stimulate FDI inflows to Turkey
Source: Turkish Ministry of Economy, Value Partners analysis
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Italy, although being late in direct investments, still remains an
important strategic partner…
2004
Total accumulated FDI in Turkey, Between
1980-2Q/2003 by country of origin
Turkish foreign trade volume btw. Jan-Sept 2004 (Imports & Exports)
100% = 35 Mld USD
Import
100% = 115 Mld USD
Belgium 1,6%
Export
Total =
11,4 mld USD
1,1% Luxemburg
Japan
ITALY
France
6,0%
6,2%
Germany
Other
44,9%
18,7%
13,4%
Switzerland
6,8
7,6%
ITALY
7,1%
18,1%
12,5%
Holland
6,6%
UK
Russia
13,2%
USA
Holland
2,5%
14,9%
Germany
6,4%
3,7% 6,1% 6,3%
3,0%
China
Spain
UK
• Equipment &
Machinery (40.0%)
• Automotive(9.5%)
• Chemicals (8.0%)
France
4,6
• Automotive
(24.4%)
• Equipment &
Machinery(14.6%)
• Texztiles and
cotton (11.3%)
USA
Source: ICE
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… reaching top values in 2004
Turkeys foreign trade evolution (Billion USD)
Import
160,6
Export
115.6
87.6
82.3
62,9
Italy’s weight on Turkish foreign trade
10,8%
46.9
9,9%
72.7
9,5%
9,2%
36.0
27.8
31.3
97,7
7,1%
68.7
54.5
51.5
41.4
2000
2001
2002
2003
2004
Italy’s share in Turkish foreign trade (Billion USD)
1.8
6,1
5,8
2.2
6,3
3.1
8,5
2001
2002
2003
2004
11,4
4.3
3.5
4.1
5.4
4.6
6.8
2000
2001
2002
2003
2004
2.3
2000
Source: ICE, Value Partners Analysis
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Italian companies operating in Turkey have triplicated in number
during the course of last 10 years…
Millions USD, December 2004
Stock
# Comp.
Italian FDI in New Europe
4.500
16.000
4.000
3.500
1.200
3.000
2.500
650
2.000
510
300
1.500
300
250
1.985
473
1.000
500
4.089
Poland
Turkey
Czech
743
Romania
1.032
Slovakia
716
Bulgaria
1.182
Croatia
Source: National Banks or Investment Agencies
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… by localising mainly in the western regions of the country
Various projects
JV con Koc Group in Koc
Financial Services
Various projects
40% of AVEA
(3rd GSM operator)
ISTANBUL
Pharmaceuticals
Insurance
Company
Izmit
ANKARA
Asset Management
Rep. Offices
… and a lot of small and
medium sized firms in food,
consumer goods, services…
Bursa
Production of refirgerators
Various projects
Tyre & Cable Production
plant
Manisa
Gaziantep
Adana
IZMIR
Total:
around 300 firms with
Italian ownership
Magnet production plant
Agricultural
machinery
production plant
JV con Koc Group
in TOFAS
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Contents of the document
• Macroeconomic scenario
• R&D and Hi-Tech in Turkey
For the conditions of use of this document please refer to the front page
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Turkey has a weak track record on R&D and innovation but
current efforts seems to be promising
2005
Past
- Weak national policy definition
regarding research and high
tech
- Weak implementation of
policies due to bureaucracy
- Lack of education and
dedicated human resources
- Lack of transferring funding to
R&D and innovation
- Lack of creating a social
awareness
Present
Future
- Governments strong
commitment to set national
policies and 5 year
development plans
- Clearly defined roadmap to:
. Raise funding for innovation
. Develop adequate HR
. Increase R&D spending of
private and public sectors
. Increase participation in
international projects
- The Scientific and Technological
Research council of Turkey
(TUBITAK) has defined a “Vision
2023 of Turkey ” project with the
aim of creation of a society which:
. is competent in science
and technology
. is capable of developing
new technologies
. possesses the skill of
converting technological
developments into social and
economic benefits
- Implementation is crucial in order to reach the objectives of 5 year development plans
and to reach future Turkey vision
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Currently overall R&D penetration and private sectors weight on
R&D remains low compared to European average in terms of
spending and dedicated human resources…
2005
R&D employees by 1.000 employees
National R&D spending over GDP
Number of Employees
Percent
13,77
4,27%
1,98%
6,00
5,68
0,64%
1,10
EU-15 Max. EU-15 Average
Turkey
2,00%
Turkey 2013
Target
Private sector R&D empl. / Total empl. (public + priv.)
Percent
EU-15 Max. EU-15 Average
Turkey
Turkey 2013
Target
R&D spending: Private sector / Total (public + priv.)
Percent
71,90%
66,10%
49,70%
50,00%
56,10%
56,10%
42,90%
16,50%
EU-15 Max. EU-15 Average
Turkey
Turkey 2013
Target
EU-15 Max. EU-15 Average
Turkey
Turkey 2013
Target
Source: TUBITAK (The Scientific and Technological Research council of Turkey) - Vision 2023
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…but there are signs of increasing activity on R&D and innovation
2005
Automotive District
Textile District
-
Advanced Engineering (robotics)
Biotechnology
Chemistry
Electronics
Environment
Health Care & Medicine
Nanotechnology
ICT (software
-
ICT
Energy
Environment
Agro Food
Material sciences
Chemistry
Electronics
Biotechnology
-
Chemicals District
Nanotechnology
Aerospace
Biotechnology
ICT
Energy
Environment
Agro Food
Material sciences
Aerospace &
Defense District
Running R&D Projects
Number of Projects
CAGR
- ICT
- Electronics
2.600
ISTANBUL
+25%
Izmit
- ICT
ANKARA
837
982
1.212
1.199
1.353
Bursa
- ICT
- Biotechnology
- Robotics
Manisa
IZMIR
-
ICT (software development)
- ICT
Electronics (defense)
2000
2001
2002
2003
2004
2005E
- Health Care & Medicine
Biotechnology
Health Care & Medicine
Adana
Advanced Engineering
(aerospace, defense, advanced
materials)
- Nanotechnology
Number of Tehcnoparks and running R&D
projects are increasing thanks to industry-university
cooperation driven also by foreign investments but
commitment is needed to reach EU levels
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Turkey has some unique strengths and opportunities that can boost
innovation if risks are properly addressed…
Strengths
Weaknesses
- Young population open to adapt new technologies
- Local scientific community with strong international
connections
- Availability of resources with international experience
- Insufficiency of of education system in promoting
research and development
- Lack of strong R&D incentive tools and financial
structure to support industry
- Increasing presence of techno-parks, companyuniversity cooperation, R&D incentive mechanisms
- Lack of coordination between universities, companies
and other related parties to realise projects
- Strongly developing IT and communications sectors
- Highly developed consumer electronics, textiles and
automotive sectors focusing on R&D to increase
competitiveness
Opportunities
Threats
- EU membership perspective and access to
international funds
- Difficulty to retain qualified human force against
attractive European and US employment opportunities
- Political instability of Turkeys neighbours and global
economic fluctuations
- Quickly developing, difficult to catch-up, international
science and high tech environment
- Strategic position, proximity to strategic markets like
EU, Russia and Middle East
- Opportunities arising from high amount of obligatory
investments- due to delicate geographic position- in
Aerospace and Defence
- Proximity to strategic energy sources
- Inability to attract R&D investments and know how of
international investors due to strategic importance
- Worldwide availability of financing to invest in R&D
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…in collaboration with its strategic business partners
• Althoug there are signs of incresing R&D and Innovation
activity, Turkey needs strong collaboration from European
countries to be able to implement defined policies in terms of:
- Funding
- Know how & education
- Cooperation in international projects
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