“SILK ROAD”

FROM CHINA TO TURKEY

Serah KekeçCommercial Counselor

Embassy of the Republic of Turkey

WHY TURKEY?AN OVERVIEW OF TURKISH ECONOMY

&TURKISH-CHINESE BILATERAL RELATIONS

CONTENTTURKISH ECONOMY IN GENERAL

WHY TURKEY? - Investing in Turkey- Sectors for Cooperation

TURKEY – CHINA BILATERAL RELATIONS

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Turkey is the 16th largest economy in the World

(6th when compared to EU Countries – IMF/2011)

5

Turkey has quickly recovered from the global financial crisis and among the least affected countries from current economic uncertainties

Turkey has the highest economic growth rate in Europe Average annual growth rate between 2002 and 2012 is 5.2% Real GDP growth for 2011 has been realized as 8.8% Real GDP growth for 2012 realized as 2.2%.

Growth Performance (2012)

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GDP (2012,Current prices, Billion $)

The biggest economy in the region

%5.0 annual average growth in the last 10 years (US: %1.6, EU: %1.0, Poland: %4.3)Source: IMF

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GDP Per Capita

Since 2002 GDP per capita has tripled from 3,492 USD to 10,497 USD. According to Purchasing Power Parity (PPP) GNI per capita surpassed 18 thousand USD.

Source: Dollar value is from TURKSTAT, PPP GNI value from World Bank

8

Source: TURKSTAT

Inflation (Annual Percent Change)

Annual inflation in 2013 was realized as 7.40% and 6.97% according to CPI and PPI, respectively.

9Source: Eurostat, Treasury

Turkish Government’s gross debt stock to GDP ratio is %36,1 while the EU27 average is %85,1

(Q3 - 2012)

General Government GrossDebt Stock

Maastricht Criteria%60

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General Government Budget Balance

Source: Eurostat, Treasury

Turkish Government’s budget balance to GDP ratio is -% 2 while the EU27 average is -%4,5

(Q3 - 2012)

%3Maastricht

Criteria

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Unemployment Rates (%)

In December 2013, unemployment rate was 10.0% and seasonally adjusted unemployment rate was 9.4%.

In 2013, unemployment rate was 9.7%. Seasonally adjusted unemployment rate in Euro Area was 12.0% and 10.8% in

(EU28) in January 2014. In terms of unemployment ratio Turkey outperformed 14 EU countries according to current data.

After Russia, Germany, England and France, Turkey has the 5th largest labor force among the European countries. (2012, World Bank)

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The year 2023 would be the centenary of Turkish Republic’s establishment. Therefore we set up a challenging vision for 2023. By year 2023, we do intend;

to take place among the top 10 economies in the world, to achieve an annual export level of 500 billion USD and to raise per capita income to 25 thousand USD.

Medium Term Program (2013-15) aims to sustain economic growth, to decrease the current account deficit, and to preserve macroeconomic and financial stability.

2013* 2014* 2015*

GDP (Billion $, Current Prices) 858 919 998

GDP Per Capita ($) 11,318 11,982 12,859

Real GDP Growth (%) 4.0 5.0 5.0

Current Account Balance / GDP (%) -7.1 -6.9 -6.5

Policy Orientation

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1,1 1,72,8

10,0

22,0

19,5

8,4 9,0

15,9

12,4

20,2

3,4

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Foreign Direct Investment Inflows

FDI inflows (cumulative) Companies with Intr.Capital (c

umulative)• 1923-2002 : 15 billion USD 6.000• 2003-2012 : 122,4 billion USD 30.000

A.T. Kearney FDI Confidence The Global CompetitivenessIndex Rankings Index Rankings2010 23 2011-2012 592012 13 2012-2013 43

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Turkey’s Foreign Trade (Billion US$)

6998 117

140170

202

141186

241 23747

6374

85

107

132

102

114

135 153

52

36

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

IMPORT EXPORT

Turkey’s Foreign Trade (Billion US$)

* Actual (Source: TURKSTAT)**Forecast: Medium Term Programme, Ministry of Development- 10/09/2012)

Major EXPORT Partners - 2012; Germany (%9), Iraq (%7), Iran (%7), UK (%6), UAE (%5), Russian Fed. (%4), Italy (%4)

Major EXPORT Items - 2012; Automotive and autoparts, Machinery, Iron & Steel, Electrical Appliances, Clothing

Major IMPORT Partners-2012; Russia (%11), Germany (%9), China (%9), USA (%6), Italy (%6), Iran (%5), Fransa (%4)

Major IMPORT Items-2012; Petroleum & Gas, Machinery, Automotive & Autoparts,

(Billion $) 2012* 2013* 2014** 2015** 2016** 2023***

Exports 152.5 151.8 166.5 184.0 202.5 500.0Imports 236.5 251.7 262.0 282.0 305.0 625.0Volume of trade 389.0 403.5 428.5 466.0 507.5 1,125.0Balance of trade -84.1 -99.8 -95.5 -98.0 -102.5 -125.0Exports/Imports (%) 64.5 60.3 63.5 65.2 66.4 80.0

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Turkey has the 5th most liberal trade policies in the world (World Trade Indicators 2009)

Customs Union

with the EU

1. EFTA2. Israel3. Macedonia4. Croatia5. Bosnia & Herzegovina6. Palestine7. Tunisia8. Morocco9. Syria10. Egypt

11. Albania12. Georgia13. Montenegro14. Serbia15. Chile16. Jordan17. Lebanon18. Mauritius19. Korea*Also ongoing negotiations

Free TradeAgreements with 20

countries:

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WHY TURKEY?

Growth Markets

Brazil

Russia

India

China

Mexico

Korea

Turkey

Indonesia

Why Turkey?

• Dynamic, Stable and Attractive Economy (The Fastest Growing Economy among OECD

Countries)

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Why Turkey?Potential of Young Population (2010)

Source: World Bank (2011), TURKSTAT (2012)

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Why Turkey?

Productive and Cost-Effective Labor Force (The longest hours worked per week of full-

time employment-annual average in Europe(2012))*

Why Turkey? A potential market with 74 million

consumers

Increasing GDP Per Capita (10,444 USD per capita income 2011)

Fast Growing Country (2010-8,9%, 2011-8,5%)

(According to OECD, Turkey is expected to be the fastest growing OECD country for the years 2011-2017 with 6,7% average)

EUROPE

GDP – $ 18.4 Trillion Population – 666 million

RUSSIAN FEDERATION

GDP – $ 1,5 Trillion Population - 142 million

MIDDLE EAST AND NORTH AFRICA

GDP – $ 2,8 Trillion Population – 636 million

CENTRAL ASIA & CAUCASUS

GDP – $ 290 billion Population – 80 million

International HubAn important partner because of its proximity to huge marketsPreferential market access to the European Union and 19 FTA partners

Why Turkey?

4h

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An important bridge between energy suppliers (Russia, Iran, Azerbaijan) and consumers (EU)

Turkey As An Energy Corridor And TerminalWhy Turkey

?

Existing Natural Gas Pipelines

Existing Oil Pipelines

Natural Gas Pipelines under Construction

Natural Gas Pipelines Underway

Proposed Natural Gas Pipelines

Oil Pipelines under Construction

National TreatmentNewFDI

Law &

Other Legislation

Corporate IncomeTax %20

Protection Against

Expropriation

Freedom to invest

Employment of Expatriates

Int’lArbitration

Access to Real

Estate

Guarantee of

Transfers

Structural Reforms

Why Turkey?

FDI Regime • National treatment • No pre-entry screening /minimum capital requirements • Right to acquire real estate• Guarantee to transfer proceeds• Right to employ key expatriate staff• Right to access international dispute settlement

• Bilateral Investment Treaties with 86 countries• Double Taxation Agreements with 78 countries• Customs Union with the EU• Free Trade Agreements with 19 countries

Improving investment climate : Moving target for the government since 2002

• Streamlining procedures for investments and eliminating administrative and bureaucratic hurdles in line with changing priorities and needs of business

• Political ownership• Making full use of public-private dialogue through permanent platforms (Co

ordination Council for Improvement of Investment Climate, Investment Advisory Council)

Policies to bring together international capital with Turkey’s assets

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The New Investment Incentives ProgramRegional

Investment Incentive Scheme

- Customs Duty Exemption

- VAT Exemption

- Tax Deduction

- Social Security Premium Support (Employer’s Share)

- Land Allocation

- Interest Support

- Income Tax Withholding Allowance Support (In Region 6)

- Social Security Premium Support (Employee’s Share) (In Region 6)

Large Scale Investment Incentive Scheme

- Customs Duty Exemption

- VAT Exemption

- Tax Deduction

- Social Security Premium Support (Employer’s Share)

- Land Allocation

- Income Tax Withholding Allowance Support (In Region 6)

- Social Security Premium Support (Employee’s Share) (In Region 6)

Strategic Investment Incentive Scheme

- Customs Duty Exemption

- VAT Exemption

- Tax Deduction

- Social Security Premium Support (Employer’s Share)

- Land Allocation

- Interest Support

- VAT Refund

- Income Tax Withholding Allowance Support (In Region 6)

- Social Security Premium Support (Employee’s Share) (In Region 6)

General Investment Incentive Scheme

- Customs Duty Exemption

- VAT Exemption

- Income Tax Withholding Allowance Support (In Region 6)

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Support Measures

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1

1

1

1

1

2

2

222

2

33

333

3

3

3

44

4

4

44

5

55

5

5

55

65

51

2

The New Investment Incentive Scheme

• V.A.T. Exemption (for the imported and domestically provided Machinery and Equipment)• Customs Duty Exemption (for the imported Machinery and Equipment)• Reduced Corporate Income Tax (C.I.T. between %2 - %10)• Social Security Premium Support (Both Employer’s and Employee’s Share, for 2 – 12 years)• Land Allocation• Interest Support• Income Tax Withholding Allowance• VAT Refund for Construction Expenses

Turkey-China Bilateral Relations28

2. Phase: Ever-increasing Trade Relations

Export -2005 : 550 Million US $

Import-2005 : 6,88 Billion US $

Volume : 7,43 Billion US $

Balance : 6,33 Billion US $

1. Phase: A Remote Trade PartnerExport-2000 : 96 Million

US $ Import-2000 : 1,34 Billion

US $ Volume : 1,44 Billion

US $ Balance : 1,24 Billion

US $

3. Phase: One of the Main Trade PartnersExport-2010 : 2,26 Million US $ Import-2010 : 17,18 Million US $ Volume : 19,44 Million US $ Balance : 14,92 Million US $

Turkey-China Trade Relations

 Million US Dollar Change (%)

2010 2011 2012 2013 2011-2012 2012-2013

Export 2,269 2,466 2,833 3,602 15% 27%

Import 17,180 21,693 21,295 24,686 -2% 16%

Volume 19,450 24,160 24,129 28,289 0% 17%

Deficit -14,911 -19,227 -18,462 -21,084 -4% 14%

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Turkey’s Export to China

HS CODE PRODUCT NAME

2009 2010 2011 2012

TOTAL All products 1.599,1 2.259,8 2.467,0 2.833,4

2515 Marble, travertine, ecaussine etc, 350,6 589,6 630,6 779,9

2610 Chromium ores and concentrates 236,6 414,8 385,5 360,4

2603 Copper ores and concentrates 234,0 273,3 193,0 267,6

2840 Borates; peroxoborates (perborates) 124,4 165,3 233,7 231,4

2607 Lead ores and concentrates 16,0 56,5 80,0 102,6

2528 Natural borates & concentrates; natural boric acid not more than 85% h

42,4 73,2 90,3 82,9

2616 Precious-metal ores and concentrates 0,1 0,6 0,5 63,8

2608 Zinc ores and concentrates 36,6 54,3 43,1 62,9

2810 Oxides of boron; boric acids 20,1 48,8 58,7 38,6

5501 Synthetic filament tow 21,8 32,7 36,8 37,9

(The first 10 product groups)

(million US $)

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Turkey’s Imports from China (The first 10 product

groups)

(million US $)

HS CODE PRODUCT NAME

2009 2010 2011 2012

TOTAL All products 12.676,6 17.180,0 21.692,0 21.295,0

8517 Electric app for line telephony,incl curr line system 886,9 977,8 1.481,2 1.651,3

8471 Automatic data processing machines;optical reader, etc 1.232,9 1.433,7 1.492,7 1.612,8

8531 Electric sound/visual signallg app (e.g. bell/siren, fire alarms)

474,8 583,9 602,0 495,7

8529 Parts for television, radio and radar apparatus 40,3 49,0 71,8 468,3

5402 Synthetic filam yarn, not put up 179,3 253,3 333,0 438,7

8502 Electric generating sets and rotary converters 118,4 395,2 116,9 354,2

9503 Other toys; scale model (puzzles of all kinds, stuffed toys, electric t

178,4 263,8 390,6 338,4

8414 Air/vacuum pumps, air/other gas compressors & fans 129,8 189,2 256,8 307,5

8504 Electric transformers, static converters & inductors 161,7 211,6 276,2 261,4

8443 Printing machinery; machines for uses ancillary to printing

164,4 237,1 275,7 258,9

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FAVOURABLE SECTORS FOR BILATERAL COMMERCIAL AND INVESTMENT RELATIONS

ENERGY

AUTOMOTIVE & AUTOPARTS INDUSTRIES

NATURAL & PRECIOUS STONES

TRANSPORTATION

CONSTRUCTION

FURNITURE

MINING

IT & SOFTWARE

LEATHER ARTICLES

MACHINE & EQUIPMENT

AGRICULTURE

TEXTILE

IRON & STEEL

TELECOMMUNICATIO

N

TOURISM

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MAIN GOAL: Deepened Commercial and Economic CooperationSustainable RelationsStrategic Partnership

- Sustainable and Mutually Beneficial Trade Relations

- Consolidation of Relations Through Economic Cooperation* Reciprocal Investments* Reciprocal Investments to State Bonds* Strengthening Financial Cooperation * Improving relations in the banking sectors and opening branches* Cooperation in the 3rd countries in the contracting sector* Cooperation in the infrastructure projectsSectoral Cooperation (energy, transportation, telecomunication etc. )* Cooperation in the fields of Energy and Transportation* Cooperation in tourism

- Improvement of cooperation in the regional and multilateral platforms

Turkey-China Economic Relations

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- Xi Jingping, Vice President of PRC, Turkey visit in February 2012* Official Meetings and Business Forum* Important Agreements

- R. Tayyip Erdo an, ğ Prime Minister of Turkey, China visit in April 2012* Offical Meetings, Business Forum, Investment Forum * Important Agreements

- Important Agreements* Financial Technical Cooperation Agreement* Swap Agreement* Protocol on Banking Cooperation* Tobacco Protocol* Letter of Intent for Nuclear Cooperation * Agreement on Food Safety

Political Determination

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THANK YOU FOR YOUR ATTENTION !