Newsletter for the Turkish businesses and investors (Issue 6, 2014)
Turkey’s initiative to create a free trade zone with a customs union will strengthen Russian-Turkish economic ties.
At the G20 summit in Cairns, Australia, on 20 September 2014, the Turkish Minister of Economics, Nihat Zeibeckhi, suggested during his negotiations with his Russian counterpart, Alexey Ulukaev, to create a free trade zone through a customs union between Russia, Belarus and Kazakhstan.
Russian-Turkish trade relations now have reached the highest level throughout the entire period of their bilateral dialogue. In 2013, the goods turnover between the countries amounted to approximately US$ 34 billion. These figures are the result of the ongoing actions by the two countries’ leaders. Russia wants to create US$ 100 billion in turnover by the year 2020. Turkey aims to double its GDP by the year 2023. The creation of a free trade zone might be a major step towards these ambitious goals.
In the current tense geopolitical situation, Turkey seems to be capable of reaching Russian markets, such as light industry and car manufacturing, that were previously dominated by western Europeans. Using national currencies in mutual payments among the customs union members will, according to Alexey Uluykaev, also make the Russian economy less dependent on US dollars.
Crimea’s leaders engage investors from Turkey, China, France, and Israel.
The Crimean government is negotiating with investors from Turkey, China, France, and Israel about investments in the Peninsula’s economy. According to the Crimean Minister of Economic Development, Svetlana Verba, Chinese investors have offered to participate in significant infrastructure projects, such as: seaports, transport transitions, transport infrastructure, highways, and five-star hotels.
According to a high-ranking official, Turkish investors are ready to participate in the development of industrial parks, energy projects, the Crimean gas transportation systems, in residential construction, and in the hotel business.
France is ready to invest in entertainment, and Israel will invest in agriculture sectors such as sheep breeding, poultry farming, and dairy production.
Ms. Verba says that legislation currently under consideration in the Russian State Duma will create a special investment regime in the Peninsula for the next 25 years. This will create "off shore like" benefits for investors. This draft law grants significant tax privileges, such as exemption from income tax for 5 years, wealth tax exemptions for 10 years, and land tax exemptions until the construction objects are actually in operation. There would also be a set of benefits similar to a "most-favored nation" status for the source countries of the investments.
Russia: a new chance for Turkey’s car industry
Automobile imports into Russia in 2013 reached a value of US$ 40 billion dollars, with spare parts imports adding US$ 11.5 billion more.
Most of these imports came from the European Union. Approximately half of all automobile imports, and 47% of spare parts imports were the production of the countries that are members of the EU. 27% of passenger cars, 46% of trucks, and 13% of buses sold in Russia come from abroad, and European firms have dominated the Russian car market.
Turkish auto producers believe that new economic and political circumstances have created new prospects in Russia for Turkish automotive companies.
Between 2009 and 2013 Turkish automobile exports to Russia grew from US$ 269 million dollars to US$ 1.92 billion. Russia now is Turkey's fifth largest customer for automobiles build in Turkey, with a 5.4% share of Turkish automotive exports. Representatives of the Turkish automotive sector do not exclude the possibility that the EU and Russian sanctions will create new prospects for Turkish producers.
If economic ties between Russian and the EU continue be strained, as many observers predict, this could result in Turkish automotive exports to Russia to doubling or even tripling before the end of this decade.