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Turkey, GCC economic relations gain momentum 26 décembre 2011

Posted by Acturca in Economy / Economie, Middle East / Moyen Orient, Turkey / Turquie.
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Arab News (Saudi Arabia)

Dec 26, 2011, Jeddah

The relationship between Turkey and the GCC (Gulf Cooperation Council) economies is emerging as one of the most promising new economic axes in the world. The countries in question share a number of important historical, cultural and demographic commonalities but also matching opportunities and needs in the economic sphere. Both Turkey and the GCC have internationally fast population growth. About 60 percent of Turkey’s 72 million population is below 30 years of age. In Saudi Arabia, the corresponding proportion is an even higher 70 percent. Both regions adhere to a highly technocratic paradigm of policy making, partly as a result of past challenges. Particularly transformative experiences in point were the Turkish crisis of 2001 and the long period of low oil prices that hit the GCC economies in the 1980s and 1990s. This has ensured remarkable economic resilience during the global crisis, according to a report « Turkey and the GCC: A strengthening Relationship » issued by the National Commercial Bank (NCB).

But economic ties also have an exceptional potential thanks to important complementarities. The GCC — notably Saudi Arabia — remains one of the leading providers of imported energy to Turkey, while Turkey can play a far greater role in meeting the growing needs of the Gulf economies in areas such as steel, agriculture, and tourism. Nonetheless, mutual commercial and investment flows between these two key hubs of the regional economy have historically been relatively modest, partly because political alliances and aspirations as well as trade tended to tie both to the advanced economies of the West. However, a number of transformative developments are now underway and they promise to accelerate the recent positive momentum in relations, the report said.

Policy refocusing

Reflecting the ambitions of regional policymakers, the formal infrastructure of Turkish-GCC relations has developed at an accelerating pace in recent years. Governments on either side have been instrumental in setting up forums for regular high-level interaction and these have in turn spawned ongoing working groups and active monitoring efforts. Turkey now has joint economic commissions and business councils with all the GCC economies. The first one of such agreements was the Saudi-Turkish trade agreement and an agreement of economic and technical cooperation in 1974. This was followed by a similar deal with Kuwait in 1982. Business councils, bringing together corporate representatives, are a more recent innovation. The NCB report said UAE-Turkish council was established in 2000, followed by the Saudi-Turkish Business Council in 2003. Qatar Investment Authority and the Investment Support and Promotion Authority of Turkey (ISPAT) in 2008 signed a memorandum of understanding on cooperation. Turkish trade centers operate in Jeddah, Riyadh, and Dubai.

In September 2008 Turkey signed a memorandum of understanding with the Gulf states aimed at creating a strategic partnership in all fields with permanent working teams for key focus areas. Private sector gatherings and conferences have grown in number and size.

Turkey has bilateral agreements for the promotion and protection of investments with Saudi Arabia, Kuwait, Oman, and Qatar. Such agreements were launched in 1962 and are signed with countries deemed to have significant potential for improved bilateral relations with Turkey.

The deeper economic dialogue has been accompanied by the reactivation of political ties, with Turkey increasingly viewing itself as a regional player. Especially the successive governments of Recep Tayyip Erdogan since 2003 have sought to foster closer ties with Turkey’s neighbors in the Middle East as a counterbalance to the country’s traditional Westward orientation. Among other things, relations have been « upgraded » through high-level state visits.

Matching needs

Turkey is heavily dependent on imported energy and the GCC is historically one of the most important suppliers of oil to the country. Oil in turn makes up 32 percent of Turkey’s overall estimated energy consumption (2008) of 4.3 quadrillion BTUs. The share of gas is another 31 percent with coal the third main source with a 29 percent share. Turkey meets the majority (some 77.9 percent) of its coal needs from domestic production but the degree of self-reliance in hydrocarbons is minimal. Turkey’s proven oil reserves, located mainly in the southeast, are estimated at 270 million barrels. Domestic production peaked at 85,000 barrels per day in 1991 and troughed at 44,000 bpd in 2006 before recovering somewhat to 53,000 bpd as of 2009. Imports make up 90 percent of the domestic consumption of 579,500 bpd (2009), significantly down from the peak of 690,000 bpd in 2007, the NCB report said.

In recent years, Iran, Russia, Saudi Arabia, and Iraq have established themselves as the leading suppliers of crude to Turkey, accounting for 87.9 percent of the total volume in the first ten months of 2011. The weight of neighboring Iran in particular has risen fairly consistently in recent years and this year exceeded 50 percent. The Saudi proportion of Turkish oil imports has remained relatively constant in the range of 10-15 percent, although it this year fell to 8.6 percent. From the Saudi perspective, oil used to be absolutely dominant among Saudi exports to Turkey, making up around 80 percent of the total until recently. However, the figure declined below 60% in 2009 and below 50% in 2010 as the role of petrochemicals has risen. Geographic factors have limited GCC gas exports to Turkey, but plans are under consideration to connect Qatar with Turkey through a pipeline.

According to the NCB report, Turkish exports to the GCC region have been heavily dominated by iron and steel, reflecting the country’s importance as one of the leading global steel producers, as well as the strong and growing demand by GCC construction and industry. Turkey was the 10th largest steel producer globally in 2010 and the second largest in Europe. In the first half of this year alone, Turkey’s crude steel output rose 21.3 percent to 16.4 million mega-tons. Turkey exported a total of 8.14 million tons of iron and steel products to the Middle East last year, some 46 percent of its total iron and steel exports. Also motor vehicles, machinery, and electrical engineering products are an important part of the export bundle.

As another dimension of relations, food security is a growing policy priority for the GCC while Turkey is a leading regional producer of food products and unique in the Middle East in terms of its net exporter status. Agriculture in 2010 accounted for 9.5 percent of the country’s GDP and some 30 percent of its active work force. About 35.5 percent of Turkey’s surface area is arable land and more than 26.5 million hectares are under cultivation. The GCC remains critically dependent on food imports in most key categories and for instance Saudi Arabia is in the process of dismantling its once substantial wheat production operations. As an example of the growing GCC interest in Turkish agriculture, Saudi Arabia this year applied to the Turkish development agency of the Southeastern Anatolia Project (GAP) to acquire a 1 million head sheep-raising farm in the region. There are a number of similar applications from the GCC countries, the NCB report said.

Tourism has emerged as an important driver of closer relations between Turkey and the GCC. Turkish travel to the Gulf is mainly religious or business in the case of Saudi Arabia and a combination of leisure tourism and business for the rest of the region. The infrastructure for tourism has improved significantly with most of the regional carriers now offering regular flights.

The number of GCC tourists visiting Turkey has increased sharply in recent years, in no small measure thanks to popular Turkish TV shows which have significantly boosted Arab awareness of the country. The total number of Saudi visitors was 55,636 in 2008, 66,938 in 2009, and 84,934 in 2010. In a further stimulus to ties, Turkey has made it possible for Saudi visitors to obtain their visas on arrival. Some 55,000 UAE tourists (including non-nationals) visited Turkey last year. Especially among Kuwaitis, Turkey has emerged as an important destination for health tourism.

Pilgrimage remains an important dimension of Turkish travel to the GCC and has seen dramatic growth in recent years, with a remarkable 70-fold increase over the past decade. While the numbers of Haj pilgrims remain subject to quotas, Umrah trips have increased dramatically to a total of more than 400,000 this year. This was up from 181,221 in 2009 and 278,555 in 2010. The figure is expected to reach 600,000 in 2012. Turkish Umrah tours typically cost 1,000-5,000 euros. Turkey has a Haj quota of 74,000.

Beyond tourism, the GCC is home to a significant number of full-time Turkish residents. According to the Turkish Ministry of Labor and Social Security, there are an estimated total of 115,000 Turks living in Saudi Arabia (as of end-2010), 70,000 of them working in the country. The UAE has 5,500 Turkish residents, Kuwait 4,000, Qatar just under 2,000, Bahrain just over 700, and Oman 500. About 40 percent of the Turks living in Saudi Arabia work in the construction sector where Turkish contractors have a large presence. Automotives are the second-largest sectors (20 percent) followed by food (15 percent), and furniture (10 percent). The opening up of the Turkish real estate sector will increase the numbers of at least part-time GCC residents in Turkey, the NCB report said.

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