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Businesses rebalance away from Europe 25 juin 2012

Posted by Acturca in Economy / Economie, Middle East / Moyen Orient, Russia / Russie, Turkey / Turquie, Turkey-EU / Turquie-UE.
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Financial Times (UK) FT Report-Turkey, June 25, 2012, p. 4

By David O’Byrne

Trade and tourism. Russia and Middle East are the target markets, writes David O’Byrne

There are, as the saying goes, lies, damned lies and statistics. In the case of Turkey’s export figures, though, statistics tell a very clear story – and it is much the same in tourism, too.

The importance of the country’s traditional European export markets has been falling, with exporters increasingly targeting markets in the Middle East, Africa and the countries of the former Soviet Union.

As recently as a decade ago, 60 per cent of Turkish exports went to European markets, but by last year that had dropped to 48 per cent, while over the first five months of this year the figure was just 41 per cent.

Clearly, much of the drop can be attributed to the turmoil in the eurozone and its effects on demand for items such as Turkish-made vehicles and white goods.

Turkey’s Automotive Manufacturers Association, for example, reported exports down 5.5 per cent over the first five months of the year.

Equally, though, in the first five months of this year, overall exports rose 10.31 per cent year-on-year to $59.8bn, making it clear that Turkish exporters are finding fresh markets – a process that has been part of a deliberate strategy.

Egemen Bagis, Turkey’s minister for EU affairs, said recently: « We need to diversify our markets. A decade ago, we had only four embassies in Africa; now we have 14, with more coming. »

While the success in finding new markets has been widely praised by economists, few believe that these can ever usurp the importance of the EU.

Inan Demir, chief economist at Turkey’s Finansbank, says: « They have done a good job in very difficult conditions. Year-on-year growth in exports to some Mena [Middle East and north Africa] markets has been triple-digit. » But this was from a relatively low base.

« Over time, the Mena will become more important, but it can’t replace Europe – exports to the EU will pick up, » he adds, echoing official expectations.

Mr Bagis comments: « Just because we are reaching out to new markets doesn’t mean we have to abandon our 52-year-old determination to be part of Europe. Despite the economic difficulties in Europe, it is still the most prosperous region. No crisis lasts for ever. »

As with exports, so with tourism. The past decade has seen arrivals almost treble from 11.7m in 2001 to 31.5m in 2011, when tourism revenue topped $23bn.

With arrivals for 2012 up 5 per cent in the first quarter and Ertugrul Gunay, the minister of culture and tourism, predicting 33m arrivals this year and revenues of more than $25bn, clearly there is still room for growth.

More importantly, however, growth to date has been enhanced by a concerted effort at attracting visitors from markets other than Turkey’s traditional western European catchment area.

While visitor numbers from the 27 EU countries plus Norway and Switzerland more than doubled from 7.61m in 2001 to 17.7m last year, arrivals from the Mena and Iran rose 400 per cent from 1.1m to 4.4m and those from the former Soviet Union rose nearly fivefold from 1.4m to 6.7m – with half of those coming from Russia.

Clearly, Europe is set to remain the key market for Turkish tourism for some time, but diversification into new markets is offering a valuable bulwark against uncertainty in the eurozone.

According to Mr Demir, the effects of the eurozone problems on Turkish tourism are difficult to quantify.

« But if Greece leaves the euro, it will become a lot cheaper, » he says, pointing out that this could attract a substantial number of low-end package tourists away from Turkey.

As with the mainstay western tourists who want to enjoy sun, sea and sand in their own language and with their own food, so, too, Russian tourists are looking for a home from home on the Turkish coast.

Significant investments, such as the MNG group’s World of Wonders Kremlin Palace resort in Antalya, offer just that – complete with accommodation in scale models of its Moscow namesake and other landmark Russian buildings.

For Mena and Iranian tourists, by contrast, it is the shopping malls of Istanbul that are the attraction.

Greater promotion of tax-free shopping and the launch of the annual Istanbul Shopping Festival helped to boost visitor numbers to 10.1m last year and tourism revenues from the city alone to $8.8bn.

This has been enough to make Istanbul the fifth most popular city destination in Europe, with the results clearly visible in the city’s air-conditioned malls, where Arabic and Farsi can be heard almost as much as Turkish.

Not a bad result, given the regional upheavals of the Arab uprising, which forced many potential visitors to stay at home.

Company Profile: Pegasus Airlines

By Stefan Wagstyl

Ali Sabanci loves the gleaming Honda motorbike he has parked inside his office: it is a 40th birthday gift that adds a touch of excitement to its businesslike surroundings.

But he gets even greater pleasure from running Pegasus Airlines, Turkey’s largest private operator.

« If you put me in charge of a tea business with a $5bn turnover, it would not be as exciting as a $1bn airline. You change people’s lives, » says Mr Sabanci.

And Pegasus has certainly brought its chairman plenty of thrills: developing since its launch in 2006 into a carrier with 42 aircraft and 52 destinations.

Mr Sabanci is a man in a hurry. Born into one of Turkey’s leading business families, he left his executive suite in Sabanci Holding, the family-controlled conglomerate, in 2004 in search of greater entrepreneurial freedom, switching to Esas Holding, a diversified investment company founded by his father, Sevket Sabanci.

Ali Sabanci immediately set to work on Pegasus, planning to take advantage of a 2003 government decision to liberalise domestic air travel and end the near-monopoly of Turkish Airlines, the long-established state-run carrier.

The government had wanted to privatise Turkish Airlines. But when this proposal failed, Binali Yildirim, the enterprising transport minister, pushed through airline liberalisation, arguing that while the state-owned carrier would be squeezed, the government would profit from the extra taxes generated by the rise in air travel.

Mr Sabanci says the minister has been proved right. VAT income from air travel has risen four or five times, as the number of passenger trips has soared on domestic and international flights.

This travel has in turn generated more commerce and more tourism in Turkey, including in regions remote from Istanbul and Ankara.

Mr Sabanci says: « 75m people have woken up to low-cost flying . . . People could not afford to fly before. Now, they will never go back to the bus. »

While about 25 airlines were launched in the initial rush of enthusiasm for the new market, their numbers were quickly whittled down through competition.

Along the way, Esas took a 16.5 per cent stake in Air Berlin, Germany’s second-largest carrier. Esas says it invested because « we believe European aviation is in a constant state of reorganisation . . . As one of the major players in Europe, Air Berlin is a very interesting mid to long term investment for us. »

According to Mr Sabanci, Pegasus is today the clear leader among the private operators, with a share of the domestic market of 24 per cent, about the same as the next four airlines put together. Turkish Airlines remains dominant, but it has dropped to 50 per cent of the market.

He says domestic passenger numbers in Turkey have grown at a compound annual rate of 41 per cent since 2005 and international passengers by 26 per cent.

All this translates into growing revenues for Pegasus, which last year saw turnover rise 27 per cent to €629m, with a further increase to €709m budgeted for 2012. Profit before interest, depreciation and tax (ebitda) is expected to rise from €82.9m to €108.7m.

Mr Sabanci says that if Turkey is to fulfil its economic potential, flights to export markets in Russia and central Asia must be liberalised.

Today, a flight from Istanbul or Ankara to the UK costs about $150 and to Baku, the capital of nearby Azerbaijan, $350.

This article was first published on FT.com’s beyondbrics blog

 

Download full report (Format Pdf)

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