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5.5 Potential trade opportunities

Overview

Increasing globalisation has pushed Turkish traders to look for more competitive sources and destinations around the globe. More importantly, a more stable Turkish currency since 2003, following the economic crises, coupled with the expanding economy, has enhanced Turkey’s import absorption capacities. As a result, an increasing number of Turkish companies are interested in buying from Asia, while exploring new export markets outside Europe and the Mediterranean.

Foreign trade turnover in Turkey

China has been the country’s third largest source of imports, accounting for 9% of the total in 2009, after Russia’s 14% and Germany’s 10.0% (40% for the EU as a whole). Imports from China more than doubled from US$4.5 billion in 2004 to US$12.7 billion in 2009. While higher labour costs in Turkey are among the major reasons why companies are looking at China, the lack of economies of scale among Turkish manufacturers also makes it more expensive to produce locally. Despite some relapse following the outbreak of the financial tsunami and the European debt crisis, the unrivalled supply chain advantages generated from efficient industrial clustering in the Chinese mainland will continue to prompt Turkish companies to increase sourcing from the mainland. In fact, more and more Turkish companies are now inclined to buy directly from China, especially when product quality has greatly improved over recent years.

Moreover, the increasing number of new start-ups in the market could also engender a new breed of potential customers for Hong Kong exporters. For example, there are cases of some small companies engaged in metal hardware and building materials which are currently sourcing Asian products via West European distributors, due mainly to their small order quantity and desire for better logistics arrangements rendered by distributors in Europe. But expanding business in Turkey – and more sophisticated sourcing requirements – are prompting them to consider buying directly from Asia, mainly the Chinese mainland, at lower cost.

Turkish imports by country, 2009 (Total: US$141 billion)

 

Total imports by selected countries in 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1

Russia

19,448

-38.0

13.8

2

Germany

14,097

-24.6

10.0

3

China

12,676

-19.0

9.0

4

US

8,569

-28.4

6.1

5

Italy

7,673

-30.3

5.4

6

France

7,091

-21.4

5.0

7

Spain

3,777

-17.0

2.7

8

UK

3,473

-34.8

2.5

9

Iran

3,406

-58.5

2.4

10

Ukraine

3,156

-48.3

2.2

Source: TurkStat

Turkish exports by country, 2009 (Total: US$102 billion)

Total exports by selected countries in 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1

Germany

9,788

-24.4

9.6

2

France

6,209

-6.2

6.1

3

UK

5,918

-27.5

5.8

4

Italy

5,892

-24.7

5.8

5

Iraq

5,123

+30.8

5.0

6

Switzerland

3,932

+37.6

3.8

7

US

3,225

-25.0

3.2

8

Russia

3,202

-50.6

3.1

9

UAE

2,899

-63.7

2.8

10

Spain

2,824

-30.2

2.8

Source: TurkStat

Following years of economic expansion and ever-growing demand for consumer goods in Turkey, Hong Kong’s trade with Turkey has been gradually expanding in recent years. Hong Kong’s total exports to Turkey recorded a compound annual growth of 6% (4%) between 2004 and 2008 (if the recession year 2009 is also taken into account).

Hong Kong’s trade with Turkey

Source: Census & Statistics Department, HKSAR Government

Given the rising demand in Turkey and the potential industry complementarities with Hong Kong, consumer goods such as toys, watches, gifts and premiums, offer certain niches for Hong Kong exporters. In many cases, Turkey importers have been buying such consumer goods and small items via their agents in Western Europe, as they are not familiar with sourcing in Asia, and are constrained by small order quantities. But spurred by the country’s strong economic growth and business expansion in recent years, an increasing number have been exploring or carrying out direct sourcing opportunities from Asia. On the other hand, Turkey’s growing importance as an alternative production base, especially for fast fashion and electronics manufacturers, for international companies, can provide new opportunities to Hong Kong companies of related industrial supplies such as textiles and electronic parts and components.

Hong Kong’s total exports of selected products to Turkey

(US$ million)

2006

2007

2008

2009

Value

Growth

Value

Growth

Value

Growth

Value

Growth

Total exports

602

+1%

624

+4%

681

+9%

619

-9%

Electronics^

318

-7%

312

-2%

341

+9%

385

+13%

Telecom equipment

34

-34%

23

-31%

75

+225%

160

+113%

AV equipment

72

-29%

110

+53%

103

-6%

81

-21%

IT equipment

98

+30%

78

-20%

59

-25%

59

+0.3%#

Gifts and premiums*

95

+11%

119

+24%

121

+2%

84

-30%

Household electrical appliances

21

-11%

19

-11%

23

+20%

8

-64%

Fashion products

56

+42%

66

+18%

81

+24%

57

-30%

Clothing

32

+88%

39

+21%

53

+37%

38

-29%

Footwear

13

+22%

13

+5%

18

+33%

12

-31%

Travel goods and handbags

11

-8%

14

+24%

11

-23%

7

-38%

Toys and games

26

+15%

30

+17%

24

-21%

17

-29%

Jewellery

14

+52%

15

+8%

22

+45%

9

-61%

Watches and clocks

39

-10%

49

+25%

57

+16%

47

-17%

# Insignificant

^ Includes finished electronic products and parts and components of electronic products
* Includes items covered in other categories
Source: Census & Statistics Department, HKSAR Government

Hong Kong as a platform for Sino-Turkish trade

Despite mounting protectionism and fierce competition in the textile and clothing industry, Sino-Turkish trade has been faring well in recent years, with total trade between the two countries surging by 195% or a compound annual growth rate of 24% between 2004 and 2009. Symbolised by the highest-level ever official visit of the Turkish president Abdullah Gul to China in 2009 and the more strategic move by Chinese companies such as Chery Auto to use the Turkish market as a gateway to other European markets, bilateral trade between the two countries is bound to flourish in years to come. Moreover, as trade leads in raw materials such as minerals (HS Chapter 25-27), machinery (HS Chapter 84-85) and medical instruments (HS Chapter 90), the fast revival of industrial and infrastructural activities in both countries after the global recession will certainly give an extra shot in the arm for Sino-Turkish trade.

Bilateral trade between Turkey and China

Source: China Customs

That said, although many Turkish companies acknowledge that China has become the world’s leading production base for a wide range of consumer products, especially electrical/electronic items, they are still not familiar with sourcing from the Chinese mainland. This is due in part to the fact that Turkey has a sizable manufacturing sector of light consumer products. Traditionally, Turkey is a producer rather than importer of such items. Many Turkish companies therefore lack experience in sourcing from overseas suppliers.

The most problematic issues for Turkish companies, especially inexperienced small and medium-sized companies, in sourcing from China include quality assurance and communications. Among Turkish companies, quite a few suffer from the inconsistent quality problems stemming from imports from the Chinese mainland. This is especially a problem for smaller-sized companies, which find it difficult to cooperate with reputable suppliers on the mainland due to their small order sizes.

On the other hand, although many Turkish traders can speak English well, they find it difficult to communicate with local Chinese companies. This is because the smaller Turkish companies usually approach the smaller Chinese suppliers, which are usually not staffed with competent English-speaking personnel. As a corollary, many Turkish companies are interested in buying Chinese products, especially consumer products, via Hong Kong traders. They generally recognise that Hong Kong companies can offer more reliable quality assurance and better services in terms of delivery, logistics and shipping arrangements, despite the fact that Hong Kong products are a bit more experience than those of indigenous Chinese companies.

Content provided by Hong Kong Trade Development Council
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