Trends and opportunities
The market
Following the textile and agriculture sectors, construction is the third leading sector in Turkey and offers real business and investment opportunities for Australian companies. To date, the total value of investment (mainly in infrastructure projects) has almost reached US$50 billion. Investments in Turkey’s construction sector consist of:
residential constructions – 60 per cent
non-residential constructions – 15 per cent
civil engineering investments – 25 per cent
Building materials constitute approximately 10 per cent of the total construction industry.
The sector employs more than 1.5 million people (6.9 per cent of total employment) and accounts for eight per cent of Turkey’s gross national product (GNP).
A current issue in the Turkish construction sector is the total annual burden of unfinished projects, the value estimated at US$15 billion. These projects include hydroelectric power plants, motorways, cultural centres, industrial investments, airports, and tunnels.
The current unfinished projects are expected to be completed by 2012 at the earliest.
A feature of the Turkish building and construction sector is that the mortgage market for retail housing is underdeveloped. This has traditionally hampered demand for building products.
Eighty per cent of building material is locally produced including cement, building steel, timber, bricks, PVC, polyethylene, glass, ceramic tiles, and sanitary ware.
There is good potential for Australian building products, in particular:
Those of more sophisticated technology
‘Finished’ products of high quality
Interior ‘finishing’ materials
Building systems
Specialist building products imported in component form and assembled in country
Turkey is estimated is estimated to have 120,000 units of construction machinery, owned by state institutions and private contractors. The equipment is used both in Turkey and abroad. Most of this equipment is estimated to be over 15 years old. The market for construction equipment is valued around A$2 billion, with imports accounting for 85 per cent of the market.
Opportunities
Although Turkey’s construction industry is mostly self-sufficient, opportunities in specialty markets such as accessories, flooring, prefabricated wall panels, paint raw materials, insulations and plumbing fixtures do exist for Australian suppliers.
The breakdown of potential building products and services is as follows:
Specialised and quality flooring materials
Technologically innovative wall and fascia panels
Building systems – low cost housing
Building systems – earthquake resistant
Aluminium profiles
Heat insulation systems
Water insulation systems
Building chemicals and adhesives
Roofing and siding materials
DIY products
Construction services required by Turkish contractors include know-how and/or technology transfer, technical support, management consulting and manufacturing under license.
Competitive environment
Building and construction sector imports have grown 20 per cent over the past few years and the main suppliers include Germany, Italy, France, Bulgaria, Russia and the USA. Some products imported into Turkey are re-exported into Central Asian countries, Russia, the Commonwealth of Independent State (CIS) countries, the Middle East and the Balkans.
The major international construction machinery companies have all targeted Turkey as a key market, with forecast growth of 15 per cent per year.
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Tariffs, regulations and customs
Turkey, in forming a customs union with the European Union (EU), has adopted (most of) the EU import regime, which involves the application of external customs tariff for third country imports and zero duty rates for non-agricultural products of the EU. As part of the same agreement Turkey has adopted the 12-digit Harmonised System of classification. In general, a value added tax (VAT) of 18 per cent is applied on most products whether locally produced or imported.
Import regulations are implemented by the Undersecretariat of Prime Ministry and Foreign Trade.
Duty rates applicable to building products include:
Product HTN Customs No Duties (%)
Marble 2515 Free
Granite 2516 Free
Cement 2523 1.7
Pigments 3206 6.5
Paints (in non-aqueous) 3208 6.5
Paints (in aqueous) 3909 6.5
Vinyl flooring and wall coatings 3918 8.9
Bathtubs, washbasins 3922 6.5
Doors, windows, plastic frames 3925 6.5
Wood siding and flooring 4409 Free
Windows and frames of wood 4418.20 3.0
Doors and frames of wood 4418.10 3.0
Textile floor coverings 5403 10.4
Floor and wall coverings applied for textile backing 5904 10.4
Ceramic building bricks flooring 6904 2.0
Roofing tiles of ceramic 6905 Free
Unglazed ceramic flag, wall tiles 6907 5.0
Glazed ceramic flag paving 6908 7.0
Ceramic sinks, wash basins 6910 7.0
Glass 7003 4.4
Paving blocks, slabs, bricks 7016 8.0
Insulation materials 7019 7.0
Iron and steel in long and flat form 7208 22.5
Structures and parts of structural iron and steel 7308 1.6
Aluminium structures and parts 7610 7.0
Prefabricated buildings 9406 2.7
Industry standards
After the 1999 major earthquakes the Turkish Government introduced the Building Control Decree with an implementing regulation that established specially licensed private inspection companies.
In accordance with this decree, all buildings – except for the ones constructed under the State Tender Law – are subject to the control of building inspection companies. These companies operate with permission from the High Committee for Building Inspection and are exclusively engaged in the building inspection business.
The Turkish Government has discretionary authority to grant a percentage preference to domestic companies on public construction projects. However, some large infrastructure projects (US$15 million plus) including, dams, power plants, highways and railways are tendered for international companies, usually with local partners. All projects with foreign credit guarantees allocated by the Turkish Government are open to foreign construction companies.
Turkish Treasury guarantees for new projects have been significantly reduced in order to meet strict fiscal goals under Turkey’s disinflation program and the Standby Agreement with the International Monetary Fund.
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Marketing your products and services
Australian exporters are encouraged to enter the building and construction market via appointments of competent local agents. Attending and showing at major trade exhibitions and construction fairs is another recommended method for entering the market.
Internationally, Turkish construction companies are very active in Russia and the Commonwealth of Independent States (CIS) countries (11 former Soviet Republics), Central Asia, Europe and the Middle East. Thirty per cent of Turkish companies have a business presence in the CIS and serve as excellent partners for Australian exporters wanting to pursue opportunities in Turkey and regional markets.
In general, Turkish construction companies are suitable for partnership because they deliver:
Projects to deadline
Quality service
Competitively priced labour and materials
Distribution channels
Services in the Turkish construction industry are sourced internationally for large-scale projects – domestic or abroad. Services for smaller-scale projects are sourced locally or are available in-house.
The main channel for distributing building products in Turkey is through a professional network of wholesalers and industrial suppliers which supply industry professionals. In order to succeed via this channel, Australian suppliers will need a presence to sell products using one or more of the following methods:
Appointing a distribution partner to handle importing and customer liaison
Finding a fulfilment company to warehouse and ship to customers, while managing from Australia
Setting up an office in Turkey
Sending staff to Turkey to represent the company
Sharing distribution with another Australian company
Undertaking a joint venture with a Turkish company
Manufacturing products in Turkey
The concept of hardware stores specialising in building materials is relatively new in Turkey. At present, Bauhaus (Germany) has a well-established presence, tending to distribute products that are sold directly to DIY end-users.
Most products that are of interest to contractors are primarily sold through agents or distributors or via regional dealers located in Turkey’s major cities.
Transport
Turkey has a fairly well established railway system, both internally and linking to neighbouring countries. The Turkish cities of Ankara, Istanbul, Izmir, and Bursa all have underground railway systems.
Turkey has several international airports servicing major cities including:
Esenboga International Airport: Ankara (35km north of the city)
Ataturk International Airport: Istanbul (24km west of the city)
Sabiha Gökçen International Airport: Istanbul (40km east of the city)
Adnan Menderes International Airport: Izmir (18km south of the city)
There are also international airports servicing the cities of Adana, Antalys, Dalaman, and Trabzon.
Turkish Airlines is the national carrier.
Turkey’s major ports include Antalya, Istanbul, Izmir, Marmaris and Mersin. There are a number of ferry services with routes between Turkish coastal cities, and countries bordering the Mediterranean, Black and Aegean Seas.
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Links and industry contacts
Building and construction related resources
Directory Turkey (construction) – www.buildturkey.com
The major Turkish construction companies include:
Akfen Group – www.akfen.com.tr
Alarko Group of Companies – www.alarko.com.tr
Baytur Construction and Contracting Co – www.baytur.com
Enka Construction and Industry Co Inc – www.enka.com
Oyak Construction Co Inc – www.oyak.com.tr
STFA Construction Co Inc – www.stfa.com.tr
Tekfen Construction and Installation Co Inc – www.tekfen.com.tr
Tepe Construction Industry Co Inc – www.tepe.com.tr
Yuksel Construction Co Inc – www.yukselinsaat.com.tr
Government, business and trade resources for Turkey
Banking regulation and supervision agency – www.bddk.org.tr
Banks Association of Turkey – www.tbb.org.tr
Business Guide Turkey – www.turkindex.com
Istanbul Stock Exchange – www.ise.org
Telerehber – www.telerehber.com/construc.htm
Turkey Business Center – http://business.wec-net.com.tr
The Istanbul Chamber of Commerce – www.tr-ito.com
Resadiye Caddesi
No. 3 Eminonu Istanbul
Tel: (90 212) 528 5828 or 511 4150
Fax: (90 212) 513 1565 or 520 1656
Email: bilgi@tr-ito.com
Turkey State Institute of Statistics (SIS) – www.die.gov.tr
Necati Bey Caddesi No 114
06580
Yucetepe – Ankara
Tel: (90 312) 417 6440
Fax: (90 312) 425 3387 or 418 1182
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