India-Turkey Economic and Commercial Relations

Scope for Indian exporters and entrepreneurs (February 2004)

General

Insular and regimented in the past, the Turkish economy opened up to overseas trade and investment around 1981. Since then, Turkey has continued to pursue liberalisation, despite occasional political uncertainties. In January 1996, Turkey became a member of EU Customs Union. As a result of continued economic reforms and shifting of many labour-intensive textile and leather factories from West Europe to Turkey, industrial activity in Turkey generally remained high. On one hand, this led to greater import of raw materials for meeting the growing demand of Turkish industry. On the other hand, lifting of import restrictions resulted in increasing import of finished products and consumer goods. Though economies of Turkey and India are broadly complementary, there is good and rising scope for cooperation not only bilaterally, but also in third countries. In the economic sense, Turkey should be seen as a full-fledged member of the EU irrespective of the inclusive status of its efforts to formally join the Union.

Bilateral Agreements

India and Turkey signed many Agreements over the years to strengthen and sustain their economic cooperation. The first Bilateral Trade Agreement was signed in 1973. This was followed by an Agreement on setting up an India-Turkey Joint Economic Commission (JEC) signed in 1983. Under this Agreement, JEC meetings are held alternately in India and Turkey. 8th Session of JEC was held in New Delhi in February 2000. An India-Turkey Joint Business Council (JBC) between FICCI and DEIK was set up in 1996. The 6th session of JBC was held in Istanbul in September 2003.

During Turkish Prime Minister Turgut Ozal's visit to India in 1986, a Civil Aviation Agreement was signed. Two Agreements - on avoidance of double taxation and tourism - were signed during Turkish President Suleyman Demirel's visit to India in 1995. During President K.R. Narayanan's visit in September 1998, Agreements on Bilateral Investment Promotion and Protection; Prevention of Illicit Trafficking in Narcotics and Psychotropic Substances; Memorandum of Understanding between the Council for Scientific and Industrial Research (CSIR) and Turkish Scientific and Technological Research Institute (TUBITAK) and Memorandum of Understanding between the National Centre of Trade Promotion (NCTP) and Export Promotion Centre of Turkey (IGEME) were signed. A Memorandum of Understanding for Cooperation in the agricultural field was signed during the visit of Turkish Prime Minister Bulent Ecevit in 2000. Another Memorandum of Understanding for cooperation in the Railway sector was signed during the visit of Turkish Minister for Transport, Enis Oksuz in September 2000. During Prime Minister A.B.Vajpayee's visit in September 2003, an Agreement on Cooperation in the field of Science & Technology and a Protocol on Cooperation in the fields of Information Technology and Computer Software were signed.

Bilateral Trade

Bilateral trade was negligible till the eighties , when balance of trade used to be in Turkey's favour. Trade, especially India's exports, started to grow significantly in the nineties. In 2002, India's exports recorded 60% growth and reached $ 564 million in an overall trade of $ 634 million, surpassing the previous best of $ 437 million of 2000. Performance in 2003 has further improved with exports reaching $ 719 million and recording 27% growth over 2002. Despite the recent growth, India's exports are currently around 1% of Turkey's global imports. The major items of India's exports are organic chemicals (bulk drugs), cotton/ cotton yarn, synthetic fibre, plastic/ plastic articles. There is also trade in tanning chemicals & dyes, machine tools & light machinery, small electrical items, iron & steel / articles, silk and silk products, jute and jute products , leather, automotive components etc. Turkey's exports include steel and steel products, chickpeas, butadiene rubber, textile machinery, textile fabrics, chemicals and small amounts of machineries and machine tools.

Existing economic cooperation

Under the agricultural cooperation programme within the framework of Indo-Turkish JEC, three Indian agricultural and animal husbandry experts visited Turkey in June 1998 to collect information and data on breeding performance of sheep etc. An agricultural delegation from Turkey visited India in February/ March 2000. A tea delegation, headed by Chairman Tea Board visited Turkey in May 2000. Except for 2002, ITPO has been regularly participating in Izmir International Trade Fair. For the first time, Turkey had official participation in the 22nd Indian International Trade Fair (IITF) in New Delhi in November 2003. Turkey was conferred Partner Country status for the event and is expected to participate again in IITF 2004. During Indian PM's visit to Turkey in September 2003, a business delegation comprising senior members and businessmen of CII, FICCI and ASSOCHAM visited Turkey. On the occasion, CII organized a "Made in India Show", an exclusive Indian Trade fair in Istanbul.

The Indian Railway Construction Company (IRCON) executed two railway construction projects worth $ 35 million awarded by the Turkish State Railway Authority (TCDD) in the nineties. A delegation of Turkish Construction Companies accompanied the Turkish PM on his visit to India in 2000. Another Turkish infrastructure delegation visited India in October 2000 to carry forward the process of consultations. Subsequent to this, two Turkish companies LIMAK and STFA started highway construction projects in India. Among Indian companies, Punj Lloyd along with LIMAK is undertaking construction work in the prestigious Baku-Ceyhan Pipeline Project. This is should be seen as a "Success story" for Indian construction industry, as the Indian company won the contact despite stiff global and Turkish competition. Kalpataru, Gujarat along with BARMEK has undertaken power transmission line projects for TEAS. National Building Construction Corporation (NBCC) has provided consultancy services for the Marmara Engineering Emergency Reconstruction Project for earthquake affected areas.

In the hydro-carbon sector, ONGC Videsh Ltd (OVL) and Turkish Petroleum Corporation (TPAO) have joined hands for operation of a Libyan exploration block. Under the Agreement, OVL will have 49% equity in the project ($ 30-40 million) and provide technical manpower and technical services. GAIL and BOTAS (Turkish public sector company dealing with gas and oil pipelines) have signed an MOU for cooperation in CNG conversion of vehicles in Turkey, training of BOTAS personnel in India, etc. In the IT education sector, YUCE College has tied up with APTECH for offering IT training courses in Turkey under APTECH brand name. Under the arrangement, APTECH courses, on franchisee basis, have commenced in Ankara and Denizli and is likely to start soon in Istanbul. While this is first such development in Turkey, NIIT is also trying to enter Turkey's IT education sector. On IT services, a small beginning has been made by Dewsoft Solutions, a Mumbai based Indian company, who has been engaged by BTC/ BOTAS for IT related work in the prestigious Baku-Ceyhan pipeline. Lack of direct air link was a serious bottleneck for promotion of business and tourism. Happily, Turkish Airways restarted thrice-a-week direct flights between Istanbul and Delhi from September 2003. Since then, visa statistics have showing upward trend. The airline is also doing roaring business. For promotion of tourism, a TURSAB delegation visited India in April 2003. The return visit of Indian tour operators took place in October 2003. A number of leading industrial houses such as Tata, Reliance, Ispat, Aditya Birla Group etc have established their offices in Turkey to look for opportunities in the market here. More and more leading Turkish industrialists are making business trips to India. Sensing the surge in business interest, CII is now planning to open an office in Istanbul.

Prospects and challenges

India-Turkey bilateral trade is currently much below its true potential. While India's exports have recorded commendable growth in past two years, bulk of our exports still come from bulk drugs, cotton/yarn and synthetic fibre. In order to sustain our current export growth, it is necessary to diversify, especially to products where there is substantial Turkish import and India's competitors are also doing well. Plastic raw-material and articles, iron and steel, machine tools, small machinery/mechanical appliances, electrical components, minor electrical apparatus, auto components, etc would fall under such category. Even among India's traditional strong hold, there is a scope for switching from synthetic fibre to synthetic yarn and from cotton/yarn to fabrics, for more value addition. Pharmaceutical formulation, para-medical products, low priced small cars are some areas where Indian exporters can try to pitch in. Especially in automobile sector, there has been some demand for TATA pick-up vehicles, TELCO passenger cars, TVS scooters etc. Embassy of India, Ankara has brought out a "Special Report" identifying the new areas for promoting India's export. The Report is available for distribution among Indian exporters and agencies promoting Indian export to Turkey.

Turkey has established itself well in the construction sector in Central Asia and Middle East. Involvement with Turkish companies for infrastructure projects in India and also in third countries can be mutually beneficial to both sides. Turkey has plans to build extensive pipeline network for transporting oil and gas from Central Asia to Europe via Turkey. This would provide an opportunity for Indian companies for involvement in Turkish construction sector. Indian companies can also benefit from direct participation or sub-contracting jobs in power and irrigation projects in South East Turkey under GAP project.

Turkey and India are virtually unknown in each other's country as attractive tourist destinations. With the restarting of direct Turkish Airways flight, between Delhi and Istanbul, new opportunities have opened up for tapping the true potential in tourism sector. Despite the awareness in Turkey about India's IT potential, India's involvement in Turkey's IT sector has so far remained limited to education. Aggressive marketing by Indian IT companies will be required to capture a niche market here. In the field of pharmaceuticals and biotechnology, India's strength in R&D can also be combined with Turkey's manufacturing capability to mutual advantage. Turkish business culture is quite similar to India's. Discussions during face-to-face meetings are given more importance than written correspondence. For this, Indian businessmen need to make more business visits to Turkey. With greater initiative from the Indian industry, Turkey can easily act as a gateway to EU as well as Central Asia. The need of the hour is to build a comprehensive economic relationship involving greater trade, joint projects and other commercial activities.

Source : Indian High Commission, Turkey