By Dilara Kenber
The Turkish economy
over the last ten years has emerged as one of the
world’s fastest growing markets, boasting a GDP
that has more than tripled since 2003.
 |
| Turkey is facing a
number of political and practical obstacles to securing
growth for its resources sector (source: B Lucava, via
Flickr). |
A stronger economic
base has enabled Turkey to start investing more in its mining
sector, which contributes around 4% of its national
income.
But, despite having
extensive geological wealth – 70 of the 90 main
minerals traded worldwide can be found in Turkey – the
country is relatively new and undeveloped as a mining
centre.
From an industrial
minerals perspective, Turkey is home to some global titans
– including Ciner Group, a multinational
conglomerate with one of the largest soda ash production
capacities worldwide, and Eczacibași Esan, a major
producer of clays and feldspar. It also has a
number of international miners and smaller local producers
of bentonite, borates, magnesite, graphite and perlite.
The Turkish
government has recognised the potential of its mining sector
and has started to reform legislation that it hopes will allow
the industry to grow.
Measures include
attractive initiatives for private investment in resources
development, in conjunction with modifications to mining
legislation to eradicate discrimination against foreign
companies – provisions which it hopes will encourage
an inflow of capital.
Efforts to shift
Turkey’s mineral wealth out of government
ownership and into private hands have already yielded
progress.
"Today just 10-15% of Turkey’s mining operations
belong to public bodies, such as Turkish Coal Enterprises
(TKI), Turkish Hard Coal Enterprises (TTK) and Eti Maden,"
Nevzat Kavaklı, Deputy Undersecretary of the Minister of
Energy and Natural resources, said recently.
"In the future, this ratio will be even smaller. We are ready
to increase foreign mining companies’ share in our
country. To encourage these foreign companies, the Ministry of
Economy has established new incentive schemes for strategic
investments."
Although investors have broadly welcomed the amendments to
date, further government reform is needed to keep growth at a
consistent level. Among the changes that still need to be
implemented are a process to streamline applications for mining
licences. Under the current system, bureaucratic bottlenecks
mean that some companies can wait years to receive permits to
conduct exploration and construct mines and plants.
Ambitions and obstacles for Turkey’s mining
sector
Notwithstanding the weakness in global financial markets, the
Turkish government has set ambitious targets for its economy,
including a goal of reaching $500bn in export revenue, $15bn of
which is slated to come from the mineral sector, by
2020.
These targets rely heavily on the consistent development of
both the Turkish economy and foreign investment,
however.
"The Turkish Republic is in need of financial direct
investment, because of the large deficit in the national
budget," said Zeynep Dereli, managing director of APCO
Worldwide Turkey, a global strategic communications and
advisory firm. "The financing of this deficit, given the
volatility with the Turkish lira, and lower GDP growth, will
have an effect on the country," he added.
Turkey
is also facing wider political challenges. Its longstanding
trading relationship with Iran has allowed it to benefit as a
vehicle for investing in the formerly isolated Middle Eastern
state.
The lifting of international sanctions against Iran this year,
following the implementation of the July 2015 joint
comprehensive plan of action (JPCOA), is likely to
increase the flow of trade between the two countries, but also
means that Turkey will now have to compete with its neighbour
for foreign investment.
"Good opportunities will open up for Turkish businesses,
particularly in the service and retail sectors, but we
can’t afford laxity since, even during the term of
[former Iranian president Mahmoud] Ahmadinejad at the height of
sanctions, flights from Istanbul to Tehran were packed with
Westerners seeking out future business opportunities there,"
Kerem Alkin, a macroeconomist and professor at
Turkey’s Istanbul Medipol University, told
regional news service, Middle East
Eye
.
Heightened
political tensions with Russia over the shooting down of a
Russian fighter jet in Turkish airspace in November last year
are likewise a concern, as is personal security in the country,
which has come under scrutiny following recent terror attacks
in Istanbul and Ankara.
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| Turkey's proximity to Syria,
which is in the grip of civil war, have led other nations
including the US and Germany to advise their citizens
against travelling to the country (source: European
Commission, via Flickr). |
The Syrian crisis
spilling over Turkey’s southern border has also
contributed to recommendations against travel to the country by
the US and German foreign offices – a blow for Turkish
investor relations with these two powerful
countries.
The two general
elections held in Turkey in 2015 meanwhile illustrated deep
divisions within the country and have raised questions over its
political stability, with negative economic
consequences.
Turkish inflation
is forecast to rise by 7% this year, unnerving investors and
echoing the high rates of the past.
Moreover, foreign
investment in the wider Turkish economy has slowed down.
The country
reported a drop in exports in January 2016 to $9.2bn, down
14.4% compared with the same month of 2015, according to data
from the Exporter’s Assembly of
Turkey.
Turkey emerged relatively unscathed from the global recession
of 2008, but with a depreciation of the currency and political
uncertainty, the country needs to find a suitable strategy to
underpin future growth.
One way in which the country’s government can
potentially improve its economic prospects is by implementing
more legislative reform in the country’s trade
laws – particularly with respect to the EU and the US,
where Turkish exporters see opportunities to tap lucrative
markets.
The question now for Turkey is whether the government can
re-capture the growth it saw post-2009 with a serious
re-evaluation of its foreign investment laws. If it succeeds,
the Turkish mining industry will have a chance to flourish and
hit its ambitious 2020 targets.