Turkey: A new growth market on our doorstep
Roland Berger examines investment opportunities for Austrian companies
Turkey is developing more and more into a Central European growth market. Whereas the Central and Eastern European (CEE) countries were hit hard by the crisis, the Turkish economy grew 8.2% in 2010. A stable political framework, privatization and structural reforms have made the county attractive for investors. It is now also an essential element in the strategic planning of European companies. For Austrian companies, Turkey can serve as a hub for the Middle East and Africa, and offers low-risk add-on potential to Russian and CIS activities. Opportunities for Austrian companies are especially in the financial services, energy, construction and construction supply, automotive supply and engineered products sectors. These are the findings of the new "Turkey's prospects for Austrian companies" study.
After the end of the boom in CEE, Austrian companies need to look for new growth markets. Turkey offers an attractive alternative on our doorstep, but so far – aside from a few exceptions – was never really considered in long-term strategic planning. However, Turkey is an attractive country for Austrian investors for several reasons: With its population of 73.3 million, it is a huge, highly developed and diversified market. Economic growth over the next few years will be between 4 and 5%, thus considerably higher than in CEE countries. And Turkey can serve as an excellent hub for activities in the Middle East and Africa.
Main hurdles are bureaucracy and poor access to equity
Austrian companies must bear several things in mind if they want to enter the Turkish market: The Turkish economy is dominated by local corporate conglomerates that have been family-run for many generations. For instance, Koç-Holding, the country's biggest corporate group, generates more than 5% of Turkey's GDP. Majority or complete takeovers are rare because of Turkey's economic structure. To enter the market, foreign investors are well advised to set up strategic partnerships. Problems for Western companies include a lack of transparency, excessive bureaucracy and poor access to equity. Even if a lot of progress has been made over the past few years, these are still problem areas compared to other countries.
Banking sector attractive for investors
Currently, the banking sector is the most attractive sector for international investors: The market has enormous development potential. About 9% of the Turkish population still does not have an account, compared to 3 to 5% in Western Europe. We expect deposits to more than double over the next five years. For Austrian banks as well, Turkey offers ideal add-on potential to activities in Russia and the Ukraine. So far, only UniCredit (Yapi Kredi) and RIAG have been active here – as niche players. The Turkish market is relatively mature and requires other strategies than in the CEE markets. This means that in many cases a niche strategy is more effective than a full-service approach.
Energy sector with new options
Austrian investors should take a look at the energy sector in Turkey. OMV and Verbund are already heavily involved in the Turkish market. Impending privatization among energy providers and the topics of renewable energy, disposal and recycling offer further attractive entry opportunities. Turkey is also an attractive growth market for Austrian automotive suppliers. This is due to the country's stable domestic demand, attractive cost structures, high quality standards and a well-developed logistics infrastructure. Already today, about one million vehicles are manufactured in Turkey, but this figure is expected to rise to about 1.6 million by 2015. Other lucrative investment areas include construction and construction supply, automotive supply and engineered products. Now is the right time to enter the market as the window of opportunity is relatively small. For Austrian companies, Turkey could be a good alternative to Asia.
Turkey is developing more and more into a Central European growth market. Whereas the Central and Eastern European (CEE) countries were hit hard by the crisis, the Turkish economy grew 8.2% in 2010. A stable political framework, privatization and structural reforms have made the county attractive for investors. It is now also an essential element in the strategic planning of European companies. For Austrian companies, Turkey can serve as a hub for the Middle East and Africa, and offers low-risk add-on potential to Russian and CIS activities. Opportunities for Austrian companies are especially in the financial services, energy, construction and construction supply, automotive supply and engineered products sectors. These are the findings of the new "Turkey's prospects for Austrian companies" study.
After the end of the boom in CEE, Austrian companies need to look for new growth markets. Turkey offers an attractive alternative on our doorstep, but so far – aside from a few exceptions – was never really considered in long-term strategic planning. However, Turkey is an attractive country for Austrian investors for several reasons: With its population of 73.3 million, it is a huge, highly developed and diversified market. Economic growth over the next few years will be between 4 and 5%, thus considerably higher than in CEE countries. And Turkey can serve as an excellent hub for activities in the Middle East and Africa.
Main hurdles are bureaucracy and poor access to equity
Austrian companies must bear several things in mind if they want to enter the Turkish market: The Turkish economy is dominated by local corporate conglomerates that have been family-run for many generations. For instance, Koç-Holding, the country's biggest corporate group, generates more than 5% of Turkey's GDP. Majority or complete takeovers are rare because of Turkey's economic structure. To enter the market, foreign investors are well advised to set up strategic partnerships. Problems for Western companies include a lack of transparency, excessive bureaucracy and poor access to equity. Even if a lot of progress has been made over the past few years, these are still problem areas compared to other countries.
Banking sector attractive for investors
Currently, the banking sector is the most attractive sector for international investors: The market has enormous development potential. About 9% of the Turkish population still does not have an account, compared to 3 to 5% in Western Europe. We expect deposits to more than double over the next five years. For Austrian banks as well, Turkey offers ideal add-on potential to activities in Russia and the Ukraine. So far, only UniCredit (Yapi Kredi) and RIAG have been active here – as niche players. The Turkish market is relatively mature and requires other strategies than in the CEE markets. This means that in many cases a niche strategy is more effective than a full-service approach.
Energy sector with new options
Austrian investors should take a look at the energy sector in Turkey. OMV and Verbund are already heavily involved in the Turkish market. Impending privatization among energy providers and the topics of renewable energy, disposal and recycling offer further attractive entry opportunities. Turkey is also an attractive growth market for Austrian automotive suppliers. This is due to the country's stable domestic demand, attractive cost structures, high quality standards and a well-developed logistics infrastructure. Already today, about one million vehicles are manufactured in Turkey, but this figure is expected to rise to about 1.6 million by 2015. Other lucrative investment areas include construction and construction supply, automotive supply and engineered products. Now is the right time to enter the market as the window of opportunity is relatively small. For Austrian companies, Turkey could be a good alternative to Asia.
