MINISTRY of ECONOMY

ECONOMIC OUTLOOK
JANUARY 2014
Economic Outlook is revized in the 1st and the 3rd weeks of the month.
Recent Update: 01/13/2014

OUTLINE
A- MACROECONOMIC OUTLOOK B- FOREIGN TRADE OUTLOOK 1) MERCHANDISE 2) SERVICES C- INVESTMENTS , FOREIGN CAPITAL and INCENTIVES

D- FREE ZONES in TURKEY

E- BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE

January 2014

Ministry of Economy

A- MACROECONOMIC OUTLOOK

January 2014

Ministry of Economy

Growth Forecasts for Selected Countries/Country Groups (%)

Growth Forecasts for Selected Countries/Country Groups (%) Turkey Euro Area US Brazil Russia India China IMF OECD WB UN
2013 2014 2013 2014 2013 2014 2013 2014 3.8 3.5 3.6 3.8 4.3 3.5 3.4 3.8 -0.4 1.0 -0.4 1.0 -0.6 0.9 -0.4 1.1 1.6 2.6 1.7 2.9 2.0 2.8 1.9 2.6 2.5 2.5 2.5 2.2 2.9 4.0 3.0 4.2 1.5 3.0 1.5 2.3 2.3 3.5 2.9 3.5 3.8 5.1 3.0 4.7 5.7 6.5 5.5 6.1 7.6 7.3 7.7 8.2 7.7 8.0 7.8 7.7

Source: IMF, OECD, UN, WB

In 2012, Turkish economy grew by 2.2%. According to the IMF, Turkish Economy is expected to grow by 3.8% in
2013. In the third quarter of 2013 ,Turkish Economy grew by 4.4%. Turkish economy expanded by 4.0% in the first three quarters of 2013.
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Forecasts for Merchandise and Services Trade Growth (%)

Forecasts for Merchandise and Services Trade Growth (%) Exports Imports World Advanced Emerging Advanced Emerging Trade Years Economies Markets Economies Markets Volume 2013 2.7 3.5 1.5 5.0 2.9 4.7 5.8 4.0 5.9 4.9 IMF 2014 2013 1.5 3.6 -0.1 5.8 2.5 WTO 2014 2.8 6.3 3.2 6.2 4.5
Source: IMF and WTO

According to the IMF estimates, global trade volume of merchandise and

services is expected to increase by 2.9% in 2013 and 4.9% in 2014. According to the WTO estimates, global trade volume of merchandise and services is expected to increase by 2.5% in 2013 and 4.5% in 2014.
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Economic Targets of 2014-2016 Medium Term Program

2012* 2013* 2014* 2015* 2016*
GDP (Billion $, Current Prices) GDP Per Capita ($) Real GDP Growth Unemployment Rate (%) Tourism Income (Billion $) Current Account Balance (Billion $) Current Account Balance / GDP (%) 786 10497 2.2 9.2 25.7 -47.8 -6.1 823 10,818 3.6 9.5 29.0 -58.8 -7.1 867 11,277 4.0 9.4 31.0 -55.5 -6.4 928 11,927 5.0 9.2 32.0 -55.0 -5.9 996 12,670 5.0 8.9 34.5 -55.0 -5.5

*Actual ** Forecast (Medium Term Program, Ministry of Development October 8, 2013)

Medium Term Program which covers 2014-2016 period aims to reduce the current account deficit gradually and increase the growth rate by minimizing the effects of global uncertainty.

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Real GDP Growth of Selected Countries/Country Groups (2012)

Euro Area

Source: TURKSTAT, IMF

Turkish Economy expanded by 2.2% in 2012. Turkish Economy grew by 3.0%, 4.5% and 4.4% in the first three quarters of 2013, respectively.
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Annual Economic Growth Rates (2002-2012)

* Forecast, Medium Term Programme Source:TURKSTAT

Turkey has recovered fast from the global financial crisis. It is among the least affected countries from current global economic uncertainties. Mean annual growth rate between 2002 and 2012 was 5.2%. Real GDP growth for 2012 realized as 2.2%.
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GDP Per Capita

Source: Dollar value is from TURKSTAT, PPP GNI value from World Bank

Since 2002 GDP per capita has tripled from 3,492 USD to 10,497 USD. According to Purchasing Power Parity (PPP) GNI per capita surpassed 18 thousand USD.
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Capacity Utilization Ratio (%)

Source: TURKSTAT

Capacity utilization ratio realized as 76% in December 2013.

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Industrial Production Index

Source: TURKSTAT

Industrial production index increased by 4,63% year-over-year to 127.00 in November 2013 (2010=100).
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Inflation (Annual Percent Change)

Source: TURKSTAT

Annual inflation in 2013 was realized as 7.40% and 6.97% according to CPI and PPI, respectively.

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Real Effective Foreign Exchange Rate (2003=100)

Source: CBRT

Compared to the previous month, as of December 2013, Turkish Lira has depreciated by 2.31% in terms of the CPI-based real effective exchange rate and depreciated by 1.39% in terms of the PPI- based real effective exchange rate.
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Total Credits and Consumer Credits (Billion TL)

Credits and specifically consumer credits increased in parallel to the growing domestic demand. Total credits increased %1.97 on a monthly basis in November 2013.
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Source: BRSA

CDS Premiums (13th Jan, 2014)

Source: DB Research * Higher CDS premiums indicate higher risk levels.

CDS premium of Turkey indicates a medium level of risk.

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Financial Markets
Data on Banking Sector Number of Banks Number of Domestic Branches Number of Foreign Branches Number of Total Domestic Personnel Employed Total Assets (Million TL) Total Equities (Million TL) Net Profit or Loss (Million TL) Nonperforming Loans (Gross) / Cash and Cash Equivalents (%) Net Profit or Loss / Average Equities (%) Liquid Assets with 12 Months of Maturity / Total Assets (%) Capital Adequacy Ratio (%)
Source: BRSA

2012 November 2013 November 49 10,929 79 200,541 1,335,794 176,868 21,786 2.97 14.60 72.73 17.39 49 11,842 83 212,855 1,653,621 193,698 23,269 2.77 13.36 75.21 15.6

Comparing to previous year, total assets of the banking sector increased by 23.7% and reached 1,653 trillion TL in November 2013. Capital Adequacy Ratio of Turkish Banking Sector is 15.6% in November 2013.
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EU Defined Budget Deficit/ GDP (%)

Source: Eurostat

* 2010

EU defined general government budget deficit/GDP ratio was 2.6% in Turkey in 2010 and Turkey satisfied the Maastricht criteria of 3%. Turkey also outperformed 22 EU Countries. Central government budget deficit/GDP ratio was 2.0% in Turkey in 2012. In January-November 2013 period, central government budget deficit was 1,2 billion TL compared to 13,3 billion TL in the same period of 2012.
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Government Debt / GDP (%)

Source: Eurostat

Debt/GDP ratio of Turkey was 36.2% in 2012, which was below the level in 25 EU Countries and the Maastricht Criteria (60%).

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Unemployment Rates (%)

Source: TURKSTAT

In September 2013, the unemployment rate was 9.9%. Seasonally adjusted unemployment rate was 10.2%. Seasonally adjusted unemployment rate in Euro Area was 12.1% and 10,9% in (EU28) in November 2013. In terms of unemployment ratio Turkey outperformed 12 EU countries according to current data. After Russia, Germany, England and France, Turkey has the 5th largest labor force among the European countries. (2011, World Bank)
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Potential of Population (2011)

Source: World Bank (2011), TURKSTAT (2012)

Turkey has a population of 75.6 million in which half of the population is under the age of 30.1. Growth rate of population is 1.2% in Turkey, 0.3% in EU Countries and 0.1% in Germany.
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Growing Dynamism in Turkey's Domestic Market

Cell phone penetration rate in households: 93.2% (2012)

Internet access rate in households: 47.2% (2012)

Internet access rate in enterprises: 92.5% (2012)

PC penetration rate in households: 31.8% (2012) Laptop penetration rate in households: 27.1% (2012) Digital camera penetration rate in households: 27.1% (2012) Printer penetration rate in households: 14.0% (2011) 1 of each 5 people owns a vehicle. (2011)
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B- FOREIGN TRADE OUTLOOK

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I) MERCHANDISE

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Targets in Merchandise Trade

(Billion $) Exports Imports Volume of trade Balance of trade Exports/Imports (%)

2012* 2013** 2014** 2015** 2016** 2023*** 152.5 153.5 166.5 184 202.5 500 236.5 251.5 262 282 305 625 389 405 428.5 466 507.5 1125 -84 -98 -95.5 -98 -102.5 -125 64.5 61.0 63.5 65.2 66.4 80.0

* Actual (Source: TURKSTAT) **Forecast: Medium Term Programme, Ministry of Development, 2014-2016)

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Turkey's Share in Global Merchandise Exports (%)

Turkeys share in global merchandise exports was %0.83 in 2012.

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Foreign Trade Volume/GDP (%)

The ratio of foreign trade volume to GDP was 49.5% in 2012. Turkeys integration to the international trade system is eminent.

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Foreign Trade Developments

2011 - 2012 / January-November 2012 - 2013
Annual (Billion $) 2011 Export Energy Export Gold Export Import Energy Import Gold Import Foreign Trade Volume Foreign Trade Balance Balance excl. Energy Export/Import (%) 134.9 6.5 1.5 240.8 54.1 6.1 375.7 -105.9 -58.4 56.0 2012 152.5 7.7 13.3 236.5 60.1 7.6 389.0 -84.1 -31.7 64.5 Periodic (Billion Dollar) 2012 / (JAN - NOV) 139.9 7.2 12.8 216.7 55.0 7.3 356.6 -76.9 -29.1 64.5 2013 / (JAN - NOV) 138.7 6.1 3.3 228.5 50.7 13.7 367.2 -89.8 -45.2 60.7 Change (%) 2012/2013 -0.8 -15.2 -74.1 5.4 -7.8 87.3 3.0 16.8 55.5 *

* Energy corresponds to Chapter 27. Source: Ministry of Economy

In January-November period of 2013 compared to same period of 2012, exports decreased by 0.8% and imports increased by 5.4% respectively.

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Monthly Exports/Imports

In November 2013 compared to same period of 2012, exports have increased by 3.6% and realized as 14.3 billion dollar and imports have increased by 2,2% up to the level of 21.4 billion dollar.

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Distribution of Foreign Trade in Broad Economic Categories

EXPORT
(Million $) Investment Goods Intermediate Goods Consumption Goods Others TOTAL Annual 2011 2012 14,192 13,734 67,942 82,656 52,219 55,556 555 516 134,907 152,462 2011/2012 De.% -3.2 21.7 6.4 -7.0 13.0 Periodic (January-Nov) 2012 2013 12,441 14,129 76,413 68,655 50,575 55,348 426 576 139,855 138,708 Jan-Nov % 2012/2013 Share Change % 12.6 13.6 61.0 -10.2 49.2 9.4 0.5 35.2 123.3 -0.8

IMPORT
(Million $) Investment Goods Intermediate Goods Consumption Goods Others TOTAL Annual 2011 37,271 173,140 29,692 739 240,842 2012 33,925 174,930 26,699 990 236,545 2011/2012 De.% -9.0 1.0 -10.1 34.0 -1.8 Periodic (January-Nov) 2012 2013 30,565 32,962 160,919 167,323 24,318 27,603 913 620 216,715 228,508 Jan-Nov % 2012/2013 Share Change % 17.6 7.8 89.2 4.0 14.7 13.5 0.3 -32.1 121.8 5.4

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Main Export Items

Periodic (January-November) Million Dolar Rank 1 2 3 Code 87 84 72 Description of Chapter VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING-ST OCK, AND PARTS AND ACCESSORIES THEREOF NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANIC AL APPLIANCES; PARTS THEREOF IRON AND STEEL ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THER EOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PA RTS AND ACCESSORIES OF SUCH ARTICLES ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNI TTED OR CROCHETED NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PREC IOUS STONES, PRECIOUS METALS, METALS CLAD WITH PR ECIOUS METAL, AND ARTICLES THEREOF; IMITATION JEW ELLERY; COIN MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION;BITUMINOUS SUBSTANCES; MINERAL WAXE S ARTICLES OF IRON OR STEEL ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, NOT KNITTED OR CROCHETED PLASTICS AND ARTICLES THEREOF LIST TOTAL TOTAL EXPORT 2012 2013 13,721 10,991 10,471 8,542 7,701 15,539 7,170 15,537 11,830 9,078 8,643 8,498 6,661 6,080 IMPORT 2012 2013 12,994 23,781 18,145 14,906 788 8,161 54,974 15,143 27,029 16,887 16,112 870 14,749 50,695 BALANCE 2012 2013 728 -12,790 -7,674 -6,364 6,913 7,378 -47,805 394 -15,198 -7,809 -7,469 7,628 -8,087 -44,615 3,115 3,536 -7,661 -76,167 -89,800 CHANGE % 2012/2013 13.2 7.6 -13.3 1.2 10.4 -57.1 -15.2 1.7 6.2 10.8 -7.7 -0.8

4 5 6 7 8 9 10

85 61 71 27 73 62 39

5,528 5,624 2,142 2,509 3,387 4,958 5,264 1,406 1,729 3,552 4,624 5,124 11,529 12,785 -6,906 89,244 82,341 148,826 158,507 -59,582 139,856 138,710 216,718 228,511 -76,861

* Percent change is related to the annual change in exports in 2013. Source: TURKSTAT

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Main Import Items

Periodic (January-November) Million Dollar Rank 1 2 3 Code 27 84 72 85 4 5 6 7 8 9 10 87 71 39 29 90 30 Description of Chapter MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION;BITUMINOUS SUBSTANCES; MINERAL WAXE S NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANIC AL APPLIANCES; PARTS THEREOF IRON AND STEEL ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THER EOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS, AND PA RTS AND ACCESSORIES OF SUCH ARTICLES VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING-ST OCK, AND PARTS AND ACCESSORIES THEREOF NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PREC IOUS STONES, PRECIOUS METALS, METALS CLAD WITH PR ECIOUS METAL, AND ARTICLES THEREOF; IMITATION JEW ELLERY; COIN PLASTICS AND ARTICLES THEREOF ORGANIC CHEMICALS OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING , CHECKING, PRECISION, MEDICAL OR SURGICAL INSTRU MENTS AND APPARATUS; PARTS AND ACCESSORIES THEREO F PHARMACEUTICAL PRODUCTS LIST TOTAL TOTAL IMPORT 2012 2013 54,974 23,781 18,145 50,695 27,029 16,887 EXPORT 2012 2013 7,170 10,991 10,471 6,080 11,830 9,078 BALANCE 2012 2013 -47,805 -12,790 -7,674 -44,615 -15,198 -7,809 CHANGE % 2012/2013 -7.8 13.7 -6.9 8.1 14,906 12,994 8,161 11,529 4,667 3,652 3,606 156,416 216,718 16,112 15,143 14,749 12,785 4,869 8,542 13,721 15,539 4,624 597 8,643 15,537 6,661 5,124 523 -6,364 728 7,378 -6,906 -4,070 -7,469 394 -8,087 -7,661 -4,346 -3,504 -3,120 -101,415 -89,800 16.5 80.7 10.9 4.3 12.3 4.9 6.2 5.4

4,101 499 597 -3,153 3,783 578 662 -3,028 166,152 72,732 64,737 -83,684 228,511 139,856 138,710 -76,861

* Percent change is related to the annual change in exports in 2013. Source: TURKSTAT

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Main Export Items (Annual)

Annual (Million Dolar) Rank 1 2 3 4 5 6 7 8 9 10 Code 71 87 84 72 85 61 27 73 62 39 Description of Chapter PEARLS, PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF VEHICLE OTHER THAN RAILWAY OR TRAMWAY ROLLING-STOCK, PARTS THEREOF BOILERS, MACHINERY AND MECHANICAL APPLIANCES, PARTS THEREOF IRON AND STEEL ELECTRICAL MACHINERY AND EQUIPMENT: PARTS THEREOF KNITTED AND CROCHETED GOODS AND ARTICLES THEREOF MINERAL FUELS, MINERALS OILS AND PRODUCT OF THEIR DISTILLATION ARTICLES OF IRON AND STEEL NON KNITTED AND CROCHETED GOODS AND ARTICLES THEREOF PLASTIC AND ARTICLES THEREOF LIST TOTAL TOTAL EXPORT IMPORT 2011 2012 2011 2012 3,739 16,325 7,022 8,529 15,803 15,148 17,184 14,514 11,561 11,999 27,111 26,316 11,225 11,332 20,424 19,642 8,874 9,373 16,835 16,280 8,386 8,419 1,085 843 6,539 7,708 54,118 60,117 5,748 6,093 2,521 2,367 5,124 5,431 1,874 1,498 4,580 5,013 12,579 12,505 81,580 96,842 160,753 162,612 134,907 152,462 240,842 236,545 BALANCE CHANGE % 2011 2012 2011/2012 -3,284 7,796 336.6 -1,381 634 -4.1 -15,550 -14,317 3.8 -9,199 -8,310 1.0 -7,961 -6,907 5.6 7,301 7,575 0.4 -47,579 -52,409 17.9 3,227 3,726 6.0 3,250 3,933 6.0 -7,998 -7,492 9.4 -79,173 -65,770 18.7 -105,935 -84,083 13.0

Source: TURKSTAT

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Main Import Items (Annual)

Annual (Million Dollar) Rank Code Description of Chapter 1 27 MINERAL FUELS, MINERALS OILS AND PRODUCT OF THEIR DISTILLATION 2 84 BOILERS, MACHINERY AND MECHANICAL APPLIANCES, PARTS THEREOF 3 72 IRON AND STEEL 4 85 ELECTRICAL MACHINERY AND EQUIPMENT, PARTS THEREOF 5 87 VEHICLE OTHER THAN RAILWAY OR TRAMWAY ROLLING-STOCK, PARTS THEREOF 6 39 PLASTIC AND ARTICLES THEREOF 7 71 PEARLS, PRECIOUS STONES, PRECIOUS METALS AND ARTICLES THEREOF 8 29 ORGANIC CHEMICALS 9 90 OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING CHECKING, PRECISION 10 30 PHARMACEUTICAL PRODUCTS LIST TOTAL TOTAL IMPORT 2011 2012 54,118 60,117 27,111 26,316 20,424 19,642 16,835 16,280 17,184 14,514 12,579 12,505 7,022 8,529 5,504 5,065 4,116 4,056 4,697 3,996 169,591 171,020 240,842 236,545 EXPORT BALANCE CHANGE % 2011 2012 2011 2012 2011/2012 6,539 7,708 -47,579 -52,409 11.1 11,561 11,999 -15,550 -14,317 -2.9 11,225 11,332 -9,199 -8,310 -3.8 8,874 9,373 -7,961 -6,907 -3.3 15,803 15,148 -1,381 634 -15.5 4,580 5,013 -7,998 -7,492 -0.6 3,739 16,325 -3,284 7,796 21.5 545 647 -4,959 -4,418 -8.0 448 555 -3,668 -3,501 -1.5 567 662 -4,131 -3,334 -14.9 63,882 78,763 -105,709 -92,257 0.8 134,907 152,462 -105,935 -84,083 -1.8

Source: TURKSTAT

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Main Trade Partners (January-November 2013)

Main Export Partners (Share,%)

Main Import Partners (Share,%)

Source: TURKSTAT

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Exports by Regions
(Million $) A- EU (28) B- FREE ZONES IN TURKEY C- OTHER COUNTRIES 1- OTHER EUROPE 2- AFRICA North Africa Other Africa 3- AMERICA North America Central America And Caraips South America 4- ASIA Near And Middle Eastern Other Asia 5- AUSTRALIA AND NEW ZEALAND 6- OTHER COUNTRIES AND REGIONS TOTAL 2012 Share (%) 5,782 42.0 202 1.5 7,768 56.5 1,413 10.3 1,137 8.3 823 6.0 314 2.3 787 5.7 524 3.8 47 0.3 216 1.6 4,381 31.9 3,393 24.7 989 7.2 41 0.3 8 0.1 13,753 100 November 2013 Share (%) Change(%) 6,287 44.1 8.7 219 1.5 8.4 7,745 54.3 -0.3 1,417 9.9 0.3 1,188 8.3 4.6 856 6.0 4.0 333 2.3 5.9 728 5.1 -7.5 503 3.5 -4.0 69 0.5 46.8 156 1.1 -27.9 4,361 30.6 -0.5 3,265 22.9 -3.8 1,096 7.7 10.9 45 0.3 8.5 6 0.0 -30.1 14,252 100 3.6 2012 54,446 2,115 83,295 12,993 12,132 8,583 3,549 8,736 6,063 705 1,968 48,893 39,313 9,580 442 100 139,856 January-November Share (%) 2013 Share (%) Change(%) 38.9 57,814 41.7 6.2 1.5 2,207 1.6 4.4 59.6 78,690 56.7 -5.5 9.3 13,075 9.4 0.6 8.7 12,841 9.3 5.8 6.1 9,127 6.6 6.3 2.5 3,714 2.7 4.6 6.2 8,842 6.4 1.2 4.3 5,989 4.3 -1.2 0.5 941 0.7 33.6 1.4 1,912 1.4 -2.9 35.0 43,323 31.2 -11.4 28.1 32,405 23.4 -17.6 6.8 10,918 7.9 14.0 0.3 487 0.4 10.1 0.1 121 0.1 20.6 100 138,710 100 -0.8

Source: TURKSTAT

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Imports by Regions
(Million $) A- EU (28) B- FREE ZONES IN TURKEY C- OTHER COUNTRIES 1- OTHER EUROPE 2- AFRICA North Africa Other Africa 3- AMERICA North America Central America And Caraips South America 4- ASIA Near And Middle Eastern Other Asia 5- AUSTRALIA AND NEW ZEALAND 6- OTHER COUNTRIES AND REGIONS TOTAL November 2013 Share (%) Change(%) 8,135 38.0 -0.4 109 0.5 13.0 13,159 61.5 3.8 3,507 16.4 17.7 498 2.3 -10.6 281 1.3 -16.4 217 1.0 -1.8 1,417 6.6 -8.9 941 4.4 -9.6 137 0.6 13.2 338 1.6 -13.8 6,623 30.9 6.2 1,805 8.4 12.2 4,818 22.5 4.1 23 0.1 -27.0 1,091 5.1 -17.4 21,403 100 2.2 January-November Share (%) 2013 Share (%) Change(%) 36.9 83,721 36.6 4.7 0.4 1,149 0.5 20.1 62.6 143,640 62.9 5.8 15.7 37,345 16.3 9.7 2.5 5,515 2.4 0.9 1.4 3,256 1.4 7.0 1.1 2,259 1.0 -6.8 8.7 17,425 7.6 -7.2 6.5 12,767 5.6 -9.4 0.4 1,270 0.6 31.8 1.7 3,389 1.5 -9.1 30.2 70,166 30.7 7.2 9.2 20,420 8.9 2.4 21.0 49,746 21.8 9.4 0.4 1,106 0.5 37.2 5.2 12,083 5.3 7.7 100 228,511 100 5.4

2012 Share (%) 8,171 39.0 97 0.5 12,680 60.5 2,980 14.2 557 2.7 336 1.6 221 1.1 1,555 7.4 1,041 5.0 121 0.6 392 1.9 6,235 29.8 1,608 7.7 4,627 22.1 32 0.2 1,320 6.3 20,948 100

2012 79,991 957 135,770 34,058 5,467 3,042 2,425 18,787 14,094 964 3,729 65,436 19,948 45,489 806 11,216 216,718

Source: TURKSTAT

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Tariff Rates

Source: WTO Tariff Profiles, 2012

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2) SERVICES

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Targets in Services
Tourism: Besides increasing the number of tourist arrivals, creating a structure that improves service quality, targets high-income groups by diversifying marketing channels, preserves natural capital and sustainability, and stimulates those types of tourism where Turkey has comparative advantages Construction, Engineering-Architecture, Technical Consultancy and Contracting Services: Establishing a structure that fits Turkeys economic and social needs, that is compatible with high technology and international rules, that is sensitive to environment, that creates high value added, high foreign exchange inflow and high employment, that grants high service quality, and that relies on qualified human and physical capital. Commercial Services: Increasing productivity and commercial trade volume in a competitive way, and to encourage technology and innovation.

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Turkey's Share in Global Services Exports (%)

Source: WTO

Turkeys share in global exports of services was 0.99% in 2012.

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Tourism Statistics (Quarterly)

Tourists visited (Thousand), Source: TURKSTAT

Turkey ranks as the 6th in the world and the 4th in Europe among the most favourite tourism destinations. Turkeys income per tourist increased by 2.6% in 2012 compared to 2011.
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Contracting Services Abroad

Years 1971-2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Project Projects Countries Volume (Million $) 2010 131 277 426 408 518 579 628 487 594 521 489 235 60 32 36 39 34 36 44 40 45 50 49 48 37 43.294 2.571 4.503 11.319 12.328 24.236 25.278 24.853 21.725 22.724 20.237 27.092 23.653 Cum. Avr. Project Project Volume Volume (Million $) (Million $) 43.294 22 45.865 20 50.368 16 61.687 27 74.015 30 98.251 47 123.529 44 148.382 40 170.107 45 192.831 38 213.068 39 240.160 55 263.813 101

Contributions to the overall economic performance: Creating foreign exchange inflow, exports, employment, technology transfer; adding to the machinery stock, facilitating internationalization

Regional Breakdown of Projects(%)

Last updated on December 2013

38 out of the worlds top 250 contracting companies are Turkish. Turkey ranks as the 2nd country (following China) in terms of the number of top contracting companies.
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Logistics 2012

Europes biggest truck fleet 45 thousands trucks and 1,420 companies Almost 1.1 million flights in 2012 2.4 million tonnes freight and 130 million passengers 25. biggest fleet in the world 48 airports and 76 ports Total length of divided highways will reach 15 thousand kilometers. High-speed railway projects are carried out rapidly.

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Turkey s Energy Perspective

In the long-term planning work, Turkey foresees to achieve the following targets in 2023 in the field of energy; To be able to make complete use of its potential of indigenous coal and hydro resources, To make maximum use of renewable resources, To incorporate nuclear energy into electricity generation To secure rapid and continuous improvement in energy efficiency. Turkeys Energy Corridor Concept
Strategy is to act as a transit country for secure & commercially viable projects and to be an energy terminal. e.g. TANAP (Trans-Anatolian Natural Gas Pipeline) Project

Some ongoing important energy projects that will help Turkeys Energy Security; Mersin Akkuyu Nuclear Power Plant-Russia Sinop Nuclear Power Plant-Japan

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C- INVESTMENTS, FOREIGN CAPITAL and INCENTIVES

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Investment Climate in Turkey

10 REASONS TO INVEST IN TURKEY 1- SOUND ECONOMIC PERFORMANCE 6- CENTRAL LOCATION 2- YOUNG and DYNAMIC 7- ENERGY CORRIDOR and POPULATION TERMINAL of EUROPE 3- QUALIFIED and COMPETITIVE 8- LOW TAX RATES and LABOR FORCE INCENTIVE FACILITIES 4- LIBERAL and INNOVATIVE 9- CUSTOMS UNION with EU INVESTMENT CLIMATE and OPEN ECONOMY 5- INFRASTRUCTURE 10- DOMESTIC MARKET

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Time Required to Start a Business

Source: Invest In Turkey

The required time to start a business is 6 days in Turkey.

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Skilled Labour Availability

Source: Invest In Turkey

Scoring is between 0 and 10.

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The Sectoral Breakdown of Foreign Investments

(Million $) AGRICULTURE INDUSTRIAL SECTORS Mining and Quarrying Manifacturing Production and Distribution of Electricity, Gas, SERVICES SECTOR TOTAL 2011 2012 2012* 32 43 41 7,965 5,420 4,783 146 213 193 3,573 4,283 3,810 4,244 924 780 8,058 5,098 3,967 16,055 10,561 8,791 2013* 36 2,718 218 1,266 1,232 4,655 7,409

*January-October

Source: CBRT

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Breakdown of Foreign Investments by Country

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Million $ Germany Netherlands Austria train Spain Japan Lebanon U.S. Luxembourg Saudi Arabia Kuwait France Azerbaijan Swiss Russia England Italy Bahrain United Arab Emirates Thailand LIST TOTAL TOTAL 2011 665 1,425 2,418 50 2,251 231 45 1,402 555 8 43 999 1,266 233 762 904 111 5 89 0 13,462 16,055 2012 491 1,226 1,519 46 193 106 315 439 1,183 439 271 86 338 454 11 2,004 154 131 52 1 9,460 10,561 2012* 389 952 1,423 2 113 94 315 331 1,043 339 63 71 318 320 8 1,966 132 110 27 0 8,016 8,791 2013* 1,713 849 654 468 465 458 369 303 209 205 204 201 190 182 169 121 114 78 71 57 7,137 7,409

* January-October Source: CBRT

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Investment Incentive System

The current investment incentive system of Turkey is structured in four sub systems: General Investment Incentive System
Regional Investment Incentive System Investment Incentive System for Big Scale Projects Encouraging the Strategic Investments
January 2014 Ministry of Economy 52

Investment Incentives
Certificates Issued 2011 2012 2012* 2013*
*January-November

4,402 4,317 3,884 4,380

Amount of Fixed Investments (Million TL) 53,964 57,606 45,513 70,526

Potential Employment (People) 125,804 146,830 130,059 160,057

CERTIFICATES ISSUED Region I Region II Region III Region IV Region V Region VI Various TOTAL 2011 1,429 897 671 579 435 376 15 4,402 2012 1,563 750 703 502 338 451 10 4,317 2012* 1,407 689 634 450 297 399 8 3,884 2013* 1,592 721 610 456 426 550 25 4,380
*January-November

Source: General Directorate of Incentive Implementation and Foreign Investment

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D - FREE ZONES IN TURKEY

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The Advantages of Free Zones for Users

Tax advantages for manufacturers Medium-and long-term investment view Availability to transfer profits Commercial facilities Exemption from customs duties Acquisition of the documents relating to the free movement of goods under the scope of Customs Union with the EU Principle of equality No time restrictions Flexibility to adjust to the market needs and conditions Reliable inflation accounting Market access to domestic and foreign markets Reduced bureaucratic procedures and dynamic business management Strategic advantages Affordable and compatible infrastructure Supply chain opportunities
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January 2014

Free Zones in Turkey

55,938 people have been employed in Free Zones of Turkey in 2012.

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Trade Flows of Free Zones

Million $ 2008 From Domestic Market to Free Zones 3,195 From Free Zones to Abroad 5,874 From Abroad to Free Zones 8,248 From Free Zones to Domestic Market 7,262 TOTAL TRADE VOLUME 24,578 2009 2,177 4,914 5,493 5,174 17,757 2010 2,295 4,361 6,626 5,291 18,572 2011 2,668 6,924 7,253 5,801 22,646 2012 2,971 7,070 7,258 5,754 23,053

Source: General Directorate of Free Zones, Foreign Investments and Services

In 2012 total trade volume of the Free Zones reached to 23.1 billion dollars, increasing 1.8% annually.

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Concentration in Free Zones by Industries

Istanbul Ataturk Airport FZ Antalya FZ Kocaeli FZ Avrupa FZ Mersin FZ Bursa FZ Izmir FZ TUBITAK-MAM FZ Adana-Yumurtalik FZ Services and Software Yacht-building, Medical Equipment Ship-building Ready-Wear Ready-Wear Automotive sub-industries Leather R&D Activities Ship Repair and Maintenance

Source: General Directorate of Free Zones, Foreign Investments and Services

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E - BILATERAL, REGIONAL, PLURILATERAL and MULTILATERAL TRADE

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Trade Relationships of Turkey with Others Bilateral Trade Relationships of Turkey

Europe, Asia-Pacific, Eurasia, Middle East and North Africa, Sub-Saharan Africa, Americas

Regional and Multiple Trade Relationships of Turkey

EU, ECO, D8, BSEC, OIC, COMCEC

Multilateral Trade Relationships of Turkey

WTO, OECD, G20

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Regional Breakdown of Exports

(Million $) CIS EFTA Economic Cooperation Organisation Organization of Islamic Conference Black Sea Economic Cooperation FTA Countries** OECD Turkic Republics TOTAL 2011 13,377 1,887 9,292 37,325 17,768 13,602 67,114 5,040 134,907 2012 15,075 2,601 16,563 55,218 18,791 14,576 66,290 5,841 152,462 Change % 12.7 37.8 78.3 47.9 5.8 7.2 -1.2 15.9 13.0 Share % (2012) 9.9 1.7 10.9 36.2 12.3 9.6 43.5 3.8 100.0 2012* 13,861 2,346 15,763 50,929 17,317 13,896 60,634 5,350 139,856 2013* 15,533 1,555 10,976 44,957 18,690 13,516 62,834 6,335 138,710 Change % 12.1 -33.7 -30.4 -11.7 7.9 -2.7 3.6 18.4 -0.8 Share % (2013*) 11.2 1.1 7.9 32.4 13.5 9.7 45.3 4.6 100.0

Source: TURKSTAT * January-November** Except Lebanon and Kosovo

In January-November period of 2013, our exports to EFTA countries decreased by 33.7% annually. The annual increase of our exports to Turk Republics in the same period was 18.4% and Turk Republics became the fastest growing export destination of the regions above.

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Chronological Evolution of the Relationship between Turkey and the EU

12 September 1963: Ankara Agreement 23 November 1970: The signing of the Additional Protocol 1 January 1973: Additional Protocol to come into force 14 April 1987: Turkeys Application for Membership 6 March 1995: The Association Council Decision Establishing the Customs Union 10-11 December 1999: Recognition of the Candidate Status of Turkey at the Helsinki Summit 8 March 2001: The first Accession Partnership Document issued 17 December 2004: European Council decision to start Negotiations with Turkey in Brussels Summit 3 October 2005: Start of the Negotiations between Turkey and the EU 20 October 2005: Start of the Screening Process 13 October 2006: End of the Screening Process
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January 2014

EU Accession Negotiations Current Status

Negotiations for 13 chapters were opended, 1 chapter was temporarily closed up to the present.
Temporarily Closed
Opened (13 Chapters)

(25) Science and Research (12 June 2006)

(4)Free Movement of Capital (18 December 2008) (6)Company Law (12 June 2008) (7)Intellectual Property Law (12 June 2008) (10)Information Society and Media (18 December 2008) (12)Food Safety, Veterinary and Plant Health (30 June 2010) (16)Taxation (30 June 2009) (18)Statistics (26 June 2007) (20)Business and Industry Policy (28 ubat 2007) (21)Trans-European Networks (19 December 2007) (27)Environment (21 December 2009) (28)Consumer and Health Protection (19 December 2007) (32)Financial Control (26 June 2007) (22) Regional Policy and Coordination of Structural Instruments

Chapters for Which Turkey Has Presented Its Negotiation Position Document to the Commission (2 Chapters)

(17)Economic and Monetary Policy (26) Education and Culture

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EU Accession Negotiations Current Status

Screening Reports Approved at the Council of the European Union with Benchmarks (8 Chapters) (1) Free Movement of Goods (3) Right of Establishment and Freedom to Provide Services (5) Public Procurement (8) Competition Policy (9) Financial Services (11) Agriculture and Rural Development (19)Social Policy and Employment (29) Customs Union (2) Freedom of Movement of Workers (13) Fisheries (14)Transport Policy (15) Energy (23) Judiciary and Fundamental Rights (24) Justice, Freedom and Security (30) External Relations (31) Foreign, Security and Defense Policy (33) Financial and Budgetary Provisions

Draft Screening Reports are to be Approved at the Council of the European Union (9 Chapters)

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Trade between Turkey and the EU

*January-November Source: Data Source of the Ministry of Economy

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FTA Countries
1. EFTA (Norway, Switzerland, Iceland, Liechtenstein) 9. Egypt 10. Albania 11. Georgia 12. Montenegro 13. Serbia

2.
3. 4. 5.

Israel
Macedonia Bosnia and Herzegovina Palestine

14. Chile
15. Jordan 16. South Korea 17. Mauritius 18. Lebanon* 19. Kosovo*
(*) Agreements that are in the approval process (**) Pending

6.
7. 8.

Tunisia
Morocco Syria (**)

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FTA Countries(On-going Negotiations)

1. Ukrain 2. Colombia 3. Ecuador

8. Cameroon 9. Seychelles 10. Gulf Cooperation Council 11. Libya

4. Malaysia
5. Moldova 6. Democratic Republic of the Congo

12. MERCOSUR
13. Faroe Islands

7. Ghana

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Trade with FTA Countries

Our exports to FTA Countries increased %7.2 in 2012. The share of FTA Countries in total exports reached %9.6. Turkey recorded a trade surplus of 3.9 billion USD in 2012 with FTA Countries, while there was a trade deficit of 1.5 billion USD in 2002.

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Trade Representatives Abroad

181 trade representatives from the Ministry are serving in 105 countries, 154 locations and 8 offices abroad.

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Locations of Trade Representatives

AMERKA
Buenos Aires New York Karakas Sao Paulo Mexico City ikago Ottava Toronto Santiago Miami Vaington San Francisco Houston Seattle Los Angeles

AFRKA
Abuja Addis Ababa Akra Cezayir Dakar Darsselam Hartum skenderiye Kahire Nairobi Pretoria Rabat Trablus Tunus Kazablanka

ASYA
Astana Akabat Bangkok Bikek Cakarta Duanbe Hanoi slamabad Kabil Kuala Lumpur Manila Pekin Seul Singapur AB DT OECD Atina Bak Belgrad Berlin Bern Bratislava Brksel Budapete Bkre Dublin Helsinki Kiev Kiinev Kopenhag Lahey Lizbon Lefkoa Takent Tokyo Ulan Bator Yeni Delhi Almat Guangzhou Hong Kong Karai Mumbai angay Georgetown
GEORGETOWN

AVRUPA/KAFKASYA
Londra Lubliyana Madrid Minsk Moskova Oslo Paris Podgorica Prag Pritine Roma Saraybosna Sofya Stokholm Tiflis Tiran skp Varova Viyana Zagreb Barselona Batum Dsseldorf Hamburg Hannover Kazan Marsilya Milano Mnih Novorossisk Odessa Rotterdam Selanik St. Petersburg Stutgart Birmingham Krasnodar Novosibirsk Yekaterinbur g

ORTA DOU
Abu Dhabi Amman Badat Beyrut Doha Kuveyt Manama Muskat Riyad Sana am Tahran Tel Aviv Basra Cidde Dubai Erbil Halep Kuds Musul Tebriz Daimi Temsilci Yardmcl

AVUSTRALYA
Sidney Melbourne

Ticaret Mavirlii Ticaret Ataelii rtibat Brolar

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Projects with Future Prospects

Export Oriented Production Strategy and Input Supply Strategy Market Access Strategy Improving the Investment Climate Trade Agreements Next-Generation Free Zones Trade in Services and Turkish Investments Abroad Market Surveillance and Inspection Strengthening the Organization Abroad
January 2014 Ministry of Economy 71