McGill University
North America and Global Economy
CPL2-561-781
Trade Report
on
Canada’s International Relations
with
Israel and Turkey
Redwan Zaouk
110246556
and
Jeremy Layton
260098609
Overview
Israel:
Country Profile
- Geography
- History
- Demography
- Government and Legal system
- International relations
- Economy
State of Economic Relationship
- Canada Israel Free Trade Agreement
- Evaluation of agreement
Actual Trade Figures
- Products export/import
- Patterns of trade
Foreign direct investment
Outlook of economic relationship
Turkey:
Country Profile
- Geography
- History
- Demography
- Political system
- Economy
International Trade
Trade relations with Canada
Future Trade
3
3
3
4
5
5
5
8
8
10
10
10
12
13
14
16
16
16
17
17
18
20
22
23
Tables and Graphs:
Israel:
- Main economic indicators
- Import/Export schedule
- Trade patterns
- FDI 1990-2000
7
11
13
13
Turkey:
- Economic indicators
- Imports and Exports
- FDI 1993-2002
20
21
22
2
Country profile: Israel
Geography:
The state of Israel is located in the Middle-East region, bordering the Mediterranean Sea,
Egypt, Jordan the Palestinian authority territory and Lebanon, with a total area of 20,770
sq Km and a coastline of 273 Km.
Israel is known for its hot and dry climate especially in the southern and eastern desert
areas where sandstorms normally occur during the spring and the summer seasons.
Natural resources consist of timber, potash, copper ore, natural gas, phosphate rock,
magnesium bromide, clays, and sand.
Israel faces a serious problem with the issue of water. The availability of fertile land and
natural fresh water resources pose serious constraints; as well as desertification, air
pollution from industrial and vehicle emissions, groundwater pollution from industrial
and domestic waste, chemical fertilizers, and pesticides.
History:
After the Second World War, the British withdrew from their mandate of Palestine, and
the UN divided the area into Arab and Jewish states, an arrangement rejected by the both
sides. Subsequently, a series of wars occurred between both sides without ending the
deep tension or getting to a comprehensive peace agreement between Israel and its
neighbours.
In 1982, Israel withdrew from the Sinai desert after the 1979 Israel-Egypt Peace Treaty.
Disputes with Jordan were resolved in 1994 through the Israel-Jordan Treaty of Peace. In
addition, in May 2000, Israel withdrew unilaterally from southern Lebanon, which it had
3
occupied since 1982 after 20 years of non-stop Lebanese resistance led mainly by the
Hizbollah military group.
In keeping with the framework established at the Madrid Conference in October 1991,
bilateral negotiations were conducted between Israel and Palestinian representatives and
Syria to achieve final resolution.
Social and security instability in Israel constitute a major threat. Palestinian organizations
such as Hamas, Al Jihad, Al Aqsa Brigades, etc… conduct periodic military operations
and attacks against both civil and military targets.
Demography:
As per the last count, the Israeli population amounts to 6.1 million people. Israelis are
considered to be young with a median age of 28.9 years. The majority of the population
63.2% has an age range between 15 and 64 years, with only 9.9% older than 65, and
26.9% under the age of 15. The population is also evenly distributed between male and
females. The total population sex ratio equals to 0.99 male for every female with a
growth yearly rate of 1.39%.
The greatest majority of the population is Jewish, 80.1% (Europe/America-born Ashkenazi- 32.1%, Israel-born –Safardi- 20.8%, Africa-born –Falasha- 14.6%, Asia-born
12.6%) and non-Jewish 19.9% (mostly Arab – Muslims and Christians).
Hebrew is the official language of the state. Arabic is used officially for Arab residents
mainly those who hold the Israeli citizenship and known as Arabs of 1948. English is
most commonly used foreign language.
The Israeli population is highly educated with a literacy rate of 95.4%.
4
Government and legal system:
Israel follows a parliamentary democratic system, where citizens vote for the parliament,
Knesset, who in turn elects the president every seven years. The president then assigns a
Knesset member, traditionally the leader of the largest party, the task of forming a
governing coalition.
The declared capital is Jerusalem the core problem of the Arab-Israeli conflict. Yet most
diplomatic and economic activities take place in the city of Tel Aviv. The major cities
are Nahariyya, Hayfa, Yafa and Ashkelon.
The country has no formal constitution. The “declaration of establishment of the state of
Israel” is a judicial and national reference as well as the laws of the Knesset. The legal
system is a mixture of English common law, British Mandate regulations, and, in
personal issues, Jewish, Christian, and Muslim legal systems. A supreme court exists
where the members are assigned for a lifetime mandate by the president of the state.
The Israeli political life is a very active one. Most national decisions are made using
democratic tools such as elections or referendums. The two major political blocks are the
leftist Labour Party, and the traditional conservative right wing Likud. Add to them many
extremist Jewish movements such as the national religious party, Shas, Yisra'el Beiteinu,
and the United Torah Judaism party.
Israel is a member nation of the United Nations and the World Trade Organizations and
an active member in many other international organizations and agreements.
International relations:
Israel is a recognised state by the majority of the world, except the member states of the
Arab League who were boycotting the nation politically and economically since the
5
inception of the state. Negotiations are taking place to achieve more recognition. Israel
enjoys the economic, sympathy and moral support of the European Union and has many
bilateral agreements with the union members joint together and individual member
nations. It also enjoys the greatest and direct economic, military, and political support of
the United States and capitalizes heavily on the exemplary relations they have.
Among the state’s international affiliations is: BSEC (observer), CE (observer), CERN
(observer), EBRD, ECE, FAO, IADB, IAEA, IBRD, ICAO, ICC, ICCt (signatory),
ICFTU, IDA, IFAD, IFC, IFRCS (associate), ILO, IMF, IMO, Interpol, IOC, IOM, ISO,
ITU, OAS (observer), OPCW (signatory), OSCE (partner), PCA, UN, UNCTAD,
UNESCO, UNHCR, UNIDO, UPU, WCO, WHO, WIPO, WMO, WToO, WTrO
Economy:
Israel has a technologically advanced market economy with large government
participation to support economic activity and investment. Regardless of the scarcity of
natural resources, Israel has developed its agricultural and industrial sectors over the past
couple of decades. The relatively high current account deficit is covered by large transfer
payments from abroad under the form of donations and by foreign loans with very low
interest rates. Half of the government's external debt is owed to the US, which is its major
source of economic and military aid. The inflow of Jewish immigrants from all over the
world plays a major role in economic growth, 7.2% in 2000. Yet the increased IsraeliPalestinian conflict, along with the difficulties in the high-tech, construction, and tourist
sectors, and fiscal strictness in the face of growing inflation led to small declines in GDP
in 2001 and 2002.
6
The Israeli economy relies heavily on services, 67% of GDP, then on the industrial sector
30% of GDP, and very little reliance on agriculture, only 3% of GDP.
The major productive sectors are high-technology projects (including aviation,
communications, computer-aided design and manufactures, medical electronics), wood
and paper products, potash and phosphates, food, beverages, and tobacco, caustic soda,
cement, and diamond cutting.
Machinery and equipment, software, cut diamonds, agricultural products, chemicals,
textiles and apparel are the major exports. The major export partners are the US 39.2%,
Belgium 6.5%, Germany 4.4%, and UK 4.2%.
On the other hand Israel depends on imports of crude oil, grains, raw materials, military
equipment and consumer goods. The major import partners are the US 21.6%, Belgium
8.9%, Germany 6.7%, UK 6.6%, Switzerland 4.9%, Italy 4.5%.
The country uses the Shekel as a national currency. The exchange rate is 4.74 shekels for
each US dollar.
Finally the estimated foreign debt amounts to $42.8 billion.
Main Economic Indicators
(1999-2002)
1999
2000
2001
2002
GDP ($B)
103
113.9
111.8
102.5
GDP Growth Rate
2.6%
7.4%
-0.9%
-1.1%
GDP Per capita ($)
16,830
18,100
17,360
15,600
GDP Per capita growth rate
0.0%
4.6%
-3.2%
-3.1%
Exports of goods and services ($B)
37
46
39.7
36.7
Imports of goods and services ($B)
40.7
46.6
43.5
42.8
Foreign debt (net) as % of GDP
10%
6%
4%
2%
Unemployment rate
8.9%
8.8%
9.3%
10.5%
Inflation rate
1.3%
0%
1.4%
6.5%
7
State of economic relationship:
Over the past fifty years, Canada and Israel have entered into numerous agreements, with
varying degrees of success. Many of them were more symbolic than substantive or have
been inactive for too long.
In order to achieve optimal results, the ultimate goal was to achieve a formal,
comprehensive agreement between both countries which weaved together all trade
elements into one cohesive effort. The Canada-Israel free trade agreement (CIFTA) was
born.
Bilateral economic relations were institutionalized in the early 1990s. In 1993 CanadaIsrael Industrial Research and Development Fund (CIIRDF) was established in order to
stimulate contact between private interests in both countries, especially in the 'high-tech'
sector. Funding by both governments for the successful Canada-Israel Industrial Research
and Development Foundation was recently renewed.
Canada Israel Free trade agreement (CIFTA)
The Canada-Israel Free Trade Agreement (FTA), was implemented January 1, 1997 and
improves market access for agri-food products of export interest to both Canada and
Israel, and eliminates tariffs on all industrial goods. It partially restored Canada's
competitive position in the Israeli market where the United States and the European
Union have gained preferential access through negotiated bilateral arrangements.
The agreement covers approximately 80% of the two-way trade in between both
countries. Canada and Israel are currently engaged into negotiations to further liberalize
8
trade with a view to maintain the competitive position of Canadian exports. In most areas,
such as sanitary and phytosanitary barriers, technical barriers and intellectual property
rights, trade will continue to be governed by the agreements under the World Trade
Organization.
Under the agreement Israel has established annual duty-free tariff rate quotas for Canada
of 150,000 tonnes of wheat and 200,000 tonnes of coarse grains (rye, barley, oats and
corn). Moreover, the annual quotas are 10,000 tonnes for wheat flour and 9,000 tonnes
for malt. Duty-free access for canola seed has been secured since duties on Canadian
canola oil will be applied at a rate of 13%.
Pulse crops benefit from a duty-free tariff rate quota of 10,000 tonnes. In addition,
mustard seeds and canary seed exports benefit from a duty-free tariff rate quota of not
less than 100 tonnes.
The agreement provides Canada with a 2,000 tonne duty-free tariff rate quota for frozen
beef and beef offal. All meat imports must be certified under Israel's Kosher Meat Import
Law.
Seed potatoes have a duty-free tariff rate quota of 1,000 tonnes and fresh berries
(raspberries, blueberries, cranberries and other specialty berries) enjoy a duty-free tariff
rate quota level of 150 tonnes. On the other hand, Canada provides duty-free access for
certain fresh vegetables, grapes and cut flowers, with duty-free access for roses from
Israel limited to an annual tariff rate quota of 90,000 dozen stems.
9
Israel's recent immigration has fuelled an increase in demand for food, both in terms of
quantity and selection. The Canada-Israel FTA takes advantage by offering new
opportunities targeting food manufacturing markets as well as final-product markets.
Canada has duty-free access for food ingredients such as mustard flour and meal and
protein concentrates, and preferential tariff access of 8% for potato flour, meal and flakes.
Canadian producers of confectionery products, peanut butter, jams, fruit jellies, pickles
and soups and sauces will also find duty-free access to the Israeli market. On the other
side, Canadian food processors benefit from the elimination of tariffs on a variety of
imported products such as peanuts, dehydrated vegetables and spices. As well, Canadian
consumers may have a better selection of Israeli food products, especially Kosher
products, which benefit from improved access to Canada.
Evaluation of the agreement
Experience over the last six years with the Canada-Israel Free Trade Agreement (CIFTA)
provides certain evidence of benefits to both nations. The economic successes caused by
the CIFTA can be equally achieved in other domains such as health, agriculture,
education, and social services.
Actual trade figures:
Products export import:
The table below shows the Canadian exports to Israel for both years 2001 and 2002.
Canada mainly exports paper and paper products, machinery, transportation equipment,
10
mineral and chemical products. In 2001 total exports to Israel amounted to 145 million
dollars and 192 millions in 2002.
On the other hand, Canada mainly imports from Israel precious stones and metals, basic
metals, machinery, medical equipment, chemical products, rubber and plastics and plant
and vegetables products. Total imports from Israel in 2001 and 2002 were respectively
150 and 145 million.
Import Export Schedule (canadian Perspective)
Export
Import
2001
Description
2002
000’$
%
2001
000’ $
%
Live Animals, Animal Products
0.24
353
0.36
Plant and Vegetable Products
1.55
2243
1.12
Animals, Vegetable Fats
0.01
13.3
0.02
Prepared Foodstuffs
2.71
3930.1
2
Mineral Products
3.48
5052.9
Chemical Products
3.02
Rubber, Plastics
697.5
000’ $
%
0
2143.9 1.52
0
000’ $
%
0
0.06
83.1
2287.4 1.62
2359.9
0
1.5
3825.5 1.25
1885.5 1.41
2046
3.18
6094.8 0.09
130 0.11
159.8
4380.3
3.06
5867.2 15.29 23038.6 15.94
23170.1
1.93
2797.9
1.53
2941.4 6.17
12316.8
Hides, Leather
0.03
47.8
0.02
34.2 0.03
Wood and Wood Products
1.95
2835.6
1.7
3225.2
0
18.01 26130.7
5.32
10202
Paper and Paper Products
36.6
2002
4.1
9296.7 8.47
39.6
0
1.8
0
0
2.2
0.1
146.6 0.24
348.9
Textile and Textile Articles
2.66
4151.1
1.48
2837.2 5.11
7697.4 4.88
7095.9
Footwear, Headgear
0.24
341.9
0.11
201.8 0.65
973.7 0.81
1174.6
Non-Metallic Mineral Product
0.65
943.1
0.59
Precious Stones & Metals
0.77
1119.8 10.98
Base Metals
3.29
4773.4
0.5
732.7
21047.6 22.29 33577.8 24.71
35923.4
6474.9 8.78 13224.1 8.49
12349.6
Machinery
35.56 51601.4 52.25 100162.9 31.69 47746.2 24.88
36171.1
Transport Equipment
16.32 23689.6
3.38
1139.2
0.5
7.92 15173.5 0.07
Optical Medical, Other Equip
4.96
7201.4
3.7
Micellaneous
2.42
3519.2
1.29
Total Country
100 145125.5
7096.4 6.28
2464.8
100 191666.6
0.2
756.5
99.6 0.14
202
9468.6 7.33
10664.3
300.5
100 150672.9
0.4
586.4
100 145390.1
11
Patterns of trade:
Over the past five decades, trade between Canada and Israel grew significantly. It was
mainly due to the growing political relationship and the development of bilateral trade
and economic agreement between both nations. The table below summarizes the
evolution of trade since the initiation of the state of Israel in 1948 until our present day.
In 1948 Canadian exports to Israel totalled $5 million while Israel recorded no exports at
all to Canada. In 1957 bilateral trade was valued at $6.6 million, mostly in Canadian
exports to Israel. In the early 1960s some elementary steps were taken to institutionalize
bilateral economic relations, through the establishment of several joint institutions. By
1967 trade jumped to $15.8 million, with a total Canadian exports to Israel of $6.6
million and a total imports from Israel of $9.2 millions. The 1970s witnessed a significant
growth in bilateral trade to just under $100 million; In 1987, two-way trade totalled about
$260 million; trade levels ranged between $250 million and $270 million in the late
1980s and early 1990s.
In January 1996 the Canada-Israel free trade zone agreement was signed. In its first year
alone (1997), agreement helped stimulate an overall increase in two-way trade with
Israeli imports of Canadian products increasing by 55.8% (to $294 million) and Israeli
exports to Canada growing by 18.1% (to $146 million). Experts contend that the mutual
benefits of the Canada-Israel Free Trade Agreement will continue to grow as preferred
access is extended to ever-greater areas of bilateral exchange.
12
Trade pattern (Millions of Dollars)
canadian perspective
Year Volume of trade Export Import Balance
1948
5
5
0
5
1957
6.6
5.5
1.1
4.4
1967
15.8
6.6
9.2
1976
1987
1990
100
260
290
63
169
190
37
91
100
1997
480
294
146
Driving Incident
Israel-Canada Development
Corporation, Canada-Israel
Chamber of Commerce
-2.6 (1962)
Joint comitee for the
development of trade and
26 economic expansion (1976)
78
90
Canada Israel Free trade
148 agreement (CIFTA)(1996)
Foreign direct investment:
Net Foreign Direct Investment in Israel
(1990-2000)
(Billions of dollars)
Israel was always aware that foreign direct investment is a vital component of economic
growth and activity. The government and business authorities give great attention to the
benefits behind FDI such as the increase in physical capital formation, technology
transfer, highly skilled managerial expertise, and the promotion of exports due to the
international orientation of foreign companies.
13
In order to encourage FDI, Israel has provided a favourable investment environment and
incentives for investors. The geographic location of the investment plays a major role in
the amount of incentives given. Israel favours investment in developing areas of the
country where jobs can be created to reduce the pressure over the big cities.
Also, the country provides research and development incentives in the form of grants and
tax cuts for the companies that want to invest into subsidized industries such as
equipment and chemical and oil products fields.
Export oriented firms enjoy the benefit of duty free zones especially in the port sites like
Haifa, Ashdod and Eilat. They receive special tax benefits as well as an exemption from
indirect taxes.
Investors perceive many advantages in investing in Israel. The country has welldeveloped free trade agreements with the major economic blocks in the world mainly the
US and the European Union. The labour force is multilingual and highly educated. 17%
hold academic degrees. The geographic location in the centre of the ancient world and the
export incentives the country provides are also of great importance to investors.
Outlook of economic relationship:
The vision of socio-economic cooperation and mutual interest between both nations that
gave rise to previous bilateral agreements is extending to new, under-explored areas. For
instance, the governments, as well as the private sector and agencies in both countries,
are currently assessing the feasibility of joint efforts, memorandums of understanding,
and formal treaties in various areas such as medical and scientific research and
development, sports and cultural affairs, and academic and judicial exchanges and other
"people to people" contacts. The direct consequence of these new public and private
14
initiatives will be the reinforcement of the strong bonds of friendship and understanding
that have evolved between Canadians and Israelis over the past 50 years and boost the
bilateral relationship to new and exciting dimensions in the years and decades to come.
According to the world competitiveness yearbook issued by the international
institute for management development Israel was ranked in 2003, 22nd in the category for
less than 20 millions citizens. In 2002 Israel was 17th While on the corruption index Israel
was ranked 21st among 133 nations the best ranking in the Middle-East region.
15
Country Profile: Turkey
Geography:
The Republic of Turkey is situated in both south-eastern Europe and south-western Asia.
It occupies an area roughly the size of Texas, measuring 780,580 square kilometres, and
borders with eight other countries: Greece and Bulgaria, in Europe, and Armenia,
Azerbaijan, Georgia, Iran, Iraq and Syria, in Asia. The span of two continents, in addition
control of the Turkish Straits (Bosporus, Sea of Marmara, Dardanelles), linking the Black
and Aegean seas, puts Turkey in a geographically strong strategic position. The capital
city is Ankara, although Istanbul remains an important sub-capital as the major city in the
European part of the country.
The climate in Turkey is temperate, with hot, dry summers and mild, wet winters,
however the conditions are considerably harsher in the interior.
Natural resources include: antimony, coal, chromium, mercury, copper, borate, sulphur,
iron ore, arable land and hydropower. Natural hazards include very severe earthquakes,
especially in northern Turkey, along an arc extending from the Sea of Marmara to Lake
Van. From an Environmental perspective, the problems faced include: water pollution
from dumping of chemicals and detergents; air pollution, particularly in urban areas;
deforestation; concern for oil spills from increasing Bosporus ship traffic.
History:
The Republic of Turkey was created in 1923 from the remnants of the Ottoman Empire.
The country then instituted secular laws to replace the traditional religious fiats. Turkey
joined the UN in 1945, and it became a member of NATO in 1952. To protect Turkish
Cypriots, Turkey intervened militarily on Cyprus in 1974, to prevent a Greek takeover.
16
Turkish Cypriots control the northern 37 percent of the island. Relations between Turkey
and Greece remain strained, but improvements have been seen over the past few years.
In 1984, the Kurdistan Workers' Party (PKK, a Marxist-Leninist, separatist group), in an
attempt to try to attain its goal of an independent Kurdistan, initiated an insurgency in
southeast Turkey, often using terrorist tactics. The PKK has observed a unilateral ceasefire since September 1999, although clashes between Turkish military units and some of
the 4,000-5,000 armed PKK militants have been known to occur. The PKK changed its
name to the Kurdistan Freedom and Democracy Congress (KADEK) in April 2002.
Demography:
The population of Turkey is estimated to be around 70 million, with a population growth
rate of around 1.16% per year. The age distribution gives a majority of the population
(66.4%) being between the ages of 15 and 64, with most of the remainder (27.2%) being
14 and under, and a relatively small proportion (6.4%) being 65 or over.
A vast majority (99.8%) of the population is Muslim, with the tiny remainder (0.2%)
being mainly Christian or Jewish. The ethnic composition consists of an 80% Turkish and
20% Kurdish population.
Turkey’s official language is Turkish, but Kurdish, Arabic, Armenian, Greek are also
spoken.
Political System:
Turkey is a Parliamentary republic. Its Legal system is based on European models and
the constitution of 1982. National legislature consists of Unicameral Meclis (parliament)
of 550 members directly elected for a five-year term. The electorate is universal direct
suffrage over the age of 18. Only parties gaining more than 10% of the national vote are
17
eligible for seats in parliament. The next election is due by November 2007. The head of
state is a president, elected by an absolute majority of the Meclis for a seven-year term.
Current president is Ahmet Necdet Sezer, elected in May 2000, with the next election
being
due
in
May
2007.
The national government coalition led by Bulent Ecevit, comprising the Democratic Left
Party, the Nationalist Action Party and Motherland Party, was heavily defeated in the
November 3rd (2002) election. The new government was formed by the Justice and
Development
Party.
The
main
political
parties
are
as
follows:
Islamist: Justice and Development Party (AKP) and Prosperity Party (Saadet, SP), both
successors to the former Virtue Party, which closed in June 2001; centre-right:
Motherland Party (Anap), True Path Party (DYP); centre-left: Democratic Left Party
(DSP), New Turkey Party (YTP); Republican People’s Party (CHP); nationalist right:
Nationalist Action Party (MHP); independent pro-Kurdish: Democratic People’s Party
(Dehap, formerly Hadep). AKP and CHP were the only parties to enter parliament in the
November election. A deputy elected as an independent joined DYP, giving it one seat.
Economy:
Turkey has opted for an open economy, and liberalization of the domestic economy has
been occurring, since the 1970s, although for the time being it remains decidedly mixed.
Utilities, infrastructure, 30% of the banking sector, as well as many basic industries,
remain state-owned, but pressure from the IMF and World bank will likely lead to
privatization in the near future.
Private consumer demand is the major driver of the economy in Turkey, accounting for
somewhere in the region of 70% of GDP, and greatly outweighing public demand which
18
accounts for 15%. Fixed capital investment now accounts for around 17% of GDP, down
from 25% in the mid ‘90s – this is attributed to a slowing of private investment - 30% of
the new figure is carried out by the public sector.
In terms of structure, GDP is shared with agriculture accounting for around 13%, industry
for 30% and services for 57%. Despite a considerable drop in contribution to GDP over
the last 40 years, agriculture still accounts for a large proportion of employment at around
40%. Industry is dominated by manufacturing, with private manufacture of consumer
goods (including textiles and clothing) taking the title of ‘most dynamic sector’ in recent
years. Other major industries in Turkey include food processing, autos, mining (coal,
copper, chromite, boron), steel, petroleum, construction, lumber and paper. The
contribution of services to GDP has risen steadily, and accounts for around 40% of
employment.
Four regions dominate industry and business: The Marmara region, including Istanbul,
Izmit and Bursa, in north-west Turkey, accounts for about one-third of GDP. The regions
centring on Izmir in the west, the Adana-Mersin-Iskenderun triangle in the south and the
capital, Ankara, are also significant areas of industrial and other business development.
Outside these areas there are far fewer large private-sector operations, but some cities
within relatively easy reach of these areas (e.g. Denizli, Konya, Kayseri and Gaziantep near the Syrian border) have attracted significant investment in sectors such as textiles,
food-processing and furniture. The south and west enjoy a majority share of income from
both tourism and agriculture, with Antalya, on the south coast, claiming the title of
leading tourist destination.
19
Inflation remains a major issue for Turkey, as does the burden of high interest payments,
and these factors are the likely cause of a lack of foreign investment. However, support
from the IMF and a general tightening of policy seems to be contributing to an upturn in
economic performance, with the general consensus being that improvement, however
slow, will continue.
In terms of central government operations, revenues of US$77 billion coupled with
expenditures of around US$107 billion, lead to a budget deficit of around US$30 billion.
Domestic debt is about US$153 billion and foreign debt US$61 billion.
Economic Indicators
Total GDP ($ billion)
Total GDP ($ billion at PPP)
GDP per capita ($)
GDP per capita ($ at PPP)
GDP (% real change pa)
Government consumption (% of GDP)
Budget balance (% of GDP)
Consumer prices (% change pa; av)
Public debt (% of GDP)
Recorded unemployment (%)
Current-account balance/GDP
Foreign-exchange reserves (m$)
2002
183.1
469.9
2,605
6,686
7.78
14.03
-14.16
44.96
88.9
10.68
-0.98
27,069
International Trade:
Over the past ten years Turkey has increased its numbers of imports and exports. In
addition to this it has managed to improve the coverage of imports by exports, although
the difference remains significant, with imports outweighing exports by about 30%.
The following table gives some perspective on the changes in levels of imports and
exports:
20
Year
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Exports
(US$000)
Change
Value
(%)
15,345,067
4.3
18,105,872
18.0
21,637,041
19.5
23,224,465
7.3
26,261,072
13.1
26,973,952
2.7
-1.4
26,587,225
4.5
27,774,906
12.8
31,334,216
36,059,089
15.1
46,877,598
30.0
Imports
(US$000)
Change
Value
(%)
29,428,370
28.7
23,270,019
-20.9
35,709,011
53.5
43,626,642
22.2
48,558,721
11.3
45,921,392
-5.4
-11.4
40,671,272
34.0
54,502,821
-24.0
41,399,083
51,553,797
24.5
68,734,070
33.3
Proportion of
imports covered
by exports
(%)
52.1
77.8
60.6
53.2
54.1
58.7
65.4
51.0
75.7
69.9
68.2
Of the 2003 exports from Turkey, manufactured goods make up 93.2%, with agriculture
accounting for just 5.2% and mining for only 1.1%. Important goods for export are
clothing and apparel, electrical machinery and equipment, and vehicles. For imports,
manufactured goods, again make up the majority accounting for 79.9%, agriculture just
3.7% and mining a more significant 15.8%. Of note are machinery, crude petroleum and
mineral fuels. Currently, the most popular destinations for exports are: Germany (15.9%),
USA (8%), and UK (7.8%). The most notable source countries for imports are: Germany
(13.7%), Italy (7.9%) and Russian Federation (7.9%).
Central Europe can be seen as an emerging location for FDI. Turkey, as a recipient
country has been lagging behind, despite strong potential. Turkey has not really benefited
from increased FDI flows brought about by globalization. From 1995 to 2000, FDI
inflows to Turkey averaged around $750 million net per year equivalent to about 0.4% of
21
GDP. Based on this percentage Turkey places 81st out of 91 developing and transition
countries, where, on average, the annual inward FDI to GDP ratio is about 2 percent.
There is no denying Turkey’s potential as a destination for FDI. Its geographical location
at the crossroads between Europe and Asia and its increasingly strategic economic,
political and historical ties with the surrounding regions add further value to this
economic potential, producing diverse market opportunities for investors.
3500
3000
2500
2000
1500
1000
500
0
Inflows
2002
2001
2000
1999
1998
1997
1996
1995
1994
Outflows
1993
Value (US$millions)
FDI in Turkey
Year
Trade relations with Canada:
‘Modest’ is the euphemism most often employed to describe the economic relationship
between Turkey and Canada. Diplomatic relations were established in 1943, but that was
about the extent of the relationship for considerable time – due in part to the geographical
locations of the two countries and a tendency to pursue business terms with their
respective, more local neighbours. That said, relations have been free of problems and
there has been a constant political will on both sides to diversify and deepen bilateral
cooperation. More recently, some steps have been taken to improve economic interaction.
22
In 1998, an MoU was signed regarding the enhancement of cooperation in the field of
energy to enhance bilateral cooperation in the projects of hydroelectric plant and dam
construction. The “Canadian Turkish Business Council” (CTBC) was set up in 2001, with
the aim of ‘promoting the flow of bilateral trade between Canada and Turkey; to raise
awareness within Canada of the opportunities to do business with Turkey; and to
facilitate the transfer of Canadian capital, technology and expertise to Turkey through the
creation of long-term, mutually beneficial strategic business alliances between Canadian
and Turkish companies.’ Further to this, there is currently a double taxation agreement
awaiting parliamentary ratification.
In terms of imports and exports, Turkey exports, amongst other things, steel and iron
bars, tiles, textiles and ready-made clothes to Canada, whilst it imports coal, wheat, and
electronic circuitry from Canada. Imports from Canada totalled US$237 million in 2003
– about 0.3% of total imports, down from 0.6% in 2002. Exports to Canada fell from
US$240 million in 2002 to around US$220 million in 2003 – accounting for 0.5% of total
exports last year.
Foreign direct investment by Canadian companies currently sits at 11 projects with a
value of US$500 million. An example of this investment is the Canadian Four Seasons
Hotel Group, which has invested in two hotels in Istanbul, despite what is described as
“particularly difficult” conditions in the form of lengthy processes and many different
authorities.
Future Trade:
Turkey is currently embarked on an IMF-supported economic stabilization programme,
and seems to be making good progress towards acceptable levels of inflation. Due to its
23
strategically superior geographical position and a highly educated and IT literate
workforce – available at an advantageous rate, it appears to be a candidate for significant
future investment from abroad. According to Abdurrahman Ariman, secretary-general of
Yased, the foreign investors’ association: “In three or four years, Turkey could attract
between $30bn and $40bn of FDI a year and settle somewhere between Brazil and
China,”
From a Canadian perspective, a so-far problem free relationship could help to pave the
way for solid investment in the future and the use of Turkey as a strategic ‘jumping off
point’ into surrounding areas.
On the ‘Global competitiveness scoreboard’ Turkey ranks 65/102 in terms of growth and
52/95 for business competitiveness. Its corruption index score is 3.1, ranking it 77th
overall.
24