One major success story in recent years has been the rapid rise in bilateral trade between Turkey and the countries of the Gulf Cooperation Council (GCC). Indeed, Turkey enjoys trade surpluses with all the GCC states except Saudi Arabia and Qatar, with energy imports accounting for the deficits there. With the UAE, Kuwait, Bahrain and Oman, Turkish goods and services exported outstrip imports, with trade in all regards expanding significantly in the past few years.
BOLSTERING TRADE: Early 2012 also saw an important step in this relationship, with a major gathering in Istanbul in January of officials and businesspeople from the GCC and Turkey. A commitment was signed to try to double trade from the $13bn achieved in 2011, with $10m being put forward to found a joint investment promotion company. The gathering was seen as a first step towards greater cooperation. A joint ministerial meeting was also held, with Turkish and GCC ministers lauding progress in the implementation of a joint action plan (2011-12) agreed in October 2010.
This had been carried out via a whole string of joint working groups and committees, looking into areas as diverse as energy and education. Amongst the points in this plan too, was a target to improve transportation and communications links between Turkey and the GCC states. This includes ambitious plans for a railway hook-up that would feed into current rail developments in the Gulf, which foresee a unified GCC railway, running from Oman to the Iraq-Kuwait border. This could then be linked to Turkey via a combination of new track and improved existing routes.
Such a move would inevitably boost Gulf trade that has historically been dominated by commerce between Turkey and Saudi Arabia and the UAE, deepening the trade with other Gulf countries.
Saudi Arabia is the third-largest source of Turkish crude oil imports, after Iran and Russia, averaging 2.8m tonnes per year between 2006 and 2010. The figure for the first half of 2011 was 749,000 tonnes, according to data released by TurkStat, the country’s statistics agency, or around 8.5% of Turkey’s total imports for the period. Saudi Arabia has run a trade surplus with Turkey for many years, with this at $219m in 2010, the last year with full figures available.
At the same time, natural gas is in greater demand in Turkey, with this increasingly evident in trade with gas-rich Qatar. Trade there slipped from a healthy surplus a few years ago to a deficit in 2010 of $14.5m.
Elsewhere though, Turkey’s major role in providing the thriving GCC construction sector with everything from iron and steel to engineers (around 115,000 Turks live in Saudi Arabia alone) and equipment is evident in the large trade surpluses.
For 2010, Turkey enjoyed a $2.6bn trade surplus with the UAE, a $100m surplus with Bahrain, a $180m surplus with Kuwait and a $90m surplus with Oman.
TOURISTS & PILGRIMS: At the same time, Turkey has become increasingly of interest to Gulf travellers, in part due to the success of Turkish soap opera TV exports. According to a recent report by Saudi Arabia’s National Commercial Bank (NCB), the number of Saudi tourists visiting Turkey rose from 55,636 in 2008 to 84,934 in 2010, when some 55,000 UAE tourists also visited the country.
Going the other way, many Turks complete the hajj to Saudi Arabia, with 85,871 taking part in the annual journey to Mecca in 2010, according to TurkStat Likewise, there were 146,039 Turks undertaking umrah – a pilgrimage at any time of year – in 2010.
In terms of non-oil and gas imports from the GCC, one sector that catches the eye is gold and jewellery.
Turkey is Dubai’s second-largest market for gold exports. Shipments of the precious metal to Turkey rose from $60m in 2006 to $426m in 2010.
INVESTMENT FLOWS: Meanwhile, the NCB also estimated that the GCC’s current total investment in Turkey stands at around $10bn, with $6.5bn of this invested in the 2004-11 period. The UAE has been the largest single investor, accounting for around 56% of the GCC total during the above period. Meanwhile, some $6bn had been invested by Turkey in the UAE between 2004 and 2011, mainly in construction, with some 500 Turkish companies undertaking operations in the UAE during that time. The NCB report also showed some $1.3bn invested in Turkey by Saudi companies between 2004 and 2009. The Kuwait Investment Authority, which manages overseas investments by the Kuwaiti government, is also a major investor in Turkey, with some $1.7bn invested, according to the NCB. One area where GCC companies are fairly visible in Turkey is in Islamic banking. Out of four sharia-compliant banks registered in Turkey, two have GCC parents – Albaraka Türk and Kuveyt Türk.
FREE TRADE: Meanwhile, there have been on-and-off negotiations over a free-trade agreement between Turkey and the GCC for a number of years. Talks, that had been launched in November 2005, were suspended during the heights of the economic crisis, yet have now recently been revived. The expectation is that a conclusion may now not be far off. This will be good for Turkey’s exporters as they seek to find alternatives to sclerotic eurozone markets, and it is also likely to benefit GCC members in their efforts to diversify away from oil and gas. Indeed, one of the main reasons for the growth in Turkish-GCC trade in recent years has likely been the problems that investors in both areas have faced within their traditional overseas markets. The financial crisis beginning in 2008 saw Arab investors in particular switch away from regional area markets like Europe and North America, with emerging markets, such as Turkey, the beneficiaries.
Meanwhile, the low growth rates and poor returns on European investments in particular have meant Turkish companies and investors too have been looking for alternatives. The high growth rates of the GCC states seemed almost tailor-made for this development. Turkey’s overall shift in emphasis away from the West in recent years and towards a more multi-polar approach to foreign relations has also provided a welcoming context for these moves.
CHALLENGES: There are, of course, certain challenges. There is a general lack of reciprocity agreements between Turkey and the GCC in areas such as real estate, while GCC investors – in common with others – also look for exchange rate stability when coming into markets. This has been an issue in recent times, although one being continuously addressed by the central bank. There are also some historical factors, with each side seeking to re-establish trust and confidence in the other after many years of mutual neglect in their relationships.
The January joint ministerial meeting also saw agreement on the next step – a new joint action plan for the 2013-15 period. The GCC Secretariat is to prepare this, with expectations high that the next few years will thus see a further surge in Turkish-Gulf links.