July 2023

Continuing its policy of monetary tightening to initiate disinflation, the Turkish Central Bank raised its key rates by 2.5 points for the second time in a row; the latter now stand at 17.5%. This is the second increase in Turkish rates in two years. The Central Bank had in fact already raised its key rate from 8.5% to 15% at the end of June.

Inflation thus fell below 40% year-on-year in June, its lowest level in eighteen months, but should rebound in the months to come, supported by the rise in wages (+34%) and by a set of tax measures which include the increase in VAT and an increase in corporate tax. The fall of the Turkish lira, which has lost more than a quarter of its value against the dollar since the end of May (Thursday July 27, it was trading at nearly 27 pounds to the dollar) should also support a possible rise in prices.

Alongside these economic measures, the Turkish president's tour of several Gulf countries marked the news of the month of July.The president was accompanied by a large ministerial delegation, including the Minister of Foreign Affairs, the Minister of Defense, as well as some 200 businessmen. This series of visits to Saudi Arabia, the United Arab Emirates and Qatar allowed the signing of agreements estimated by some analysts at 100 billion USD.

This tour comes at a time when Türkiye is pursuing a very active foreign policy. She agreed to Sweden's membership in NATO and supports Ukraine's membership. Ankara is also discussing the renewal of the agreement on Ukrainian grain exports with Moscow.

In terms of investments, Türkiye remains a country particularly popular with foreign investors; members of the International Investors Association of Türkiye (YASED International Investors Association) are indeed planning 7.1 billion USD in direct investments in the country over the next 6 months and this enthusiasm was manifested this month with notably the investment decisions of TotalEnergies, DHL Group or the automobile manufacturer Skywell.

Economic & business news from Türkiye

TotalEnergies strengthens its commitment in Türkiye

French giant TotalEnergies has become a 50% partner of Rönesans Enerji, a subsidiary of Rönesans Holding operating in the renewable energy sector, to develop renewable energy production capacity in Türkiye.

Rönesans Enerji currently has 6 hydroelectric plants with an installed capacity of 166 MW. With this acquisition, the two partners plan to build 1,000 megawatts (MW) of wind and solar farms within three years. Rönesans Enerji's goal is to become one of the 3 largest green energy companies in the country.

The signing ceremony of the agreement, the purchase value of which was not disclosed, was held in Istanbul with the participation of the Turkish Minister of Energy and Natural Resources and the French Ambassador to Türkiye, Hervé Magro.

Türkiye attaches great importance to its energy transition. As part of a new investment and reform movement launched by the Turkish government in line with its goals to combat climate change, several areas will come to the forefront to meet Türkiye's growing energy needs: renewable energy, energy efficiency, nuclear energy, natural gas as a transition fuel, hydrogen and the digitalization of energy. Today, around 55% of installed power comes from renewable energy sources, making Türkiye 12th in the world and 5th in Europe. The Turkish government aims to increase the share of renewable energy in installed capacity to around 65% by 2035 and plans to license up to 3,000 MW of wind and solar power plants each year to meet its emissions targets.

Source: Daily Sabah, July 21, 2023

DHL Group acquires Turkish MNG Kargo

Global logistics giant DHL has signed an agreement to acquire all of the shares of Turkish MNG Kargo to strengthen its presence.

This transaction will provide further impetus to the growing e-commerce and parcel delivery sectors in Türkiye.

The Turkish parcel market is indeed forecasting double-digit growth over the coming years, driven by a young and dynamic population with a strong affinity for online shopping. MNG Kargo, founded in 2003, is one of the leading players in the sector, with 27 transfer centers, more than 800 branches and approximately 10,000 employees. The company delivers packages to an average of 600,000 addresses each day.

Through this acquisition, MNG Kargo will benefit from DHL's international logistics expertise as well as its extensive global network. It will join DHL's e-commerce division and complete the parcel delivery network in Europe. In addition to securing a leading position in the domestic parcel market, this acquisition will create additional synergies for the DHL Group, and its customers will benefit from unique logistics offerings in Türkiye as well as cross-border thanks to the collaboration of the various DHL divisions already present in Türkiye.

The acquisition process will require approval from the Competition Authority and the Information and Communication Technology Authority to be finalized.

Source: DHL Group, July 25, 2023

FDI, promising economic prospects

Members of the International Investors Association of Türkiye YASED International Investors Association anticipate USD 7.1 billion in direct investments in the country over the next 6 months.

Türkiye, as a regional hub for production, services and trade, aims to attract a 1.5% share of global FDI (foreign direct investment). By 2022, Türkiye had attracted approximately USD 13.3 billion in investments, with a significant share coming from the real estate sector.

EU-27 countries have been the main sources of FDI in Türkiye. The latter represented 64% of the total, with the Netherlands (25%), Germany (14%) and Ireland (11%) in the lead. Türkiye is one of the main beneficiaries of foreign investment in the region. In 20 years, the country has received 257 billion USD in FDI.

Source: Hürriyet Daily News, July 14, 2023

BHS Corrugated invests EUR 40 million in Türkiye

The Turkish subsidiary of German company BHS Corrugated, specializing in the manufacturing of corrugated board machines, has invested EUR 40 million to establish a new factory in Eskişehir, Türkiye. This 20,000 m2 factory will be equipped with the most advanced technologies and will be focused on digital transformation. It will produce flat metal machine parts and guide rollers used in the manufacture of corrugated cardboard.

The factory should be operational in November 2023 and will create 200 jobs, including 50 management positions.

This investment was decided with the aim of producing the parts that the company currently outsources in their own structure with better quality, faster and at lower cost.

Turkish subsidiary BHS Makina plans to increase its production capacity every year, from 40,000 working hours in the first year to 160,000 hours in the third year. The company plans to produce 700 types of products in the first two years, and ultimately, it aims to export 100% of the manufactured parts, making Eskişehir an export hub.

The choice of Eskişehir as an investment location is explained by several factors, including the availability of qualified labor, comprehensive infrastructure, a favorable geographical location, as well as the presence of local suppliers when needed .

BHS Makina attaches great importance to energy efficiency and has therefore installed a solar power plant on the roof of the factory, with a power of 1,958 kWp, capable of producing approximately 2.5 million kWh of energy per year .

Source: Ekonomim, July 4, 2023

China's Skywell to build battery factory in Türkiye

Skywell, the Chinese electric vehicle manufacturer, has signed an agreement with Türkiye's Ulubaşlar to develop and produce batteries in Türkiye. The Turkish group's subsidiary, Ulu Motor, is the distributor of Skywell in Türkiye and 15 other countries.

The two companies will each invest USD 25 million in the factory, which is scheduled to open in the first quarter of 2024. The factory will produce batteries with 800V+4C super fast charging technology, allowing vehicles to charge at 80 % in eight minutes.

Projects aimed at establishing an assembly line in Türkiye, providing a spare parts supply system as well as the production of certain components on site are on the agenda, the objective of the two companies being to contribute to the development of the electric vehicle industry in Türkiye.

Source: Daily Sabah, June 19, 2023

Turkish start-ups receive EUR 111 million in H1

Turkish startups attracted investments totaling USD 111 million over 130 investment rounds in the first half of 2023. Interest was most focused on companies engaged in gaming and cybersecurity.

In terms of investment value, Türkiye ranks behind Norway, Estonia and Greece and ahead of Poland, Portugal and Bulgaria. The largest transaction in this period is Turkish-Turkish and was carried out by Getir, the food and grocery delivery app, which bought the remaining shares of the n11 marketplace.

Other popular segments included energy, sustainability, fintech and marketplaces.

Following the global trend, investment in Türkiye declined in the first six months of the year, caused by weaker demand amid high interest rates.

On a quarterly basis, investments also fell in Q2 2023 (-59%) compared to the previous year, a trend also observed in other countries such as the United Kingdom or Israel which saw their investments halve over the same period.

Source: Daily Sabah, July 14, 2023

Zimmer Biomet opens innovation center in Ankara

The American Zimmer Biomet, world leader in medical devices for orthopedists and practitioners, has opened an innovation center in Ankara.

This center will enable physicians and healthcare personnel to better understand how Zimmer Biomet implants, technology and data can improve the efficiency of patient healthcare.

One of Zimmer Biomet's flagship solutions, and featured at the center, is ZBEdge, a solution that integrates Zimmer Biomet's digital, robotic and implant technologies, connecting and collecting data throughout the patient care process. patient. ZBEdge transforms data into insights to empower healthcare providers and raise the standard of care while helping increase hospital productivity.

The opening of this center demonstrates Zimmer Biomet's commitment to supporting its Turkish and regional customers in a context of profound transformation in healthcare.

Zimmer Biomet is a global medical technology leader with a comprehensive portfolio designed to maximize mobility and improve patient health. The company operates in more than 25 countries and markets its solutions in more than 100 countries.

Source: Ekonomim, July 19, 2023

Significant British funding in rail

UK Export Finance (UKEF), the UK's export credit insurance agency, will support Turkish company Rönesans Holding, one of Europe's top ten construction companies, by enabling it to complete a line of 286 km #electric railway in south-eastern Türkiye by guaranteeing a loan of EUR 781 million.

This financing will allow Rönesans Holding to complete the high-speed line which will connect the cities of Mersin to Gaziantep via Adana and Osmaniye, a line which aims to be more respectful of the environment since it will reduce carbon emissions. CO2 of more than 150,000 tonnes per year. Travel time between Gaziantep and Mersin will be reduced by four hours.

The agreement should also create new contract opportunities for British exporters in different areas (infrastructure, engineering, project management, etc.) further stimulating the already well-established commercial relations between London and Ankara; In 2022, UK exports to Türkiye reached GBP 8.5 billion.

The British government had already concluded in March 2022 the largest civil infrastructure export financing agreement in its history, worth EUR 2.1 billion, for the construction of the electric railway line to high speed between the Turkish capital Ankara and a major port in the western province of Izmir.

The project will also contribute to Türkiye's goal of expanding high-speed rail coverage to 10,000 km (currently 1213 km).

Source: gov.uk, July 24, 2023

Agri-food financing, the EBRD confirms its commitment to Türkiye

EBRD grants EUR 55 million to Yayla, an agri-food company in Türkiye, to finance an investment program.

This funding aims to support the company in acquiring efficient machinery and equipment for its state-of-the-art facility in Niğde, Central Anatolia. The investment will also allow Yayla to cover its working capital needs.

This investment is co-financed by the Taiwan International Cooperation and Development Fund and the EBRD Clean Technology Fund.

These funds will also enable Yayla to adopt a global sustainable development strategy by implementing an ecological investment program aimed at improving resource efficiency, reducing greenhouse gas emissions and energy consumption. electricity in its operations.

The EBRD is a major investor in Türkiye. To date, the institution has invested more than EUR 18 billion in various sectors of the Turkish economy, mainly in the private sector.

Source: Hürriyet Daily News, July 12, 2023

Turkish Airlines named the most sustainable airline

Turkish Airlines has been named “Most Sustainable National Airline” for the second year in a row by the quarterly World Finance Magazine.

This award was given to the company for its sustainable practices, including the use of sustainable aviation fuel, sustainable in-flight products, for its waste management and digitalization projects but also for its voluntary compensation platform. carbon emissions C02mission, a program that aims to balance the emissions caused by all business travel carried out by company staff.

Turkish Airlines aims to become a carbon neutral airline by 2050. As part of plans to combat climate change, the use of sustainable aviation fuel since 2022 has helped drastically reduce carbon emissions . In fact, in 2022, the company saved 57,581 tonnes of fuel, thus avoiding the emission of 181,379 tonnes of greenhouse gases into the atmosphere.

Since 2008, the company has undertaken more than 100 operational optimization projects to reduce its carbon footprint.

Source: Ekonomim, April 3, 2023

Türkiye attracts record investments in the video game industry

Turkish gaming companies attracted investments of USD 333 million in the first half of the year, the largest amount invested among European countries. Türkiye is thus ahead of the United Kingdom, second with 158 million USD and Norway, third with 60 million USD. This also marks a 60% increase from the previous year.

Türkiye stands out for its high number of gamers: 92.3% of Internet users play video games, surpassing the global average of 81.9%. Since 2018, Türkiye's video game ecosystem has attracted international attention and the country now has more than 500,000 active game studios in Istanbul and more than 100 in Ankara.

Mobile games are particularly popular in Türkiye, with 42 million gamers using their smartphones to play them, 41% of whom spend more than 10 hours/week engaging in this activity. Around 24-25 million gamers prefer computer games, while around 15 million opt for consoles.

When it comes to gaming habits, almost half of gamers play mobile games two to three times a day. In terms of age distribution, we see that players are present in all brackets, including 1% of players aged 64 or over.

Source: Daily Sabah, June 13, 2023