Turkey ponders whether Iran is economic partner or rival

Friday 12/02/2016
Turkcell is looking for acquisition opportunities to expand regionally and Iran could be a target market.

Istanbul - Some are rubbing their hands in anticipation, oth­ers are concerned about an emerging rival but what Turkish business leaders and politicians agree on is that eco­nomic relations with Iran are in for a massive change.

Iranian President Hassan Rohani has said his country needs up to $50 billion in foreign investment a year if it wants to reach its aim of 8% annual economic growth after the removal of international sanc­tions following the deal on Teh­ran’s nuclear programme.

As a neighbour with an $800 bil­lion economy and a strong export industry that ships everything from high-standard washing ma­chines to modern cars and televi­sion sets, Turkey can expect to be among the biggest beneficiaries of the expected Iranian boom.

“As Turkey is like an entrance door for Iranian goods on the way to Europe and Iran is like a door for Turkish products on their way to Central Asia, Iran and Turkey can be good trading partners for each other,” Eyup Bartik, head of the Chamber of Trade and Industry in the south-eastern Turkish city of Gaziantep, said after a visit to Teh­ran.

Bartik put potential bilateral trade between Turkey and Iran at $35 billion a year, almost three times the current volume. The government in Ankara aims for $30 billion in 2023. Turkey’s export­ers, as well as the construction and the steel industries, are in a good position to provide goods and ex­pertise for a country that wants to catch up with the rest of the world after being cut off from much of the international trade for many years.

Turkey’s car industry, which ac­counted for $22 billion in exports in 2015, could use its advanced manufacturing techniques to enter the Iranian market.

Turkish companies could hope for many contracts in a short time period, Mehmet Dudaroglu, the chairman of the Turkish auto parts manufacturing association TAY­SAD, said in January. He said up to 2 million cars would be sold in Iran and the need for spare parts would rise. He also noted that many Irani­ans speak Turkish.

But Iran’s economic awakening is not a chance just for Turkish companies hoping to widen export markets. The Turks are not the only ones out to secure plum business deals and establish themselves in what could be a huge market in a country of 77 million people that sits on some of the world’s richest oil and gas reserves.

During a recent European visit by Rohani, Italian and French companies signed contracts worth tens of billions of dollars with Ira­nian counterparts. Deals in Italy amounted to $18 billion, while aeroplane manufacturer Airbus won Iran’s agreement to buy 118 jets worth $27 billion, including a dozen A380 super-jumbo jets.

Rohani’s shopping trip demon­strated to the international com­munity that Iran is open for busi­ness. The International Monetary Fund expects Iran’s economy to expand 4.3% in 2016, with growth at or more than 4% in the follow­ing two years. It also sees Iran’s im­ports expanding 18% in 2016, 14% in 2017 and 7% in 2018.

“Iran would always prefer Tur­key but they are entering a period where they will evaluate numer­ous alternatives,” Bilgin Aygul, president of Turkey’s Foreign Eco­nomic Relations Board (DEIK) and head of the Turkish-Iranian Busi­ness Council, told the Hurriyet Dai­ly News, an English-language daily in Turkey. “They want cooperation but they want to do the same with the Europeans, too.”

European countries, as well as Japan and China, sent large trade delegations to Iran, Aygul added. In contrast, Turkey had lost time with two general elections in 2015. “We have to catch up now and start moving faster,” Aygul said.

Economic rivalry by Europeans and others is not the only problem for Turkey. Aygul said political dif­ferences between Ankara and Tehran, which follow contrast­ing agendas in the Syrian conflict, could affect economic relations.

Potential competition from within Iran itself is another con­cern. With its large population and a well-educated workforce, Iran could become a rival to Turkey, which has the biggest and most ad­vanced economy in the region.

At the moment, Iran is no match for Turkey when it comes to for­eign investment. Turkey attracted more than $12 billion in direct for­eign investment in 2014; Iran just $2 billion. Turkish Economy Min­ister Mustafa Elitas told Reuters that this was unlikely to change as foreign investors preferred demo­cratic countries.

But the minister admitted that, further down the road, Iran could become a force to be reckoned with. “If Iran advances with its economy, then they could become a rival,” he said.

Dudaroglu also said state incen­tives for Iran’s industries as well as lower costs could turn Iran into a competitor. Namik Ekinci, the head of the Turkish Steel Exporters Association, said Iranians had “the potential to export some of what they produce and could compete with Turkish steel”.

Cement producers are also wary. “The input with the highest cost is energy and energy is cheap in Iran,” Reuters quoted a senior of­ficer at a major Turkish cement producer as saying. “There’s tough competition ahead.”