Global energy experts set to meet in Turkey

The Turkish energy minister and a senior economist are to deliver speeches at the opening of the Anadolu Agency co-sponsored, 20th International Energy and Environment Fair due to be held in Istanbul on April 24.

The convention, to be held over three days at the Istanbul Expo Center, will be the largest energy and environment fair to be held in Turkey, attracting approximately 16,000 local and foreign participants.

Energy Minister Taner Yildiz will open the fair, and International Energy Agency Chief Economist Fatih Birol will deliver a speech during the opening ceremony.

International energy experts will discuss a variety of issues including renewable energy technologies, developments in the renewable energy market, the operation and maintenance of power plants, nuclear power, natural gas and petroleum and the financing of energy projects and energy law.

The Anadolu Agency’s Deputy Director General Cagatay Culcuoglu will also chair a session entitled, “Nuclear energy and the latest developments in Turkey.”

WP

Turkish defence industry struggles to go global

Turkey’s defense industry exports have largely been possible through offset arrangements made with foreign arms suppliers. Defense offset agreements, as legal trading practices in the aerospace and military industries, are widely used by many countries as a means of bringing some of the foreign currency going abroad back to the country through arms procurement deals to strengthen local industries through a work share to be given to local companies in a defense project. Yet Turkey’s heavy reliance on offset arrangements in its defense exports, among other things, is hindering its defense industry companies from becoming globally competitive companies.

It is difficult to say that Turkey has used offset commitments in a rational manner to build a stronger local defense industry base. Instead, offset commitments pledged by foreign contractors are sometimes realized in areas such as building additional military headquarters within military compounds instead of focusing on creating technology-based infrastructure.

In essence, offset agreements are protectionist and distort competition.

Hence, any country that receives defense offset commitments must govern these pledges in a transparent and rational manner, minimizing the effects of protectionism, which hinders defense companies from competing at a global level.

Turkey has not yet been able to utilize offset pledges made by foreign contractors to strengthen its defense industry base through the production of critical military technologies despite some of the efforts to this end which have been under way lately.

Defense Minister İsmet Yılmaz emphasized in a November 2013 speech the importance of offset arrangements with foreign contractors for the development of local industries and for the industry to receive work share as well as for defense exports.

According to figures he released, Turkey’s total defense and aerospace turnover reached $4.75 billion as of 2012 while its exports exceeded $1.26 billion.

Turkey’s exports, however, would have been well below those figures stated above without its offset commitments with foreign arms suppliers.

At the end of the day, Turkish defense industry companies are only being fed with offset arrangements and are not encouraged through state policies to create an export industry based on high military technologies.

Turkish companies have been turning into monsters being fed by offsets instead of the country producing global companies.

As a matter of fact, according to a report released by the Turkish Union of Chamber and Commodity Exchanges (TOBB) on March 15, there were only five defense industry companies out of the 500 largest Turkish companies and only one defense company out of the 100 fastest growing Turkish companies.

One of the recipes for Turkey to create global defense industry companies is through the privatization of military-owned defense companies, including Aselsan, Roketsan and Havelsan as well as the Turkish Aerospace Industries (TAI).

However, the government’s long-time plan to privatize a large portion of the nation’s defense industry companies and increase efficiency through new competitive bidding processes which could force the liquidation of firms that fail to compete faces opposition from the military. The privatization policy was intended to improve the efficiency of these military firms through downsizing and opening them up to competition.

The current unaccountable status of 18 Turkish military companies, whose shares are partly or fully owned by the Foundation to Strengthen the Turkish Armed Forces (TSKGV), stands as a big hurdle to privatization. Added to the problem is the absence of real will within the government to bring these companies under civilian oversight and to finally privatize them.

As a report released by Sweden-based Stockholm International Peace Research Institute (SIPRI) in March of this year and written by Professor Nurhan Yentürk pointed out, these 18 military companies — whose military spending is not available either — operate according to the law for private commerce but are managed by public officials, namely the TSKGV’s board of trustees consisting of the defense minister, the deputy chief of General Staff and the undersecretary affiliated with the defense minister.

The government’s legislation from February of this year introducing non-defense commercial offset agreements — a practice that runs contrary to international free trade regulations — in the meantime, has the potential to cause a headache for Turkey in its international trade dealings.

It remains to be seen whether the government will finally implement a privatization plan for defense companies while facing serious accusations of corruption and bribery, some of which are linked to the privatization process of civilian local companies.

Turkey tops employment growth

Turkey has ranked first among 32 developed and developing countries in increasing its workforce size since the 2008 global economic crisis, marking a 22.7 percent rise.

According to figures compiled by data from the International Monetary Fund (IMF) and the Turkish Statistical Institute (TÜİK), the Turkish workforce increased by 4.7 million people from 2008 to November 2013.

The number of people employed in Turkey, which was 20.7 million in 2007, reached 25.4 million as of November 2013, making it the only country that achieved an increase of above 20 percent.

Israel was the country closest to Turkey in its employment increase rate with 18.8 percent, while Luxembourg with 15.3 percent, Malta with 11.5 percent and Australia with 10.9 percent succeeded in raising their employment growth over 10 percent threshold. Greece, meanwhile, is the worst performing country in employment, with a 28 percent joblessness rate, followed by Spain with 26 percent.

AA

Greece Eyes $206 Billion From Oil & Gas Deposits

Greece can potentially bring in more than 150 billion euros ($206 billion) in state revenue over the next 30 years through untapped oil and natural gas deposits, said Prime Minister Antonis Samaras on Wednesday, with the sum worth nearly half of Greece’s current debt mountain.

There are “very strong indications of significant” reserves off Greece’s western coast, Samaras told reporters, as cited by Bloomberg, adding that explorative work was already ongoing in waters off the island of Crete in the south.

The gulf of Patras, in the west, is thought to hold some 200 million barrels of crude oil, while another 50-80 million barrels are believed to lie near Ioannina and another three million barrels near Katakolo.

In 2012, the government commissioned a Norwegian contractor to carry out seismic surveys in the Ionian Sea and south of Crete in search for oil and gas. Drilling contracts for the region are to be issued later this year.

“We are completing the concession agreements for the gulf of Patras and Ioannina, where the indications are strongest, and they will be tabled for ratification by parliament,” Samaras said.”

Meanwhile, Greece resumed bailout talks with its international lenders on Monday, hoping to end six months of wrangling over the release of new rescue loans it needs to avoid default.

Athens has already obtained 218 billion of the 237 billion euros set aside under the bailout, which expires this year; and will require another disbursement of funds to repay 9.3 billion of bonds maturing in May.

Economy Watch

Turkey accelerates defence Silicon Valley

Teknopark Istanbul is heading fast toward its planned inauguration this August. It will host over 1,000 advanced technology companies and generate nearly $10 billion annually when completed .

Turkey’s commercial capital Istanbul generates an annual $140 billion and houses about 50 universities, but the country’s defense heavyweights are overwhelmingly located in and around the official capital Ankara. Now it’s time defense companies put one foot in Istanbul to make sensible partnerships with the world’s most prominent advanced technology companies and university-generated “science” in Istanbul.

The Undersecretariat for Defense Industries (SSM), Turkey’s sole defense procurement agency, wants the accumulated scientific and industrial knowledge in Istanbul to be introduced to the national defense industry. The venue for that ambition will be Teknopark Istanbul that opens late in August.

“Our principal mission is to contribute to the national innovation system and to boost the local industry’s international competitiveness through multinational partnerships and technological advancement. That’s a mission fully in line with the Turkish government’s strategic objective of creating an increasingly independent, competitive and export-oriented local industry,” explains Teknopark Istanbul’s CEO, Turgut Şenol.

Turkey’s “defense and aerospace Silicon Valley,” will operate a 950,000-square-meter indoor space at the Sabiha Gökçen Airport, accommodating more than 30,000 people, 1,000 top advanced technology companies, 18 universities and targeting $10 billion in defense and nondefense business annually, to become one of Europe’s largest technology parks.

Defense priority

Şenol aims to bring together companies and universities in Istanbul, targeting strategic fields like aviation, maritime, electronics, information technology, nanotechnology, energy and automotive, biotechnologies, automation systems, and robot technologies. Contracts have been signed with over 100 companies for the first phase of the project. SSM’s chief, Murad Bayar, once described Teknopark Istanbul as “Turkey’s best technological center.”

The huge lab’s major shareholders are SSM and the Istanbul Chamber of Commerce. The partners will spend $4 billion in the project in the next 12 to 15 years.
“This is not a profit-targeting venture for either partner. Presently, over 1,000 international companies are headquartered in Istanbul. We want these multinational entities to have a view of Istanbul not only from a commercial dimension, but also from a technology development aspect. We want to improve innovation on a national level by making us of local and foreign partners here and, thus, to turn scientific and academic knowledge into high-tech commodities,” Şenol explains.

Defense will be a priority sector but not the only one.

The defense industry is often a recipient of technology from several other sectors. There are many non-defense industries which supply technology to defense industry. “Aviation will have a special place in this project, as evinced by the fact that Teknopark Istanbul is located at one of Istanbul’s two airports. It will become one of the major reference points in aviation technologies in the next few years,” Şenol said.

Tax exemption

Resident companies’ research and development activity at Teknopark Istanbul will be exempt from corporate and income tax. Similarly, software companies will be exempt from the value added tax. Operating costs like power will also be supplied at major discounts. Resident companies also will enjoy free of charge local and international consultancy services.
“Almost every major player in Turkish defense industry will be here. There is also great interest from Turkish and foreign automotive industry companies. We are now discussing modalities of residence with several major European and U.S. defense companies. There also will be advanced technology companies from the Far East,” Şenol said.

HDN

Turkey awaits the new nuclear bid

Turkey is getting ready to choose a winning tender for its second nuclear plant and Istanbul’s third airport as early as tomorrow, amid a firesale of many state assets, including a key port in Istanbul and Turkey’s railroads,

Two high-profile tenders are expected to be finalized tomorrow, one for Istanbul’s third airport and the other for the second nuclear plant in Turkey, in the Black Sea province of Sinop.

The tender to build the third airport in Istanbul is set to be made at Ankara Esenboğa Airport tomorrow. Until now, 15 Turkish and two foreign companies have bought the tender specification document for Istanbul’s third airport, which was valued at around 7 billion euros ($9 billion) by Transport Minister Binali Yıldırım.

Many of Turkey’s leading companies, from Sabancı Holding to TAV, İÇ Holding and Limak Holding, had declared their interest in the tender. In order to spark competition for the third airport, the Transportation Ministry introduced some amendments to the specifications last week. The changes made in the specifications included lifting the three-company limit for consortiums and the requirement that a dominant partner own a 51 percent share.

Following the finalization of the tender approval, the first phase of construction is set to be completed in 2017 and will provide an initial capacity of 90 million passengers a year. Once all six of the planned runways are complete, the capacity is expected to increase to 150 million passengers. The tender, however, has been taken to court by the head office of the Turkish Chamber of Environmental Engineers (ÇMO) of the Union of Chambers of Turkish Engineers and Architects on the grounds that the project violated the existing legislation for the environmental impact assessment (ÇED) report preparation.

In the race to build Turkey’s second nuclear plant, a Japanese-French partnership appears one step ahead of its Chinese rival; the official announcement of the winning bid is expected by the end of this week, most likely tomorrow.

“The Japanese bid has the advantage, but there is still one or two issues that we need to work on together,” Energy Ministry sources told the Hürriyet Daily News April 29. “We believe that we will find a common way when [Japanese Prime Minister] Shinzo Abe comes to Turkey [May 3].”

Energy Minister Taner Yıldız said last week that Ankara would announce by the weekend who would construct the country’s second nuclear plant, a project located in the Black Sea province of Sinop that is expected to cost around $22 billion. Abe is expected to arrive in Turkey late this evening and will meet with his Turkish counterpart, Recep Tayyip Erdoğan, tomorrow. An agreement on the construction of the nuclear plant will be signed after the two prime ministers meet, Japanese daily Yomiuri Shimbun reported last week.

There have been various reports in the Japanese media citing unnamed government sources in recent weeks claiming that Japanese firms would build the Sinop plant. The construction of the plant in Sinop is to start in 2017. Turkey plans to have three nuclear plants by 2023.

Turkey’s first electric bus ready to hit roads

Turkey’s first electric bus is ready for serial production after a 6-month test.

Turkey’s first electric bus, the Doruk Electra, produced by Turkish bus maker Otokar, is ready to be produced serially and hit the roads after completion of a six-month testing period.

Doruk Elektra, which runs completely on electricity and can cover 280 kilometers of road with a single charge, has been operating on some routes in Istanbul for six months as a part of the Otokar’s deal with Istanbul Public Transport Authority (İETT).

Thanks to six-month operations of the buses on the road, the developers have earned experience ahead of the vehicle’s launch on the market, Otokar’s general manager, Serdar Görgüç said.

“Many municipalities throughout the country have shown interest in the bus. But instead of selling the buses quickly, we preferred to test the performance in the field,” he said.

As the buses’ performances proved themselves, now the company is ready to talk with interested municipalities.

“We’re also receiving demand from cities other than Istanbul, particularly metropolitan cities. After tests with IETT, we’re ready to send off Doruk to these cities,” Görgüç said.

Doruk Electra produces zero emissions with minimal vibration and sound. The bus will be able to function for six to eight hours and cover a distance of 280 kilometers in ideal circumstances and 170 kilometers in heavy traffic with a maximum load of passengers after having been charged. In addition, the bus has an onboard charging unit to recharge itself while waiting at bus stops.

US firms seek Turkish defense contracts, partners

A mission of US defense and aerospace industry firms, which include Bell, Boeing and Sikorsky, will visit Istanbul and Ankara to seek local partners. The US commerce undersecretary will lead the mission.

A large business mission of U.S.-based defense and aerospace companies, including world giants such as Bell Helicopter, Boeing, General Electric and Sikorsky, will arrive in Turkey on Dec. 3 to seek local contracts and partnerships, according to a written statement by the U.S. Embassy in Ankara. U.S. Commerce Undersecretary Francisco J. Sanchez will lead the trade mission of 19 American firms, the statement said.

“Turkey is a priority market for the U.S. Department of Commerce – and the only one in Europe. More and more American firms are discovering the Turkish market and seeking partners in this growing economy. I look forward to returning to Turkey with leading U.S. defense and aerospace companies to facilitate partnerships with Turkish firms,” Sanchez said.
The trade mission will visit Ankara from Dec. 3 to Dec. 5 before going to Istanbul on Dec. 6 for two days.

“The mission will identify opportunities for U.S.-Turkish business partnerships and offer trade financing to qualified firms. This business development effort is part of ongoing efforts to increase bilateral trade and investment between the United States and Turkey, under the aegis of the Framework for Strategic Economic and Commercial Cooperation,” the statement said.

Turkish sector companies are asked to request face-to-face introductions with U.S. companies on the mission.

U.S. companies won two contracts in the past year and are viewed as front-runners in two others. In April 2011, Sikorsky Aircraft defeated Italy’s AgustaWestland in a competition to lead the co-production of more than 100 T-70 utility helicopters, a Turkish version of the Black Hawk International. In January 2012, Turkey’s top procurement body picked Bell Helicopter Textron for the country’s light police helicopters.

The U.S. is among the strongest bidders for Turkey’s estimated $4 billion Long-Range Air and Missile Defense Systems program.

‘Vibrat’ ties

“Since President [Barack] Obama’s visit to Turkey in 2009, we are adding to our vibrant political and defense relationships through increased bilateral trade and investment,” U.S. Ambassador Francis J. Ricciardone noted in the press release.

“In 2011 we set a new record with nearly $20 billion in U.S.-Turkish trade. This year, we saw the first visit of a U.S. secretary of commerce to Turkey in 14 years and the first visit ever by a U.S. trade representative. Despite regional tensions, our trade and investment relationship is stronger than ever, building on Turkey’s economic success. In this way, we are fulfilling President Obama’s call to ‘renew the alliance between our nations and the friendship between our peoples.’”

The mission is organized the U.S. Mission’s Commercial Service in partnership with the Undersecretariat of the Defense Industry, Ankara Industry Chamber, Turkish Union of Chambers and Commodities Exchanges (TOBB), American Business Forum in Turkey and the Turkish Businessmen’s Association.

2016: Turkey’s defense purchases to reach $8 billion

Turkey will buy around 100 F-35 Joint Strike Fighter Lightning II aircraft. EPA photo

Turkey will spend up to $8 billion in defense purchases as its exports will reach $2 billion in 2016, four years from now, according to a major estimation by the procurement agency, the Undersecretariat for Defense Industries (SSM).

The present figures are around half of that.

The expectations in the SSM’s updated 2012-2016 strategic program are realistic given the money Turkey would pay for expensive systems – such as the F-35s or the U-214 submarines from Germany – over the next few years, as well as the rapid increase in its exports mainly to Islamic countries, according to one defense analyst.

Turkey is in talks with four key foreign suppliers on a $4 billion Long Range Air and Missile Defense Systems project.

The country’s mainly exports armored vehicles of many sorts, rockets and other ammunition, as well as military electronics like radios, to more than 10 Islamic countries. It also sells aviation equipment as part of offset deals.

Fighter jet program delayed

Separately, Turkey has delayed a program to develop a domestic fighter aircraft for the Air Force nearly two years, the strategic document has revealed. “A conceptual design … for the fighter aircraft will be completed by the end of 2014,” the SSM’s program said.

The defense minister at the time, Vecdi Gönül, announced on Dec. 14, 2010, that Turkey would build a fighter aircraft, to be constructed together with a friendly country or fully by itself, by the 100th anniversary of the Turkish Republic in 2023.

Gönül told reporters after a meeting of the Defense Industry Executive Committee that the SSM would start talks with the Turkish Aerospace Industries (TAI), the country’s main aerospace company, for a “conceptual design” of a fighter aircraft and a jet trainer to be built after the year 2020.

At the time, Gönül said the TAI would have two years for the conceptual design. He said Turkey’s newly designed fighter aircraft “would be a next-generation type, replacing the [U.S.-made] F-4Es and functioning well with the F-16 and the F-35 … This is effectively a decision for the making of Turkey’s first fighter aircraft.”

However, the new strategic document calls for the completion of the conceptual design by 2014. “The original timetable must be wrong. It’s impossible to complete the conceptual design of a new aircraft in two years. The estimate is more reasonable now,” said one senior procurement official.

Turkey will buy around 100 F-35 Joint Strike Fighter Lightning II aircraft built by a team led by the U.S. firm Lockheed Martin, but Gönül said at the time that they were planning to develop the new fighter with a partner other than the United States.

Turkey previously had South Korea in mind, but one South Korean official in Ankara said South Korea was at a more advanced stage than Turkey, and was currently developing its KF-X model with Indonesia. “We can’t say at this point whether it will be with South Korea or not,” Gönül said.

Global Defense Sales Slip 3.3%, Aerospace Rises

Worldwide defense sales fell 3.3 percent in 2011 from a year ago, driven by governments’ spending priorities, weak Western economies, and withdrawal from Iraq and Afghanistan, a report from consultancy Deloitte said.

The decline in defense contrasted with an overall 2.3 percent rise in global aerospace and defense revenues, helped by higher production rates of airliners, the 2011 Global Aerospace & Defense Industry performance wrap-up report showed.

Despite the rise in the headline revenue figure, many key financial results generally fell, “likely because of the predominant weighting of the defense sub-segment,” the report said.

European industry grew by 0.8 percent compared with U.S. industry’s 3.3 percent, a lower performance attributed to a difference in “incentives, management philosophies, and work force practice,” the report said.