US embassy cable - 05ANKARA322

UNCLAS SECTION 01 OF 04 ANKARA 000322 
 
SIPDIS 
 
DEPT FOR EB/TP/MTA/MST - AWHITTEN 
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA 
DEPT PASS USTR FOR CHOOKER/LERRION 
TREASURY FOR INTERNATIONAL AFFAIRS 
 
E.O. 12958: N/A 
TAGS: ETRD, TU 
SUBJECT:  Suggested Services Market Access Priorities 
 
Ref:  State 270998 
 
Not for Internet Distribution. 
 
1.  As requested reftel, Embassy has ranked market 
access priorities for Turkey's services sectors.  We 
have also consulted with the local American business 
chamber on these priorities.  Rank 1 are the highest 
priorities and 5 are the lowest.  In addition, market 
openness is rated as high, medium or low.  Supplemental 
information on selected sectors follows the ranking. 
 
2. Services Rankings: 
 
Sectors with Rank 1 
 
Engineering and integrated engineering services  (high) 
Computer and related services (high) 
Energy services (medium) 
Telecommunications Services (medium) 
Construction and related engineering (high) 
Tourism and travel related services (high) 
Banking and financial services (medium) 
Educational services (medium) 
Mining (medium) 
Courier services (high) 
 
Sectors with Rank 2 
 
Insurance services (medium) 
Legal services (medium) 
Accounting, auditing and bookkeeping (medium) 
Real Estate services (high) 
Rental/Leasing services (high) 
Management consulting services (high) 
Distribution Services 
Environmental services (medium) 
 
Sectors with Rank 3 
 
Architectural services (medium) 
Placement and supply services of personnel (medium) 
Investigation and security (low) 
Entertainment services (high) 
Technical testing and analysis services-including 
energy testing (high) 
Maintenance and repair of equipment (medium) 
Printing and publishing (medium) 
 
Sectors with Rank IV 
 
Research and Development services (medium) 
Advertising services (medium) 
Scientific and technical consulting services (high) 
Convention services (high) 
Urban Planning 
 
Sectors with Rank V 
 
Taxation services (low) 
Building cleaning services (medium) 
Photographic services (high) 
Packaging services (high) 
Market Research 
 
3.  Banking:  Turkey does not permit private management 
of social security funds. 
 
4.  Telecommunications Services 
 
Turkey has a large telecommunications service market - 
the 5th largest in Europe and 12th largest in the 
world.  The market size is estimated to be over USD 9 
billion and expected to grow to USD 16 billion in 2010. 
 
In 2005, full liberalization of the market should 
increase the size of the market.  The private sector 
has obtained and will obtain licenses for the 
introduction of new fixed line telecommunications 
services in competition with Turk Telecom.  Turk 
Telecom already has to compete with the three GSM 
cellular operators, which has an increasing number of 
subscribers.  The competition will create more business 
both for the private sector and Turk Telecom. 
 
Turk Telecom is the main fixed line telecommunications 
operator with a subscriber number exceeding 19 million. 
The Government of Turkey (GOT), plans to privatize 55 
percent of the shares of Turk Telecom.  The three 
cellular phone operators, Turkcell, Telsim and Avea 
exceeded 30 million subscribers, well ahead of the 
fixed line subscribers.  In 2005, Telsim will be sold 
to interested investors. 
 
Best prospects will be 3G services, ADSL, other 
broadband applications, VoIP.  Over 40 private sector 
companies have already obtained a license for long 
distance telephony services.  Institutional clients of 
these companies have already started benefiting from 
lower rates in long distance international calls and 
the ones within Turkey. 
Turkey's strategic location in the Eurasia will play an 
important role in obtaining revenues from international 
telephone traffic between Central Asia/Middle East and 
Europe/USA. 
 
Following are the market size estimates for this 
sector: 
 
USD millions 2003 2004(Estimated)  2005(Estimated) 
a. Total Market Size     6,500     7,500     9,000 
b. Total Local Production5,600     6,000     7,500 
c. Total Exports           950     1,000     1,500 
d. Total Imports         1,850     2,500     3,000 
e. Imports from the U.S.   160       250     300 
 
Note:  The above statistics are unofficial estimates. 
Exchange Rate used: 1USD = TL 1.4 
 
5. Natural Gas Transmission, Distribution, Storage and 
Trade 
 
As part of the liberalization process in the natural 
gas (NG) market, the Energy Market Regulatory Agency 
(EMRA) is issuing license tenders for the distribution, 
storage and wholesale trading of NG.  Most cities are 
constructing distribution networks to supply gas to 
industry and homes.  One of the major tenders will be 
NG distribution in Izmir and the other will be 
privatization of Ankara and Istanbul NG distribution 
network. 
 
Turkey imported 21 billion cubic meters of NG and LNG 
from Russia, Iran, Algeria and Nigeria in 2004.  The 
state-owned Turkish Petroleum Pipeline Corporation, 
BOTAS, recently announced a tender for the transfer of 
existing long-term purchase contracts to the private 
sector.  Turkey has two pipelines transporting Russian 
gas to Turkey as well as a pipeline for Iranian gas. 
Turkey also has two LNG terminals; one in Marmara 
Ereglisi and the other in Aliaga, Izmir.  The first is 
owned and operated by Botas and the latter is owned by 
the private sector, but has not yet received an 
operating license from EMRA. 
 
BOTAS recently announced a tender to connect the 
Turkish NG pipeline network to the Greek pipeline 
network.  Projects and negotiations are underway to 
connect Azeri, Iraqi and Egyptian gas to the Turkish 
pipeline network to export gas to the other European 
countries. 
 
USD millions 2003 2004(Estimated)  2005(Estimated) 
a. Total Market Size     850  950  1200 
b. Total Local Production250  300   350 
c. Total Exports          50  100   150 
d. Total Imports         650  750  1000 
e. Imports from the U.S.  50   60    90 
 
Note:  The above statistics are unofficial estimates. 
Exchange Rate used 1USD = TL 1.4 
 
6. Franchising 
 
Turkey's franchising sector comprises approximately 150 
franchises with more than 1000 outlets.  About one- 
third of the franchisers are foreign businesses.  The 
country's National Franchise Association (UFRAD) 
estimates the total annual turnover of all franchises 
in the country at USD1.5 billion in 2002. 
 
The sector is diversifying rapidly from fast foods, 
into apparel, education, cleaning services, printing, 
office services, furniture, hardware, real estate, 
fitness and supermarket chains.   A large number of 
entrepreneurs are regarding franchising as an 
attractive investment in a somewhat uncertain economy. 
 
There is significant name recognition among Turkish 
youth for U.S. franchises, especially in urban centers 
where the country's wealth accumulates. 
 
Market size estimates (USD millions): 
 
2001 2002 2003 2004 
a. Total Market Size     1,700 1,500 1,700   1,900 
b. Total Local Production1,100 1,200 1,400   1,700 
c. Total Exports           400   500   700     900 
d. Total Imports         1,000   800 1,000   1,100 
e. Imports from the U.S.   450   400   470     550 
 
Source: Turkish National Franchise Association's 
estimates.   (Note: sales figures for some franchise 
operations are not disclosed, and are therefore 
estimated for all years.) 
Exchange rate used: TL 1.4 = USD1 
 
7. Architectural, Construction, and Engineering 
services 
 
Due to population growth and continued urbanization, 
Turkey requires an estimated additional 5.5 million 
housing units by 2010.  Added to the existing housing 
deficit, this represents a requirement for more than 
500,000 new housing units to be built each year. 
Additionally, with a growing economy and rapid urban 
expansion, there is a need for the construction of more 
commercial/office/professional buildings.  Likewise 
shopping malls and retail establishments need to be 
built as consumer spending is increased. Tourism 
development continues to generate new construction 
projects.  As in other countries the construction 
industry is highly susceptible to macro economic 
factors. Government projects, mostly infrastructure 
projects such as highways, bridges, airports, seaports, 
etc., have been slowed by the economic crises. 
Residential and industrial buildings are mostly 
completed by the private sector. While this portion of 
the sector is also influenced by the world financial 
conditions, there is still growth, albeit at a slower 
rate. 
 
Turkish Architectural/Construction/Engineering (ACE) 
services are one of the major sectors, which contribute 
to the exports of the Turkish services sector. 
According to the Turkish Contractors' Association, 
Turkish contractors are working in 49 countries across 
4 continents. Their market presence is in Southeast 
Asia, Central Asia and the Caucasus. Some contracts 
were recently won in India, Morocco, Pakistan, 
Philippines, Thailand, Malaysia and Indonesia.  The 
next steps could be other ASEAN countries as well as 
towards Eastern and Southeastern Europe in the 
framework of the Stability Pact programs. Total work 
already performed or being performed throughout the 
world by Turkish contractors is estimated at USD 45 
billion. Today, the share of Turkish contracting in 
international global contracting services is about 2-3 
percent. American companies may cooperate with Turkish 
contractors for opportunities in these regions. 
 
Projects funded by international institutions like the 
World Bank, European Investment Bank, and the Japanese 
ICF offer the best prospects for U.S. companies. U.S. 
ACE firms are highly regarded in Turkey, although they 
face stiff competition from European and Japanese 
firms. When possible, U.S. firms should consider joint 
ventures with Turkish firms to take advantage of low 
Turkish labor costs and local familiarity with 
bureaucracy. 
 
Market size estimates (USD millions): 
2001 2002 2003 2004 
a. Total Market Size      1,130 1,200 1,240  1,290 
b. Total Local Production 1,150 1,200 1,250  1,280 
c. Total Exports            220   220   250    270 
d. Total Imports            200   220   240    280 
e. Imports from the U.S.     42    45    48     52 
Source: The above statistics are unofficial estimates 
provided by sector contacts. 
Exchange rate used: TL 1.4 = USD1 
 
Edelman