Advanced manufacturing to Turkey (Marine and Defence)
(Last updated: 24 Sep 2013)
Trends and opportunities
The market
Supported by favourable economic conditions which include a young and low cost labour force, Turkey’s boat building industry is becoming a lucrative sector measured by both profits and job creation. Long-recognised as a specialist manufacturer of chemical and oil tankers, Turkey has turned its attention to the luxury vessel market, building super and mega-yachts.
Foreign investors, attracted by the labour market, have set up yards on Turkey's Southern Coast, to gain a competitive advantage in an increasingly cost sensitive industry. Turkey is now home to more than 70 boat yards, many of which are international companies which have relocated their yards from more expensive European countries.
(Source: Turkish Chamber of Shipping)
Australian boat and ship builders and marine equipment manufacturers have built a strong reputation internationally through delivery of high quality, niche and technically advanced boats and equipment. Australia also boasts significant capability in fast ships for both commercial and defence use. Australian fast ship builders had some success supplying car ferries to the Turkish market in the mid-2000s.
Turkey has made considerable strides towards modernising its armed forces and local defence industry and has the second-largest armed forces in NATO. Recent increases in tensions across Turkey’s border territories and emerging disputes in neighbouring regions provide further impetus for Turkey to quickly develop its defence capability.
(Source: Undersecretariat of Defence Industries)
Given that Australian defence suppliers are already global players with a track record exporting to key defence markets such as the USA and the UK, it is expected that Turkish manufacturers and integrators would be open to Australian solutions.
Marine
Turkey has a very strong and centuries old commercial shipbuilding industry and is recognised as a specialist producer of chemical and oil tankers between 50m and 100m in length. Geographically, there are three main boatbuilding regions: Tuzla, a major shipbuilding region close to Istanbul, Antalya, an economic free zone in the south and Bodrum / Ören, considered the birthplace of boatbuilding in Turkey, claiming a boat building industry going back almost 2,000 years.
Turkey is world’s third-largest mega-yacht manufacturer after Italy and the Netherlands. During the last 10 years luxury yacht building has increased in popularity and capacity. This video from Bloomberg provides further information about the marine sector in Turkey and the Turkish economy.
Yacht builders currently fall into two categories based on the structure of their organisation and facilities. The first category generally comprises boat builders with small workshops owned by individuals who have been building boats of all sizes, mainly out of wood. Over the years the size of vessel has increased and production methods modernised. The old method of carvel planking on cut frames has died away and has been replaced by wood epoxy planking over laminated keel and frames. Several significantly sized yachts have been constructed using this method, predominantly motor yachts or traditional ketches, called ‘Gulets’, which can reach up to 50m in length. Another common sight in Turkey is a three-deck, hard-chine motor yacht, normally 40m or 42m. This group of vessels is the most cost-effective in terms of production and offer excellent value for money.
The second category comprises shipyards with strong corporate identities, well-known brand names, modern facilities and well educated and highly experienced engineers. Yachts in this category range from 20m to 80m; the smaller ones being constructed from composite materials with planing hulls and the larger ones in steel/aluminium or all aluminium.
Still in its early stages, this sector of the Turkish boat building industry has experienced rapid growth and with experience improved quality and manufacturing efficiency. Many foreign yards are choosing to have facilities in Turkey and, in some cases, are starting to deliver vessels under their own brand name built entirely in Turkey.
The high profile Maltese Falcon, built at Perini Navi’s facility in Tuzla did much to change the perception of Turkish yacht building and yards such as Numarine can boast some of the most sophisticated manufacturing techniques and technology found anywhere. Between 2004 and 2008 the leisure boatbuilding sector enjoyed significant foreign investment with a number of the world’s higher profile yacht builders looking to Turkey to set up production facilities either as subsidiary companies or by working with partner companies. Examples include Vitters, Nedship, Oyster, Perini Navi and Azimut.
Turkey has long since been a popular tourist destination and enjoys the Mediterranean, Aegean, Marmaris and Black Sea around its coastline. However, domestic boat ownership per capita is very low and the slow pace of marina development is blamed for restricting the growth of the leisure marine industry. Turkey has also had to contend with the global economic downturn further restricting growth within the marine sector.
The future growth of the Turkish leisure marine industry relies on increasing the export reach of its boat builders and therefore build quality, brand recognition and general reputation are of utmost importance for its credibility on the world stage. Many companies are now demonstrating that they are globally savvy and are pushing hard to establish themselves in the world’s markets, gaining presence through global marketing and establishing strong dealer networks. For this reason, Turkey’s yacht builders are becoming more discerning of quality products and services creating opportunities for Australian manufacturers of high end products. These opportunities also extend to yacht designers and naval architects, interior designers and to services such as marketing and brokerage.
Defence
Turkey occupies a key geo-strategic position and provides a vital stabilising influence in a potentially turbulent region. Turkey is a member of the UN, NATO, the Council of Europe, the Organisation for Security and Co-operation in Europe (OSCE), Organisation for Economic Co-operation and Development (OECD), an Associate Member of the Western European Union, and is a candidate for accession to the European Union.
Turkey was the ninth top importer of defence equipment in 2009, tenth in 2010 and twelfth in 2011. Turkish defence equipment expenditure is approximately A$4 billion per year and this is unlikely to change soon.
Turkey’s armed forces comprise five services: the Turkish Land Forces Command (TLFC), Turkish Naval Forces Command (TNFC), Turkish Air Forces Command (TAFC), the Coast Guard Command and the Gendarmerie (Jandarma). The Naval, Land and Air forces are controlled by the Turkish General Staff (TGS) with the Coast Guard and Gendarmerie controlled by the Ministry of the Interior. However, the TGS assume responsibility for the other two services in times of emergency. The most senior military officer in Turkey is the Chief of the General Staff. The individual Services are each headed by their own Commander.
The manpower of all services is primarily conscripted. The TGS is directly responsible to the Turkish President and Prime Minister for all operational matters, and is very influential in the equipment procurement process. The Turkish Ministry of National Defence (MND), which is headed by a civilian Minister, is primarily responsible for general policy and staffing matters.
Turkey has made considerable strides towards its goal of modernising the armed forces and indigenous defence industry, and has invested heavily while doing so. Turkey aims to reduce its arms import-dependency and cultivate its own export markets. It is Turkish Government policy that defence procurement should, through joint ventures with overseas companies, provide the stimulus for industrial development. The Turkish Government has encouraged foreign investment, and there are a number of very significant co-production deals between Turkish and foreign companies involving important transfers of advanced technology to Turkey. Turkey is keen to export and remain competitive in the defence sector.
The Under Secretariat for Defence Industry (SSM) undertakes technical, financial and industrial evaluation of projects including a major local technology transfer element. SSM also occasionally manages projects that have been budgeted for by other organisations (eg. the Coastguard). The extent to which overseas companies are willing to meet Turkey’s industrial aspirations, and to provide both direct and indirect offset, is a key factor in determining their success in these programmes. Further information on Turkey’s defence industry and current procurement projects can be found on the SSM website.
The Defence Industry Manufacturers Association (SaSaD) contributes to development of the defence industry sector by cooperating with defence procurement authorities and helping industry to fulfil Turkey’s defence requirements.
The main international competitors in the Turkish defence market are the USA, the UK, Italy, Israel, Russia, South Africa, the Netherlands, France, Germany and South Korea.
Tariffs, Regulations and Customs
Regulations
Marine
The Turkish Undersecretariat for Maritime Affairs (UMA) is the principal government institution dealing with issues related to the maritime and shipbuilding sectors, and is the main agency that coordinates national maritime policy and other matters related to the broad maritime sector. With respect to shipbuilding, UMA has the strategic goal of taking measures for the improvement of the ship and boat building, repair and recycling sectors, and to reduce dependency on foreign companies. In general, the Turkish government takes a relatively non-interventionist approach to shipbuilding. UMA produces regular economic ‘Development Plans’ that are used by the Turkish government to frame its guidelines for the development of different sectors of the economy, in order to ensure their long term sustainability and competitiveness. According to the 9th Development Plan (SPO, 2007) which covers the period 2007-2013, the objective for shipbuilding, is:
“With the aim of designing and manufacturing military and commercial vessels in Turkish shipyards with high domestic contribution and renewing the Turkish Maritime Fleet, new shipyards will be established, primarily in the Ceyhan region, based on the Turkish Shipyards Master Plan.”
In addition, a Government Action Plan, dated January 2008, requires that the Turkish shipbuilding industry should be improved, and that “in order to increase the local contribution in shipbuilding, necessary steps will be taken to improve the local supply industry, including through R&D infrastructure”.
More specifically, in accordance with the objectives of the 9th Development Plan, and in line with the Turkish Shipyards Master Plan, the construction of breakwaters at some shipyards has been funded through an annual public investment programme, including at the Sürmene-Yeniçam, Karadeniz Ereğli and Samsun Tekkeköy shipyards.
Defence
In most cases it is crucial to work with a local agent, with proven connections to the military, if companies wish to be considered for Turkish projects. Austrade has offices in Istanbul and can assist in identifying compatible Turkish companies (the Defence Attaché at the Australian Embassy in Ankara cannot help out in this regard).
It is difficult to make direct contact with Turkish Defence authorities as they prefer to work on a bilateral defence basis. It is therefore important to seek the advice of the Australian Defence Attaché (based at the Australian Embassy in Ankara), through the International Materiel Branch in the Defence Export Unit (DEU) in Canberra, prior to making contact with the Turkish military and the Defence Industries Undersecretariat. Over the last two years Austrade and the Department of Defence have organised two separate Defence Missions to Turkey including participation at IDEF, a large defence exhibition held every two years in Istanbul.
Marketing your products and services
Market entry
Austrade's experienced Business Development Managers are members of relevant sector business groups. They are well connected with key business people and able to open doors on behalf of Australian companies. Austrade arranges appointment programs for companies making individual visits.
There is a big difference between the commercial laws in Turkey and Australia, which if not understood by Australian companies, can result in decisions which impede the growth of business. It is very important to understand the legal context. Austrade provides information about agency/distribution and legal regulations and the different types of commercial entities open to Australian companies.
Links and industry contacts
Marine-related resources
Chamber of Shipping - www.denizticaretodasi.org.tr/Sayfalar/Anasayfa.aspx
Turkish Shipbuilders Association - www.gisbir.org
Turkish Lloyd Foundation - www.turkloydu.org/turkloydu/home.aspx?lang=en-GB
Istanbul Sailing Club - www.istanbulyelken.org.tr
Turkish Marine Research Foundation - www.tudav.org
Port Operators Association - www.turklim.org
Defence-related resources
Undersecretriat for Defence Industry – www.ssm.gov.tr
Defence Manufacturers Association – www.sasad.org.tr
Ministry of National Defence - www.msb.gov.tr/anasayfa/phpscr/anasayfa.html
Turkish General Staff - www.tsk.tr/ing/index.html
Turkish Land Forces - www.kkk.tsk.tr/EN/
Turkish Navy Forces - www.dzkk.tsk.tr
Turkish Air Force - www.hvkk.tsk.tr/EN/Index.aspx
General Command of Gendarmerie - www.jandarma.tsk.tr/ing/start.htm
Turkish Coast Guard Command - www.sgk.tsk.tr/index_eng.asp
Foundation of Strengthening Turkish Armed Forces - www.tskgv.org.tr
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.