Ambassador Extraordinary and Plenipotentiary of Turkish Republic in the Republic of Kazakhstan Mr Omer Burhan Tuzel responds on questions of Kazakhstan the international business magazine.
What indicators characterize trade-economic relations between Turkey and Kazakhstan?
Turkey was the first country to recognize the independence of Kazakhstan in 1991. From that date onwards Turkish investors and businessmen started to come to Kazakhstan, fully confident of the country’s bright and stable future under it’s visionary leader, President Nursultan Nazarbayev. No doubt, the widespread perception among Turks that Kazakhstan is the land of their forefathers and therefore the strong sense of kinship Turks feel towards their Kazakh brethren also helped in forging close, political, social and economic ties from the very beginning. Strong bonds of mutual trust and friendship between the Presidents and high ranking officials of the two countries translated into strong political will to strengthen and upgrade mutually beneficial relations in all spheres. Against this very favourable political and social backdrop, naturally economic and commercial relations progressed rapidly. First, the administration of both countries worked closely together to put in place a very comprehensive legal framework for economic and commercial ties to flourish. Key agreements, such as for the promotion and protection of investments and prevention of double taxation were rapidly concluded. Turkish Airlines started to operate direct flights from Turkey to Kazakhstan and a visa free travel regime for the citizens of both countries ensured connectivity and ease of access. A joint Economic Commission was established between the two country’s Economy Ministries to regularly take stock of bilateral economic developments and issue future guidance. Turkey and Kazakhstan also started multilateral economic cooperation in such regional economic organizations as the Economic Cooperation Organization, Islamic Cooperation Organization.
Today, after twenty two years, the Turkish-Kazakh relationship has attained the level of “Strategic Partnership”, with regular high level dialogue and inter-institutional cooperation established between all segments of government. Whereas many third countries have established themselves exclusively in the extractive sector in Kazakhstan, Turkish businesses can be seen in all sectors.
A common misperception is the predominance of Turkey exclusively in the construction sector. No doubt it is true that the construction sector is the flagship of the Turkish presence in Kazakhstan. It is optically the most visible. One need only look at the commitments Turkish construction companies have undertaken in this booming modern city Astana. The total value of construction projects carried out by Turkish firms here exceeds $17 billion.
However, more than just the construction sector, Turkey is represented in all sectors that have a direct positive impact on the lives of the ordinary Kazakh citizen, be it in the education, health, pharmaceutical, food and beverage, textile, SME, services, transportation or hotelerie sectors. These sectors creat jobs, help train skilled labour and hence contribute to building up much needed human capacity in Kazakhstan. And just recently Turkey has also entered the Kazakh market with a substantive investment in the defence industry sector.
Therefore, while statistically Turkey is overall the 17th largest investor in Kazakhstan, however if investments in the very limited extractive industries sector are excluded, it will be apparent that Turkey is actually the 4th largest and most versatile investor in Kazakhstan with some $2 billion in FDI. There are over 200 Turkish firms registered in Kazakhstan.
Last year trade between Turkey and Kazakhstan stood at around $4–4.5 billion. Despite the global economic slowdown and negative developments in our common neighbourhood that have had a negative impact on the Kazakh economy, the latest statistics indicate that we will be able to largely maintain the volume of our trade this year.
The unique geographic place Kazakhstan occupies as a bridge between East and West, at the crossroads of vital transportation corridors, its vast natural resources, its rapidly developing human potential and its breathtaking pace of reform makes Kazakhstan a leading economic and commercial partner for Turkey in the Central Asian region. The strong political, social and economic dynamics in the country provide ample ground for taking forward and further deepening the already existing privileged economic and commercial ties between the two countries. The completion of the Beyneu – Jeskazghan railway line this year, together with the expected completion of the Baku – Tbilisi – Kars railway line in the Caucasus geography and Turkey next year, will connect Kazakhstan via the Caspian Sea, Azerbaijan, Georgia and Turkey to the Mediterranean basin, providing an additional, as well as alternative access route for Kazakh commodities to the Mediterranean littoral states but also beyond, to the West and Africa.
And finally, while integration efforts between Kazakhstan, the Russian Federation and Belarus within the framework of the Eurasian Economic Union may initially present some challenges for bilateral trade and commercial relations, however in the long run, it will surely create vast opportunities for Turkish and Kazakh businnesses in undertaking joint projects.
What branches of the Kazakhstan economy are most interesting for Turkish business ?
From my answer to your first question, you will have noted that Turkish business in Kazakhstan is present in almost all sectors, except the very capital intensive extractive industries sector. Therefore, interest in Turkey for investing in Kazakhstan is broad and it is real. The challenge is in attracting and getting Turkish investors here. In particular Turkey has a very robust SME sector. SMEs are the locomotive of any industrial based economy. Kazakhstan aspires to transform its present economic model, based on the export of raw materials from its extractive industries to a high-tech, high value industrial commodities based model. This requires specific policies aimed at attracting SMEs to Kazakhstan. We note with satisfaction the very energetic and purpose oriented efforts of the present government in Kazakhstan to put in place the necessary legislative infrastructure in order to create an attractive investment climate for SMEs. I believe we have much to offer Kazakhstan in terms of our experience with SMEs and Specialized Industrial Zones which allow SMEs to thrive and do business.
Could you give examples of ongoing capital activity. Whether there are in Turkey joint ventures with participation of the Kazakhstan investors?
Unfortunately I cannot say that Kazakh investors are taking advantage of the rich opportunities Turkey provides. Some Kazakh investments have targeted the hotel, tourism and real-estate sectors in Turkey, however the overall volume remains low, at some $650 million. In order to deepen the strategic partnership between the two countries and to transform these sentiments from words to deeds, we need to focus perhaps on some select projects of strategic importance. For example one such project could be the construction of a joint Turkish-Kazakh refinery in Turkey on the Mediterranean coast. This would ensure Kazakh oil high value and secure access to western markets. The connectivity which the Baku – Tibilisi – Kars railway line I have mentioned before offers for Kazakhstan is indeed unique and requires strategic vision to transform into a long term asset for this country. Again, in relation to the above, a Kazakh/Turkish logistics center in Turkey in one of the major seaports would constitute another such strategic project.
According to the experience of your country, what the state has to do for development of manufacturing branches of economy?
Turkey with a GDP of $800 billion is currently the 17th largest economy globally and the 6th largest economy in Europe. Turkey is projected to become the 10th largest economy in the world by 2023 (the 100 year anniversary of the founding of the Republic), with a GDP of some $2 trillion, exports of some $500 billion and a per capita income of approximately $25.000.
In the past quarter of a decade, Turkey has strengthened its private public partnership thus spurring industrial production and lowering the dependance of our exports based economy on imports. Turkey has also invested heavily into research and development, which has increased the technological base and value added of export commodities.
Due to the shortage of capital at the founding of the Republic in 1923, the industrialization drive in Turkey was spearheaded by the state through a system of 5 year development plans for the first 60 years of its existence. However, beginning with the 1980s, liberalization of the economy lead to the integration of the Turkish economy with the global economy. The private sector was strengthened through a set of supportive and regulatory policies on the part of the State. An inward looking protective system was replaced by an outward looking open system resulting in a massive boom in exports and the development of the industrial sector, based on the entrepreneurial and inventive spirit of Turkish businessmen. The volume of exports in the beginning of 2000 which stood at around $30 billion, expanded to $150 billion in just over 10 years, multiplying four fold.
Turkey in its industrialization drive has attached great importance to the SME sector which we regard as the locomotive of any industrial exports based economy. We abandoned the notion that SMEs are small enterprises because they don’t have the capacity to grow. Today, 99% of all enterprises in Turkey are SMEs and 78% of the total work force are employed in this sector.
The Turkish State plays a supportive role in developing Turkish made products and introducing them globally through a series of policies aimed at creating national brands, designs and innovative products which set trends. A system of State support for exports and investments plays a crucial role in developing our industrial based economic sectors. Developing the scientific base of the country through a targeted education system and as mentioned earlier, investments into research and development which currently stands at some $6.5 billion has contributed significantly in transforming the Turkish economy. Research and development investments are expected to reach $60 billion in 2023.
What are your impressions about Kazakhstan. What is your vision of its future?
Kazakhstan is a country blessed with vast natural resources, located strategically at the crossroads between Europe and Asia. I don’t know of any other country that better befits the description “Eurasia”. Here you can hear traditional Asian Kazakh music together with European classical music. People live a modern European life-style, however with Asian Kazakh values and traditions. The ethnic and religious diversity is a reflection of the country as a melting pot of European and Asian peoples.
Kazakhstan is an exciting young country, undergoing sea changes, as it rapidly sheds its post-Soviet legacy and transforms into a modern State. Turkey knows the difficulties involved in such a process. States in transformation are fortunate if they are able to produce great Statesmen at critical junctures in their history. Turkey had that fortune a century ago when our great leader Atatürk spearheaded the transformation of our country and steered it towards todays modern, democratic Republic. Kazakhstan is yet another such fortunate country. Under your great Statesman and visionary leader President Nursultan Nazarbayev, the country has taken tremendous strides in a very short time. We Turks are proud of Kazakhstan’s achievements as if it were our own.
I believe Kazakhstan and its people can look forward to a prosperous and bright future. Its wealth of natural resources has already catapulted Kazakhstan to a middle income country in the short span of 22 years, with a per-capita income close to $13.000. Successive governments have placed great emphasis on education and the Bolashak scholarships are helping develop the human capital of the country. Ongoing infrastructure projects in the transportation and logistics sectors are set to make Kazakhstan a major hub and transportation corridor between East and West, as well as North and South. Kazakhstan’s WTO membership soon will ensure full integration of the Kazakh economy with the global economy. Kazakhstan’s peaceful multi-vector foreign policy has established the country as a factor of security and stability in its geography. I have no doubt that the Kazakh people have the wisdom, fortitude and resolve to capitalize on all the above mentioned assets in order to realize the ambitious goals set forth by President Nazarbayev, thus firmly planting Kazakhstan amongst the most influential nations in the 21st century.