Relations between France and Turkey

16.09.2014

 

The alliance between François 1er and Soliman the magnificent in 1536 illustrates the age of the relation between Turkey and France. Although the importance of trade relation is little known, France and Turkey have been developing trade in divers areas and the French chamber of commerce in Turkey with its 128 years of existence, is the oldest in the world. Trade between France and Turkey have risen since the mid 1980s, investments have doubled within ten years and in 2014, Turkey is the thirteenth client of France and the fifth without the European Union and Switzerland before emerging countries such as Brazil or India. The French president, François Hollande during his visit in Turkey in January 2014, has announced that he wanted to keep up trade between France and Turkey in order to reach 20 billions euros in annual trade. Considering the recent divergences on the issues of the Turkey's accession to the European Union and the Armenian Genocide, with this announcement François Hollande has expressed his desire to improve bilateral relations with Turkey and has showed that France considers Turkey as a really important partner.

(a) French economic presence in Turkey

In 2011, France was the seventh foreign investor in Turkey. French investment stocks represented 5% of global stock in Turkey with more than seven billions USD and FDI (Foreign direct investment) represented 6,3 % of all the FDI going to Turkey (985 MUSD).

French investments in Turkey mainly come from big businesses. Indeed, 50% of the 400 French companies that have an activity in Turkey are CAC 40 companies. In 2014, French businesses in Turkey employ more than 100.000 persons in industrial sector, energy sector, pharmaceutical and farm-produce sector, bank and financial sector or commercial services. Therefore, French economic presence in Turkey is genuinely varied. However French investments are often production and industrial investments (52%) or high technology such as Alstom in Gebze or Renault in Bursa (Alstom has a state-of-the-art factory in Gebze for electrical transformers and Renault has started to produce its first electrical sedan in Bursa). France and Turkey have concluded many commercial partnerships such as those between Airbus Turkish Airlines and Pegasus, which have both purchased Airbus aircrafts. The most attractive sectors for French companies in Turkey remain car sector (For example: Renault is the leading company in the country),the field of daily living with Carrefour, Darty, Decathlon, Total or Danone, and in the insurance area where Axa is for example, the Turkish leading insurance company.

Geographically, Istanbul and its region host 70% of the French investments whereas Ankara hosts 10% and Izmir 5%.

(b) Turkish economic presence in France

France is currently Turkey?s one of the biggest trading partner among the EU member states. French imports from Turkey are mainly focused on two sectors: automotive, clothing and textiles being 2/3 of the total purchases. Turkish goods imports from France amounted to 8,6 billion $ in 2012 (an decrease of 6,12 % when compared to 9,2 billion $ in 2011). Turkish firms held and are holding 10 projects in France with a total value of 5 billion dollars up until now. And Foreign direct investment from Turkey to France was 85 million $ in 2012. FDI stock from 2002 to 2012 comes to 4 million $.

(c) Franco-Turkish trade

For the third consecutive year, Franco-Turkish trade has decreased over the first 6 months of the year: -2.3% in the first semester of 2014 compared to the first semester of 2013.

In a still challenging economy, the Franco-Turkish trade, with a total of 6.178 billion euros for the first semester of 2014 (as estimated CVS / CJO French Customs data published Aug. 7) is, despite a second trimester better than the first, dropping of 2.3% compared to the first half of 2013.

Exports of French companies in Turkey fell sharply (-9.7%), while those of Turkish companies in France increase significantly (+5.4%) in 2014. We can note that the trend turns out to be pretty much the same as the first quarter of 2013 compared to the first of 2012. The trade balance between the two countries remains profitable for France (166 millions ?), which is a slight decrease, compared to the first half of 2013 (224 millions ?).

With a global amount of 3.226 billion euros (raw data, excluding military equipment), the French sales in Turkey in the first half of 2014 has decreased of 3.7% compared to the first half of 2013 especially because of the sharp decline in auto sales area (-37.3% for equipment and -20.8% for vehicles - 5th) which represents 13,8% of the French exports in Turkey though. All others French export areas are also knowing a substantial decline. However, the aeronautical sector is the only growing area(+ 184.1% totaling 19.3% of total French exports to Turkey over the period) thanks to recent contracts signed by Airbus with Turkish Airlines (82 aircraft in December 2012) and Pegasus (100 aircraft in March 2013).

Many reasons appear to explain the fall of the Franco-Turkish trade. Indeed, the conjunction of the domestic demand fall, the Turkish local production that grows and diversifies and the growing reorientation of the country?s trade especially to neighboring countries are the main causes which explain the decline of French exports observed for three years and the drop of its market share in Turkey (7% in 2002 to 5% in 2009 and 3.5% in the first September of 2014).

Regarding the current economic context - stagnation in France and significant decline of the Turkish growth - we cannot expect a significant rebound for the second semester of 2014. Nevertheless, the major aircrafts contracts signed with Turkish aeronautical companies, as well as prospects in transport and energy should enable France to keep his rank in trade with Turkey in the coming years.

Pierre Devoize

Legal Assistant at Ozgun Law Firm