The extent of Turkey-Italy partnership

VALERIA GIANOTTA
Published 30.01.2019 01:04 Modified 30.01.2019 01:04

Turkish Airlines launched the first direct flight from Ankara to Rome after 60 years on Jan. 7. The new route seals the strong relations between Turkey and Italy. Indeed, with its 131 flights a week to 10 Italian cities, Turkish Airlines is the main carrier for Italian tourism. The mutual connections are long-standing: Over the centuries, Italy and Turkey have built important ties and nowadays, they share economic connections. The industrial Italian presence in Turkey dates back to the '60s when the first joint venture – Tofaş – was established by Turkey's Koç Holding and Italy's Fiat group. Today, the companies with Italian participation in Turkey number more than a thousand. Some examples include: In the automotive sector with Fiat-Tofaş, Fiat-Türk Traktor; in banking with Yapı Kredı and Unicredit; infrastructure with Astaldi; defense with Leonardo; agribusiness with Barilla and Ferrero along with other sectors such as textiles, chemical and services.

From an economic perspective, Italy is Turkey's second-largest European trading partner after Germany and the fifth worldwide after China, Germany, Russia and the U.S. On the other side, Turkish investments in Italy have recently seen an important increase by reaching $387 million between 2002 and 2017, according to recent data released by the Central Bank of the Republic of Turkey. In 2018, two Turkish companies, Trakya Cam Sanayi from Şişecam Group and Kastamonu Entegre, invested around $198 million in Italy. By acquiring an Italian group operating in the furniture sector, Kastamonu Entegre has invested $180 million to restart business production, while Trakya Cam Sanayi has doubled the production of glass with an investment of $17.8 million.

Turkey's role

Certainly, Turkey plays a strategic role in Italy's economy and vice versa. As the second manufacturing country in Europe, related to textile machines, Italy ranks as the first exporting hub for Turkey. While textiles are the leading voice in Turkish exports, Italy is the leading textile supplier in Turkey as well as one of the most important customers. Indeed, Turkey is one of the world's biggest exporters of textile products; hence all the related know-how is of crucial importance.

The existing relations between the two economies takes into account Italy's ability to export capital and technology in its driving sectors, namely textile, automotive and agribusiness; and on the other side, the specialized Turkish labor force and the capillary knowledge of both its domestic and neighboring markets. As it is located between Europe, the Middle East and the Caucasian region, Turkey's geographical position is strategic both from a political and economic point of view. Turkey is a key outlet market, especially for capital goods that exploit a consolidated complementarity with the local industrial system, as Italy provides the most up-to-date technology to improve production in the leading sectors. This is also based on the wide areas of development for sectors where Italian production stands. Namely, the fields of energy, defense and mechanics are expected to provide more opportunities and growth prospects. In this regard, it is worth the collaboration in the aeronautical sector between Leonardo and TAI for the joint production of ATAK military helicopters as well as the implementation of the Gokturk satellite.

In addition, regarding the companies' structure, Italy and Turkey are very similar and contribute a lot to each other. Both economies not only have strong industrial bases, but they are characterized by vibrant small and medium enterprise activity. Moreover, both partners boast the presence of productive districts in their territories. This is an added value of a "win- win" cooperation.

Furthermore, with its upward economic indicators and its liberal market policies, Turkey has all the characteristics of a country with great potential for investments and for boosting effective collaboration between national and foreign companies. The approval of the new Turkish plan for foreign direct investment along with the privatization program launched earlier by the Turkish government has created a solid basis for increasing the already good economic-commercial relations between Italy and Turkey.

Historically, the transformation from an agricultural to industrial economy facilitated more competitiveness for Turkish products. Actually, the customs union played a crucial role in further developing and strengthening the economic exchanges between Ankara and European countries, including Italy.

Since 1996, the value of bilateral trade has more than quadrupled as well as the European direct investment to Turkey. However, nowadays there is an urgent need to rethink and review the customs union agreement, which still excludes major sectors, including the services and agriculture sector which is respectively 60 percent and 10 percent of the Turkish gross domestic product – and public procurement.

Indeed, barrier regulations, the high average rate of the most favored nation and the politics of price regulation hamper imports of agricultural products from Turkey. Moreover, an efficient update requires the elimination of the asymmetric relations between Ankara, Brussels and third countries and establishing a mechanism for resolving disputes and controversies. On the top of this, Turkey is still the only candidate country that does not have a visa liberalization agreement with the EU.

Accession talks delayed

Although Italy has always been a strong supporter of Turkish European accession and several dialogue attempts were launched, no tangible changes have occurred for Turkish visa liberalization. The problem is Turkish entrepreneurs face difficulty accessing the countries that are the first destinations for their exports.

As political allies and economic partners, Turkey and Italy have maintained a strong alliance over the years, resisting international political storms, government changes and economic crises. As a sign of sincere friendship and mutual trust, just in the last three years, three economic ministerial meetings were held. It is worth mentioning that just one month after the coup attempt in 2016, a Turkish delegation was invited to Rome, marking the importance of the bilateral ties. Likewise, in February 2017, Istanbul hosted the first Joint Economic and Trade Commission between Italy and Turkey, aiming to strengthen the strategic partnership between the two countries; and during his official visit to Vatican City in February 2018, President Recep Tayyip Erdoğan met with top Italian industrial managers in Rome. In other words, Italy and Turkey are a reference to each other and both have much to gain from a mutual increase of their trade and investments, also in the perspective of Turkey's 2023 vision.

* Assistant professor at University of Turkish Aeronautical Association, Ankara

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