UAE and Türkiye elevating relations to the level of a strategic partnership

The UAE and Türkiye bilateral trade experienced a significant jump after the signing of the Comprehensive Economic Partnership Agreement (CEPA) in March as it climbed 77 per cent during the first six months of 2023, according to a top diplomat.

Tugay Tuncer, Ambassador of the Republic of Türkiye to the UAE, said the total value of bilateral trade has reached $7.9 billion, with a 23 per cent rise in exports and a significant 147 per cent increase in imports. This rapid growth has set a record, positioning Türkiye as one of the top five trading partners of the UAE and UAE becoming the leading trading partner of Türkiye within the GCC, he said.

“Building on this positive momentum, we anticipate doubling our trade volume in the very near future. Furthermore, we are pleased to announce that the Joint Economic and Trade Committee will convene in Istanbul at the end of this month, accompanied by a Business Forum. We view these events as important milestones for launching tangible projects and fostering further economic cooperation,” Tugay Tuncer told Khaleej Times during an exclusive interview.

The Comprehensive Economic Partnership Agreement (CEPA) has been in effect since September 1, 2023. Last year, our bilateral trade, excluding re-export figures, reached $10 billion, marking a 25 per cent growth compared to the previous year. It is worth noting that, according to UAE data, the trade volume between our countries stood at $14 billion in 2022, including re-exports.

“We firmly believe that this new phase of our economic partnership, coupled with the impetus provided by high-level visits, will create fresh opportunities for our countries and encourage increased collaboration among our business communities,” the ambassador said.

Excerpts of the interview:

The UAE and Türkiye are celebrating 50 years of bilateral relations this year. Please describe major events in the past 50 years and what is your programme for the next 50 years?

2023 has been a significant year for the relations between Türkiye and the UAE. We have reached a milestone by elevating our relations to the level of a strategic partnership. Under the leadership of our two Presidents, we have announced the establishment of a High-Level Strategic Council. Additionally, we have successfully concluded the Comprehensive Economic Partnership Agreement, with the aim of quadrupling our bilateral trade volume within five years.

The progress made in our collaboration is evident through the signing of numerous new cooperation agreements, totalling over $50 billion worth of deals. Furthermore, there are many more agreements in the pipeline, highlighting the continuous efforts to strengthen our ties. The frequent mutual contacts between high-level officials, including visits and calls from our respective leadership, have further solidified the bilateral political scene.

This year, as we celebrate the 50th Anniversary of the Establishment of Diplomatic Relations between our countries, we are delighted that it coincides with a new chapter of collaboration for our nations. The rapid pace of development witnessed over the past two years reflects the strong political will on both sides to deepen this partnership.

As we reflect on the past and look towards the next 50 years, we find comfort in the belief that the strength of our renewed partnership and the close people-to-people ties will continue to guide our future relationship. This year, we not only celebrate the 50th Anniversary of the Establishment of Diplomatic Relations between Türkiye and the UAE, but we also embrace the opportunities and potential that lie ahead for our enduring partnership.

Türkiye signed over $50 billion worth of deals during the recent visit of President Recep Tayyip Erdogan in July. How do you see this development to promote bilateral relations?

During President Recep Tayyip Erdogan's recent visit in July, Türkiye has successfully secured deals valued at over $50 billion. This development has significantly enhanced bilateral relations between Türkiye and the UAE, elevating their partnership to the level of strategic importance. Notably, the establishment of the High Level Strategic Council, to be jointly led by the two Presidents, marks a pivotal step in strengthening the relationship between the two countries.

Both nations have worked closely and diligently during the preparatory phase of these agreements. We have identified mutually beneficial investment opportunities in priority sectors and signed agreements in various fields such as export financing, earthquake bonds, energy, defense, infrastructure, technology, and banking.

With the signing of these agreements, Türkiye and the UAE have consolidated their bilateral relations, propelling them towards a strategic partnership. It is our firm belief that these agreements will further strengthen the bond between Türkiye and the UAE.

What new initiatives have you taken to further strengthen trade and investment ties between the two countries? Any major deal is in the pipeline?

There is a thriving trade partnership and a significant increase in investment and business volume between our country and the UAE. Last year, our bilateral foreign trade reached a remarkable $8 billion, highlighting the strength of our economic ties. Furthermore, contracting services play a crucial role in fostering economic activities between our nations. To date, our contractors have successfully undertaken 141 projects in the UAE, with a total value of approximately $13 billion. These projects span various sectors, including housing, tourism, and infrastructure development such as airports, railways, and highways.

We are proud to have achieved numerous successful ventures, demonstrating the expertise and capabilities of our companies. Our shared commitment to enhancing mutual investments and improving the investment environment remains a top priority. In the past two years alone, we have signed 40 bilateral agreements. Notably the most important agreements were reached during the visit of our President n July, amounting to an impressive $50.7 billion.

These achievements reflect the dedication and collaboration between our countries, paving the way for continued growth and prosperity. We look forward to further strengthening our economic partnership and exploring new avenues of cooperation in the future.

What are the most important sectors in bilateral trade at present and which other industries are you planning to explore in the coming years?

When considering the sectors that have gained significance, particularly in the post-pandemic era, it is evident that e-commerce, information and communication technologies, logistics, health, agriculture and food sectors have experienced notable growth. We also see a potential for collaboration between the two countries in these areas.

In addition to the aforementioned, there are numerous areas for collaboration, including mutual investments, financial technologies, construction, tourism, renewables, science, civil aviation, cyber security and food security.

Türkiye's strategic location positions it as a regional energy hub, with significant renewable energy potential. Therefore, we place great importance on expanding cooperation in the field of energy and are ready to facilitate collaboration between relevant companies and authorities in the renewable energy sector. The signing of the Agreement on Strategic Partnership in the Fields of Energy and Natural Resources during our President’s visit in July is a testament to this fact and reflects the interest on both sides to increase cooperation in the field of energy.

The UAE's pursuit of increasing its renewable energy mix aligns with the rising share of energy and infrastructure projects. Turkish construction companies have expressed interest in participating in these projects. Consequently, we aim to strengthen our relations with UAE companies in the field of renewables.

What is the present strength of the Turkish companies in the UAE and what is your plan to increase this number to boost bilateral trade?

Turkish companies have been actively investing in the UAE market for more than a decade, with a cumulative investment of $720 million. We take pride in the significant investments made by Turkish companies in various sectors such as hospitality, food and beverage, retail, and construction.

Looking ahead, we aim to further enhance our investment presence in the UAE, particularly in the areas of logistics, finance, renewable energy, and infrastructure. This is made possible by the UAE's favorable investment environment, which offers numerous incentives for Turkish companies to leverage and benefit from.

The UAE-Türkiye agreed a $5 billion currency swap deal last year to strengthen the lira. How do you describe its impact on bilateral trade, and do you have a plan to increase the limit?

Türkiye places significant emphasis on enhancing and solidifying economic, financial, and political relations with its partner nations. One effective approach to achieve this objective is through the signing of swap agreements. Such agreements not only bolster bilateral trade and investments but also promote the use of local currencies in trade, while also sending positive signals to financial markets.

Given the strong fraternal ties and prominent partnership between Türkiye and the UAE, the two countries have signed a swap agreement to further strengthen their existing relationship. In the first eight months of 2023, the trade volume between our nations has shown growth compared to the same period in 2022. The swap agreement will provide additional support in enhancing trade relations. The possibility of increasing the existing limit can be considered by the central banks of Türkiye and the UAE. Any developments regarding this matter will be duly announced to the public by our respective central banks.

What are the foreign investment trends that will strengthen the Turkish economy in coming years?

As a natural bridge between East and West and the North-South axes, Türkiye is an efficient and cost-effective hub to major markets, offering easy access to a combined population of 1.3 billion people and a GDP of $28 trillion, all within a four-hour flight radius. Türkiye has demonstrated outstanding economic growth, with an average annual growth rate of 5.4 per cent over the last 20 years, moving from the 18th up to the 11th largest economy in purchasing power parity terms in the world within the same period. With this remarkable growth rate, Türkiye has surpassed peer countries in the region that are grouped in terms of attracting FDI. Furthermore, according to the OECD, Türkiye is expected to maintain this growth momentum, and will be the 10th biggest economy in 2026, and the 5th largest economy in the world by 2052.

Besides, Türkiye is an important hub of attraction for international investors with its location, modern logistics infrastructure, liberal foreign investment law, incentive packages, broad production potentials, and skilled and dedicated labor force. Türkiye offers investors a strategic advantage that enables them to overcome barriers in international trade, thanks to the Customs Union signed with the EU and Free Trade Agreements (FTAs) with 28 different countries worldwide. As a result, investors in Türkiye enjoy unrestricted access to a wide market.

Türkiye has successfully completed a significant amount of investment in the transportation, logistics and communication infrastructure over the last two decades. With continuous progress in road infrastructure, Türkiye offers one of the best highway networks in the region.

Türkiye has tremendously improved its airport infrastructure. The number of passengers in the airway sector has gone up by almost tenfold thanks to the number of airports doubled in the same period. This progress has yielded remarkable results such as Istanbul Airport ranks first in Europe and seventh in the world by passenger traffic in 2022; at the same time Antalya Airport ranks 10th in Europe and 38th in the world; and İstanbul Sabiha Gökçen ranks 11th in Europe and 40th in the world.

Maritime sectors have witnessed eye-catching progress as well. The increase in freight handling reached 344.9 tons per year, and the number of international ports increased from 152 in 2003 to 217 in 2023. Thanks to the progress seen in the maritime sector, the port clusters in Türkiye offer invaluable trade opportunities to investors.

Türkiye is committed to transforming its rail transport infrastructure as well. Türkiye has put high-speed railways into effect, spanning 1,213 km so far and aims to enlarge it to 8,293 km which is equivalent to nearly sevenfold increase by 2035.

Türkiye has been scaling up and transforming the energy infrastructure. About 73 per cent of the world’s oil and gas reserves are in the surrounding regions. With a total installed capacity of 104GW by end-2022, Türkiye stands as the sixth largest electricity market in Europe. The share of private sector in electricity generation went up from 40 per cent in 2002 to 85 per cent in 2022. The share of renewables in total installed capacity rose from 33.4 per cent in 2005 to 54 per cent in 2022. Türkiye aims to raise its installed power capacity to 190GW and increase the share of renewables to 65 percent by 2035. Türkiye has installed strategic Floating Storage and Regasification Units (FSRU) and Underground Storage Facilities, and more are underway to reach the storage capacity equal to 20 per cent of annual consumption.

Türkiye holds the sixth spot in energy productivity in the world according to data provided by the International Energy Agency. In addition to offering a large and green energy capacity, higher energy productivity of Türkiye draws attention of potential investors. While ranking 30th in the Green Complexity Index in the world (2020), Türkiye ranks 6th in the Potential Green Complexity Index in the world. This indicator proves the potential of manufacturing capabilities that can swiftly adapt to green economy conditions and that enables Türkiye to become a leading green manufacturing hub in the world.

To catch up the train of digitalization phenomenon transforming economies in the world, Türkiye has been enhancing ICT infrastructure. Fixed and mobile broadband subscriptions in Türkiye have exceeded 90 million in 2022 which accounts for an impressive penetration rate of 104 per cent. As of second quarter-2022, the length of fiber-optic cables reached 488km serving 5.2 million subscribers. With a high smartphone possession rate of 70 per cent, Türkiye ranks 14th in the world.

With the principal contribution and boost from the progress materialized in the infrastructure and economic development, Türkiye has successfully moved up the ladder of global value chain participation, from the cluster of countries classified as providing limited manufacturing to that providing advanced manufacturing and services. This progress has elevated Türkiye as one of the most attractive FDI destinations, and its attractiveness has further increased in the post-pandemic world.

The volume and range of products exported have increased tremendously, reflecting the expanding capacity, and advancing quality of the real sector in Türkiye in the last 20 years. Total export volume increased by almost sevenfold from $36 billion to $254 billion, and the number of products with export value over $1 billion increased by almost sixfold from 9 to 53. The progress exhibited in export terms underscores the increasing significance of Türkiye in the international production network and global value chains. With approximately $255 billion worth of exports in 2022, Türkiye achieved an all-time high in history.

The geostrategic location of Türkiye not only attracts international investors for manufacturing and exporting but also for conducting high-quality services. Well-known multinationals such as Boeing, Unilever, GE, Bosh, Cargill, Ford, to name just a few, have established R&D centres, training centers, IT centers and regional headquarters in Türkiye, engaging in high value-added services.

While witnessing a steady growth in the domestic ICT market, Türkiye has been penetrating international ICT markets, which consists of service, software, hardware, and equipment subsectors. Total exports in the ICT sector from Türkiye have more than doubled from $655 million in 2014 to $1.8 billion in 2022. There are currently 213 thousand employees in the ICT sector, 49 per cent of which are R&D personnel. Türkiye is home to over 120 thousand professional software developers, and in 2021 Türkiye launched the one million+ Software Developer Program to increase the number. Owing to the dynamic and vibrant outlook, large-sized local and international companies play a major role in the ICT ecosystem of Türkiye. In addition, Türkiye has laid the foundation of a strong R&D and technology ecosystem, and already started to witness the positive outcomes.

There are 86 technoparks in operation and an additional 12 are underway. In the technoparks,

1. around 9,500 companies are operating, five per cent of which are international companies,

2. 95 thousand employment is generated,

3. around 2,000 companies are partnering with academia.

Besides, 1,285 R&D Centres are operational in Türkiye,

4. 15 per cent of which is international companies, and

5. Altogether 79 thousand employment is created.

6. Moreover, there are 10 universities in the top 100 in the QS World University Rankings of 2022.

Türkiye’s Gross Expenditure on R&D (GERD) accounts for one per cent of GDP. With this performance, Türkiye ranks 28th in the world in terms of GERD that is financed by the private sector.

Also, the favourable regulations within Türkiye’s R&D ecosystem have enabled Türkiye to thrive in the technology-based entrepreneurship ecosystem and foster innovation-driven growth. This is evidenced by a notable leap in the Global Innovation Index ranking, from 49th in 2019 to 37th in 2022. Additionally, Türkiye holds the 4th position among 36 upper-middle-income economies, offering a more equitable assessment when considering Türkiye’s performance relative to its peer economies.

Türkiye has made outstanding progress in the startup ecosystem, contributing significantly to attracting more international investors to the sector. More specifically, the number and value of deal activities supporting early- stage startups have increased tremendously. Fintech, Software as a Service, Artificial Intelligence, Game, e-commerce, and Grocery Delivery are the top funded verticals in the ecosystem so far. The ecosystem in Türkiye has given birth to two decacorns which are “getir” and “trendyol”, and four unicorns which are “peak”, “dream”, “Insider” and “hepsiburada”. It is highly expected that more success stories will emerge soon in the startup ecosystem of Türkiye. Also, Istanbul is ranked among the top 15 in the world among the 100 best emerging ecosystems for startups.

Offering a comprehensive ecosystem that meets the diverse needs and expectations of international investors has transformed Türkiye into a focal point for Foreign Direct Investment (FDI) in the region. Türkiye has attracted over $255 billion in FDI since 2003, and currently, approximately 80 thousand international companies are engaged in economic activities within its borders. This remarkable progress has positioned Türkiye ahead of most peer countries compared to the period before 2003. Also, Türkiye now accounts for around one per cent of the total global FDI.

How will the improved bilateral ties contribute to regional peace and enhance defence cooperation?

Türkiye and the UAE play significant roles in promoting peace and stability not only within our region but also on a global scale. The strengthening relations between our countries across various levels and the increased cooperation in diverse fields serve as a remarkable example of mutual understanding and contribute significantly to the overall efforts in maintaining peace and security.

The defence cooperation between Türkiye and the UAE continues to grow stronger with each passing day, and there is immense potential for collaboration in the defense industry. In 2022, Turkish defense exports reached a global value of $4.5 billion, with the UAE being the leading destination in the Middle East and the second globally. The active participation of Turkish defense industry companies in events like IDEX and NAVDEX Fairs, along with the notable presence of the UAE in TEKNOFEST and IDEF, further highlight the promising opportunities in this field.

How do you see tourism potential in the UAE for Turkish citizens and vice versa?

Transportation between Türkiye and the UAE is convenient and straightforward, with direct flights allowing for a travel time of approximately 4-5 hours. We are proud to offer a seamless experience for guests who depart in the morning and arrive in our country by noon.

Currently, there are eight airline companies operating a total of 153 weekly flights between Türkiye and the UAE. Turkish Airlines, in particular, operates eleven weekly flights to Abu Dhabi International Airport, thirty-three weekly flights to Dubai International Airport, and four weekly flights to Sharjah. Moreover, during the summer season, direct flights to popular destinations such as Trabzon and Bodrum are scheduled to cater to the high demand from tourists from the UAE.

Türkiye is highly regarded as a health tourism destination for Arab and Gulf countries, and we prioritize meeting the demands and needs of the health tourism sector. In addition to health tourism, our country is renowned for its summer and winter tourism offerings.

I would be remissed if I fail to mention the positive impact of our growing relations with the UAE, as well as the role of the Turkish TV series sector in attracting tourists from both countries. Our TV series garner immense success and reach over 600 million viewers in 152 countries. Starting in the Middle East and North Africa region, including the UAE, Turkish TV series have gained worldwide popularity, capturing the interest of countries such as Chile, China, Russia, and India. Furthermore, we are delighted to learn that various Turkish productions are being adapted and filmed in the UAE, further contributing to our joy.

— muzaffarrizvi@khaleejtimes.com

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