Turbocharged growth for Turkey as it prepares to achieve its 2023 vision

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Erstwhile Turkish Prime Minister Recep Tayyip Erdogan had set out on an ambitious mission to make Turkey the world’s tenth largest economy by 2023 - when the nation will hold both a presidential election and celebrate the country’s centennial. The transportation and logistics sector, one of the six economic pillars supporting this 2023 vision, has been instrumental to the nation’s growth and progress.  

Even as the pandemic ravaged Turkey, the $736 billion economy outperformed all emerging markets and its G-20 peers, except China, in 2020. Turkey is already the world’s 17th largest economy by GDP and would probably be the sixth largest in the European Union if the nation’s membership ambitions are realised. 

Going by the country’s 2023 vision, air freight has played a crucial role in Turkey’s ambitious programme to be the world’s tenth largest economy. Turkey currently has 21 active free trade agreements (FTAs), including its very first trade deal with the European Economic Area in 1991 and the most recent one with the United Kingdom, which entered into force on 1 January 2021. 

In 2020, the pandemic plunged Turkey's volume of exports by an unprecedented rate of 17.8 percent whereas its imports contracted by 6.4 percent. However, the new year  in February 2021, Turkish exports hit an all-time monthly high for the third consecutive month, the country’s trade minister Ruhsar Pekcan announced. Sales surged 9.6 percent year-on-year to over $16 billion in the month. Imports rose 9.8 percent to $19.4 billion, bringing the trade deficit to $3.4 billion, data showed. The export-to-import coverage ratio was 82.7 percent this February, the minister noted.

Going forward, Turkish exports are forecast to rebound by 26.5 percent in 2021 with its imports projected to rise at a slower rate at 6 percent, according to data released by the International Monetary Fund. Turkish Exporters' Assembly (TIM) Chairperson Ismail Gülle said now that the country has renewed records in the first two months of the year, they believe a year-end target of $184 billion could be achieved and even exceeded.

While Turkish airfreight volumes account for around one per cent of exports, it remains an important facilitator for Turkey’s industrial base, which includes the sizeable textile industry, with a near 29 per cent share of the country’s total export volumes by all modes.

The last year has paid off well for Turkish Cargo, the cargo arm of the nation’s flag carrier Turkish Airlines, which handles over 5 percent of global freight movement. The airline has also grown from the 8th largest cargo airline to the 6th in the last few months, according to CAPA, signaling that its planning has been working out.

Speaking during Cargo Talks, an online event hosted by Turkish Cargo, the airline’s chief cargo officer Turhan Ozen revealed that last year, its cargo volumes had witnessed an increase to 6.7 billion freight tonne kilometres (FTKs) from 6.6 billion FTK in 2019, despite the overall depressed market. 

This comes as the airline utilised 50 of its passenger aircraft for cargo operations, as well as its 25 freighters. The carrier’s market share, meanwhile, increased from 3.7 percent in 2019 to 4.7 percent last year.

Our facility, SmartIST, is built to reach 4 million tonnes of annual capacity when all phases are completed. By moving into SmartIST, we will also complete our transition to a single hub system, and we will provide our customers with [shorter] connection times and better service quality.
Turhan Ozen, Turkish Cargo

During the presentation, Ozen outlined several initiatives that he hopes will help the carrier continue to grow in 2021 and revealed its target of becoming one of the top three cargo carriers in the world.

The carrier will move all operations over to its new facility, named SmartIST, at Istanbul Airport by summer of this year. At the moment, the airline’s cargo operations are split between Istanbul and Ataturk airports, with cargo needing to be transferred between the two. “Our facility, SmartIST, is built to reach 4 million tonnes of annual capacity when all phases are completed,” said Ozen.

“By moving into SmartIST, we will also complete our transition to a single hub system, and we will provide our customers with [shorter] connection times and better service quality. In SmartIST, we aim to use modern technology such as automated storage systems, 3D ULD planning and unmanned ground vehicles and integrate them fully into warehouse management systems and work process,” he added.

While the industry freight tonne-kilometers declined by almost 11 percent in 2020 according to the IATA, Turkish Cargo increased its market share by adding almost 1 percent FTK during the same period, especially December was a productive month with an 11% increase in FTK. With increasing both its FTKs and unit revenues, the airline achieved market share increase of 1 percentage point in FTK. 

Meanwhile, Turkish carrier MNG Airlines and low cost airline Pegasus have been helping to meet the demands of companies who are both importing and exporting, from its hubs in Turkey — Istanbul Sabiha Gökçen Airport, and Izmir and Antalya airports, with their cargo flights to domestic and international destinations in their flight network In 2018, Turkey’s mega Istanbul Airport was inaugurated and has proven itself a global hub in its first year already. The scale of cargo operations will surge with the completion of new cargo terminal in Istanbul Airport. While the total cargo capacity in Ataturk Airport is at 1.4 million tonnes per year, Istanbul Airport's yearly cargo capacity will be at 2.8 million tonnes after the completion of the first phase. Turkish Cargo's SmartIST facility in the Istanbul Airport will have a closed area of 340,000 square meters and an annual capacity of 4 million tonnes of cargo with the completion of the second phase. And the second phase is planned to be completed in 2024. SmartIST consists of three crucial elements: first, automation and optimization, which includes robotic process automation and augmented reality technology; second, special cargo services which enable the shipment of temperature-sensitive cargo and animals; third, design, which contains direct connection to the freighters. 

By 2023, Istanbul is likely to be ranked fourth biggest cargo hub in the world and the biggest in Europe in terms of annual cargo handling capacity. 

Logistics centers near completion

Turkey’s plans to establish logistics centers in strategic areas in Africa, the Americas, Europe and the Far East are on the verge of completion.

The centers aim to enable Turkish goods to reach customers in foreign markets in the fastest way and at affordable costs, Ruhsar Pekcan, the country’s trade minister said in a statement.

These logistics centers are expected to double the country’s exports to the regions where they are established and will support its exporters in distant markets.

Some 1,538 firms have made their first exports ever in February, carrying out around $70.48 million worth of sales. A total of 40,616 companies made exports in the month.

With logistics centers, Turkish products will be able to reach new markets more easily. These centers, which will increase Turkey's competitiveness in international markets, will serve as a distribution center, and sustainable export growth will be achieved
Ruhsar Pekcan, Minister of Trade, Turkey

These centers will be provided with a $100,000 annual support for logistics expenses, such as customs clearance, inventory management and storage. These logistics centers covered by the ministry will be supported for five years, and those with an average capacity utilization rate of at least 50 percent in the last three years will be given an additional period of up to five years. The centers will consist of areas that provide storage, loading and unloading, handling, shipment, cargo unification and division services.

“With logistics centers, Turkish products will be able to reach new markets more easily. These centers, which will increase Turkey's competitiveness in international markets, will serve as a distribution center, and sustainable export growth will be achieved to these regions,” Pekcan said.

The centers will also provide services and support that Turkish e-commerce enterprises may need in terms of logistics, the minister added.

“In addition, the centers will play an important role in transforming e-commerce initiatives, whose share in global trade is rapidly growing, into successful investments by increasing their logistics capabilities,” Pekcan said. “From this point of view, the centers will also play an important role in developing and accelerating our country's e-exports with digitized solutions.”

Meanwhile, German logistics giant Deutsche Post DHL Group recently announced that it will continue to invest in Turkey. “We are investing 135 million euros to construct a highly advanced operation center at the new Istanbul Airport. We are ready to grow our business in Turkey and believe that there is a great opportunity to support companies in Turkey to grow and to increase exports,” Frank Appel told Turkish broadcaster Bloomberg HT. “We will definitely continue our significant investments in the next years and have more service centers and new warehouses,” he added.

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