Turkey – The New Production Powerhouse

  • Date: 19/11/2013
Turkey – The New Production Powerhouse

Andrew Kemp, Regional Director, EMEA looks at the growing economy of Turkey and the ramifications for freight transport operators.  He assesses recent regulatory developments and how the conflict in Syria is affecting the country’s burgeoning export drive.

With an average annual growth rate of exports between 2005 and 2010 of 11.8%, Turkey has a strong claim when it comes to economies that have increasing influence over global trade. Indeed the equivalent growth rate for the BRIC nations was 14.8%.  Of course, in common with the world as a whole Turkish development was arrested, and exports went into decline, during the recession. However, Turkey is now once more showing signs of an export-driven recovery.

  • The first half of this year saw a year-on-year increase in exports of 2.5%, and imports are also on the rise with year-to-date figures to the end of September showing an increase of nearly 6%.  
  • In terms of the effect on freight transport operations, we saw container throughput at Turkish ports rise significantly from 2011 to 2012. 
  • Istanbul increased by nearly half a million TEUs to over 3 million and Mersin increased volumes by 11% over the same period*. 

Of course, as well as transport by sea, a significant amount of Turkish import/export trade moves over land to Western Europe and the Middle East

The extended risk burden

It is natural that such volume increases will expose transport operators to greater risk, but TT Club are also finding that the type and range of services that operators, particularly freight forwarders, logistics service providers and warehouse operators, are now offering, is also expanding their liability.  In some cases operators are unaware of their extended risk burden. 

Turkish freight companies, like fellow operators in other regions, must take care when agreeing to contracts covering extended services.  Many multi-national retailers and manufacturers who are importing/exporting to Turkey are insisting that logistics service suppliers take full responsibility for loss or damage to goods they are transporting, storing or handling.  Often this creates an onerous liability for the operator.  TT Club advises its insured parties to make careful checks of contractual clauses and take the advice of their insurance provider before agreeing or suggesting clausal alternations.

Turkish Commerical Code

In Turkey there has been a regulatory change that does however help make the legal position with regard to liability clearer.  This is a result of the New Turkish Commercial Code that came into force in July last year.  The Code grants contractual parties the right to use Standard Terms for transport contracts and insurance policies as is common practice in Western markets.  These can assist transport operators in limiting their liability in accordance with international conventions.  Prior to the Code coming into effect it was difficult for transport operators to invoke these conditions in Turkish courts in cases of dispute resolution.

The main aim of the Code is to facilitate transport companies, and indeed insurers, wishing to invest in the Turkish market and operate services.  In this regard it has been successful.  The Code, which is very comprehensive, covering all forms of business law not just transport and insurance, is also part of the state’s efforts to be granted membership of the EU. 

War in Syria

In this respect international freight transport is being made easier for those involved in the Turkish market but the civil war in Syria is making things more difficult.  In 2010 an estimated 22% of Turkish exports were bound for the Arabian Gulf states, the bulk of them transiting through Syria.  Since March 2011 this routing has almost ceased to function. 

Two of the alternative routings involve additional costs.  Transport by road through Iraq incurs extra insurance premiums to cover War Risk and the sea-route via the Suez Canal can add up to two weeks to a cargo’s transit time, making it a poor option in particular for perishable goods. Some operators are therefore resorting to using road trailers on ro-ro vessels to Haifa in Israel from where they continue by road south through Jordan and on into Saudi Arabia.  This route also adds time and expense to the delivery of Turkish exports.

So Turkey and its trade potential has much in its favour.  However, as with any sort of economic development in the world today, it also has its risks.  Risk assessment, management and the mitigation of loss or damage are fundamental tenets of TT Club’s business philosophy and we will continue to guide and advise our Members as the challenges of international trade remain as dynamic as ever.

*Sources: Trade growth statistics - World Bank.  Port volumes - Containerisation International. Exports to Arabian Gulf state – Jordan Business Magazine

Article Published in ITJ – November 2013

Through Transport Mutual Insurance Association Limited and TT Club Mutual Insurance Limited, trading as the TT Club. TT Club Mutual Insurance Limited, registered in the UK (Company number: 02657093) is authorised by the Prudential Regulation Authority and regulated in the UK by the Financial Conduct Authority and Prudential Regulation Authority. In Hong Kong, TT Club Mutual Insurance Limited is authorised and regulated by the Hong Kong Insurance Authority, in Singapore by the Monetary Authority of Singapore and in Australia by the Australian Prudential Regulation Authority. In the United States, TT Club Mutual Insurance Limited is approved as a surplus lines insurer in all states and is accessible through properly licensed surplus lines brokers. The registered offices are: 90 Fenchurch Street, London, EC3M 4ST.

Through Transport Mutual Insurance Association Limited, registered in Bermuda (Company number: 1750) is authorised and regulated in Bermuda by the Bermuda Monetary Authority. 

The UK VAT Identification number for Through Transport Mutual Insurance Association Limited is: GB 564 5244 35 and for TT Club Mutual Insurance Limited is: GB 564 3375 30. The Italian VAT Identification number for TT Club Mutual Ltd is: 03627210101.

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