The export volume of Turkey’s free zones has remained fairly stable over the past half decade. What steps can Adana Yumurtalik Free Zone take to increase its annual export volume going forward?
Adana Yumurtalik Free Zone has been active since 1986, but it has made a leap forward over the past decade. Between 1995 and May 2016, we reached approximately $3.5 billion USD in trade volume. Despite an overall decrease in Turkish trade zones, our free zone remains stable. As of May 2016, our trade annual volume is $198 million; it was also around $198 million in 2015, which means our free zone is stable. The biggest reason for the current decline in trade volume is the decreasing commodity prices all around the world. Otherwise, our free zones continue to work at full capacity and investments have increased. In Adana Yumurtalik Free Zone we increased our number of investors by 24% over the past year. Because of the decrease in commodity prices our trading volume stayed the same. Let me give an example. One of our clients used to export a product with a rate of $65 / tonne in 2015; now the export rate of the same product is $27 / tonne. This is the same all around the world. Yet we have more opportunity to grow in Adana Yumurtalik Free Zone, as we have land availability for investment. As the global economy improves we will see an increase in commodity prices and trade volumes will likewise increase.
What sectors do you see as growth areas that are prime for investment in Adana Yumurtalik Free Zone? What kinds of companies do you envision taking advantage of new investment opportunities?
We are located in the eastern Mediterranean. It is close to the Gulf, by way of Egypt’s Suez Canal, and is also connected to the entire Mediterranean region, the Middle East, and Eurasia. We have hosted various sectors. Up until the 2000s, when maritime industry, in particular shipbuilding, was quite strong, we had this industry in our free zone. But shortly after, we realized it was not sustainable here, so we changed directions and went after new potential investors. Today, we see that chemicals and petrochemicals are very appropriate for our region, as Adana Yumurtalik Free Zone is very convenient for these types of investments given the relevant industries within its reach. There is a growing industry in chemicals/petrochemicals and their end products in Gaziantep, Kahramanmaras, Kayseri, Osmaniye, Adana, and Konya. Investments in our free zone in the last ten years both helped to decrease the foreign trade deficit and bring new industries to Turkey, such as polystyrene. Today, we have Turkey’s highest capacity for polystyrene in our free zone. We are building a second plant to be opened at the end of 2016. So we will be leading the production of polymers and plastics. Raw material for these products come from Gulf countries, which makes our location favourable. We have another advantage. We are integrated with Toros Ceyhan Terminal Port, which is adjacent to us, through the pipeline, giving us the logistical advantage of using this port as a port of the free zone. Raw materials are not carried inland, so goods are provided with optimum conditions. Chemicals and petrochemicals are thus absolutely a priority for our free zone. We are becoming a production hub for these industries.
What is Adana Yumurtalik Free Zone’s role in adding downstream value to petrochemical products in Turkey? Does Adana Yumurtalik aim primarily to facilitate value addition to foreign petrochemicals in order to export downstream products to international markets, or to support the Turkish upstream industry?
The Ceyhan region is special in the sense that it will become an important energy transit zone in the coming years. Iraq’s Kirkuk – Yumurtalik pipeline has been working for 40 years. There is also the Baku-Ceyhan pipeline. After the issues in Iraq, Syria, and in the Middle East in general are resolved positively for all countries, energy from these countries will be transferred to international markets through Turkey, and particularly our region. This includes new energy sources discovered in the eastern Mediterranean as well. In the near future, Adana Yumurtalik Free Zone will become a hub where these primary energy products are transferred through and at the same time where production is also developed. Our free zone aims to convert the primary energy sources to produce end products that are used by industries. Some of our firms here are partnering with international companies to bring in know-how and technology transfer. Today, globally, the end users’ health and environmental cautions are the priority when producing goods. We will see more health-friendly and biologically friendly, sophisticated products in goods we use, wear, and eat. We see firms with this type of production coming to our free zone. Our free zone is also the most secure zone. Because of the big energy transfer going through, internationally our free zone is protected and secured. Despite all the issues in the Middle East, nothing disturbing has ever occurred here. This is important for our growth and we’ll see bigger potential as things get better regionally.
Access to cheap energy for fuel and feedstock is one of the key elements sought by investors in the petrochemical industry. How can Adana Yumurtalik Free Zone meet companies’ energy needs?
Energy costs for a company are important anywhere in Turkey. We have conducted studies about reducing energy costs. We made investments in the free zone after seeing the potential of reducing energy costs. New energy lines were established and we brought new energy systems such as 154KW to provide the optimum tariff for our investors. Another project we are still working on with our ministry concerns natural gas. There is a natural gas line at a 14 km distance, and we will have pipeline connections for our free zone soon. These are efforts that we are undertaking as the operator. The government, on the other hand, is focusing on taking steps to provide energy at a lower cost to investors, such as the option of providing natural gas from Iraq and eastern Mediterranean.
Does Adana Yumurtalik Free Zone have a shortterm and longterm strategy for attracting investment to its heavy industries such as petrochemicals, chemicals, and shipyards?
We have long-term and short-term strategic plans. With the time extension given to complete the necessary infrastructure, we will be extended another ten years for operation. We are working with Deloitte and will present our studies to the ministry. The most important part of these studies concerns decreasing energy costs and encouraging petrochemical investment. The new free zone law will bring new R&D incentives and important investment incentives. Together with government initiatives, our strategic plans as the operator will focus on chemicals, petrochemicals, food products, agriculture, and mining as target sectors.
Adana Yumurtalik has 4.5 million square meters of available land space, making it an exceptionally large free zone. How can it maximise the economic potential of this space going forward?
Well, a 4.5 million square meter area is not that big, given the space needed for certain types of investments. For example, in Mersin Free Zone, where the warehousing business is very active, the area needed for the investment is not that big, a land measure of 2000 square metres would be enough. On the other hand, in Antalya Free Zone, where shipbuilding industry is active, bigger areas are needed. Yumurtalik Free Zone is envisioned as a main production base, and the area is planned as 10 million square meters. Now we are only using the first-stage area. An investor that will start producing petrochemical end products is requesting 600,000 square metres of land from us. Our smallest investor uses 10000 square metres’ area. And average-sized investments tend to use 200,000 to 250,000 square metres. Petrochemical investors ask for between 400,000 to 1,000,000 square metres. Looking at these numbers, we can say a 4.5 million square metre area can be occupied by just a couple of petrochemicals investments. Therefore, it is not a large space for the types of investments we are getting and targeting. We are one of a kind in this sense in Turkey, because you can only get these types of large land investments if you make the land and infrastructure ready.
What kinds of technology transfer would Adana Yumurtalik Free Zone like to attract from foreign companies?
In petrochemicals, we are developing products that are currently imported to Turkey and not produced locally. This means we target industries that will produce the types of products that will reduce import dependence, add value, and even be exported to some neighbouring countries. The types of products in chemicals and petrochemicals are evolving as the industries using these products undergo changes. They have started to use different materials and products for their needs. For example, firms producing plastic products that are composed of materials dangerous to human health and the environment have a much smaller market share now. So those firms are also beginning to produce more high-end products. Firms producing these high-end products will be coming to our free zone and bringing innovation and technology transfer. Our discussions with these types of firms indicate as much. Chemicals and petrochemicals by nature evolve very rapidly when it comes to technology.
Do any barriers to entry exist for foreign companies looking to invest in Adana Yumurtalik Free Zone?
As I mentioned earlier, there is no political or economic barrier. Looking at Turkey’s growth rate, expectations, and future, trade is growing with virtually all countries. Encouraging foreign investment in Turkey only depends on rules and regulations. Turkey has a serious amount of foreign investment. When we look at Turkey’s imports and exports, we see that the automotive sector is the most important for our imports. All of the automotive sector producers are foreign investors. This means there is no barrier for foreign investors to come and produce in Turkey. When it comes to free zones, we need regulations that are attractive, sustainable, open to progress and most importantly stable for foreign investors. Investors should not question their investment with a sudden law change after five years. We should target this type of understanding, concept, and economic climate. And as free zone operators, we give support to our ministry and put forward our best efforts to have sustainable and developed laws and regulations.
Can you define the kind of business community that investors can expect to find in Adana Yumurtalik Free Zone, and the organisation and services provided to them?
We want investors to focus only on their business: producing and exporting. We provide all the services of human resources, healthcare, waste management, food supply, logistical services, resolution of disputes with the management, land selection, zoning plans, new investment assessment and approval, cheap energy supply, infrastructure, etc. We do not want investors to deal with bureaucracy. This is why we are there as the operator, to come up with all these solutions. Now our logistical means are increasing. We have enhanced the pipelines with the free zone and Toros Terminal. We are helping some of our investors who will build their own ports. With those ports, logistics will also develop further. We function as a solution provider, making things easier for investors. We will continue to do just that so that they can focus on production.
In terms of its geographic location, what are the strategic advantages of Adana Yumurtalik Free Zone in terms of accessing important international markets? Can you provide some information or examples of prominent trade routes?
Ceyhan is at one of the most important points in the eastern Mediterranean, connected to global trade routes at an optimum level. Its importance as a neighbouring region to energy-producing countries likewise cannot be underestimated. Considering the increasing trade in the Asia Pacific region, our proximity to the Suez Canal enables our goods to be shipped and reach the Asia Pacific market very efficiently. Secondly, looking at the surrounding region, if we think of Ceyhan as the top side of a compass, that compass includes all of Eurasia, a big portion of Europe, North Africa, the Middle East, and the Gulf. All these regions are energy-rich but also have growing young populations and thus high consumption. There are both producing countries and consuming countries in these regions. Our free zone and country will play an important role in this sense, through supplying raw materials from energy-rich countries, doing the production, and sending the produced goods to countries with high consumption. With sanctions being lifted on Iran, an increase in trade between Turkey and Caucasian and Asian countries, and our faith in resolution of conflicts in Iraq and Syria, new brand opportunities will come to light. This latent economic potential is one important reason for investors to come to this region.
What are the soft incentives, such as access to skilled local labour, language training facilities, and a positive social and family environment, that Adana Yumurtalik Free Zone provides, or could provide, to new investors?
As we take a closer look at the Adana Yumurtalik Free Zone area, meaning Adana, Osmaniye, and Hatay, both agriculture and industry are well-developed. There are good universities in the area. Most of these universities teach in English. The fact that our urbanisation is completed and that we have an educated population helps the social and economic climate of these cities. Therefore, they are receiving migration. With industries also developing, there is a growing workforce from outside the region. Just like Istanbul since the 1940s, these cities have no issues related to finding and providing an experienced, educated, multilingual workforce. In fact, there is excess labour and therefore unemployment issues. So new investments will have the no issues with workforce supply. Further, people who come and work in our free zone often decide to live in the region because of all the comforts available. We know this as the operating company, because we have our own factories in the free zone as well, and we face no problem with finding quality workforce there.