Transportation.logistics.industry

transportation logistic industry
View more...
   EMBED

Share

  • Rating

  • Date

    December 1969
  • Size

    1.2MB
  • Views

    640
  • Categories

Preview only show first 6 pages with water mark for full document please download

Transcript

DECEMBER 2009 REPUBLIC OF TURKEY PRIME MINISTRY Investment Support and Promotion Agency of Turkey TRANSPORTATION & LOGISTICS INDUSTRY REPORT JANUARY 2010 2 CONTENTS 1. Executive Summary 3 2. Sector Overview 4 2.1 Global Sector 4 2.2 Domestic Sector 5 2.2.1 Overview 5 2.2.2 Road Transport 7 2.2.3 Railway Transport 8 2.2.4 Air Transport 10 2.2.5 Maritime Transport 12 2.2.6 RoRo Transport 13 2.2.7 International Trade 13 2.3 Main Players 14 2.4 Sector Outlook and Trends 15 2.5 SWOT Analysis 16 2.6 Investment Opportunities 17 2.7 Sector Establishments and Institutions 19 LIST OF FIGURES 20 ABBREVIATIONS 21 3 1. Executive Summary The transportation and logistics sector, broadly defined to include airlines and airfreight, shipping, road and rail transport and the associated infrastructure and services, generated US$ 3.4 trillion of revenue globally in 2007. It has grown with a CAGR of 6.2% between 2003 and 2007. By 2012, the global transportation industry is forecast to reach US$ 4.5 trillion growing with a CAGR of 5.4%. 1 The share of the logistics sector (broadly defined to include all transport as above) in Turkey’s GDP is estimated between 8-12%. 2 Thus the size of the sector can be estimated as being around US$ 65-95 billion in 2008. The size of Turkish transportation & logistics industry is determined as US$ 59 billion, while the share of the logistics service supplier market is estimated as US$ 22 billion in “Turkey Logistics Industry Survey 2008”. It is also stated that the industry has tripled since 2002 while the share of logistics service suppliers has increased by only 7%, which signals an unrealized growth potential for logistics service companies. 3 The industry has grown by 20% on average in the last 5 years and the forecast size is US$ 120 billion in 2015. 4 Road transport is currently the major mode of freight and passenger transportation in Turkey: at present 95% of passengers and 90% of goods are carried by highway transport. 2 The Turkish Government intends to further modernize existing roads and construct new roads. The estimated investment cost for such modernization and construction amounts to TL 37 billion. 5 Privatization of the two Bosphorus bridges and various motorways is planned for 2010. The railway system has suffered from a legacy of past underinvestment. The Turkish government aims to modernize the railways through a range of projects, for which a budget of US$ 23.5 billion has been allocated up to 2023. 5 The flagship project is the Marmaray Project (the Rail Tube Tunnel under Bosphorus in Istanbul) where construction is well advanced and completion is planned for 2013. Another major infrastructure project is the Kars-Tbilisi-Baku railway. Turkish Airlines is the largest airline in the country and now the 4 th largest in Europe in 2009 according to passengers carried. 6 It has achieved one of the best growth rates of any airline worldwide in the past decade. Although traded on the Istanbul Stock Exchange, it is mainly State-owned, but it is included in the national privatization program. There are currently 45 airports in Turkey. These are mostly very modern, but a budget of around TL 4 billion 5 is projected for further airport modernization and construction. Turkey has a competitive advantage in maritime transport since it is surrounded by seas on three sides. By August 2008, the Turkish maritime fleet consisted of 1,631 ships and ranks 25 th in the world according to the number of ships. 2 Shipping is the most usual method of transportation for Turkey’s exports and imports, with respective shares of 46.0% and 59.1 %. Second to shipping for Turkey’s foreign trade is road transportation, with a share of 41.7 % for exports and 23.6 % for imports. 7 Air transport comes third. In addition to the shipping of foreign trade, maritime transport of individuals is also significant, especially by IDO (Istanbul Sea Buses and Fast Ferries) in the Istanbul region. Currently there are 2,000 customs clearance companies, 1,200 international road transport companies, 1,000 international maritime companies, 250 freight-forwarders and 200 bonded warehouses which offer logistics services to international trade firms. 8 1 Datamonitor, 2008 2 IGEME (Export Promotion Center of Turkey), 2009 3 Quattro Business Consulting “Turkey Logistics Industry Survey 2008” 4 Capital Magazine, 2007 5 Deloitte, Investors’ Guide Turkey, 2009 6 Association of European Airlines, 2010 Traffic Data 7 TUIK (Turkish Statistical Institute) 8 TSKB (Industrial Development Bank of Turkey), Sector Report, 2009 4 2. Sector Overview 2.1 Global Sector Logistics are a critical factor in a country’s overall foreign trading competitiveness. The importance of logistics is also increasing in BRIC as a result of the growth in their economies. In addition, the location of a country is a critical factor for logistics: countries such as Turkey can serve as a transport hub or a link between neighbouring countries. The transportation industry has experienced fluctuating growth between 2003 and 2007. Growth is expected to continue in future, but at slightly lower rates than the recent past, as shown by the yellow line in the chart below. Figure 1 – Global Transportation Industry Value With respect to geographic classification, Asia-Pacific and Americas create 35.9% and 32.4% of the total sector revenue, respectively. 9 Figure 2 - Global Transportation Industry Segmentation 9 Datamonitor, 2008 7.4% 5.9% 5.4% 6.2% 5.5% 5.5% 5.4% 5.4% 5.3% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2003 2004 2005 2006 2007 2008f 2009f 2010f 2011f 2012f Global Transportation Industry Value and Forecast $ billion % Growth U S $ b i l l i o n Source: Datamonitor f: forecast CAGR: 6.2% 48.9% 19.9% 16.8% 11.1% 3.2% Segmentation by Modes of Transport % Share by Value, 2007 Road&Rail Transportation Infrastructure Marine Airlines Air freight Source: Datamonitor Source: Datamonitor 35.9% 32.4% 31.7% Geographical Segmentation % Share by Value, 2007 Asia-Pacific Americas Europe Source: Datamonitor 5 Road Transport Industry A decline in the global road sector’s size is believed to have occurred in 2009 but the sector is expected to resume growth in 2010 since carriage by truck is often the initial and final stage of freight transport. The global road sector produced total revenues of US$ 2,308 billion in 2008, with a CAGR of 7.8% between 2004 and 2008. Competition is intense and entry barriers are low, which can be illustrated by the fragmented nature of logistics with the top 50 companies having a market share of only 33%. 10 Increasing costs due to high oil prices and new environmental measures adopted, since road transport is the largest contributor to global warming, negatively impact the margins of the road transport companies. Railroad Transport Industry After good growth between 2003 and 2007, with a CAGR of 6.3%, the growth of the railroads sector is forecasted to lose speed. The global railroads sector created US$ 472.1 billion of revenue in 2007. 10 Since expansion of the network is so capital-intensive, the rail sector is mostly constrained to operate with its existing network. However Europe and North America are working towards improving and renovating existing railway infrastructures. Air Transport Industry The global air freight sector created total revenues of US$ 100 billion in 2008, with a CAGR amounting to 5.6% between 2004 and 2008. After a rapid growth stage between 2004 and 2007 (a CAGR of 7.4%), the air freight sector grew only by 0.1% in terms of value and contracted by 0.5% in terms of volume in 2008. 10 In 2009 some airports reported extreme decreases in freight volumes due to lower frequency, merged routes and bankruptcies. Also high oil costs challenge the companies and force them to pass on such costs to customers. The global airline industry has experienced strong growth since 2003 and that growth is expected to continue in the future. The global airline industry produced US$ 429.9 billion of revenue in 2007, with a CAGR of 11.2% between 2003 and 2007. 10 Price has been becoming a dominant factor in competition between airlines, even for the business segment. The use of on-line booking enables customers to find the lowest priced ticket for their trip. Even though the intensive capital investment requirement and safety regulations are barriers to potential new entrants, low-cost competitors have managed to challenge the established airlines in recent years. Maritime Transport Industry The global maritime industry grew very fast, with a CAGR of 34.5% between 2004 and 2006 but revenues then declined by 21.4% in 2007. Further decline is expected to have occurred in 2009 but a recovery period is forecast to start towards 2013. The maritime industry earned US$ 749 billion of revenue in 2008. 10 The industry is highly capital intensive due to the cost of vessels and large cash flows required for funding working capital requirements. Moreover, expertise and technical know-how are critical factors since the international shipping regulations related to safety are strict. Competition is price based; however, companies with younger fleets can charge a premium. 2.2 Domestic Sector 2.2.1 Overview Turkey's geographical location establishes links between the East and the West which makes the transportation industry crucial for the economic development of the region. The Customs Union agreement between Turkey and the EU that came into force in 1996 and potential EU membership are important opportunities encouraging new investments in this industry. Transport is among the five major chapters already covered in Turkey’s EU accession agenda. The harmonization process with EU laws includes compliance with 10 Datamonitor, 2008 6 infrastructure, vehicles, environmental standards, the development of logistic networks and the improvement of foreign trade policies. The current transportation network in Turkey is behind EU-27 standards mainly in terms of the density of the highways, motorways and railways. The State Planning Organization has underlined this fact in their 2010 Annual Programme, which describes steps for the development of the transportation industry. Further details of the Development Programme, signalling the potential for future growth, are provided at the back of this report. Turkish logistic companies mainly serve the sectors in which most foreign trade is concentrated: these include textiles/garments, automotive, FMCG, retail and food, petrochemicals, machinery production and the construction industry. The share of construction and construction equipment has significantly increased since 2002. According to the Logistics Performance Index (“LPI”) issued by the World Bank, Turkey is improving its logistics performance. LPI is based on a survey of operators on the ground worldwide, providing feedback on the logistics friendliness of the countries in which they operate and those with which they trade. Economies are divided according to 2008 GNI per capita, calculated using the World Bank Atlas method. Turkey belongs to upper middle income group having a GNI per capita between US$ 3,856 - US$ 11,905. Turkey ranks fourth among 24 upper middle income countries. The LPIs of the top ten upper middle income countries from the study are exhibited below. Figure 3 – LPI of Top 10 Upper Middle Income Countries According to TUIK, 1.1 million people are employed in the transportation-communication and storage services in Turkey as of September 2009. The share of the transportation and logistics sector in Turkey’s GDP is estimated between 8-12%. 11 The size of Turkish transportation & logistics industry is determined as US$ 59 billion, while the share of the logistics service supplier market (Third Party Logistics) is estimated as US$ 22 billion in “Turkey Logistics Industry Survey 2008”. The industry has tripled since 2002 while the share of logistics service suppliers has only increased by 7% which signals an unrealized growth potential. 12 Freight transportation has been increasing continuously as seen in the following table. 11 IGEME (Export Promotion Center of Turkey), 2009 12 Quattro Business Consulting “Turkey Logistics Industry Survey 2008” 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.6 Estonia Argentina Latvia Poland Czech Republic Hungary Turkey Chile Malaysia South Africa LPI of Top 10 Upper Middle Income Countries Source: World Bank 7 Figure 4 - Transportation of Freight and Passenger Freight and Passenger Transportation by Modes of Transport Million 2004 2005 2006 2007 2008 Road Freight kilometers 156,853 166,831 177,399 181,330 181,935 Passenger kilometers 174,312 182,152 187,593 209,115 206,098 Maritime (1) Freight kilometers 3,929 3,477 3,830 5,189 6,001 Passenger kilometers 621 670 752 843 847 Railway Freight kilometers 9,417 9,152 9,676 9,921 10,739 Passenger kilometers 5,237 5,036 5,277 5,553 5,097 Air Transport (1) Freight kilometers 321 392 N/A N/A N/A Passenger kilometers 3,223 3,992 N/A N/A N/A Source: TUIK (1) Data does not include transport to or f rom f oreign countries. 2.2.2 Road Transport Road transport is the major mode of freight and passenger transportation in Turkey: at present 95% of passengers and 90% of goods are conveyed by highway transport. 13 The network of highways has been developed significantly and the relative importance of highways has increased. The Turkish Government intends to further modernize existing roads and construct new roads. The planned cost for modernization and construction of roads amounts to TL 37 billion. 14 Turkey is involved in the construction of the Black Sea Ring Highway, which is planned to have 7,140 kilometres of length and to pass through 12 BSEC countries. In addition, to mitigate road congestion in Istanbul, the government is considering the construction of a third Bosphorus Bridge. The two existing bridges are scheduled to be privatized. Besides construction of new roads, major roads which will be modernized are summarized below;  Denizli-Antalya Motorway 135 km  Şanlıurfa-Habur Border Gate Motorway 400 km  Ipsala-Malkara Motorway 54 km  Iskenderun-Antakya-Cilvegözü Motorway 70 km  Havsa-Malkara Motorway 87 km  Gerede-Amasya-Erzincan-Erzurum-Ağrı-Gürbulak Border Gate Motorway 1300 km  Ankara-Samsun Motorway 400 km  Trabzon-Şanlıurfa Motorway 550 km  Urfa-Diyarbakır-Gürbulak Motorway 650 km  Ankara-Pozantı Motorway 316 km  Aydın-Denizli Motorway 182 km 13 IGEME (Export Promotion Center of Turkey), 2009 14 Deloitte, Investors’ Guide Turkey, 2009 8 Figure 5 - International Road Transportation Network Length of the roads in 2008 is presented below. 97% of state and provincial roads and 87% of village roads are surfaced. 15 Figure 6 - Length of Roads 2.2.3 Railway Transport In Turkey the length of railways is 8,697 km, operated by the General Directorate of Turkish State Railways (TCDD). Since most of the railways are old, the Turkish government aims to modernize the system through various projects. A budget of US$ 23.5 billion is allocated to railway development up to 2023. 16 The Turkish Government intends to construct Ankara-Istanbul, Ankara-Konya, Ankara-Izmir and Istanbul- Bulgaria high-speed lines. It also aims to complete the Marmaray (the Rail Tube Tunnel under Bosphorus in Istanbul) Project in 2013, a major project under the Bosphorus in Istanbul which has been under construction for several years and which will connect the European side with the Asian side. The length is 76 km and the total cost is anticipated to be US$ 3 billion. 16 Another major infrastructure project is the Kars-Tbilisi-Baku railway for which construction has started in 2008. The total length of the project would reach 124 kilometres of which 92 kilometres will cross through Turkey. Once the projects are finalized, Turkey will become a connection hub among Europe, Central Asia and the Middle East. 15 TUIK (Turkish Statistical Institute) 16 Deloitte, Investors’ Guide Turkey, 2009 31,311 30,712 288,013 Lenght of Roads in 2008(km) State road Provincial road Village road Source: TUIK Source: General Directorate of Highways 9 Figure 7 - Marmaray and Kars-Tbilisi-Baku Projects Apart from the construction of new railways, the lines which will be modernized are listed below:  Halkalı-Kapıkule  Sivas-Erzincan-Erzurum-Kars,  Ankara-Izmir,  Kayseri-Şefaatli,  Bandırma-Izmir,  Konya-Mersin,  Bandırma-Bursa-Osmaneli,  Eskişehir-Antalya,  Ankara-Sivas,  Lake of Van North Passage. The World Bank approved a loan of EUR 143.7 million on June 9, 2005 to finance the first phase of the Rail Restructuring Project in Turkey. The loan agreement was signed on March 13, 2006. The project is an Adaptable Program Lending (APL) with a total cost of about US$ 450 million. 17 The overall objective of the project is to improve the financial viability, productivity, and effectiveness of railway operations. This will be achieved through separation of infrastructure from operations, increasing accountability and competitiveness in rail operations, restructuring and rationalization of passenger services, staff adjustment, as well as institutionalisation and privatization of non-core activities. Figure 8 - Railway Transportation Network 17 World Bank Source: UTIKAD Source: UTIKAD Source: UTIKAD 10 Figure 9 - Length of Railways 2.2.4 Air Transport Turkey has many modern airports that are open to international and domestic flights. The major international airports are Atatürk in Istanbul, Antalya international terminals, Esenboğa in Ankara and Adnan Menderes in Izmir. There are 45 airports, 16 of which serve for international flights. In addition to the 45 airports in Turkey, the government intends to construct new airports in Bingöl, Iğdır, Hakkari Yüksekova, Şırnak, Kütahya-Afyon- Uşak, Istanbul, Çukurova and Diyarbakır. The cost for airport modernization and construction is projected around TL 4 billion. 18 Figure 10 - Air Transportation Network Turkish Airlines is the largest airline company in the country and the only one with a significant international network. Its shares are traded on the Istanbul Stock Exchange but it is mainly owned by the Turkish State. It is included in the national privatization program. Turkish Airlines’ sales revenues increased by 26.0% in 2008 compared to 2007 and reached TL 6,123.2 million, with 78.0% derived from international flights and 22.0% from domestic flights. 18 Deloitte, Investors’ Guide Turkey, 2009 1,928 6,771 Length of Railways in 2008 (km) Electrified lines Lines not electrified Source: TUIK Source: ISPAT 11 The total number of passengers carried grew by 15.1% and reached 22.6 million in 2008. In addition, cargo carriage increased by 8.0% to 203,000 tons. 19 With deregulation and liberalization in the sector, several private airline companies have entered the market in recent years: the largest are Pegasus, Atlas Jet and Onur Air. The result has been dramatic growth, as shown in figure 11 below. The freight carried by domestic and international lines has continuously grown until 2008. However, freight volumes then declined in 2008 due to the effects of the global financial crisis. Although domestic airfreight volume is smaller than international airfreight, it is growing faster. The CAGR between 2004 and 2008 has been 7.1% for freight carried by international lines and 11.0% for freight carried by domestic lines. Figure 11 - Air Freight Transportation Figure 12 - Air Transport Statistics 19 Turkish Airlines, Annual Report, 2008 263 316 373 414 399 860 934 974 1,132 1,130 0 200 400 600 800 1,000 1,200 2004 2005 2006 2007 2008 Freight Statistics Freight carried by domestic lines Freight carried by international lines t h o u s a n d t o n n e s Source: TUIK CAGR-dom: 11.0% CAGR- int: 7.1% 14 21 29 32 34 31 35 33 38 41 34,287 38,600 42,894 40,017 41,634 - 10,000 20,000 30,000 40,000 50,000 - 10 20 30 40 50 60 70 80 2004 2005 2006 2007 2008 M i l l i o n Air Transport Statistics Number of passengers domestic lines Number of passengers international lines Seat capacity Source: TUIK 12 2.2.5 Maritime Transport Turkey has a competitive advantage in maritime transport since it is surrounded by seas on three sides with the Mediterranean, the Aegean, and the Black Sea, together with the straits of the Dardanelles and the Bosphorus. The length of Turkey’s coastal borders is 8,333 kilometres. Marine transport is mostly handled by Istanbul-Izmit, Izmir, Adana-Mersin and Samsun ports. Mersin Port Administration was privatized in 2007. The ports of Bandırma, Samsun, Derince, Iskenderun and Izmir will be privatized for 36 years in 2010. In August 2008, the Turkish maritime fleet consisted of 1,631 ships and ranks 25 th in the world by number of ships. 20 Figure 13 - Major Port Authorities in Turkey The total loading, unloading and transit volumes have been continuously increasing. Total maritime freight grew at a CAGR of 10.4% between 2004 and 2008. The unloading of goods at Turkish ports constitutes the highest volumes within the total maritime freight transportation. Figure 14 - Maritime Statistics 20 IGEME (Export Promotion Center of Turkey), 2009 Botaş İskenderun İzmir Aliağa Gemlik Kdz. Ereğli Samsun Trabzon Bandırma Karabiga Çanakkale Zonguldak Bartın Silivri Ambarlı İzmit Tekirdağ Güllük Antalya Mersin Marmara Rize Ünye İstanbul Tuzla 70,041 68,640 78,783 86,383 92,168 136,002 140,092 154,540 171,405 171,690 5,492 5,622 11,144 28,486 50,745 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 2004 2005 2006 2007 2008 Maritime Freight Handling Statistics Total Loading Total Unloading Transit Source: Prime Ministry Undersecretariat for Maritime Affairs t h o u s a n d t o n n e s Source: Prime Ministry Undersecretariat for Maritime Affairs CAGR: 10.4% Source: Turkish Undersecretariat of Maritime Affairs 13 2.2.6 RoRo Transport The RoRo lines used by Turkish companies are Haydarpaşa (Istanbul)-Trieste (Italy), Ambarlı (Istanbul)- Trieste, Zonguldak-Ukraine, Samsun-Novorossisky (Russian Federation), Trabzon-Sochi (Russian Federation), Rize-Poti (Georgia), Çeşme-Bari/Brindisi/Ancona, Mersin-Magusa, Derince-Constanta and Taşucu-Girne. 330,100 trucks/cars were carried through RoRo and 18% of road traffic was handled by RoRo services in 2008. 21 Figure 15 - RoRo Operations Figure 16 - RoRo Statistics 2.2.7 International Trade Maritime transportation is the most preferred method of transportation both in Turkey’s exports and imports, with respective shares of 46.0% and 59.1% in total. This is followed by road transportation, with a share of 41.7 % of exports and 23.6 % of imports between January and November 2009. Air transportation comes third for both exports and imports. Germany and the Benelux countries (Belgium, Netherlands and Luxembourg), are the leading locations to which logistics companies transport. The share of Germany and the Benelux countries has dropped while the East European countries and Turkic Republics became new markets for the industry. Industry players expect an increase in East European countries (especially Romania, Moldavia and Poland) and Germany in the coming years. 22 21 UTIKAD (International Freight Forwarders & Logistics Service Providers Association), 2008 22 Quattro Business Consulting “Turkey Logistics Industry Survey 2008” 263,910 274,778 291,562 348,213 330,100 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 2004 2005 2006 2007 2008 Number of Vehicles Transported by RoRo Source: Prime Ministry Undersecretariat for Maritime Affairs Source: Prime Ministry Undersecretariat for Maritime Affairs Source: UTIKAD 14 Figure 17 - Export and Import by Modes of Transport 2.3 Main Players Currently there are 2,000 customs clearance companies, 1,200 international road transport companies, 1,000 international maritime companies, 250 freight-forwarders and 200 bonded warehouses which offer logistics services to international trading companies. 23 There is excess demand for customs clearance, container transportation and bonded warehousing services in Turkey. With the restructuring processes and investments from global logistics companies, Turkish logistic companies have achieved worldwide quality standards. Major players in the Turkish transportation & logistics industry, selected according to their revenues from the 2008 Capital 500 list, are listed in the following table. Figure 18 - Main Transportation and Logistics Sector Players in Turkey Major Transportation&Logistics Companies Capital 500 Ranking Company Name Sector Location Revenue 2008 (TL million) % Change from 2007 13 Türk Hava Yolları Transportation Istanbul 6,123.2 35.4% 48 TAV Hava Limanları Transportation Istanbul 1,466.3 69.3% 92 Onur Air Taşımacılık Transportation Istanbul 834.5 1.4% 120 Pegasus Hava Taşımacılığı Transportation Istanbul 669.3 27.3% 138 THY Teknik Transportation Istanbul 615.2 3.7% 205 Istanbul Deniz Otobüsleri Transportation Istanbul 405.4 16.5% 228 Unsped Paket Servisi Logistics Istanbul 353.8 22.1% 232 Omsan Lojistik Logistics Istanbul 345.4 9.0% 242 SKY Hava Taşımacılık Transportation Antalya 336.0 42.1% 246 Ekol Lojistik Logistics Istanbul 329.9 35.9% 255 Borusan Lojistik Dağıtım Logistics Istanbul 319.9 45.2% 271 Çelebi Hava Servisi Transportation Istanbul 302.0 9.3% 290 Reysaş Lojistik Logistics Istanbul 271.3 3.5% 311 Kamil Koç Otobüs İşletmeleri Transportation Bursa 257.1 38.6% 313 Balnak Lojistik Grup Logistics Istanbul 255.9 13.9% 336 Havaş Havaalanları Yer Hizmetleri Transportation Istanbul 239.2 28.1% 346 Ceva Lojistik Logistics Istanbul 230.0 70.3% 350 Hürkuş Havayolu Taşımacılık Transportation Istanbul 228.0 N/A 376 Horoz Lojistik Logistics Istanbul 210.5 (1.3)% 384 Netlog Lojistik Hizmetleri Logistics Istanbul 205.3 15.9% 410 Mars Lojistik Logistics Istanbul 190.9 8.4% 485 Fasdat Gıda Dağıtım San. Ve Tic. Logistics Kocaeli 156.8 42.6% Source: Capital 500, 2008 23 TSKB(Industrial Development Bank of Turkey), Sector Report, 2009 46.0% 0.9% 41.7% 9.5% 1.8% Exports by mode of transport (Jan-Nov 2009) Sea Rail Road Air Other Source:TUIK 59.1% 1.2% 23.6% 8.3% 7.8% Imports by mode of transport (Jan-Nov 2009) Sea Rail Road Air Other Source: TUIK 15 2.4 Sector Outlook and Trends The industry has grown by 20% annually on average in the last 5 years and its forecasted size is US$ 120 billion by 2015. 24 The value of the logistics sector is directly related to the size of Turkey’s exports and imports. As presented in the chart below, foreign trade is expected to resume its growth, which should offer promising growth potential for logistics service suppliers. Figure 19 - Export-Import Estimates for Turkey As a result of the new projects in Turkey, combined transportation will gain more importance in the future. Turkey is also planning to construct new logistic villages in Halkalı, Köseköy, Kayseri, Samsun, Eskişehir, Balıkesir, Yenice, Erzurum, Mersin and Aydın. The current major trends in the Turkish transportation & logistics industry are as follows; In the medium term programme of 2010-2012 prepared by the State Planning Organization, future steps for the development of the transportation industry are listed as; 24 Capital Magazine, 2007 - 50.0 100.0 150.0 200.0 250.0 300.0 350.0 2005a 2006a 2007a 2008a 2009e 2010e 2011e 2012e 2013e 2014e Export and Import Estimates for Turkey Exports of goods & services Imports of goods & services Source: Economist Intelligence Unit a:actual e:estimate U S $ b n Long-term relationships aspect • Companies tend to work with a limited number of logistics companies and establish long-term relationships in order to decrease switching costs. Price based competition • The competition is based on pricing rather than service quality. The companies that are able to offer differentiated services will be the sector leaders. Expansion of e-commerce companies • Growing e-commerce industry increases trade volumes. Besides, majority of e-commerce companies are outsourcing their supply chain operations. Combined transportation • Logistics villages that unify logistics companies together have started to be established in order to develop combined transportation. Turkish Logistics Industry Trends CAGR (import): 10.2% CAGR (export): 9.8% 16  Public-private partnership models will be widely implemented for transportation infrastructure investments and traffic safety will be increased in all transport modes, with maritime safety being given priority.  Efforts to integrate the national transport network with European transport will be continued.  The existing dual carriageway infrastructure works will be completed and also the standards of existing highways will be improved.  TCDD (State railways) quality of service will be increased and high speed train passenger transport will be made more widespread. TCDD will be restructured in order to reduce its financial burden on the State.  In freight transport, priority will be given to rail and maritime transport and ports will become logistics centres that facilitate combined transport. Appropriate port areas will be determined and effective and efficient management of the ports will be ensured.  Studies will be conducted in order to determine the medium and long term capacity needs of airports. Necessary measures will be taken to promote regional air transportation. 2.5 SWOT Analysis S trengths  Geostrategic importance- Turkey is like a hub on the way from the developing Middle East and Turkic Republics to Europe  Presence of the logistic multinationals enables the local players to transfer know-how  One of the largest truck fleets in Europe and a developed road transportation industry O pportunities  Railway restructuring projects will increase efficiency  Size of the industry is significantly lower than EU countries and the market is still unsaturated  Increasing international trade  Turkey’s potential EU membership would further stimulate trade volumes  Suitable topography for the construction of new harbours W eaknesses  Price driven competition constrains the high quality service providers and negatively impacts their margins especially in trucking  Unregistered players in the sector  Modernization requirement in rail and marine infrastructure T hreats  Substantial transportation quotas, visa restrictions and custom documentation for the trucking industry  Competition with neighbouring countries, such as Greece  Intensive capital requirement 17 2.6 Investment Opportunities Below is a list of major M&A transactions by foreign investors in the Turkish transportation & logistics industry over the last decade. Deal values are in millions of US dollars. Figure 20 - Major M&A Transactions Selected M&A Transactions (2004-2010) # Acquirer Origin Target Company Date Stake Deal Value USD(m) 1 Invest AD Private Equity UAE Ekol Lojistik Nov-09 N/D 74.9 2 HSBC Investment Bank; Iş Private Equity UK-Turkey Havaş Ground Handling Oct-09 35.0% 152.6 3 United Parcel Service USA Unsped Paket Servisi Jun-09 80.0% N/D 4 CEVA Logistics Netherland Varan Kargo Sep-08 N/D N/D 5 Gulf tainer UAE Demas International Lojistik Jul-08 50.0% 15.9 6 Maersk Line Denmark Maersk Denizcilik Jun-08 40.0% N/D 7 Manara Investments Saudi Arabia ACT Airlines Inc Feb-08 21.0% N/D 8 The Great Circle Fund USA Balnak Logistics Oct-07 49.1% N/D 9 Trieste Bidco by Kohlberg Kravis Roberts (KKR) USA U N Ro-Ro Oct-07 97.6% 1,283.7 10 GeoPost France Yurtici Kargo May-07 25.0% 95.2 11 Babcock Brown; Goldman Sachs Australia-USA TAV Dec-06 N/D 315.0 16 Tcar S.a.r.l by Bedminster Capital USA Hedef Araç Kiralama Oct-06 N/D 87.5 12 Camper and Nicholsons; Içtaş USA-Turkey Çeşme Port Jul-06 N/D 7.0 13 Babcock & Brown; Goldman Sachs; Islamic Dev. Bank Australia-USA-Saudi Arabia TAV May-06 N/D 388.0 14 DP World Dubai Yarımca Dec-05 N/D 105.0 15 TNT Post Netherland TNT Lojistik Jul-04 50.0% 8.7 Source: Merger Market N/D: Not Disclosed Privatization Portfolio The motorways and bridges listed below as well as the maintenance-operation and toll connection units will be privatized via TOR agreements. These motorways and bridges are currently in use and being operated by KGM. Assets subject to privatization were included in the privatization portfolio in April 2007 and are intended to be privatized by December 31, 2010. Figure 21 - Financial Summary of Motorway and Bridges Subject to Privatization Summary Figures of Motorway and Bridges Subject to Privatization 2007 2008 2007 2008 2007 2008 Edirne-Istanbul Motorway 50.7 51.5 105.9 102.2 27.6 33.2 Istanbul-Ankara Motorway 66.2 69.5 191.0 194.4 69.7 70.9 FSM Bridge and Peripheral Motorway 81.0 78.8 155.3 122.8 17.2 18.9 Boğaziçi Bridge 66.3 67.2 98.5 87.7 6.1 3.1 Izmir-Çeşme Motorway 7.3 7.8 11.4 11.6 7.7 8.3 Izmir-Aydın Motorway 11.2 12.1 23.1 23.4 20.6 17.7 Pozantı-Adana-Mersin Motorway 9.3 10.0 23.6 23.5 10.7 13.4 Adana-İskenderun-Şanlıurf a Motorway 11.0 12.9 32.6 37.8 18.1 20.9 Total 303.1 309.8 641.5 603.4 177.7 186.5 Source: Priv atization Administration (1) Motorway Income f igures include 18% VAT, Bridge Income f igures include 18% VAT and 10% municipality share. Number of Vehicles (million) Gross Income (TL million) (1) Expenses (TL million) The following five ports are included in the privatization portfolio for 2010. The tenders for Bandırma, Derince, Izmir and Samsun have been completed and submitted to Council of State for its final decision. The tender for Iskenderun has been revoked by the High Council of Privatization and another tender should take place. 18 Figure 22 - Ports Subject to Privatization in 2010 Ports Subject to Privatization Port Privatization Method Status Bidder Sale (US$ million) Bandırma TOR The tender started by the announcements as f rom February 20, 2008 concerning privatization of Bandırma Port, and the mentioned tender process completed on May 16, 2008with the decisive bargaining negotiations which were open to the public. A decision dated September 19, 2008 numbered 2008/59 has been obtained f rom Privatization High Council regarding privatization of Bandırma Port. The Privilege Agreement has been submitted to the Council of State af ter initials have been put on each page. Çelebi Joint Venture Group 175.5 Derince TOR The tender started by the announcements as f rom June 21, 2007 concerning privatization of Derince Port, and the mentioned tender process is completed on September 12, 2007 with the decisive bargaining negotiations which were open to the public. A decision dated November 22, 2007 numbered 2007/64 has been obtained f rom Privatization High Council regarding privatization of Derince Port. The Privilege Agreement has been submitted to the Council of State af ter initials have been put on each page. Türkerler Joint Venture Group 195.3 Iskenderun TOR The tender started by the announcements as f rom July 11, 2005 concerning privatization of Iskenderun Port, and the mentioned tender process is completed on September 9, 2005 with the decisive bargaining negotiations which were open to the public. However, the mentioned tender is revoked by the decision of the High Council of Privatization numbered 2007/09 and dated February 6, 2007. Another tender is planned regarding the mentioned port. Izmir TOR The tender started by the announcements as f rom 04.01.2006 concerning privatization of Izmir Port, and the mentioned tender process is completed on 03.05.2007 with the decisive bargaining negotiations which were open to the public. A decision dated July 03, 2007 numbered 2007/47 has been obtained f rom Privatization High Council regarding privatization of Izmir Port. The Privilege Agreement has been submitted to the Council of State af ter initials have been put on each page. Global-Hutchison- Ege İhracatçı Birlikleri Liman Hizmetleri ve Taşımacılık A.Ş. Joint Venture Group 1,275.0 Samsun TOR The tender started by the announcements as f rom February 20, 2008 concerning privatization of Samsun Port, and the mentioned tender process is completed on May 16, 2008 with the decisive bargaining negotiations which were open to the public. A decision dated September 19, 2008 numbered 2008/59 has been obtained f rom Privatization High Council regarding privatization of Samsun Port. The Privilege Agreement has been submitted to the Council of State af ter initials have been put on each page. Ceynak Lojistik ve Ticaret A.Ş. 125.2 Source: Priv atization Administration 19 2.7 Sector Establishments and Institutions Sector Establishments and Institutions Name Code Description Website International Freight Forwarders & Logistics Service Providers Association UTIKAD A non-governmental organization f or combining all logistics companies and it has 350 members. http://www.utikad.org.tr Logistics Association LODER An occupational organization mainly f ocuses on conf erences, education and inf orming logistics companies and it has 2,505 members. http://www.loder.org.tr Ro-Ro Vessel Operators and Combined Transporters Association RODER An association which gives services to international highway transportation companies and Ro-Ro ship transportation companies and it has 718 members. http://www.roder.org.tr International Transporters' Association (UND) UND Occupational organization has been established to solve and present sector problems in national and international platf orm and it has 940 members. http://www.und.org.tr Railroad Transport Association DTD The association aims to develop railway transportation service and increase quality and it has 26 members. http://www.dtd.org.tr International Highway Freight Transporters and Agency Owners Association UKAT Organization aims to simplif y procedures, decrease harmf ul competition, solve custody problems, and speed up operations and has 2,000 members. http://www.ukat.org.tr Carrier Association of Turkey TND Association aims to combine all sector enterprises into the big organization and constitute a national and an international social sector power and has 150 members http://www.tnd.org.tr Vehicle Logistics Association ARLOD The organization gives service to educate loading and driving automobile transporters and its 22 members serve automotive sector f or transportation of f inished automobiles. http://www.arlod.org 20 LIST OF FIGURES Figure 1 – Global Transportation Industry Value 4 Figure 2 - Global Transportation Industry Segmentation 4 Figure 3 – LPI of Top 10 Upper Middle Income Countries 6 Figure 4 - Transportation of Freight and Passenger 7 Figure 5 - International Road Transportation Network 8 Figure 6 - Length of Roads 8 Figure 7 - Marmaray and Kars-Tbilisi-Baku Projects 9 Figure 8 - Railway Transportation Network 9 Figure 9 - Length of Railways 10 Figure 10 - Air Transportation Network 10 Figure 11 - Air Freight Transportation 11 Figure 12 - Air Transport Statistics 11 Figure 13 - Major Port Authorities in Turkey 12 Figure 14 - Maritime Statistics 12 Figure 15 - RoRo Operations 13 Figure 16 - RoRo Statistics 13 Figure 17 - Export and Import by Modes of Transport 14 Figure 18 - Main Transportation and Logistics Sector Players in Turkey 14 Figure 19 - Export-Import Estimates for Turkey 15 Figure 20 - Major M&A Transactions 17 Figure 21 - Financial Summary of Motorway and Bridges Subject to Privatization 17 Figure 22 - Ports Subject to Privatization in 2010 18 21 ABBREVIATIONS 3PL Third Party Logistics CAGR Compound Annual Growth Rate BRIC Brazil, Russia, India and China BSEC Black Sea Economic Cooperation EU European Union EUR Euro FMCG Fast Moving Consumer Goods GDP Gross Domestic Product GNI Gross National Income IDO Istanbul Sea Buses and Fast Ferries Inc. ISPAT Republic of Turkey Prime Ministry Investment Support and Promotion Agency KGM Directorate of Highways LPI Logistics Performance Index TCDD General Directorate of Turkish State Railways TOR Transfer-of-Operating-Rights TUIK Turkish Statistical Institute UAE United Arab Emirates UK United Kingdom USA United States US$ US Dollars UTIKAD International Freight Forwarders & Logistics Service Providers Association 22 Disclaimer This Document is one of a series which have been assembled by the Republic of Turkey Prime Ministry Investment Support and Promotion Agency (“ISPAT”) with the assistance of DRT Kurumsal Finans Danışmanlık Hizmetleri A.Ş. (“Deloitte”) for the sole purpose of giving investors a sector synopsis of key priority growth sectors in Turkey. This Document has been prepared for information purposes relating to this sector. This Document does not purport to be all-inclusive nor to contain all the information that a prospective investor may require in deciding whether or not to invest in this sector. No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of this Document or any other written or oral information made available to any prospective investor or its advisors in connection with any further investigation of the sector and no responsibility or liability is or will be accepted by ISPAT or Deloitte or by any of their recipient or respective officers, employees or agents in relation to it. Each of ISPAT and Deloitte and their respective subsidiaries and associated companies and their respective officers, employees and agents expressly disclaims any and all liability which may be based on this Document or such information, and any errors therein or omissions therefrom. The information contained herein was prepared based on publicly available information sources at the time that this Document was prepared. In particular, no representation or warranty is given as to the achievement or reasonableness of future projections, targets and estimates, if any. ISPAT and Deloitte have not verified any of the information in this Document. Recipients of this Document are not to construe the contents of this Document as legal, business, tax or other advice. Any recipient or prospective investor should not rely upon this Document in making any decision, investment or otherwise and is recommended to perform their own due diligence and seek their own independent advice. This Document does not constitute an offer or invitation for the sale or purchase of securities or any of the businesses or assets described herein or to invest in the respective sector and does not constitute any form of commitment or recommendation on the part of ISPAT or Deloitte or any of their respective subsidiaries or associated companies. Neither ISPAT nor Deloitte accept any liability in relation to the distribution or possession of this Document in and from any jurisdiction and neither ISPAT nor Deloitte shall be liable for any violation by the recipient of any such registration requirements or other legal restrictions. Under no circumstances should this Document itself or any modified version be published or reproduced or sold by any third party in return for a fee or membership. The intellectual property rights of this Document are owned by ISPAT.