Turkey and Kuwait’s close relationship will boost bilateral trade
Turkey and Kuwait share deep historic and cultural connections. In recent years, the two nations have built on their already close relations by signing a variety of agreements covering trade, defense and economic co-operation. Turkey’s Foreign Economic Relations Board has a target of increasing trade between Turkey and Kuwait to $3 billion annually by 2020.
While Turkey is in a customs union with the EU, Kuwait is in the common market of the Gulf Cooperation Council (GCC) Countries. Improved road and rail infrastructure will have a significant impact on trade between Kuwait and Turkey. Railway links already provide a route for goods travelling between Kuwait and Turkey. However, a new US$250 billion GCC Railway project is scheduled to open 2,200km of track connecting all 6 GCC member states with high-speed railway links by 2023.
Kuwait’s ambitious development plan aims to make the emirate a major trading and financial hub by 2035. The 2015-2020 framework plan has seen a major expansion of air and sea facilities, and significant improvement of Kuwait’s road network. Meanwhile, Turkey is also developing improving its infrastructure and manufacturing base, as a significant trading hub, linking the Middle East, Europe, Russia and Asia.
These facts suggest a major future increase of trade between Turkey and Kuwait, and the deepening of economic ties. There are already over 250 Kuwaiti firms active in Turkey, while 180,000 Kuwaitis now visit Turkey for tourism each year. Kuwaitis may visit Turkey without a visa, and over 6,000 Kuwaitis own real estate in Turkey.
Turkish contractors and investors are heavily engaged in the Kuwaiti economy. In 2015, the Turkish construction firm Limak won a US$4.3 billion tender for the construction of a new terminal at Kuwait International Airport. Other major Turkish contractors are currently engaged in building ports, roads and other vital infrastructure. Reciprocally, investment in Turkey rose above $5 billion in 2015 and is understood to have increased since.
In recent years, there have been repeated high-level meetings between the leaders of both countries. At a 2017 meeting between Kuwaiti Emir Sheikh al-Sabah and Turkish President Erdogan, Mr Erdogan emphasized the long-term strategic importance of the economic partnership between the two countries, saying that Kuwait is Turkey’s gateway into the Gulf, while Turkey is route into Europe and central Asia.
The close relationship between the two nations’ is also demonstrated by the fact that their collaborations extend into the humanitarian sphere. For example, in recent years, Kuwait hosted three International Humanitarian Pledging Conferences for Syria, to support the three million displaced Syrian refugees hosted by Turkey. Kuwait also funded the construction of the Sabah Al-Ahmad village in southern Turkey, which is now home to over 15,000 refugees. As greater stability returns to the region, and refugees return home, so will prosperity increase, and the work of rebuilding Syria will begin in earnest.
Despite Turkey’s recent economic headwinds, the World Bank predicts continued economic growth through 2019 and notes that, “Turkey’s economic and social development performance since 2000 has been impressive. Macroeconomic and fiscal stability were at the heart of its performance”. In the wake of a fall in the Turkish lira last year, international investors – including Kuwaiti investors – now see real value in Turkey and are flocking to acquire Turkish companies. Mergers and acquisition activity in Turkey exceeded US$13 billion last year.
Turkey is strategically positioned for easy market access to Europe, Asia and the Middle East. It also has a youthful and increasingly prosperous domestic market of 80 million people. Labour costs remain competitive and the government has incentives for investment in industries such as electronics, telecommunications, shipbuilding and services such as health and education.
Turkey is in a customs union with the EU, making it an ideal base for Kuwaiti businesses seeking access the EU’s 500-million strong market. Reciprocally, Kuwait provides an ideal base for Turkish investors in the Gulf region. It is clear that Turkish-Kuwaiti trade and investment are set to grow rapidly in the coming years.
Levent Lezgin Kılınç, Founding Partner
This article is published in Business Chief