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Turkey 2014 | INDUSTRY & MINING | FOCUS: INDUSTRIAL EXPANSION

Select foreign investors are investing serious money in growing their manufacturing base in Turkey to take advantage of its regional trade exposure.

Whether it is new companies establishing their first factories in the country or long-established ones expanding their existing manufacturing capabilities, Turkey has become an increasingly attractive production site for foreign companies. The first half of 2014 has already witnessed some large manufacturing investments by a number of foreign companies in a wide variety of economic sectors.

Overall, Turkey attracted $12.9 billion in FDI over 2013. The average size of investments were in the $300 million-$500 million range, making Turkey a top-20 country in terms of receiving greenfield FDI.

Although other neighboring countries and Eastern Europe offer lower labor costs, Turkey was seen as a more favorable investment destination for manufacturing facilities due to a number of factors. The slightly higher labor costs were offset by what new Mercedes-Benz Türk CEO Rainer Genes described as “a highly educated and competent work force, with well-trained people, and a solid know-how." Other factors include Turkey's favorable and central geography, which improves the export potential for foreign companies looking to use the country as a regional manufacturing base, and Turkey's own large and growing domestic market. The combination of these factors have created very attractive conditions for companies looking to find a strong export base, while also tapping into a lucrative domestic market.

The Ford Motor Company, active in the country via Ford Otosan, a joint venture with Koç Holding, is planning to significantly increase its investments in Turkey by allocating $340 million for 2014. Turkey already serves as the production hub for the company's commercial vehicles. Ford is currently in the final year of a four-year investment plan (2011-2014) in Turkey. This plan features a new vehicle production facility, new vehicle additions, as well as investments to increase the R&D operations of the company in Turkey. The $1.6 billion investment total of this four-year plan is 60% larger than the initial $1 billion that was allocated four years ago. Ford Otosan already has two plants in Turkey, which exported more than 200,000 vehicles over 2013. Relying on its Turkish unit's expertise in the manufacturing and engineering of light and heavy commercial vehicles, Ford's investment in the said period covers a new plant, new vehicle additions, and R&D works. The company's two Turkish plants exported over 200,000 vehicles in 2013.

In April 2014, the German automotive supplier Muhr und Bender KG opened a manufacturing plant in the Manisa Organized Industrial Zone. Commissioned in September 2013, this new 31,000-sqm factory is a €20 million greenfield investment and will produce automotive supplies that were previously imported into the country, such as suspension coil springs and stabilizer bars.

Italian white goods manufacturer Indesit has also announced plans earlier in 2014 to expand its production capabilities in Turkey by investing in a new washing machine manufacturing facility in the Manisa Organized Industrial Zone. The €35 million investment is scheduled to be active by October 2014, employing an additional 750 people. Of the new plant's annual production, 75% will be allocated for export, while the remainder is set for Turkey's domestic white goods market. Explaining the rationale behind this new investment, Indesit CEO Marco Milani said, “[Turkey's] strategic location, political stability, young and dynamic population, and a high performing economy make Turkey one of the key countries among Indesit's global network."

Manisa will witness factory expansions in the confectionary sector this year as well. Italy's Ferrero will increase its earlier investments of TL300 million with an additional TL100 million by upgrading its existing factory to accommodate the production of a wider range of products.

Other international companies that have recently opened or announced plans for a manufacturing plant in Turkey include Italy's pharmaceutical company Recordati, US-based Worthington Industries through its acquisition of Aritas, and the British-Dutch FMCG giant Unilever, among others.