Turkey plays a strategic role in cargo transportation between the countries of the East and West. Thanks to a constant transit flow across the country’s central geographical location, logistics had until recently been one of Turkey’s fastest growing sectors with an average annual growth rate of 20%. Also, in 2016 Turkey entered the top 30 list of global exporters and importers. All these factors were attracting more and more European investors. The situation changed dramatically in August 2018, when the US imposed sanctions against Ankara.
About the Turkish features of the logistics business and what is happening with the logistics of Turkey today, we talked with Elena Firsova, Asstra Istanbul’s Branch Manager, about unique aspects of the Turkish logistics business and how it is going today.
Elena, have you been able to round out AsstrA’s business culture with new ideas or practices you have picked up since AsstrA Turkey launched? Have Turkey's tighter relations with the EU led to any changes on the ground there?
Turkish business culture is based on transparency, legality, and openness. If you find your niche, provide the right quality of service, and follow the law you can be sure to generate income. It is easier to conduct business in Turkey due to the absence of bureaucracy in the country: you can quickly get any appropriate license or certificate you need. For European companies, one of the key advantages of starting a business in this country is that foreign citizens have the same rights as residents.
Experienced managers in the Turkish B2B space know that if things go smoothly in the initial stages of a business relationship, a Turkish partner takes a loose interpretation of “today” that is in fact closer to "maybe tomorrow" for practical purposes. Therefore, immediately after – and even better during – discussions, it is important to establish the specifics of all agreements and prescribe clear conditions for cooperation.
Turkish business culture depends heavily on human bonds. You won’t hear things like "every second counts" or "it's just business" from most Turks. Your results in this market will depend entirely on networking. Turks prefer to deal only with people they know, respect, and trust. The advantage here is that Turkish partners and clients prioritize long-term cooperation over short-term gains.
Turkish business is conducted Eastern-style: slowly and thoroughly. Here, time is not such a scarce resource as in the West, and relationships are more important. A partner is likely to perceive a short business conversation as inattention and even disrespect. Payment speeds are different than most European companies are used to, with Turkish carriers usually requiring quick payments or prepayments in cash.
Currently, the Turkish government is actively introducing new laws and regulations that should bring the country’s economic model and legislative machinery in line with European standards. Regulatory innovation is taking place almost daily an obliges us to monitor all changes closely. But from legislative adoption to adoption within society as a whole, a certain amount of time must pass.
How did the US sanctions affect AsstrA’s business in Turkey?
The Turkish lira has lost almost twice its value since the beginning of the year and inflation is up by 15% and counting. Many Turkish companies are now on the verge of default, as the weak lira makes it difficult to service debts in foreign currencies. These economic problems are the result not only of higher US duties on imports of aluminum and steel but also the overheating of the economy due to the credit boom.
The weakening of the lira means that imports are becoming more expensive, especially for groups of goods like cars, household appliances, and raw materials. As a result, Turkey's imports decreased significantly, which immediately affected the cost of export cargo transportation. Due to the lack of "returning trucks," the freight rate for export destinations has significantly increased.
Right now, the entire Turkish economy – not just the logistics sector – is frozen, waiting for future developments. The Bank of Turkey has undertaken some regulatory measures in particular involving reserve requirements. But these solutions are temporary.