Burak Pehlivan: What to expect from Zelensky’s trip to Turkey

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Turkey’s President and leader of the AKP Justice and Development Party, Recep Tayyip Erdogan (C) and members of the party attend a meeting at the AKP headquarters in Ankara, on July 26, 2019. (Photo by Adem ALTAN / AFP)

Volodymyr Zelensky, elected as president in Ukraine with a record 73 percent of the vote on April 21, also achieved an unprecedented absolute majority for his Servant of the People party in parliament in the July 21 election. His party now controls 254 out of 424 seats.

With this victory, the public’s expectation will be for concrete and quick reforms that bring positive changes to their daily lives. There are no more excuses for delay.

Zelensky is aware of the importance of foreign investment to reach high growth rates and improve the general welfare. He addressed  foreign investors in English and invited them to do business in Ukraine. Immediately after the election, he started to implement his promises and started to visit the countries with significant investments in Ukraine.

One of the president’s first stops this week will be Turkey, Ukraine’s southern Black Sea neighbor and strategic partner with 80 million people. The timing of this visit is also remarkable, as it shows the priority of both countries for each other. Undoubtedly, the first article of the economic agenda between the Turkish President Recep Tayyip Erdoğan and Zelensky will completion of a bilateral free trade agreement.

Since 1998, the year when the Turkish-Ukrainian Free Trade Agreement was considered for the first time, 21 long years have passed. Since 2007, when official negotiations started, 12 years have lapsed.

Despite the strong will of the highest-ranking officials in both countries to signing this agreement and despite deadlines announced several times, unfortunately, this agreement has not been signed yet. The largest obstacle for increasing bilateral trade between Ukraine and Turkey and mutual investment is the lack of a free trade agreement. The foreign trade volume between the two countries reached $8 billion in 2008. However, today this figure is stuck below an annual amount of $4.5 billion and the annual foreign trade surplus gained by Ukraine from its trade with Turkey is diminishing.

Free trade agreements also affect investment agreements. Before the trade deal between Turkey and Egypt was signed, Turkish investment in was just $50 million, after the free trade agreement, investment increased 40-fold in three years to reach $2 billion.

Ukraine is one of the four countries in the world where Turkish citizens may travel without passports. Each year, approximately 1.4 million Ukrainians visit Turkey. There are more than 200 scheduled flights between two countries weekly. We are neighbors.

Today, there are 600 Turkish companies operating in Ukraine already. Turkish investment in Ukraine amounts to $2.6 billion and Turkey has become one of the three largest investors in Ukraine, after the EuroMaidan Revolution that ended President Viktor Yanukovych’s reign in 2014.

And the managers of many international companies in Ukraine are Turkish expats. Turkish companies in Ukraine operate, not only in the traditional sectors like textiles, foodstuff and construction, but in almost every part of the Ukrainian economy and provide a contribution to the economy. Therefore, a free trade agreement between Turkey and Ukraine will dramatically improve the changes for more green field investments and the opening of production centers by Ankara.

Turkish construction companies in Ukraine have constructed a cutting-edge stadium and Kyiv Boryspil International Airport,  thousands of kilometers of roads and motorways, transportation bridges, five-star hotels, hundreds of thousands of square-meters living spaces and shopping malls.

The value of construction projects undertaken by Turkish companies in Ukraine has exceeded $6 billion and the number of completed projects has exceeded 200. Currently, construction of metro stations, roads and industrial facilities is continuing.

Ukraine is a country with an incomplete and insufficient infrastructure structure. To reach an annual growth rate of 5 percent, it should renovate its physical infrastructure and it is not possible to achieve this in the short term only by the means within the scope of the state budget.

Therefore, the public-private partnership model, by which Turkey has attracted private sector investment in the amount of $150 billion and has completed more than 200 road, bridge, tunnel, hospital, airport and port projects, particularly in the last 15 years, shall be useful for Ukraine as well. Turkish construction companies lean towards sharing their savings and experiences and, thereby, investing in Ukraine.

In renewable energy, Turkish investors have deep interest in the construction of solar and wind power plants, for which attractive subsidies are provided by the state. Turkish investments in this field will reach $150 million as of the end of the year.

There is a dynamic investment environment in the real estate sector and in retail investments, particularly in clothing. New Turkish brands are entering the Ukrainian market every year.

Ukraine has one third of the arable lands in Europe. Agriculture is another sector that attracts Turkish investors. Abolishment of the moratorium which hinders the purchase and sale of agricultural lands and the formation of an agricultural market in Ukraine will pave the way for Ukraine to attract investment from Turkey in this field.  Capital, know-how and technologies of the Turkish companies in food production will contribute to the Ukraine’s vision to export its agricultural products, not as raw material, but in value-added form, as processed product.

When the latest economic and political developments are considered, the two friendly and neighboring countries on two sides of the Black Sea need more than ever to provide economic integration between them by increasing trade and investment by signing the Turkish-Ukrainian Free Trade Agreement.

The new and powerful government in Ukraine led by Zelensky is an important opportunity to reach this goal.


Post Author: Intercourier

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