Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 17 - Evidence - Meeting of November 21, 2012
OTTAWA, Wednesday, November 21, 2012
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:15 p.m. to study economic and political developments in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities, and other related matters.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, today the Standing Senate Committee on Foreign Affairs and International Trade is continuing its examination of economic and political development in the Republic of Turkey, their regional and global influences, the implications for Canadian interests and opportunities, and other related matters.
In the first session of this meeting we have before us representatives of Export Development Canada. We are pleased to welcome Mr. Todd Winterhalt, Vice President, International Business Development; and Mr. Lewis Megaw, Regional Vice President for Africa, Europe and Middle East. Mr. Winterhalt, I understand you will have opening remarks and then we can proceed to questions.
Before I do that, I want to remind senators, so I do not forget at the end, that we will have a session tomorrow on our study on Iran, and then next week we will start our study of the bill that just has been forwarded to us on the Canada-Panama Free Trade Agreement. That will be next Wednesday.
With that slight interruption, Mr. Winterhalt, welcome to this committee and please proceed.
Todd Winterhalt, Vice President, International Business Development, Export Development Canada: Thank you very much Madam Chair and honourable senators for inviting Export Development Canada to appear before this committee.
[Translation]
We appreciate your interest in EDC's activities supporting the efforts of the Government of Canada in the area of international trade. Turkey is the largest and most important market in the Eastern Mediterranean region, as exemplified by the opening of our representation in Istanbul in 2011. EDC considers Turkey a strategic market offering numerous opportunities to Canadian businesses.
[English]
Today I would like to take a few moments to highlight how our two countries have a unique opportunity to expand our mutual trade and investment relationship; and how EDC in particular is working closely with Canadian companies, other financial institutions and partner arms of the Canadian government to help make this happen.
Certainly the ongoing volatility in the United States and Europe reinforce the need for Canadians to seek additional markets to do business in, not only to reach new export customers but also to participate in global supply chain opportunities for their long-term survival.
Turkey and Canada have many affinities that can help us to accelerate our trade relationship. Indeed, Canada has a well-established trade relationship with Turkey and the country has a strong dependence on trade.
Representing the sixteenth largest economy in the world and with its strategic geopolitical location, Turkey is an excellent corridor to access many key markets in Europe as well, including preferential customs union access to the European Union, the Caucasus, Central Asia, Africa and parts of the Middle East.
The business environment that is emerging in Turkey is strengthening international trade, and the country's stable political climate and economic liberalization programs have led to increased trade opportunities for Canadians. Further economic and judicial reforms and prospective EU membership are also expected to boost Turkey's attractiveness to foreign investors.
Investment in Turkey is growing at a rapid pace. Recently, Turkey has experienced a surge of foreign direct investment from around the world. Many Canadian companies have also recognized the great investment potential that Turkey offers.
In 2011, Canadian investments in Turkey stood at roughly $1.5 billion and that is a trend that is growing. Further privatization of a number of national assets is also a growing trend that is creating additional investment opportunities for companies.
Overall, we see a great potential for trade and investment for Canadian companies across a wide range of sectors. Niche opportunities exist for Canadian investors, particularly in the energy, information and communications technologies, mining, education and infrastructure sectors. Importantly, commercial opportunities in Turkey match very well with Canadian supply capabilities. An interesting point as well from our perspective, is that Istanbul has been short listed to host the 2020 Olympic Games, which would be a boon for the local economy and for a number of major infrastructure projects.
EDC in particular has a strong relationship with a number of Turkish banks and we have supported many transactions with these banks over the past 10 years. Our primary business with these banks is through our trade finance support to Canadian banks in expending their own capacity and willingness to increase their trade finance obligations with these Turkish partners. In 2012 alone, these programs will support in excess of $1 billion in trade. In addition to the support provided to the banking sector, EDC also supports approximately 200 Canadian companies in the Turkish region, the majority of which are small- and medium-sized enterprises.
[Translation]
EDC also understands the difficulties facing Canadian companies in Turkey. To be recognized in that market, Canadian companies must have a local presence and demonstrate that they mean to stay there for the long term. Given the persistent uncertainty in the global economy, lending markets might well continue to stagnate in the foreseeable future. It is therefore even more important to find new financing sources.
[English]
Partnerships are key to overcoming many of these risks and challenges. Partnerships between businesses and financial players, whether public or private, foreign or domestic, greatly increase the chances of a project or transaction's success. Development banks as well, like the European Bank for Reconstruction and Development, or the EBRD, multilateral agencies and export credit agencies like EDC will continue to play an expanded role to ensure greater financial capacity to this market.
More broadly, Canada and EDC are trusted partners in Turkey. Canada-Turkey bilateral merchandise trade totalled a record high $2.4 billion in 2011, up 53.9 per cent from the 2010 total. Canadian exports to Turkey reached $1.3 billion in 2011, largely in the commodities of iron and steel, mineral fuels and oils, and vegetable exports. Today, Turkey is Canada's twenty-first largest merchandise export and the fortieth largest source of merchandise imports.
To help improve these numbers and accelerate Canadian opportunities in Turkey, EDC is focused on the following strategies: First, to develop and deepen relationships with known and reputable buyers and borrowers in Turkey by strengthening our financial partnerships both with local and regional banks; by helping to match Canadian capabilities to Turkish market opportunities as well as seeing the potential for Canadian companies to participate in supply chains originated in Turkey; by delivering services that promote more Canadian direct investment in key Turkish sectors; and by engaging with local enterprises, government, banks and associations to better understand some of the procurement gaps and related opportunities for Canadian exporters.
[Translation]
Finally, I would like to stress three points.
[English]
First, Canada and Turkey have an opportunity to work together from unique positions of strength and affinity in a wide variety of sectors. Second, there is a large opportunity for Canadian companies pertaining to investments directly in Turkish operations and participation in the global supply chains of the conglomerate companies in Turkey. Third, and lastly, market presence and long-term relationships are key. Canada's trade commissioner service and EDC are helping to make these important connections and to help facilitate concrete deals.
[Translation]
As a whole, Turkey presents very promising business and investment opportunities for Canadian companies.
[English]
Thank you again for the opportunity to be present today. We will be delighted to answer your questions.
The Chair: Thank you.
[Translation]
Senator Fortin-Duplessis: Thank you and welcome to both of you. I was very eager to read your submission. In regard to trade and investment, the Turkish government has committed to improving the investment climate and implementing policies to better promote direct and foreign investments. How well, according to you, has the Turkish government kept his commitment?
I might as well ask my second question while I am at it, to either of you. Do Canadian investors meet with challenges when they wish to invest in Turkey?
[English]
Mr. Winterhalt: We have seen significant steps forward, I would say, certainly in the last 10-year period with the rise to power of a very pro-business element in Turkey. Prime Minister Erdogan has done a fair amount over the course of the last decade to put in place significant and real measures to make the investment climate much more attractive. We have seen Canadian companies take advantage of that, again in a number of key sectors, in particular in the infrastructure space, both in transport and related sectors, as well as in a number of areas.
There are, I think it is fair to also say at the same time, challenges that remain. Turkey is a market that is truly opening up. We see greater developments required in the next five years to take advantage of these opportunities.
Where EDC leverages our colleagues in the trade commissioner service and through the Department of Foreign Affairs and International Trade to help at a government-to-government level flag these issues and concerns, EDC sees itself as a conduit to represent those concerns as they are raised to us and to pass them on to our colleagues in government to be addressed in that manner.
Lewis Megaw, Regional Vice President for Africa, Europe and Middle East, Export Development Canada: To add to that, from a capital markets perspective, Turkey is a very sophisticated capital market. The government has done all of the necessary things to ensure that the banks are true Schedule A banks. They are truly global players in every respect, well capitalized and welcome investment from abroad in terms of generating the next layer of Turkish trade companies.
[Translation]
Senator Fortin-Duplessis: EDC certainly has people in Turkey, and you said earlier that the Turkish president is very keen to do business. He tends to favour business. Have EDC representatives sensed a desire among the people for a new president, come the 2014 elections? Could there be a change of government that would result in a curtailment of foreign investment?
[English]
Mr. Winterhalt: I will start by suggesting that you are exactly right. For two years EDC representatives have been present in Istanbul, a sure sign of the value and the growth potential that we see in the market. We receive regular reports from our staff there in terms of the general economic political climate. I would hasten to add that, from our perspective, our focus tends to be largely around the economic space as well as trade-related measures and capital market developments, as Mr. Megaw has indicated. We do not traditionally see much in the way of the political climate other than inasmuch as it would impact on business related in Turkey.
From our perspective, again, we can only comment on what we have seen to date, which is a government very much committed not only to improving the situation in Turkey but also to raising Turkey's status as a trading nation in and of itself within its region. I would perhaps leave the question there.
Senator Downe: I would like to follow up on the question asked by Senator Fortin-Duplessis. You indicated the procedure for passing on concerns from Canadian business. What is the nature of those concerns?
Mr. Megaw: At the heart of Turkey, corporate senior players are largely significant, long established Turkish conglomerates where there is a tendency to be very insular, and if you are going to play in Turkey, you need to reply with a conglomerate partner in a joint venture where you will bring technology and financing to the equation. Often, that is a significant stretch for Canadian companies who are much smaller — by definition, the small, medium-sized variety — and hence, between ourselves and the Department of Foreign Affairs and International Trade, are looking to make those introductions through the various supply chains so that we can demonstrate that Canadians can play and bring financing with the support of folks like us at Export Development and the Canadian banking community.
Senator Downe: In the examples of those companies that have entered into agreements with these larger Turkish companies have they worked well in most cases?
Mr. Megaw: They have for sure, in particular in the power sector, which has been liberalized in Turkey. They are looking for folks like the Manitoba Hydro internationals, to come and provide the technology transfer that they need to make it work. They are truly investors in the market, long-term investors, who have had no difficulty with the power sector, as an example.
Senator Nolin: As a follow-up, is what you just explained the reason the FTA negotiation has stalled?
Mr. Megaw: I think the FTA has stalled a little bit because there are industries to protect, without a doubt. There is a global reach from Turkey into many parts of North Africa and Europe that they would like to protect for obvious reasons while we are consequently negotiating a Free Trade Agreement in Europe today. There are all kinds of interests that they are looking to protect without doubt.
Senator Nolin: Did the negotiations stop on an agreement, or did we or they stop them? It seems that the tempo was quite positive, and suddenly after the consultation there was nothing. What is needed to restart all that?
Mr. Megaw: Often, these are long, protracted discussions. There are many parts to resolve and ensure everyone is happy. This is not unusual in the Turkish or the African space. This is a cultural piece in that it is one step forward and three back, and then you might take one more forward. These are never instant or easy solutions in that part of the world.
Mr. Winterhalt: From our perspective as EDC, we see a little less on the policy side; that is how I would frame it. We see more of the day-to-day, business-to-business level of interactions and certainly we defer to Department of Foreign Affairs and International Trade in terms of how the negotiations are proceeding or not, and we are not party to those. It is a little challenging, other than the general business environment, for us to get a really current read on the status of the negotiations there.
Senator Nolin: If I take the business-to-business reality, is the negotiation with the EU causing a problem with the business relationship in Turkey?
Mr. Winterhalt: From our perspective and for most Canadian companies, not at this stage. No, the opportunities in Turkey, and to Mr. Megaw's earlier point, the supply chain opportunities from Turkey outward into Asia and the central ``stans'' as we call them or into North Africa, for example, tend to win the day. That is where we see the most interest and appetite from Canadian companies, whether exporters or investors, into the Turkish space. We do not see much headache or heartache with respect to the free trade agreements and where they stand currently.
Senator D. Smith: I was curious about the free trade being stalled, too, and I will get back to that. There is one little technical thing. In our briefing note, I read that Turkey is the eighteenth largest economy in the world and you mentioned they were the sixteenth. Did a statistic come out in the last couple of weeks or months that pushed them up the ladder two more pegs, or do you know?
Mr. Winterhalt: I would like to hope it had something to do with EDC supporting Canadian companies in Turkey, but I think I will come back to my team and get back to you through them.
Senator D. Smith: I am just curious. If they are moving up or down, it is better to be moving up, and I just thought maybe they have jumped two more pegs.
The Chair: I think we will have both sources revisit the issue and bring it to the clerk.
Mr. Winterhalt: Certainly.
Senator D. Smith: I have been fortunate to visit Turkey a couple of times. As you know, after the fall of the Ottoman Empire many years ago, there was a secular shift in that particular area, and they are pretty stable.
In terms of Canadian opportunities, what do you identify as the particular ones for which we might have a niche to get into the marketplace there and export Canadian products? What would you see as the more likely prospects?
Mr. Megaw: That is a great question. The broad pieces of infrastructure are a significant opportunity. There are all kinds of highways, byways and hospital upgrades where Canadian expertise is certainly in full force.
There is the world of agriculture and ag-related — peas, beans and lentils that are transiting through Turkey into markets in North Africa and other parts of the globe, and, of course, some value-added in the resource sector.
There is the world of mining, where there are some significant Canadian players who have investments on the ground and adding environmental cleanup to a lot of Turkey's historic mining issues.
The power sector, as I mentioned earlier, is a sector that the Turkish government elected five years ago to privatize fundamentally, and all kinds of Canadian interests are looking for opportunities in that sector.
Senator D. Smith: I notice that one of the founding four of the CTBC was Bombardier — and I have flown Turkish Airways — but are they selling planes to local carriers over there?
Mr. Megaw: More in the regional space
Senator D. Smith: Sort of like Porter.
Mr. Megaw: In addition, there are train opportunities, such as rail car. The city of Istanbul recently put out for bid an extension to their metro project at about $1.5 billion, which involves all kinds of signalling equipment that a Bombardier could play in, and of course there are the trains.
Senator D. Smith: In terms of getting the free trade dialogue going again, what catalyst might help it the most? If we made a loud statement about that, would it mean anything?
Mr. Megaw: Best described when Turkey is ready, I think. It is an economy that continues to grow. While it is back a little from its 8 per cent historic growth GDP, today it is still 3, 3.5, so they found many markets without having to negotiate many Free Trade Agreements in addition to what they have and enjoy today in the European corridor.
Senator Johnson: In terms of Turkey's transition from a mid-range, efficiency- driven stage of development toward more of an innovation-driven society, with increases in the percentage of GDP from services relative to the agriculture industry and infrastructure, what are the strengths and weaknesses of this with regard to their economy as they grow and move forward?
Mr. Winterhalt: Thank you very much, honourable senator, for the question. I would note that it really is a fundamental demographic shift in Turkey that is driving a lot of the growth that we see in their economy. In the move from more base-type sectors to the services space, as you indicate, their population, now in the 75 to 80 million range, with well over half of that under the age of 30, has a great impact on the economy, on the sectors of growth. We have seen various elements in the information and communications technology sectors and the services tied to that. One can witness double-digit, if not 20 per cent, growth rates in certain years. We expect that to continue.
What that generally drives at is a need to import additional products or services that they do not produce any longer or where the demands and the supplies have shifted over time. I think that this does open the door, as we have suggested, to a number of Canadian opportunities through the provision of services into the ICT sector, through looking at the provision of educational services to help to do a little bit of capacity building and technology transfer or through the continued export of base commodities, as Mr. Megaw has described. This provides additional opportunities for us as their economy evolves and matures with the growth and demographic shift.
Senator Johnson: Where are they in terms of the technological side of growth? Are they high users of the Internet and all of the latest technology? Where are they on the totem pole now in this respect?
Mr. Winterhalt: I will start and then Mr. Megaw can offer a specific example. I will give an anecdote from my last visit there about a year ago. In the education space, in particular, where they are trying to enable a fairly diverse, regionally separated population to bring the education standards to a consistent level across the country, there is a real need and a real demand for tele-education, for example. We have certainly heard, at both the national and the sub- national level, an interest in developing that capacity in Turkey. That is an area where Canada could bring a lot to the table and where EDC, ideally, with the right project, could help through the provision of a financial service to do that.
The demand and the interest are certainly there. Mr. Megaw can speak a little bit to where they stand today.
Mr. Megaw: One of the Turkish government's stated priorities is that every child should have a computer. Technologically, the catching up of their infrastructure and the youth in the market have absolutely mandated that they skip a whole lot of the landline technology and move straight to the world of cellphones. Turkey is a market, not unlike parts of North Africa, where you would see everyone with two or three cellphones. That is the reality. A growing population under 30, as Mr. Winterhalt suggested, is really where the market is and they will drive the technology forward. They are very advanced.
Senator Johnson: The demographic is young.
Mr. Megaw: Very young, and they have a growing middle class.
Senator Johnson: Is it? What would the size of the middle class be now as it is growing?
Mr. Megaw: The vast majority of the under-30s are well educated and well employed. There is a sophisticated financial sector that employs a large number of these people. They are truly paid at world standards in every respect. In terms of the percentage of the market that would be middle class, we would need to come back and research that a little bit, but it is certainly growing.
Senator Johnson: Coming from Manitoba, I know Manitoba Hydro has been doing some work there. Do you know how many Canadian companies are actually on the ground there doing the kind of work that Manitoba Hydro is doing? I know some of the engineers who have worked there.
Mr. Megaw: Between the engineering side and the transfer of technology, there would be a half a dozen, without a doubt, that I could name from across Canada.
The Chair: You indicated that the growth and the change in Turkey are coming. They are looking inward for infrastructure changes and bringing their country up to speed. I have recently been reading a lot that says that BRIC was where our attention was. South Africa has been added to BRIC, but it is Indonesia and Turkey that are looking to world markets. It is not necessarily manufacturing from Turkey outward, but it is investment into natural resources, et cetera, throughout Africa. Witness the 23 new embassies opening up for a total of 33. They also have two or three decades of investment into the ``'stans,'' as you say, as far as Russia, Ukraine and even Belarus. What is the reason for the economic changes? I can understand why you would build your infrastructure, protect your country and wish to bring it up to economic standards. What is their reasoning for the rest of what they are doing in a broader region? Is it of the same philosophy, or is something else driving them?
Mr. Winterhalt: It is interesting that you mentioned BRIC and how that is evolving. There has been a fair amount of writing recently about whether it is time to retire the BRIC acronym. There are a couple of other alternatives out there. You might have heard of CIVETS, which has Colombia and Indonesia in it. Turkey is the ``T.'' There is another one, Jack Goldstone wrote in Foreign Policy about a year ago this week, about something called TIMBI, which puts Turkey first, actually. It is Turkey, Indonesia, Mexico, Brazil and India. From our perspective at EDC, we see a little more validity in that one because it keeps the parts of the BRIC that have the greatest growth rates and, in our view, the greatest potential but adds Turkey first and foremost. I think that is important because Turkey, at the same time as it is having significant internal growth, partially because of its geopolitical positioning, recognizes that it has a very sizable opportunity to really connect as it used to many, many hundreds or thousands of years ago to Europe and Asia and North Africa. I think that there is an evolution not only in terms of the growth inside of the market but also in the role they see themselves playing internationally. To your point, new embassies are open. There is an effort to put a little bit of a Turkish stamp on the regions surrounding the country but also to have a much more open worldview than probably has been the case for many years. Part of that is a role that the current government has played. Part of it is driven by the growth in the younger population, who are looking for something a bit different and looking to be a bit more of a world player in many respects. It is partially cultural, partially economic and partially political influence that is changing over time.
Senator Wallace: I am just thinking, in practical terms, of the ability of Canadian companies and business people to do business in Turkey as compared to doing business in North America, in the United States or Canada. You had mentioned that there are significant Turkish conglomerates that, I take it, have major influence over business in Turkey. Not to read more into that than what you said, but I am wondering whether there are obstacles or differences that Canadian companies must overcome in order to get in the door in Turkey. For example, do they have to partner with these conglomerates? Would they find the experience different than it would be here in North America, where you could create a company in another jurisdiction or a subsidiary and carry on business? Has it, in some way, been a closed shop in Turkey, and you have to align or partner yourself with some of the major business influences in order to get in? How does it compare to what our experience would be in North America? Does it differ in a significant way in Turkey?
Mr. Megaw: In fairness, it is a little bit of all of the above. Depending on the size of the Canadian company, folks such as SNC are very familiar with that part of the world, and play in a very different league than a small- and medium-sized exporter. Folks like Manitoba Hydro have certainly a technology advantage that they take to the market that they cannot find any place else, so they have the ability to direct the traffic. An organization such as Alliance Pulse, that processes peas, beans and lentils out of Saskatchewan, have a significant advantage in terms of their ability to compete effectively. They actually bought the Turkish firm.
For the vast majority of Canadian small and medium-sized enterprises who are niche players, the easiest way to access the market is through a partner and into a supply chain. Turkey is, of course, a nation of traders, so in real numbers at the height of the crisis, they are great constructors because they are looking for employment for all of this youth. Therefore, in a market like Libya, at the height of the Libyan crisis, they would have had $25 million from Turkish construction companies playing in Libya. Much of this is the oil and gas patch. They are niche players that Canadians can join in terms of the great technology they bring to the game.
Mr. Winterhalt: To add to that, I think the relativities remain important. As Canadian companies search for opportunities outside, perhaps, their traditional comfort zone or markets, whether that be the U.S., NAFTA or Western Europe, and they look to Turkey, the scope and size of opportunity is certainly impressive.
However, when they do their research and look at relativity, for example, by looking at Ukraine or even Russia by comparison, they see a market that is significantly easier to do business in than the other two I have mentioned. That is borne out by the ease of doing business index, things published by the World Bank, IFC and others, and it is improving in Turkey, where some of these other markets remain static in terms of some of the regulatory challenges and the impediments to doing business. If a Canadian company is prepared to make that leap to go out of their comfort zone or their traditional markets, in that region, Turkey provides a relatively safe landing spot.
Senator Wallace: In your opening comments, you mentioned that the privatization of national assets is a growing trend, and I take it that provides opportunities for Canadian businesses. What type of national assets and businesses are we talking about? What is nationalized now in Turkey and where do you see that changing to privatization?
Mr. Megaw: Probably the best example of that is the power sector. About three and a half weeks ago, a Turkish company we have lent to previously came to us with three projects that the Turkish government had previously started and never finished and now were on the private game looking for investment and Canadian players that could bring hard cash to the transaction.
Senator Wallace: Aside from bringing cash, are there restrictions on foreign investment or foreign ownership of corporations that exist in Turkey similar to what we have in Canada?
Mr. Megaw: It is rule of law, to Mr. Winterhalt's earlier comment, versus a company trying to do business in Ukraine, which I certainly some have experience with as well, and in Russia. Turkey is a haven. There is rule of law. It may take the courts some time to adjudicate, but they do respect contracts and they will enforce contracts, not a lot different from in Canada.
Senator Wallin: I was recently speaking with the Alliance Pulse folks in Regina and talking about their activities there, but there is still this question of risk assessment and risk management, given the shifting political waters in the region and Turkey's objectives. Is anyone really concerned about that?
Mr. Winterhalt: I will start on that question.
Mr. Megaw: The economist.
Mr. Winterhalt: We will see how this goes.
Senator Wallin: You have to think about this.
Mr. Winterhalt: The short answer is yes. It remains a concern for people and for any savvy exporter or investor; it well should, I think it is safe to say. As the situation continues in Syria, and as Mr. Megaw mentioned earlier, in Libya, there are real issues there that need to be dealt with. In the Syrian example, we have seen the complete cessation of two- way trade between those two countries. At one time there was a vibrant trade between the two. That may have an impact, obviously, on foreign investors into Turkey, as we have talked about, into a supply chain that was maybe supplying an end company in Syria. Obviously, that would have an impact.
We would caution, and we do through our economic and political risk assessment team at EDC, that it is very carefully thought out who is the end user, what is the need and where does this product or service end up actually going. If it is near any of the hot spots, obviously, you would be well advised to think twice before you go into that space.
Generally speaking, though, we found Turkey in and of itself to be a very stable environment.
Senator Wallin: Leave it to the economist. Thank you.
Senator Nolin: With respect to the end of your answer regarding stability and Turkey, do you think they can become the player in the area to stabilize the region? That is what we need now. If so, I think the market will boom, definitely.
Mr. Winterhalt: Certainly, I think Turkey can bring a lot to bear by simple virtue of its size, the power it wields economically and the fact that it is looking much more internationally than it has to date.
I would defer to my colleagues at Foreign Affairs in terms of their political mentality or motivations to do that, but certainly the size is significantly above and beyond other regional players, and they have a fairly loud voice in that region. I would agree they have a role to play if that is in their national interest.
[Translation]
Senator Robichaud: For now, Turkey is a secular democracy with a Muslim population. We have heard that the secular status of Turkey was under pressure. Could that eventually change the economic climate of the country, and would it then become more difficult to do business with Turkey?
[English]
Mr. Winterhalt: I would say that is absolutely true. If there was to be a change of some sizable or radical nature that would change the view that the current government has taken, to me, that is a possibility. It is very difficult to say at this point, absent a crystal ball, what might happen. Certainly, we do have the upcoming elections in 2014, as one senator has mentioned. Again, we do not have much of a view from where we sit in terms of where that is headed, but it is safe to say that any substantive change would have an impact quite possibly in terms of how Turkey looks at itself and its regional partners as well as possibilities, economically speaking, within Turkey. However, it is challenging at this point to come up with a clear answer one way or another.
Mr. Megaw: Ultimately, Turkey is a trading nation, dependent on trade, so business is often a first thought, and they need to be creating and trading foreign exchange. They have a current account deficit because they are heavily dependent on the import of oil and power substitutes. They need to be creating foreign exchange to keep the wheels of industry in motion. Hence, they need to trade, they need to think business and their banks are global in every respect and playing on a global scale.
Senator Downe: We heard from business people, for example, when we did the study of Russia, about the problem of corruption. Do you hear that at all from Canadian business people about Turkey? If so, in what area?
Mr. Megaw: Having been in the region from Moscow to Johannesburg, I can honestly hold my hand to my heart and say that I have not seen or heard, directly or indirectly, a lot of the corruption pieces in Turkey that you would see in many other parts of the region. Without a doubt, they truly are very transparent, in general terms, and really focused on a win-win scenario in terms of negotiating contracts.
Senator Mahovlich: Years ago I visited Turkey. There was a Canadian hotel there. They purchased a women's prison and turned it into a hotel. I think it was the Four Seasons. How are they doing and have they expanded into other hotels?
Mr. Megaw: It is still very much in business. They are very well known to EDC. They have made marvelous progress. They have renovated the Four Seasons of very recent vintage and it is a first-class hotel on the Bosporus.
Senator Mahovlich: Is Turkish immigration to Canada steady or has it increased or decreased in recent years?
Mr. Winterhalt: Unfortunately, we would have very little line of sight in terms of immigration flows.
[Translation]
Senator Fortin-Duplessis: I have a question relating to the mining sector. Are there opportunities for Canadian companies wishing to do business in Turkey, or does Turkey, like other African nations, keep all the underground resources for China? In this area, what are Turkey's strengths and weaknesses?
[English]
Mr. Megaw: I can give you a very good example in the mining sector. A Toronto-based company, Toronto Stock Exchange listed, called Silvermet, is a joint-venture investor with a Spanish company in the mining sector. They reclaim metal from the dust and tailings of existing, long-established Turkish facilities. It is a great story that is now in its fifth or sixth year of development. They are in the process of further building out another two such facilities in various parts of Turkey.
It is not only a great mining story, it is a great environmental story and a clear indication of the interest by Canadian companies in that part of the world, for sure.
[Translation]
Senator Fortin-Duplessis: Are there other Canadian mining companies that might wish to do business with Turkey?
[English]
Mr. Megaw: There is the early stage of some gold and silver mining in northern Turkey where Canadian companies are certainly expressing interest and doing some on-the-ground due diligence.
[Translation]
Senator Fortin-Duplessis: Would you care to add something, Mr. Winterhalt?
[English]
Mr. Winterhalt: To touch on your point around the importance of other investors, whether Chinese or others, certainly we see this as a market of opportunity, so we would see a healthy competition from a variety of other nations and their mining firms. What further enables that, as Mr. Megaw mentioned, is a fairly open and transparent regulatory environment. In this instance we see a healthy competition and I would say it is a little different from what we see in other places in Africa, with maybe a little more seasoned regulatory environment and government view on what type of investment they want to see in Turkey.
Senator D. Smith: My question goes back to the point that Senator Downe mentioned with regard to immigration rates. A statistic that is surprising in this briefing note is that there are approximately 43,000 people of Turkish origin or descent living in Canada. Considering Turkey has a population of 75 million, that is a very small number, when you think about other countries in the region, like Greece is something in the 12 million or 13 million range. Greece would probably have 20 times that many people here. The population of Lebanon is not very big, and there are probably 43,000 Lebanese people in Ottawa. We also have Iran and even Syria.
I am curious. Maybe in part it is because ever since the end of the First World War, when the Young Turks — and that is where that phrase comes from — led by Kemal Atatürk, booted out the sultan. It has been quite secular and pretty stable, and maybe people did not have reasons to have to leave it.
Do you have any thoughts on why a country with 75 million would only have 43,000 in this country?
Mr. Megaw: I think that part of it is the youth of the population, the sector that is under 30. Istanbul is probably one of the most cosmopolitan cities on the globe with a population of 17 or 18 million people. Many stay at home and lots of Turks go back to take their skill sets and grow out the Turkish capabilities. The pride of homeland best describes it.
Mr. Winterhalt: That presents an opportunity for Canada in some respects. A newly affluent younger Turkish population looks to come out and perhaps do some international training, obtain education abroad, and then return to Turkey, because indeed it is a very dynamic place to be. If we can help form a little bit of a Canadian imprint in a short time, that is another area of opportunity, I think, for Canada.
Senator D. Smith: The one exception might be the Kurdish group. I do not think there are huge numbers of Kurds who have immigrated to Canada or left the country. They are still there for the most part — not happy all the time, but in any event. I am just thinking out loud.
The Chair: Our next witnesses might be able to deal with part of what you are talking about.
Turkey has, interestingly, joined NATO and contributes there. I have had opportunities to look at how they have formed their military, made it into the force — a huge force, I think second largest after the United States in NATO — and how their military equipment has changed. They have patterned it a great deal on the technologies they have been able to gain and have become sellers of their fighters, tanks, et cetera, to others in the area.
Is there an opportunity for Canadian business in any of the military support systems that we traditionally work with in NATO, and has EDC been involved in it at all?
Mr. Winterhalt: I think the second question you pose is perhaps the easier one for us to answer. Traditionally EDC does not become overly involved in supporting military technologies or equipment, almost full stop. However, we do, in a secondary or tertiary way, where there are services or certain products, look to provide support.
We have certainly seen interest from Canadian suppliers, generally speaking, in approaching the Turkish military to be a part of that supply. However, as we traditionally do not provide much support there, other than an anecdotal level of interest, I cannot give you much more colour on that.
[Translation]
Senator Robichaud: When Canadian companies do business with Turkey in the mining sector, do they have difficulty finding qualified workers? And if this were the case, would there be business opportunities for Canadian community colleges to offer such services?
[English]
Mr. Megaw: Again, with a population of 80 million, and much of it under 30 years of age so it is in prime physical shape to work in the mining sector, it is not a huge difficulty to find labour. The qualification and the training is always a challenge, as it is in many parts of Africa, so indeed I believe there would be a huge opportunity for the Canadian mining industry to take the technology transfer and the education.
The Chair: Thank you. As you can see, your presentation before our committee has generated a lot of interest. Some of the questions are beyond what I think you might have expected, but you have answered those questions admirably in the area you deal with and given us a little of your perspective in terms of doing business in Turkey and the culture and environment of the region. Thank you very much for coming this afternoon.
We now have before us the Canadian Turkish Business Council. We are pleased to welcome Mr. Mike Ward, Advisor to the Board; and Mr. Richard Mabley, Business Development Manager. Please proceed with your presentation.
Mike Ward, Advisor to the Board, Canadian Turkish Business Council: Thank you, Madam Chair, honourable senators and ladies and gentlemen. I am delighted to be here today to speak with you about Turkey from a business perspective. I will say right off the bat that I will cover a little bit of the ground that EDC covered. They were talking about how big the Turkish economy is. My number is seventeenth largest in the world.
I was the senior trade commissioner in Turkey starting in 2007. My assignment consisted of a two-year posting at the Canadian Embassy in Ankara followed by a further two years in Istanbul, where I took on the additional role as head of the new Canadian consulate there. I retired from the department last year and am currently an adviser to the board of the Canadian Turkish Business Council, or the CTBC. I am a board member the Atlantic Council of Canada, which, among other things, provides administrative support to the CTBC. Over the past year, in addition to participating in various conferences and other speaking opportunities, I have provided advice to some Canadian firms exploring business opportunities in Turkey.
Mr. Mabley is the business development manager at the Canadian Turkish Business Council, a position he has held for about the past two years.
Established 10 years ago by Canadian firms and organizations active in Turkey, the CTBC's mandate is to promote trade and investment between the two countries. It is a not-for-profit, non-governmental organization.
By virtue of his position at the CTBC, Mr. Mabley has been involved in organizing a number of key bilateral events, including a major Canada-Turkey business conference in Toronto a few weeks ago and, about two weeks prior to that, a speaking engagement in Toronto by Turkey's foreign minister.
I was in Turkey at an interesting time in terms of Canada-Turkey commercial relations — one that involved dealing with some challenges and that also saw some significant milestones. Frankly, the major challenge I faced in Turkey was getting Canadian firms interested in the market. In fact, over the course of my career as a Canadian diplomat, and aside from a posting in the United States, I found that a majority of Canadian small and medium-sized firms, and even a few of the larger ones, were much more comfortable and knowledgeable about pursuing opportunities and commercial initiatives in NAFTA countries and foregoing other potentially-lucrative markets, such as Turkey.
More recently, I believe that the impact of the economic downturn has had an influence in motivating some firms to look beyond North America. Firms have also been motivated to look further afield due to recent negotiation of various government-to-government instruments that encourage increased Canadian foreign investment and trade, such as investment protection agreements, double taxation agreements and, of course, more comprehensive FTAs.
In the case of Turkey, I can tell you that today its commercial profile in Canada is much stronger than it was five or six years ago.
With this brief presentation, I would like to highlight for you some of the reasons why more Canadian firms are doing business in Turkey now and why, in my view, an increasing number of Canadian firms will start looking at the potential there.
I referred a moment ago to the challenge I faced in 2007 because a number of Canadian firms did not realize the importance of the Turkish market. Back then, for example, many were surprised to learn that Turkey was a G20 market, that it was the third most populous country in Europe after Germany and Russia, and that it had a substantial and growing consumer-driven middle class and a young population, some 50 per cent of whom were under the age of 30.
Shortly after I arrived in Ankara in 2007, we arranged a round table meeting with representatives of Canadian firms who had established a presence in the country. At the time that amounted to about $1 billion in Canadian investments in Turkey. When I asked what we as an embassy could do to help advance Canada's commercial interests there, they listed three priorities right off the bat. First, they wanted an agreement on the avoidance of double taxation, commonly referred to as a double-taxation agreement or a DTA. The purpose of this was to ensure that individuals and persons from one country operating in the other would avoid being taxed twice.
Second, they called for a bilateral air agreement that would allow Turkish Airlines to provide direct flights between Istanbul and Toronto. The primary benefit they saw in that was that it would enhance the ease of business travel between the two countries by avoiding stopovers in Europe.
Third, they all supported the opening of a trade-based Canadian consulate in Istanbul. At the time, Canada was the only G20 country without a formal office in Istanbul, aside from an honourary consulate representative.
A message that outlined those recommendations resonated with decision-makers in DFAIT and all three of the recommendations were consequently implemented, the most recent being the DTA, which came into effect in January of this year. The consulate was officially opened in 2010 and Turkish Airlines now flies five times a week between Istanbul and Toronto.
These and other factors, such as increased ministerial and other high-level visits between the two countries, have served to raise Turkey's commercial profile with Canadian firms. In 2009, for example, the largest-ever Canadian trade commission to Turkey visited both Ankara and Istanbul, and it was headed by the Canadian Turkish Business Council. The delegation was composed of 30 firms from across Canada, along with representatives from three provinces and from three federal government organizations. For about two thirds of the firms participating, this was their first visit to Turkey. In terms of international business, most had dealt with the United States back then, which was 2008. However, with the economic downturn, they were motivated to explore the lucrative commercial potential Turkey had to offer. That potential is growing.
In recent years, Turkey's market reforms, strong growth and economic and political stability have attracted substantial foreign direct investment. In fact, in the past nine years alone, Turkey has attracted about $110 billion in FDI and the Turkish government seeks to attract more.
To complement the work of Turkish trade officers located in the Turkish embassy in Ottawa and at its consulate general in Toronto, the Government of Turkey has established an organization that promotes foreign direct investment in the country. The Investment Support Promotion Agency of Turkey, ISPAT, reports directly to the Turkish Prime Minister. It has a representative in key locations around the world, including one who works out of Toronto. The fact that ISPAT has established an office in Canada is a strong indication of the potential the Turkish government sees in increasing Canadian FDI in Turkey. The ISPAT representative would work closely with EDC, for example.
That is not to say that Turkey is not facing its fair share of challenges from the perspective of foreign investors. These include such issues as keeping inflation in check; monitoring the current account deficit, which EDC referred to; and concerns over youth unemployment.
However, there is no denying its strong economic position. With a gross domestic product ranked sixteenth, seventeenth or eighteenth in the world, Turkey's economy is bigger than those in many EU countries. Its story is all the more impressive when taken in the context of the economic crisis. Prior to the recession, Turkey's growth rate was among the highest in the OECD countries. As a result of its objective of eventually joining the EU, a number of key laws and regulations have been introduced over the past decade or so. Generally speaking, these were designed to strengthen the banking sector, promote strong business practices and to attract foreign investment.
Consequently, Turkey weathered the recession much better than many of its peers and while Turkey's economy did not escape the crisis unscathed, it staged a strong comeback. In 2010, the country's economic growth reached an amazing 9 per cent, higher than a majority of the emerging market economies that year.
In 2011, the economy grew by a further 8.5 per cent, making it Europe's fastest growing major economy last year. Even with Europe's continued economic woes — and Europe is Turkey's largest trading partner — the IMF predicts that Turkey's economy will grow by 3 per cent this year.
While inflation is higher than we like to see it in Canada, the current rate, which is below 10 per cent, is fine for a country that knew double-digit inflation for a sustained period of time in the 20th century. Unemployment and capacity utilization rates correspond closely to levels in Canada.
It is against the backdrop of strong economic growth over the past decade that Turkey has met many of the key criteria for firms looking to trade and invest internationally. Certainly, Canada's business presence in Turkey has grown in recent years to the extent that, by the end of last year, as EDC mentioned, our exports have reached $1.2 billion. How big is this? Had Turkey been a member of the EU last year, it would have been Canada's seventh largest export destination for that 27-member trading bloc.
Canadian and other international firms are not looking to Turkey in and of itself. These firms recognize the tremendous advantage of Turkey's central geographic location, along with its strong business and political networks in the surrounding area. For example, Turkish investments in the Middle East and North Africa tend to be concentrated in manufacturing, construction, oil and gas, and the service sectors. In Saudi Arabia, Turkish involvement in the construction and infrastructure sector stands at about $10 billion. Turkish investment in northern Iraq is growing quickly; in fact, it is estimated that Turkish firms currently hold up to 95 per cent of the $3 billion Iraqi construction market.
These sorts of business connections represent tremendous partnering opportunities for Canadian and other international firms looking for another avenue to expand into regions close to Turkey.
The news for Canadian firms has not been all good. The economic crisis had an adverse impact on a few Canadian investments in Turkey, but these were solely a consequence of factors outside of Turkey. In 2009, for example, CanWest sold its four Turkish radio stations. In 2010, Nortel divested itself of its Turkish holdings which, at its height, employed some 1,100 Turkish engineers. That is an amazing investment.
Indeed, over the past few years, there has been a strong uptake in the number of Canadian firms active in Turkey. For example, the Turkish firm Atlasjet, which is a low cost airline, signed a letter of intent for 10 Bombardier CS300 aircraft and has options on five more, which could potentially bring the total value of the deal to $1.18 billion.
Bombardier is also looking to sell aircraft to the national carrier, Turkish Airlines. Candu Energy is conducting a feasibility study for Turkey's proposed Sinop nuclear power plant. Canadian technology is one of the candidates for that project. Silvermet, which was mentioned earlier by EDC, is looking to substantially increase its investment footprint in Turkey. Using waste that results from steel made from Electric Arc furnaces, Silvermet produces zinc. There is good potential to extract zinc from steel in Turkey since it is Europe's second largest crude steel producer. The Four Seasons hotel chain now operates two hotels in Istanbul, the Prison, which is a beautiful place in Sultanahmet, the old part of town, and, right on the Bosporus, the Bosporus Four Seasons. I believe it used to be a French private school. It is a wonderful hotel. Speaking of schools, Centennial College became the first Canadian educational institution to establish a recruiting centre in Turkey.
As a result of growing business in the Turkish market, the environment firm Golder opened a second office in the country, this one in Istanbul, to complement the one in Ankara. A number of Canadian renewable energy firms have zeroed in on Turkey. Last week, the Ontario firm Canadian Solar Inc. announced that it had been awarded a solar module supply contract in Turkey. Wind energy firm Free Breeze operates an office in the country that serves Turkey and the region. Mining is huge in Turkey. Eldorado Gold oversees the largest gold mine. Inmet Mining operates one of the largest copper mines. Other mining firms, such as Frontline Gold and Alamos Gold have recently invested in the Turkish mining sector, and they and other firms plan increased activity there.
There are a number of potential engineering projects for Canadian officials, such as building bridges and highways and constructing airport facilities.
A few years ago, Saskatchewan-based Alliance Grain Traders completed its $104 million acquisition of the firm Arbel, which is Turkey's largest lentil and pasta producer. The Ontario Teachers' Private Capital and the Canada Pension Plan Investment Board have jointly established the largest private equity fund exclusively focused on investment opportunities in Turkey that EDC helped to set up. The list goes on.
I heard the term BRIC earlier. As you know, that is an acronym that was created by Goldman Sachs in 2001. It refers to the countries of Brazil, Russia, India and China, which, at the time, were all deemed to be very large and rapidly growing economies. The acronym was subsequently expanded to BRICS in order to include South Africa. The term has come to be a symbol of the shift in global economic power away from the developed G8 economies toward a new geographic area. More recently, Goldman Sachs has come up with the term ``Growth Markets,'' which is an exclusive group of what you might refer to as ``super emerging economies.'' EDC gave you another acronym, and Goldman Sachs' borders on it a little bit. Goldman Sachs takes BRICS, plus the countries of Turkey, Indonesia, Mexico and South Korea, which, if I am giving a talk, I remember as TIMS. What that means is that Turkey is part of this distinguished group, and it is a testament to its economic significance and all the more reason for Canadian firms to be there.
Many thanks for providing an opportunity for us to appear before you today.
The Chair: Thank you, Mr. Ward. You have covered a lot of territory there.
Senator Downe: I very much enjoyed your presentation, Mr. Ward. I was particularly interested in your explanation of the round table that was conducted a number of years ago where you identified three priorities. When Ottawa acted on those three priorities then the trade and business climate changed dramatically for Canadians doing business in Turkey. What would the three new priorities be? What do we have to do to grow business between Canadian and Turkish companies even more?
Mr. Ward: That is a good question.
Senator Downe: Another way of asking is: What are the irritants that we have to address?
Mr. Ward: We have done a lot already. Those three have helped tremendously. Again, these were not my ideas; they were their ideas. The fact that the department moved so quickly to make these things happen was incredible. You know that there are discussions on free trade. I think that those, as EDC implied, would be complex negotiations. In Canada's case, I cannot speak to that. I am not part of the department anymore; you would have to speak to someone from that area. However, I am sure there are areas where Canada wants to ensure that we safeguard the issues that are important to us. If that could move forward — and they are still open; they have not been cancelled — that would certainly be a major step forward in terms of relations.
Senior visits are also extremely important. If you can get a minister to bring a delegation over, that minister can meet with counterparts to discuss market access issues. He will attract a crowd. He will attract not only the politicians but large businesses in a country such as Turkey. He will attract a strong delegation to accompany him. The Trade Commissioner Service is so well schooled in how to set up these things. You get seminar presentations and one-on-one meetings. I remember that when Minister Van Loan came in 2010 to open up the consulate, he brought some firms with him. Istanbul and Ankara were the first stops, and then they were going on to Greece. The visit was so good for Canadian ICT firms. They had to go to Greece; they were committed. However, they could not wait to come back to Turkey. We picked the right partners over there. There are some business NGO groups. We picked a really good one to work with, and they have great members. That firm left Turkey the first time with a bunch of agreements initialled, and then they came back to do more business.
Senator Downe: Given that the international trade minister cannot be everywhere, I assume, because of other responsibilities, I assume that other ministers are equally important. What you are saying is that it is a delegation. It could be the Agriculture Minister. It could be other people.
Mr. Ward: Minister Ritz has been, yes. Senators would be a great idea.
Senator Downe: How often do other countries, our competitors, visit compared to Canada?
Mr. Ward: My goodness.
Senator Downe: Do they send ministerial delegations? You were there for a number of years.
Mr. Ward: It does not matter what country you are talking about; the Americans are always there in a big way, with high level representatives. Sometimes I wished that I was an American diplomat — maybe not, because some of them would complain about the frequency of the visits. Senators and large U.S. Senate delegations would come over. They show up all the time. Governors show up and, of course, cabinet ministers as well.
You will always get something going. I remember one country I was in where a senior person stopped at the airport and one of the Turkish ministers went out to the airport to see the Canadian in a stopover.
Senator Johnson: I too enjoyed your presentation very much. I am wondering if you could update us on the New Turkish Commercial Code that was brought in in July 2012. It was a change to the law that has been in effect since 1956. In my research, I found that they say that it is a major overhaul of Turkish business life in terms of auditing, accounting requirements, et cetera and will make a big improvement in the way they operate. I am wondering how this would affect Canadian business in Turkey.
Mr. Ward: It is a wonderful piece of legislation. It brings Turkish commercial codes into the 21st century. There is a requirement now for increased transparency and for independent audits.
Can I ask, does what I say here stay within the room to a certain extent?
Senator Johnson: No, it is on television.
The Chair: We hold these meetings in an open atmosphere.
Mr. Ward: As we should, of course.
The Chair: There is a record kept of this and it is disseminated. Choose your words from here on in.
Mr. Ward: That is good advice, Madam Chair.
You can now establish a company with only one shareholder. There is protection of minority shareholder rights. This is everything that the North American and European countries would want moving into Turkey. It is a reflection of the fact that Turkey has worked to join the EU and has adopted its laws and regulations to reflect that objective. There is no telling, of course, when that would be realized, but in some ways it does not matter because they have made this progress.
These things — increased transparency, independent audits, which is huge, establishing a minority company with only one shareholder, and protection of minority shareholder rights — are exactly what we want.
Senator Johnson: Was that motivated by the need to increase inward investment, as well as technological change?
Mr. Ward: I believe those would be two important factors.
Senator Johnson: Internet and e-commerce?
Mr. Ward: Well, Internet. Turkey is —
Senator Johnson: Are they with the program?
Mr. Ward: They have the fourteenth highest number of Internet users in the world, at 35 million people. All this information will be available on line. All the company information will be available on line.
Senator Johnson: Can we reasonably say that this code will be beneficial for investors?
Mr. Ward: One hundred per cent, absolutely.
[Translation]
Senator Fortin-Duplessis: First of all, I thank you for you very positive presentation.
Mr. Ward: Thank you.
Senator Fortin-Duplessis: You said that the Turkish prime minister had a financing agency and was financing businesses. I do not suppose he finances them all at the same time.
What kinds of obstacles do Turkish businesspeople encounter when they need a loan from Turkish financial institutions?
[English]
Mr. Ward: Let me clarify. I apologize if I made the wrong statement. I see where you are coming from, because I did make the link with ECD, but the investment support promotion agency is designed to attract foreign investors into Turkey, so Canadian in our case. They are active around the world. They promote the incentive programs — for example, the fact that personal and corporate income tax have been reduced. There are tax benefits and incentives to work in various geographic zones in Turkey and special tax measures to support research and development in Turkey.
In terms of Turkish firms getting financing, there are banks that provide loans, so they would shop around and try to get the same sort of loans, as much as Canadian firms would do. I hope that answers your question, and I apologize again for that.
[Translation]
Senator Fortin-Duplessis: My second question is slightly different. You talked about Turkey's economic growth. On that point, the credit rating agencies do not seem in agreement, since Fitch forecasts sustained economic growth, while Moody's and Standard & Poor's are more cautious.
What is your opinion, and what factors do you take into account in your analysis? Might Canadian investors be scared by that?
[English]
Mr. Ward: I am speaking now as a private citizen. I know someone at Fitch, a good friend of mine in Turkey, and met someone at Moody's, but I have always been a little more upbeat about Turkey. I think in many ways it has been underestimated by the fact that it took a hit when the economic crisis hit and charged right back and exceeded all expectations. If you read the media at the time, there was a bit of doom and gloom. There were IMF negotiations. They figured Turkey was going to have to get involved with the IMF again, and it did not. The growth was tremendous, even this year, with the IMF talking about 3 per cent growth, and so far it is right on track to reach that 3 per cent growth. The average rate so far this year is around 3 per cent for the first two quarters.
They are looking to ease up visa arrangements and expand trade agreements in the region and around the world, including with Mercosur, for example. They do not want to rely so much on Europe. They do not trade as much with Europe as they did even five years ago. The EU is still their major trading partner, but they are diversifying. For example, in automotives, Turkey has a major automotive sector. There are 19 automobile manufacturers located in Turkey. Unlike some of the other Eastern European countries involved in the automotive sector, Turkey does not ship to the EU only, but it ships to the Middle East and North Africa. It is using things like these arrangements, the free trade initiatives and other good will it has built up and is building up in this region to promote these things. I am a more optimistic than some of the others might be.
[Translation]
Senator Fortin-Duplessis: Thank you so much for giving me an answer that really reflects your perspective.
[English]
Senator Nolin: I have a supplementary question. Listening to your answers to Senator Fortin-Duplessis on access to financing, I must tell you we have in our briefing material some information that is somewhat contrary to the answer you gave us. The World Economic Forum's global competitiveness report, the latest one, was basically saying the contrary to what you just said and that the most problematic thing for Turkish business is to access financing. Who should we trust?
Mr. Ward: I would probably go with the World Economic Forum, if I were you.
Getting credit was an issue for the Royal Bank, ease of doing business, dealing with construction permits and resolving insolvency. These things are issues, and I have to say I am not an expert in this area. I lived there for four years and, with the companies that I knew and that I dealt with and that I interacted with, that issue of financing for projects that they were looking for never came up.
Senator Nolin: Are you familiar with that report?
Mr. Ward: Yes, I am.
Senator Nolin: What are the problems?
Mr. Ward: Part of it, in my personal view, is that there is the question of whether the banks want to lend. It is a question that is faced around the world. Are you going to invest in this, because of the uncertainties in Europe, for example? Often the banks want to hold on to their money. That might be one issue. Again, it did not cross my radar.
The Chair: Mr. Ward, you are representing the Canadian Turkish Business Council. Can you tell me when it was established and a bit about your membership so we can have a better idea of your organization?
Part of where I am coming from is that you do not have to be of Turkish heritage to do business in Turkey, but do you have some membership from the Turkish communities that have settled in Canada and are they in any particular area? In Saskatchewan I am very familiar with the Alliance group and Mr. Al-Katib and how much he has been value- added to doing business in Turkey because of his heritage and background. Those are the questions. I would like you to give us an overview of your council.
Richard Mabley, Business Development Manager, Canadian Turkish Business Council: I will pick it up; this is my area of expertise. When it comes to the CTBC itself, you are looking at companies from a wide range of sectors, from Bombardier, SNC-Lavalin, Scotiabank, Alliance Grain Traders, as you mentioned, Murad Al-Katib, and Ehmet are very helpful when it comes to getting in touch with the appropriate people in Turkey. The Turkish community is very helpful in getting in touch with the people, especially when it comes to conferences. For example, last month we had our tenth joint annual conference. The Honourable John Holmes presented. Dr. Argüden was there. Over 120 people come in and looked at our different sector panels from aerospace and defence to mining and resources to energy to ICT, which was actually a new panel for us. We were debating whether or not to go with that.
Many of these new government perspectives, especially when it comes to Ontario and DFAIT, are going toward the ICT sector, especially since Research In Motion was in Turkey and had a deal with Turkcell. Since that point, it just flew from there.
Going back to CTBC itself, we have over 30 members. Not all of them are as active as I would want them to be, but the big players are always very active: SNC-Lavalin, as I said, and Bombardier is always very helpful.
We always have very new members that come in as well, for example Bahçesehir University which just opened a branch in Toronto. That is very new. That is the first Turkish university to open a branch in Canada. They want to open up English schools here and they want to teach Turkish as well. The Turkish community is very active in putting these deals together.
There are many large firms that have a lot of native Turkish people who come in, like PWC, KPMG, Heenan Blaikie, and hire Turkish people to come to Canada because there is such a large Turkish population in Toronto. It is a great way for PWC to encourage trade between Canada and Turkey, getting these Turkish people to communicate on the cultural part and do business at the same time.
I hope that answers your question.
The Chair: Do you touch tourism at all as a sector to work with?
Mr. Mabley: Tourism is a huge sector when it comes to Turkey. That is the first thing people talk about when they talk about Turkey. They talk about Cappadocia, Antalya, Izmir, Istanbul and they talk about the hotels. However, a lot of the talk that I hear when it comes to tourism is infrastructure. A lot of these big companies are willing to go in there and build these hotels.
For example, I had a talk with a gentleman from Ritz-Carlton, the global sales manager, and they are looking to open three new Ritz-Carlton in Turkey because the market is so big and growing. Turkish Airlines is opening new routes around the world. More and more tourists are going to Turkey.
For example, Mr. Ward mentioned that on October 30 they opened direct flights five times a week between Toronto and Istanbul. That is a great opportunity for Canadians.
Mr. Ward: If I might just add, CTBC is 10 years old. They just had a major conference. John Holmes is Canada's Ambassador to Turkey, and Yilmaz Argüden is the chair of the Turkish-Canadian Business Council, which is the counterpart of the CTBC. It is located in Istanbul.
One other thing I wanted to add, we talked about sectors and EDC talked about sectors, ICT and automotive parts, but there is education. You made me think about it when you talked about tourism. Turkey has a huge youth population: It is larger than some countries in Europe. There is restricted government spending on education relative to other OECD countries, so it represents a tremendous opportunity.
If you wanted to do something to strengthen, to go the distance, there used to be an organization called the Canadian Education Centre that was across the world. There was an office in Turkey and it closed in 2009. That organization did a tremendous job of getting the word out to Turkish students about the opportunities of studying in Canada. In 2010 there were approximately 1,500 Turkish students studying in Canada out of a total of about 32,000 Turkish students studying worldwide.
The Americans are there, the Brits are there, the Germans are there and the Australians are there. It is a wonderful opportunity.
I remember when I lived in Bangkok we got the Thai alumni that had studied in Canada together. We had to do two separate receptions there were so many of them. These people are decision-makers in the public and private sectors now. These are the people; they have fond memories of Canada and are keen to help out. You could do something there.
I remember, before the crisis hit, they were actually looking at establishing, at the Canadian consulate in Istanbul, an education marketing position. I do not believe that that has moved forward, and I think that is because of the cutbacks. That would be something that, for a small investment, would have tremendous payback.
The Chair: Mr. Ward and Mr. Mabley, thank you for coming before us and giving us your perspectives on the record. You certainly have built on the other evidence we have received and it has been very helpful. Again, on behalf of the committee, thank you for coming.
We have a session, senators, tomorrow, and I remind you that next week we will proceed to the bill that is before us.
(The committee adjourned.)