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German firms wooed by Turkish boom

As Europe battles its never-ending debt crisis, Turkey, with its flourishing economy, is increasingly attracting the attention of German companies, as well as German-born Turks in search of a job.

German firms wooed by Turkish boom
RWE CEO and Turkish Minister lay foundation for Turkish power plant, Photo: DPA

The Turkish economy is the envy of the crisis-wracked eurozone: its gross domestic product (GDP) has expanded by an annual average 5.4 percent over the past 10 years. Its public debt has fallen below 40 percent of GDP, much lower than the majority of European countries. And inflation, which was once dizzyingly high, is now under control.

“Flattening growth in (Europe) will trigger new growth and foreign direct investments in Turkey, making it an indispensable part of long-term strategic planning for European firms,” consultancy Roland Berger wrote in a recent study.

Turkey has a population of 74 million, of whom more than 60 percent are 35 years old or younger. And with purchasing power growing from year to year, there is strong demand in areas such as infrastructure, energy, cars and the financial sector.

These are precisely the sectors where German companies excel: out of around 30,000 foreign companies in Turkey, nearly 5,000 are German, according to the German-Turkish chamber of commerce in Istanbul.

Indeed, the number of new German-funded companies set up in Turkey last year shot up by 14 percent to 534.

Tedrive Steering, a maker of steering systems and components for the automobile industry, is one of them. The small specialist engineering firm, based in Wülfrath in Germany’s industrialised Ruhr region, has selected Turkey as the site for its first overseas assembly plant.

The Turkish automobile market is “growing fast” and “German technology enjoys an excellent reputation there,” said the company’s chief executive Thomas Brüse.

“A lot of German companies have long been present in Turkey, but new subsidiaries, branches and joint ventures are signing up to the chamber of commerce,” a sign that they are expanding their activities in the country, said Ralph Jäger, deputy chief of the chamber of commerce and finance chief of RWE Turkey.

RWE, Germany’s number two power supplier, is investing 500 million euros ($615 million) in the construction of a gas-fired combined cycle power plant at Denizli, in the south west of Turkey, to supply some 3.5 million households with electricity.

The plant is scheduled to be up and running at the end of 2012.

RWE and other German companies can benefit from the close social and economic ties that Turkey and Germany have enjoyed for decades.

Germany is in fact Turkey’s main trading partner, accounting for 10.3 percent of its exports and 9.5 percent of its imports, according to data published by the Germany Trade & Invest development agency.

Germany invited hundreds of thousands of Turkish “guest workers” to come and work during the country’s economic miracle back in the 1960s. They stayed and some three million Turks now form the largest immigrant population in the country.

Indeed, it is the younger generations of those immigrants – Germans of Turkish origin who are equally at ease in both the Turkish and German languages and cultures – who are increasingly being recruited by German companies for their Turkish operations, said Jäger.

A private training centre in Kreuzberg, a multicultural district in the heart of Berlin, offers apprenticeships in German, English and Turkish in industry and in the hotel sector, with placements in German companies in Turkey.

“We want to train young people who will eventually be beneficial to the German economy,” said the centre’s chief Nihat Sorgec, himself of Turkish origin.

“At the same time, it helps to dispel the image of Turks being socially underprivileged. So it’s a win-win situation,” Sorgec said.

AFP/bk

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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