Turkey has advantages in Iran, but Europe will be biggest rival

Barçın Yinanç - barcinyinanc@hdn.com.tr

Turkey needs to coordinate the public and private sectors’ efforts and prepare a road map in a very short time to enter into the Iranian market, says the president of DEİK’s Turkish-Iranian business council

As Iran slowly opens up to trade following the lifting of international sanctions, Turkey will be competing with Europe to secure advantages in the lucrative neighboring market, Foreign Economic Relations Board (DEİK) President Bilgin Aygül has told the Hürriyet Daily News.  

“Iran would always prefer Turkey but it is entering a period where it will be evaluating numerous alternatives. All the European countries, as well as Japan and China, have been going to Iran with large delegations since July [2015]. These visits are supported by political delegations as well,” said Aygül, who also serves as the president of the Turkish-Iranian Business Council.

Let’s start with a brief overview of current relations.

There is a solid economic structure and a good network of political social relations between the two countries, which have a common culture and values, the same consumer habits and a similar population composition. Iran has always been Western-looking.
 
Even after the Islamic revolution?

Iran had its face towards the West for many years. It has Western norms. Its industrial structure is for instance taken from Europeans. Iran sees Turkey as important both in terms of logistics but also in cooperation and joint investment.

When talk about a common culture, I am not only talking about the Azerbaijanis (in the country), but due to TV series even the Persians are speaking Turkish. Iran is one of the few countries where Turkish is not a problem. Turkey was one of the countries working most efficiently during the embargo. Nearly 200 Turkish companies invested in different sectors during that time.
 
Have economic relations been affected by political tension due to the disagreement over Syria?

Economic relations have not been affected to date. But let’s face it, even if there might be brotherly ties, economic relations can be fast affected by politics in the Middle East.
 
The economy has its own rules. Let’s not forget Iran is not Iraq. Iran would always prefer Turkey but they are entering a period where they will evaluate numerous alternatives. All the European countries, (as well as) Japan and China, have been going to Iran with large delegations since July (2015). They are supported by political delegations as well. Iran is a country with a centralized economy. The economic structure is quickly affected by the decisions of the government.
 
In this framework, where do you see the potential in the near future?

Turkey is present in all sectors. It has a comparative advantage in some of them. A significant segment of Turkey’s exports are industrial products and that will continue. Apart from industrial plants, I am not that positive about the construction sector because Iran has a very developed construction infrastructure. But there is potential in construction material. There have been only a handful of hotels constructed since 1980. There will be a lot of movement in the accommodation sector, not only in terms of the construction of hotels but also their furnishing and management. The same goes for hospitals and shopping malls. Turkey has accumulated a lot of experience as far as management is concerned, so there is great potential there.

The same is valid for ports and airports, despite the fact that TAV has had bad experiences in the past (as the company’s planned investment for the airport in the capital was blocked by parliament).

The transport of products to and from Iran and oil and natural gas pipelines stand as investment areas in the upcoming period. Iran has three state companies - one of them is a petro-chemical company which has dozens of plants which would require upgrading.
 
Let’s talk about the challenges. You said Iran is not Iraq…

It has a self-sustained economy. It is looking to produce everything on its own therefore it has huge customs walls. Iran is not a member of the World Trade Organization (WTO), so there are certain difficulties in terms of international legal norms.
 
What is the mood in Iran? Are they willing to intensify economic relations with Turkey?

They want cooperation but they want to do the same with the Europeans too. The Europeans have the advantage of finance. Turkish exporters and industrialists need financial support.

Iranians would still prefer Turkey to update its technologies. But Turkish companies should go there with a strategic, sustainable approach.
 
What do you mean by that?

Economic leaders need to base their approach on a healthy structure. Iran is a country which is dominated largely by state companies called Bonyad. The state and economic leaders need to approach them with strategic planning. Those that went from Europe were accompanied by prime ministers, deputy prime ministers and ministers. The Europeans will be our serious competitors.

I still believe that Turkish companies who have deeply-rooted relations there have great potential because it is not so easy to do business with the traditional structure there and adapt to the trade conditions.
 
So do you claim our biggest advantage is cultural affinity?

We know very well the traditional structure - the conditions of trade, the behavioral characteristics of people – and we have learned a lot in the course of many years.

But let’s also not forget that Iran has a significant segment of its society living abroad, around five million people who are very well-equipped and who are now coming back to set up business.
 
Many countries have sent political delegations. Is Turkey running late in that sense?

We are not running late; we have trade delegations going there every week. But obviously having two elections in one year has had its negative effect. We have to catch up now and start moving faster.
 
Isn’t it unfortunate this new era with Iran coincides with a problematic period in our relations, especially in terms of Syria?

We do have to think about problems that might arise due to the Syrian issue but I am not convinced that it will reflect on our economic relations. Unlike other Middle Eastern countries Iran does not take immediate action, but of course they might end up making certain assessments.
 
How do you see Iran’s future? We know there are competing power centers who differ on relations with the West.

It is difficult to say. But there has been a more positive mood towards the West with the arrival of (President Hassan) Rouhani since 2013. While the economy is in serious dire straits due to the fall in oil and gas prices, these will be overcome very shortly and serious economic activity has started under Rouhani. The litmus test will be the elections in February. If Rouhani gets enough seats in parliament, then relations with the West will be wide open.
 
Will Iran become a more constructive actor to engage with on regional issues or, on the contrary, will it stick to its foreign policy line, continuing proxy wars in different parts of the region?

Iran is a religious state but it is like other countries like Saudi Arabia. Iran is not a country where decisions are between two lips. It has a parliament and a religious council - two different entities. Decisions are debated. Persians have learned a lot and they have gained international experience, particularly after the Islamic revolution. They will maintain their principles and values in foreign policy too. But economically, they have no option but to integrate with the world and they are moving fast in that direction.

Do you think Turkish society knows Iran well?

We are two close but far away neighbors. The public has a negative perception. But Iran is an extremely rich country with its nature, history and culture. Its cultural life with concerts, expositions and art galleries is very dynamic. They have a very strong educational infrastructure, even stronger than that of Turkey.
 
In short, what is your advice for the upcoming period?

There is a lot of interest from the Turkish business community. We need to reinforce trade representation, as we only have one trade attaché in the embassy. The most important challenge will be in terms of providing finance. But above all, we need to coordinate the public and private sectors’ efforts and prepare a road map in a very short time.