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Still hope for Turkish-Israeli business

Posted By David Shamah On June 20, 2010 @ 12:00 am In | No Comments

Their relationship may be in severe crisis, with calls for trade boycotts on both sides, but entrepreneurs believe the strong business connection between Turkey and Israel isn’t over yet.

 

Photo by Olivier Fitoussi/Flash90.
Israeli pharmaceutical giant Teva is thought to own a billion dollar market in generic drugs in Turkey through its Turkish owned subsidiary Med Ilac.

Once close allies, in recent months Israel and Turkey have had to confront various incidents that have strained their relationship. Now it’s at an all-time low, following the IDF raid on the Turkish vessel the Mavi Marmara on May 31, which resulted in the deaths of nine Turkish citizens and injury of several IDF soldiers. It’s difficult to imagine that the fraught relations between the two countries could be repaired, let alone restored to their previous heights.

Difficult, but not impossible, says Menashe Carmon, chairman of the Israel-Turkey Business Council, which promotes business ties between Israeli companies seeking opportunities in Turkey, and Turkish companies seeking to sell in Israel. “According to statistics, there are about 900 Israeli companies that do work in or with Turkey, and we supply them with information and support in their efforts to forge ties and find business partners with Turkish companies,” he tells ISRAEL21c.

The organization, which functions like a Chamber of Commerce and works closely with a business promotion group in Turkey, organizes tours and meetings. For obvious reasons, several meetings that were to have been held in the coming months are currently on hold. Still, ties forged over the years have led to trade reportedly surpassing $2.5 billion for both countries. Turkey was Israel’s 10th largest market in 2009, with Israel’s $1.4 billion in exports to Turkey comprising 1.6 percent of the country’s $67.5 billion export total.

Israel and Turkey have a free trade agreement, which so far neither side has considered canceling. Although the most well-known deals between the two involve Israel’s sales of military equipment to Turkey – deals Turkey is interested in continuing to pursue – Carmon says that many other made-in-Israel products are exported to Turkey, including electronics, smartcards, diapers, and medical and agricultural technology.

In 2007, Israeli company Teva, the world’s largest maker of generic pharmaceuticals, completed the acquisition of Turkey’s Med Ilac through a transaction estimated at tens of millions of dollars, putting Teva at the heart of what economists believe is a billion dollar market of generic pharmaceuticals in Turkey.

Snubs and counter snubs

To date, says Carmon, none of that has changed. The business ties that were built up during the ‘good years’ are still extant. It’s true that at least one new agreement – a code-sharing arrangement between El Al and a regional Turkish airline – was cancelled before it could be implemented, and that an Israeli investment house has decided to divest its holdings in Turkey. But beyond that “I haven’t heard of any existing deals being cancelled, although that’s no guarantee for the future,” Carmon concedes.

Still, the situation with Turkey clearly extends beyond business. “For years, Israel and Turkey were able to work together, even though Israel’s contribution to Turkish trade is not that great – it’s about a hundredth of Turkey’s $100 billion foreign trade. And Israel, too, has many opportunities to pursue, which could replace deals with Turkey. Still, the sentiment I am hearing on both sides is one of sorrow that things have come to this,” says Carmon.

“The business community was perfectly happy with the arrangements and agreements both countries have come to in recent years, and I know that given the opportunity, business people in Turkey would again welcome Israelis,” he adds.

In fact, the business ties are more enduring and solid than many are aware. The tension with Turkey was first felt in late 2008, when Israel launched Operation Cast Lead in response to Hamas’ years-long, incessant launching of Qassam rockets on southern Israel. Mass demonstrations in Turkey at that time led to a series of strained diplomatic moments.

These included the incident at the World Economic Forum in Davos in January of 2009, when Turkish Prime Minister Recep Tayyip Erdogan stormed off the stage after a heated exchange with President Shimon Peres; Turkey’s barring of the IDF from a Turkish military exercise in October (in response, the US pulled out of the exercise); and several starkly anti-Semitic TV series on Turkish networks, one depicting IDF soldiers as killers of Palestinian babies.

Israel snubbed the Turks a few months ago when Deputy Foreign Minister Danny Ayalon summoned Turkey’s ambassador to Israel to a meeting to discuss the anti-Semitic TV programs, and seated him on a chair that was significantly lower than all the others in the room. When the press learned of this, another battle of words ensued between the two countries.

Also, in the aftermath of the flotilla incident, thousands of Israeli tourists cancelled vacations at Turkey’s ‘Club Med’-style hotel complexes. Although Turkey attracts millions of vacationers from all over Europe, the Israeli trade is considered important to the country’s tourist industry – and the potential loss of 300,000 Israeli tourists is sure to fan yet more flames between the two countries.

Menashe Carmon (right) with a Turkish government official at a recent meeting.

Turkey welcomes Israel to the OECD

And yet… just a month ago, in May, despite tremendous pressure from the Palestinian Authority (PA), Turkey voted to accept Israel as a member of the Organization for Economic Cooperation and Development (OECD), generally considered to be the entree for countries seeking to be recognized as having a ‘first world’ economy.

Prior to the vote, the PA lobbied all 30 full members of the OECD – especially Turkey – with letters, presentations, demands and threats aimed at convincing at least one country to veto Israel’s entry into the group (according to OECD rules, new members must be voted in unanimously). And still Turkey, the most likely candidate to veto, voted to approve.

“Actually, we’re lucky the OECD vote came before the Gaza flotilla incident, because Turkey might have voted differently now,” admits Carmon – who then quickly adds that, in fact, even then Turkey had reason to veto Israel’s bid.

“The OECD vote was on the surface surprising, but actually made sense,” he explains. “It was one of a series of improvements we had seen in ties since the end of Operation Cast Lead, proving that even under the most difficult circumstances neither country is quite ready to throw in the towel. All the agreements are still in place, and Israeli companies still call our organization to get information on investment opportunities in Turkey.”

Despite threats by Turkey to cancel large infrastructure projects and other joint ventures, Carmon believes that it’s just talk; the projects are between private companies, for the most part, and boycotting of member nations, he points out, is against OECD rules.

Preserving commercial ties

While Carmon understands why Israelis might not want to visit Turkey this summer, he’s hopeful things will improve in the future – as they have in the past. “We do have some specific plans to reach out to our friends abroad, but given the current situation, I am not at liberty to mention anything,” he tells ISRAEL21c.

He will divulge that his organization is working on plans to bring a group of Turkish businesspeople to Israel, to arrange meetings for them with Israeli companies who aren’t quite ready to give up on Turkey. “There is a strong interest to preserve commercial relations and they will persevere,” he states.

“It’s clear that the Turkish people are hurt over what has happened,” says Carmon, “But I know the Turkish people, especially the business community, and many believe that what is happening now on both sides is an overreaction, related to internal Turkish politics.”

Politicians come and go, he continues – but, as the OECD vote showed, some things are stronger than politics. “I’m an optimist, and in the end I believe this will turn out to be less severe than we think. Two years ago, we couldn’t have imagined the current situation, and hopefully, in another two years, all this will be behind us.”

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