CURRENT affairs

Diversifying its portfolio of products, services, and sectors, Eaton is prepared for slower global and domestic growth.

OEM customers; export business has continued to support the wider Turkish economy and our business.

Can you break down Eaton’s annual revenue in Turkey between products and services?

Turan Koçyiğit

CEO, VEFA GROUP From a revenue standpoint, in which of sub sectors has Vefa Group been the most successful, and where do you expect to grow?

Our prefabrication work is carried out through Vekon, one of Vefa Group’s subsidiaries. We have 30 years of experience and have done projects in more than 100 countries. In these projects, we use four different building systems: prefabricated panels, modular containers (living containers), lightweight steel, and structural steel. Through these structures, we have been involved in many different projects around the world such as worksite structures, commercial structures, public buildings, as well as camps for the military, refugees, mining facilities, and so on. In addition, we run social housing projects. As per revenue, our profitability is high in social housing, schools, hospitals, and camp projects, as they are relatively big and centralized projects in terms of execution. Our focus for the future is on transferring our know-how and technology abroad.

“Fast and high-volume production capacity is essential because the material we produce is used in emergency situations.”

How challenging has it been for Vekon to convince price-sensitive sectors to invest in high-quality prefabricated units?

Being a strong brand brings about high production capacity and high quality. In the prefabrication sector, one of the most important things is speed. When our customers make an inquiry, they say “We need it yesterday.” Fast and high-volume production capacity is essential because the material we produce is used in emergency situations, such as refugee camps. We generally work with top companies, both international and domestic, and these companies have already accepted the fact that we are 1015% more expensive than the standard market prices. They still purchase our products because they know they will have a long-term gain by using our products.

How did you end up building a production facility in Afghanistan?

The proposal to build a factory came from the Afghan government. The minister of environment and urban planning visited our facilities and our offices. He informed us that Afghanistan required a factory to produce prefabricated units and asked for an offer. After we sent an official offer, they invited us to Kabul to make a presentation alongside another company from Ankara and one from Dubai. In the end, the Afghani government decided to go ahead with us because our delivery time, price, and quality surpassed our competitors. The project is worth USD11 million in total. It took us 14 months to finalize it as promised. Before the project, the Afghan government sent a group of 30 architects and civil engineers, and we trained them in our facilities for three months so that they can now run the factory in Afghanistan. We have also been providing a consultancy service for the factory for a year now and is due to finish soon. Afghanistan’s primary need at the moment is schools. Everyday, the factory produces 1,000sqm of two-story schools. However, the facility can also produce hospitals or houses in the future if needed.

Which countries or regions are the most important for Vefa’s exports, and into which new markets are you hoping to expand?

We work on projects in 30-35 different countries annually. Currently, we are working on projects in 10 different countries, including South American countries, Africa, Turkic countries, and those in the Gulf. We hold a Turquality Certification and have chosen five target countries within the scope of this certification to export to. Those countries are Indonesia, Ethiopia, the US, Kazakhstan, and the UAE. Africa and South America have always been our target markets because premixed concrete is extremely expensive in these regions, or sometimes unavailable. For this reason, our products are suitable for building schools, hospitals, or mass housing projects in Africa. We have an excellent competitive edge in the countries where the cost of labor is expensive, such as the US and UK. There is currently a social facility project under construction in the UK by using our products. We have a distributor in the UK and export our products there. ✖

Derya Hatiboğlu

GENERAL MANAGER, ASAŞ ALÜMİNYUM

urkey’s defense industry, which has been the country’s fastest-growing export sector over the past two years, is accustomed to adaptation. Its initial development was spurred by a 1974 arms embargo placed on Turkey by the US following the Cyprus crisis. Today it is the world’s 14th largest defense exporter, yet still finds itself adapting—and strengthening—in response to a changing geopolitical landscape. 2019 has seen Turkey’s defense exports penetrate or expand in a number of markets, largely in Asia, Africa, and Latin America. Many of these region’s countries are wary of falling too far under the influence that comes with American, Russian, or Chinese defense purchases, which makes them prime targets for Turkish defense companies.

Turkish defense exports are also particularly well-suited for these markets, which have small, but growing, militaries. For example, Turkish defense companies TAI and Bayraktar produce UAVs that are highly advanced but cheaper than the competition. Similarly, FNSS—a JV between Turkish holding Nurol and BAE— produces 4x4 armed vehicles in high demand by African militaries not advanced enough for larger, more sophisticated vehicles.

However, Turkey’s increasingly aggressive international ambitions have begun to limit the defense sector’s ability to open new markets. Notably, the sector has not penetrated some of the world’s leading weapons importers, such a Saudi Arabia, Iraq, and Egypt— countries that have objected to recent Turkish foreign policy decisions.

Turkey’s procurement of Russian-made S-400 surface-to-air missile systems in July 2019 defied NATO norms and resulted in the ousting of the country from the F-35 fighter jet program. While the Turkish firms omitted from the program were dealt a crushing blow to their business models, the broader sectoral impact was relatively limited.

In a more telling example of the importance of the industry’s relationship with the West, the Turkish military’s October 2019 incursion in northern Syria resulted in the suspension of arms sales to Turkey by a number of EU nations. Though the nations stopped short of an all-out embargo to their NATO partner, this episode has laid bare the defense sector’s dependence on foreign partnerships. While Turkey is quite capable of producing finished defense products, it is still highly dependent on Western defense components manufacturers and licenses. An ongoing export ban could prove highly disruptive to the Turkish defense supply chain.

While the Turkish defense industry has been successful in regional export diversification, these ongoing diplomatic spats represent existential treats to the Turkish defense industry. The US and Germany alone account for just under 50% of all Turkish defense exports. A loss of the Western market cannot be replaced by one-off arms purchases in the developing world. ✖

T