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Turkey now has 700 companies operating in Ukraine. Last year, he said, Turkey was Ukraine’s top foreign investor, investing $400 million. With cross-Black Sea trade growing, Turkish companies are mulling bidding on Ukraine’s three state-owned ports that are to be privatized at electronic auctions over the next two month.
Turkey is currently Ukraine’s fifth-largest trade partner, although business links between the two countries grow every year. 2021 is not over yet, but it has already seen a trade volume of $5bn. This volume exceeds the total for the last pre-pandemic year of 2019. President Volodymyr Zelenskiy wants it to hit $6bn. In 2020, Turkish companies invested $400mn into Ukraine, making Turkey the largest investor that year. Pehlivan also pointed out that Ukraine’s trade with Turkey has not recovered to its 2008 peak of $8bn but insisted that a comprehensive free trade deal will push trade far above the current level.
Ukraine is one of only five countries in the world that have reciprocal passport-free travel arrangements with Turkey. According to Pehlivan, this is Turkey’s “mini-Schengen zone.” Turkey, alongside Egypt, accounted for a staggering 70% of Ukrainian outbound tourism in the first half of 2021. In June Turkey declared it wanted $1.5mn Ukrainian tourists in 2021. Turkey was the most popular destination for Ukrainian tourists in 2020, according to a report by the Mediterranean Tourist Hoteliers Association, with 564,000 out of 750,000 outbound tourists choosing to visit Turkey. The Ukrainian market share of tourists visiting Turkey has increased from 2% 10 years ago to 4% today.
However, commercial exchanges between the two countries are still impeded by the lack of a free trade agreement. Talks have been ongoing since 2007, although Ukraine’s trade volumes with Turkey are much higher than some nations with which it has a free trade agreement, such as Canada.
Ukraine consistently runs a large trade surplus with Turkey. According to Pehlivan, since independence, Ukraine has exported $40bn more to Turkey than it imported. This means that Turkish businesses are reluctant to give Ukrainian goods unfettered market access.
Ukraine has a poor negotiating position because it joined the World Trade Organization in 2008 on unfavourable terms. On average, tariffs permitted by the WTO’s conditions for Ukraine are much lower than those for Turkey, meaning Ukraine can offer fewer concessions.
Agriculture is a sensitive negotiation topic. It represented nearly 45% of Ukraine’s exports to Turkey in 2019. Soybeans and corn alone made up over 70% of agricultural exports.
Traditionally, Ukraine’s largest exports to Turkey have been iron and steel. Some Turkish steel producers are uneasy about giving their Ukrainian competitors even more access to their market.
There are now over 700 Turkish businesses operating in Ukraine, with $4.1bn invested so far. Lifecell, the third-largest phone network operator in Ukraine, which is wholly owned by telecom giant Turkcell, is also the largest Turkish business in Ukraine.
Turkish construction firms have already built over 200 projects in the country,
28 UKRAINE Country Report November 2021 www.intellinews.com