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Mark Rutte and Recep Tayip Erdogan in the better days |
As the diplomatic squabble between Turkey and the Netherlands
continues to fester, concerns are raised about whether — and to what
extent — the tensions will harm bilateral relations, particularly in
economics where the two countries have robust trade and investment
connections.
For Turkey, the Netherlands offers a large and expanding export
market. Trade between the two countries has roots in the 17th century
when the Ottomans exported wool and cotton (later tobacco as well) to
the Netherlands and imported clothes and linen in return. Commerce
between the two
countries remained strong into modern times; in 2016 the
bilateral trade volume was US$6.6 billion.
The Netherlands is the 10th largest export destination for Turkey,
and perhaps more importantly from the Turkish perspective, it is also a
fast-growing market. Last year Turkish exports to the Dutch market
amounted to $3.6 billion, against $3 billion in imports. And while the
annual increase in imports was 3.4%, exports expanded much faster, at
13.8%. For the Turkish economy, which is suffering an acute
current-account deficit, the increasing trade surplus with the Dutch is a
precious commodity.
On the other side of the equation, Turkey is and has always been a
favored destination for Dutch investment. A process that started in 1930
when the Dutch company Philips set up shop in the newly established
Republic of Turkey has reached new levels since then, making the
Netherlands by far the largest source of foreign direct investment in
Turkey today. According to data by the Turkish Central Bank, Dutch
investment stock in Turkey was $22 billion in 2016, compared with $11.2
billion in US investments in second place, and $9.8 billion from Austria
in third place.
Turkey is home to 2,700 companies funded by Dutch capital. This
figure includes those transnational companies registered in the
Netherlands for legal and tax-related purposes. This sizeable Dutch
involvement in the Turkish economy benefits both sides. For Dutch
multinationals such as Unilever, ING Bank, Philips, Perfetti, Royal
Dutch Shell and Philip Morris, Turkey is not only a favorable production
base but also a lucrative market and a trading and logistics hub for
access to the Middle East and North Africa, Balkans, Caucasus and
Central Asia. More Dutch investment is set to come to Turkey, such as
the recent purchase by Vitol Group of the Turkey-based fuel products
distribution company Petrolofisi for $1.47 billion. Investment needs a
stable political climate, and the diplomatic spat between Turkey and the
Netherlands doesn’t help.
It is also worth nothing that while the amount of Turkish investment
in the Netherlands is considerably smaller, there are several large
Turkish firms that have set up subsidiaries enabling access to the
larger EU market.
For the past week, Dutch pundits have been commenting that Turkey is
more dependent on the Netherlands, so possible sanctions imposed by
Ankara would only mean “shooting themselves in the foot.” Turkish
authorities have imposed political sanctions over the Dutch government’s
refusal to allow Turkish ministers to meet with members of the Turkish
diaspora there, including halting high-level political discussions
between the two countries and the closing of Turkish airspace to Dutch
diplomats. But Ankara has carefully ruled out economic sanctions.
Turkey’s economics minister, Nihat Zeybekçi said: “If we take these
steps, both sides would be hurt.” Ömer Çelik, minister of EU affairs
said the Dutch business community, which is “investing in Turkey, doing
commerce and generating employment” is “certainly not a part of this
crisis,” and “Dutch investment in Turkey is by no means under risk.”
Economic sanctions between Turkey and the Netherlands don’t seem
likely at the moment, but longer-term threats remain. First, even if no
sanctions are imposed, the significant loss of confidence caused by
recent events will take a toll on bilateral economic relations for some
time.
Second, the sizeable Turkish diaspora in the Netherlands, as well as
the relatively smaller Dutch community living in Turkey, will face
uncertainty, and this will have an economic impact too. An estimated
400,000 Turks live in the Netherlands, according to a diaspora
association, and there are 25,000 businesses with Turkish owners, most
of them smaller enterprises. Many of these companies are doing business
with Turkey, and they are negatively affected by the current dispute
between the two governments. So is the much smaller Dutch community in
Turkey. But it is equally active in the economy, especially in the
tourism sector. Declining tourist numbers will hurt Turkish and Dutch
operators alike, and it might take some time to recover to pre-crisis
levels of business.
Third, the diplomatic spat is likely to have a negative effect on
efforts to revise the Turkish-EU Customs Union. The union, which took
effect in 1996, is outdated, failing to catch up with the requirements
of today’s global trade. Ankara and Brussels had begun talks to improve
the deal, but the current circumstance is likely to overshadow attempts
based on economic rationality.
This week Turkish football team Beşiktaş played the Greek side
Olympiakos in the European cup. The Turks won 4-1 helped by two goals
from Ryan Babel, the Amsterdam-born Dutch striker. Turkey and the
Netherlands have links that are closer than many realize, and it will
benefit both to keep them intact.
Read more: Economics of the standoff between Turkey and the Netherlands | Asia Times