The recently signed free trade agreement between Turkey and Singapore probably won’t be a game-changer for the global economy, yet both countries appear to have great expectations from the deal.
This is perhaps more so the case for Turkey, which, given the complicated geopolitical situation in the Middle East, stalled relations with Europe and the recent standoff with Russia, is seeking to open up new breathing space in its global relations by making deeper inroads in Asia.
The Turkey-Singapore Free Trade Agreement (TRSFTA) is a comprehensive one covering not only bilateral tariff liberalization, but also a reduction in non-tariff barriers, facilitation of mutual access to services sectors and government procurement contracts. Turkey will eliminate tariffs for Singapore’s exports on more than 95% of all tariff lines while Singapore will grant duty-free access for all Turkish products. In the meantime, the two countries have also agreed to adopt international standards and practices aiming to reduce non-tariff barriers impeding trade. Turkish companies will be able to bid in procurement contracts from the Singaporean government and Singapore companies will have the same access to Turkish tenders. Moreover, the agreement will also facilitate market access for both sides in retail services, business services, and construction services.
When it becomes effective following parliamentary ratification by both sides, TRSFTA will encourage greater trade and investment flows between the two countries. Turkey is already part of Singapore’s global investment spree with a number of undertakings such as PSA’s stake in the Port of Mersin at Turkey’s eastern Mediterranean coast, Temasek Holdings’ share in Halkbank, a bank specializing in the financing of small and medium scale enterprises, as well as other investments in tourism and electronics industries. Singaporeans seem to be more interested in the investment and services side of the agreement rather than merchandise trade and they are willing to utilize Turkey as a gateway for opening up to European, Middle Eastern and Central Asian markets, just as Japanese and Korean companies did during the 1990s and early 2000s benefiting from Turkey’s proximity to and trade agreements with countries in these regions. Singapore’s Minister for Trade and Industry Lim Hng Kiang, who visited Turkey recently, explicitly pointed to Eastern Europe as a destination market: “We know Turkish companies are successful there. They can help Singaporean companies to enter these markers, and we can jointly undertake investments in infrastructure and energy.”
Turkey would surely welcome doing more business with Singapore, but from Ankara’s point of view, TRSFTA is, or needs to be, located in the greater scheme of things. For several years now, starting with the relief efforts after the tsunami disaster of 2004, the Turkish government has been advocating stronger relations with the Southeast Asian countries, however, so far there has been much rhetoric but less substance.
Efforts at the bilateral level focused predominantly on Muslim majority countries like Malaysia and Indonesia, while at the same time incentives taken at the multilateral level, such as the mediation efforts between the Philippines government and the Moro Islamic Liberation Front, as well as between the Buddhist groups and Arakan Muslims in Myanmar, have also had a predominantly identity-based perspective. While these efforts have helped to increase Turkey’s standing in Southeast Asia, Ankara is aware that a region-wide engagement is needed, which can only be possible by establishing a strong economic backbone for the relations.
TRSFTA appears to be the appropriate recipe to that end, because Singapore is the most suitable partner in the region to form an economic axis. This is not because Turkey and Singapore have a huge trade volume—they have not. Turkey’s trade volume with Singapore was $663 million in 2014, compared to $1.47 billion with Malaysia and $2.27 with Indonesia. But after all is said and done, Singapore is the the nation with which Turkey can build a long-term, mutually beneficial economic relationship.
Trade between the two countries is relatively low, but there are two advantages for Turkey. First, Singapore is one of the very few countries in Asia with which Turkey has not a deficit but a surplus. For Turkey, which is a country suffering from an acute current account deficit, this is a vital issue. Second, given the complementarity of economic structures of these two countries, trade provides significant value added for both sides. For instance, the plastics industry in Turkey has been the one greeting the trade deal with utmost enthusiasm, because Singapore with its petroleum refineries is a key supplier of raw materials and at the same time, it is a major export market for plastics products as well.
On the other hand, Turkey wants more investment from Singapore, as it will bring not only financial capital, but also technology and know-how, providing great value for the Turkish economy and establishing a lasting interest between the two countries. In short, a solid long-term economic relationship with Singapore can complement Turkey’s existing Muslim identity related initiatives in the Southeast Asian region thus serving Ankara’s objective of a stronger standing in this part of the world.
If this can be achieved, this will also provide substance to Turkey’s stated willingness of becoming a partner to ASEAN, be it in the form of a dialogue partner, an observer or a cooperation partner. Improving economic ties between Turkey and Singapore, not only in merchandise trade, but more importantly in the form of economic transactions that construct long-term partnerships such as foreign direct investment, will support Turkey’s claim to partnership with ASEAN. TRSFTA is Turkey’s second free trade agreement with a Southeast Asian country after the one with Malaysia that took effect earlier this year. According to a list posted on the web site of Turkey’s Ministry of Economy, “attempts are being made to start negotiations” with Indonesia, Vietnam and Thailand as well, and these agreements will be crucial for shaping Turkey’s position with respect to ASEAN and Southeast Asia in general. Turkey can become a dialogue partner to ASEAN, but first it needs to become a good business partner.
Dr. Altay Atlı is a lecturer at the Asian Studies program of Boğaziçi University in Istanbul, and a senior research associate at Turkey’s International Strategic Research Organization (USAK).
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