Turkey’s transportation and logistics industry: Route of global importance

Throughout history, Asia minor played a crucial role both in terms of Geopolitics and Trade. It is a setting of the Iliad and odyssey, where the city of Troy flourished from its important trading location. It was here that the city of Byzantium, the largest city in the world for a long period of time, and a crucial trading hub for East-west road transportation trade routes stood. And following its conquest by the Ottoman Turks, it was here that the cultural border between Islam and Christianity was drawn.

The strategic importance of Asia Minor, as a crucial global logistics hub, persists today, with Turkey playing a decisive role as a global transportation and logistics corridor. While the industry is relatively young in Turkey, it is expanding at a rapid pace, with strong assistance from the government, in a bit to capitalize on its strategic geographic position and maintain a status as the regional transportation and logistics hub. The expansion of the industry coincided with the country’s stellar economic growth, maintaining a steady 7% annual growth, mirroring Turkey’s GDP growth rates, and is estimated to be worth $150-200 billion by 2023.

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Overview Of The Industry

The importance of the logistics industry is primarily relevant to Turkey itself, contributing roughly 15% of the total GDP of the nation, according to the Investment Support and Promotion Agency of Turkey (ISPAT), and is one of the top contributors to nations growing economy.

The global and domestic importance of the industry can be categorized by the sub-sectors within the transportation and logistics field. The overseas trade is primarily dominated by the shipping sector, accounting for over 85% of freight by volume, with road transportation holding 11% and air freight only 1%.

Meanwhile, the internal cargo distribution is primarily conducted through road transportation, where 85% of internal freight by volume is conducted by cargo trucks and road transportation, while rail transportation accounts for a significantly smaller volume of 5%.

Looking at the foreign trade by value, the shipping continues dominating the field, accounting for 50% of the market value, with road transportation having 35% of the market, air freight having 10% and rail transportation accounting for just 1% of the total market value.

Road Transportation

As mentioned above, road transportation holds the dominant position in the logistics industry in Turkey. The sub-sector saw massive expansion over the past decade, with the key indicator - Tonnage vs Kilometers increasing by 47%, increasing from about 152,000 tonnes per kilometer in 2003 rising to over 224,000 tonnes per kilometer in 2013.

Turkish government emphasizes the importance of road transportation as the key factor in maintaining Turkey’s leading regional position as transportation and logistics hub, channeling large sums of funds towards maintaining and expanding the already impressive highway network of the nation. At the moment total length of the highway network, under control of General Directorate of Highways, stands at 65,909 km, with the projects to expand and construct new highways being underway, aiming to add an additional 5,500 kilometers to the existing motorway network.

One of the catalysts of the road transportation sector, and the motivators for expanding the sprawling highway network, is the fact that Turkey is the owner of the largest truck fleet in the entirety of Europe, with over 750,000 vehicles in the fleet hauling cargo across the country.

Maritime Transport

Maritime freight is poised to increase in importance drastically in the coming year. At the moment, it accounts for about 8% of the total cargo transportation market, with the aims of bumping that number up to 10% by 2024. The importance of the shipping sub-sector is evident in its market share of overseas trade, accounting for up to 87% of the total market.

The importance of the sub-sector is increasing dramatically. This is evident by the sharp increase in the volume of maritime freight over the past decade, which witnessed a 105% rise since 2010.

Currently, Turkey boasts over 220 commercial ports of varying tonnage capacity. Given the increasing demand for shipping transportation, this number is expected to double in the next 5 years, primarily with the assistance of the private sector. Currently, over 60% of the 220 commercial ports in turkey are privately operated, with the ratio of privately-held ports expected to rise in the next decade, as the government actively seeks privatization and public-private partnerships (PPP) with leading international operators.

Air Transportation

While seemingly unimportant at the moment compared to road transportation, the air freight is predicted to occupy a sizable share of the domestic freights. The sub-sector has been the source of a substantial revenue stream, despite holding a minuscule share of the market, and has been increasing dramatically, accounting for $2.2 billion in revenues in 2003, which skyrocketed to $24 billion in 2014.

Turkey is aiming to become a major international hub for air transportation, and a monumental effort has been undertaken to accommodate the rising demand on air transportation, with substantial investments directed toward constructing new commercial airports, that doubled in number from 26 to 52 in 2016.

The expansion of the airport network has long been among the top priorities for the Turkish government, and the monument of this goal came in the shape of the new Istanbul Airport, that opened in October 2018, is the largest airport in the world with the capacity to accommodate 200 million passengers, once all phases will be finished by 2025.

Rail Transport

Unlike other sub-sectors of Turkey transportation and logistics field, rail transport has been fairing the worst, being plagued by poor optimization and severe lack of investments, accounting for only 5% of total freight volume.

Turkish Government seeks to turn this sub-sector around however, through privatization and deregulation, hoping to increase the total freight volume accommodated by rail to 15% in the next few years.

The Lianyungang-Istanbul freight corridor is poised to be the locomotive behind the expansion of rail freight, giving Turkey the status of the rail-gate to the east.

Road, Rail, Air Transportation And Beyond: Gate To The Black Sea

The key importance of Turkish geolocation stems from the possession of the Dardanelles and Bosporus straits, being crucial for access to and from the Black Sea, granting Turkey economic and political significance for black-sea nations.

Countries on the coast of the Black Sea have been striving to increase their freight capacity over the last few years, attracting substantial government and private investments. The example of this being Georgia’s move for constructing a deepwater port from scratch in Anaklia, and conducting works for transforming the port city of Poti into a deep water port.