TURKEY: FLYING TO BE LEADER OF FURNITURE INDUSTRY Turkish Furniture Industry soars up Into Prominence And Objectives A Place Among

Top 10 Exporters. Turkeys rapid issue as one of the fastest growth markets in the last few years could hardly have come as a surprise. Sitting on the edge of Asia and Europe, it functions as a trading post between the east and west. Its a country with a ample history and a reputation for its classic oriental designs - fashionable with Turkey's eastern neighbours. Much of the wealth accrued in the world in the last few years has centralised in neighbouring Middle Eastern and Central Asian markets. Disposable revenue in these two regions has been increasing at a much greater pace than in the European markets. Turkeys strategic placement means it is well placed to extend its reach into the worlds expanding markets. INCREASING NATIONAL DEMAND National demand in Turkey has risen sharply over the last decade due to three main factors: Rapid urbanization, a important increase in disposable revenue, and lifestyle changes. Turkish furniture producers have also raised their production capacity during this period in line with the raising demand for Turkish furniture. Now, the urbanization of Turkeys population stands at around 70 percent, with the rate of urbanization predict at 1.7 percent annually until 2015. In spite of the global financial crisis, the industry kept to stand strong and posted year-on-year growth in production even in 2009. Demand for furniture is awaited to grow at a compound annual growth rate (CAGR) of around 16 percent from 2011 to 2013. Speaking at the Furniture Summit in Istanbul on January 30, 2012, Chairman of the Association of Turkish Furniture Manufacturers (MOSDER), Ramazan Davulcuoglu, imparted certain consumption patterns in Turkey. He shared that the average furniture renewal period for consumers is currently 8 years - he added that this figure has been falling over the years. He also said that according to consumers, the most significant factor in selecting furniture is the quality of the product. Around 69 percent of responders pointed this was the most important factor, over reliability of brand and price of product. Turkeys substantial growth in recent years has been reflected in both its production and consumption. From 2008, production of furniture in Turkey had raised 25 percent, accomplishing an output value of US$6 billion in 2011. Consumption had raised by around 28.6 percent, to US$9 billion in 2011. Year Production (in US$ billion) Consumption (in US$ billion)

2008 2009 2010

4.8 5.25 5.6

7 7.5 8 9

2011 6 Turkish Production And Consumption Source: MOSDER

TURKISH LANDSCAPE Turkey stands as the 16th largest producer and 21st largest exporter of furniture in the world, with a global market share of 1.5 percent, according to the Centre for Industrial Studies (CSIL). In Turkey, furniture is acquired both in workshops and industrial-scale manufacturing facilities. Small workshops play an significant role in producing handmade furniture. Such workshops are flexible establishments in nature and usually have the capacity to enlarge their production line to fulfil large orders. Bigger furniture firms mass-produce standard patterns by applying automated techniques; the majority of their production is exported. Furniture production in Turkey is centralised mainly in Istanbul, Ankara, Bursa, Kayseri, Izmir and Adana. The famous furniture manufacturing zone in Turkey is known as Siteler, placed within Ankara. The number of recorded small and medium enterprises in Siteler alone is over 10,000. Mr Davulcuoglu declared at the Furniture Summit 2012 that in Turkey, many large companies production now follows EU regulations while smaller companies are already working on following EU regulations. Official figures from MOSDER expose that the Turkish furniture industry is composed of 29,346 manufacturers and 32,382 retailers, giving a total figure of 61,728 active companies. It is an industry which provides employment to some 500,000 workers, including employees in the diverse subsidiary industries. Istanbul and Ankara are the two most active cities in the Turkish industry. Around 40.3 percent of Turkish manufacturers are based in either of the two cities, which also collectively account for 41.5 percent of workers in the industry. City Istanbul Ankara Izmir Bursa Kayseri Other Total in Production Total in Retail Number of companies 6,458 5,361 2,379 2,130 740 12,278 29,346 32,382 Number of workers 35,633 30,062 14,142 16,096 20,280 42,000 158,213 100,000 258,213

Total Active 61,728 Structure Of Turkish Furniture Industry Source: TUIK - MOSDER

EXPONENTIAL EXPORT INCREASE Turkey presently exports to a total of 173 countries across 5 continents. From 2003 to 2011, Turkey received growth in exports of over 292 percent, with a CAGR of 18.6 percent for this period. Growth during this period was substantial and stable except in 2009, when the global financial crisis caused exports to contract by 13 percent. Year 2003 Export Value (US$ Million) 434.6 Percentage Change -

2004 2005 2006 2007 2008 2009 2010 2011

587 684.6 764.7 1,026.9 1,332.9 1,153.3 1,414.6 1,703.9

+35 +17 +12 +34 +30 -13 +23 +20

Exports from 2003-2011 Source: TUIK Iraq continued unchanged from 2010 as Turkeys top destination for exports. In 2011, exportations to Iraq amounted to US$250.7 million, up 38 percent from 2010s export value of US$181.4 million. In total, Iraq reported for 17 percent of all furniture exports from Turkey in 2011. Exports to neighbor Turkmenistan saw the largest growth, with exports in 2011 showing a 63 percent increase from 2010, to reach US$68.5 million. The United Kingdom was the only top 11 export address to experience a fall in Turkish imports, recording a drop of 0.4 percent. Country Iraq Germany Azerbaijan Iran France Turkmenistan Holland Russia Saudi Arabia United kingdom 2010 181.4 115.1 73.1 73.5 63.2 42.1 40.6 31.2 25.7 35.4 2011 250.7 147.5 97.4 93.7 79.3 68.5 49.6 43.9 37.9 35.3 Percentage Change +38 +28 +33 +27 +25 +63 +22 +41 +48 -0.4 +11 Percentage of Total Exports 17 10 7 6 5 5 3 3 3 2 2

Italy 27 30 Furniture Exports By Country ( In US$ Million) Source:TUIK

Information from the International Trade Centre (ITC) and the United Nation Statistics Division (UNSD) points that in 2011, the biggest furniture export segment was panel furniture - which made up 29 percent of total exports. Sofas and Sitting Sets were the 2nd biggest export segment - making up 26 percent of exports. IMPORTS STILL LOWER THAN EXPORTS The Turkish furniture industry had a commercial surplus in 2011, with export volume nearly double of import volume - net trade last year totaled to a surplus of around US$758.7 million. Since 2009, Turkish exports have raised by around 20 percent annually, and this trend is waited to continue this year. The strong export growth is waited to see Turkey positioned among the 10 biggest furniture exporters in the world in the near future. The value of Turkeys furniture imports has been rising at a falling rate since 2003. In 2011, Turkish imports totaled to US$945.2 million - approximately 55 percent of total exports. This value represented a 28 percent increase from 2010. However this figure is still lower than the increase in imports received in 2010 from the year before, which was 38 percent. Year Import Value (US$ Million Percentage Change

2003 2004 2005 2006 2007 2008 2009 2010 2011 Imports from 2003-2011 Source: TUIK

177.3 285.3 370.9 511.8 680.1 738.2 535.4 738.4 945.2

+61 +30 +38 +33 +8 -27 +38 +28

China strengthened its position as Turkeys top supplier of furniture imports. In 2011, Chinas exports to Turkey accomplished US$277.6 million, which reported for 35 percent of all of Turkeys furniture imports that year. Of the top 11 sources of Turkeys furniture imports, Romania and the United Kingdom recorded the biggest percentage growths. Romanian exports to Turkey raised by 100 percent to reach US$24.6 million, while United Kingdom exports to Turkey raised by 230 percent to accomplish US$19.7 million. Country China Italy Germany Poland France Spain Romania Indonesia Vietnam United kingdom 2010 222.3 62 68.3 34.1 32.6 26.6 12.3 17.7 17.8 6 2011 277.6 83.9 81.1 46.4 39.2 36.4 24.6 20.2 20.1 19.7 Percentage Change +25 +38 +19 +36 +20 +37 +100 +14 +13 +230 -7 Percentage of Total Imports 35 10 10 6 5 5 3 3 3 2 2

Japan 16.2 15.1 Furniture Imports By Country ( In US$ Million) Source: TUIK

TURKISH FURNITURE ENLARGES TO WESTERN MARKETS In recent years, Turkish furniture brands have started taking market share in Italy, Germany and China, the dominating powers in the global furniture industry. This was according to the Executive Board Chairman of Burosan, Murat Dilme. He added that Burosan, a national furniture company in the southern state of Adana, has established exports to Italy. Our goal is to serve Turkish brands find more confidence in markets in all corners of the world, said Mr Dilme. We have become a trademark when it comes to office furniture. We are proud to export our products from Adana to the rest of the world and 10 percent of our income comes from exports. Burosan provides a broad range of products to both the European and Middle Eastern markets. After offering furniture items to the Italian Aviano Air Base, we have made military bases for NATO member countries, the United Nations and the United States throughout the world our potential markets. We will supply all the furniture requires of the United States bases in Bulgaria and Romania by 2012, added Mr Dilme.

THE FUTURE IS BRILLIANT Turkeys relatively young population is an significant determinant of the industrys substantial performance in the long run. 2011 forecasts point that 26.6 percent of Turkeys total population is under the age of 14. In addition, only 6.3 percent of the total population are aged 65 or above. The median age of the Turkeys population is 28.5 years. Turkeys total population is estimated to have reached around 79.7 million by July 2012. Its big population combined with Turkeys relatively young population bodes well for the countrys furniture industry - an industry known to be traditionally labor-intensive. If Turkey is able to keep to nurture its industry and its workforce, it will only be a matter of time before it accomplishes its aim of becoming one of the worlds top 10 exporters of furniture. http://furniture.furkey.com/en-US/furniture-news/1257-turkey-flying-to-be-leader-of-furniture-industry.html