Monday, April 23, 2012

At a Crossroads of Continents, Ancient Turkish Port City is Modern Logistics Hub

The Aegean Free Zone, located at the port city of Izmir on Turkey’s Aegean coast, takes advantage of Izmir’s desirable maritime hub and a favorable business environment.  Known as ESBAS, the Turkish acronym for Ege Serbest Bölge, the Aegean Free Zone Corporation has been an engine for economic development.

An important Mediterranean port for centuries, Izmir is also a modern-day commercial center for Turkey and the region.“Turkey’s economy is a success story, especially in Izmir,” said Ertugrul Isiksoy, ESBAS director of marketing.  The free zone’s location is in the center of a vibrant market, he says.  “Within a three hour flight radius of Izmir, there are 1.5 billion people with $25K or more purchasing power.”

Officially known as the Aegean Free Zone Development and Operating Company, ESBAS is located near the port of Izmir, which along with several other nearby ports, are growing in containerized traffic, and is just five minutes from the international airport

There are 19 free zones in Turkey, which, like ESBAS, were established to create jobs.  ESBAS was the first free zone run privately, and had a mandate to bring in high-tech employers to take advantage of the well-educated and qualified work force in the Izmir area. “There is no difficulty finding skilled labor,” said Isiksoy.

With a total population of nearly four million people, Izmir is Turkey’s third largest city after Istanbul and the capital city of Ankara. The basic advantage is the human resources,” he says.  “We have eight universities nearby, and can offer high-quality workers at competitive prices compared with the rest of Europe.

“Hugo Boss is our largest company in terms of employment, with 3,500 workers, and land, with 122,000 square meters,” Isiksoy says.  “Hugo Boss started their plant at ESBAS with 24 German engineers.  Now there’s just one.  The rest are from the domestic market.”

Murat Ozgurtas, marketing manager at ESBAS, said the free zone is near capacity.  “When the new investments start operating in the Aegean Free Zone, the employment will have reached over 21,000 people, and US$5,5billion in trade.”

To qualify as a free zone, the majority of goods processed or produced must be exported outside of Turkey.  For trading, companies can maintain commodities and large inventories here for unlimited time without paying either customs duties or levies.  Electronic companies can maintain stocks of components for just-in-time delivery to customers.

And the free zone offers two important tax breaks. Manufacturing companies get 100% exemption from corporate tax, and if a manufacturing company exports 85% or more of its production, the company’s employee are exempt from income tax.

The raw materials for food processing and packaging, as well as textiles, can easily be obtained locally, which buoys the region’s economy.  The ESBAS tenants have the opportunity to buy Turkish products at export prices without Value Added Tax (VAT).Almost all the lots on the 550-acre industrial park are built upon or reserved for construction.  19,500 people work there, with many plants operating in three shifts.

International tenants include Eldor Electronics from Italy, Stean AB from Sweden, German apparel maker Hugo Boss and Delphi Automotive from the U.S.   Some tenants are Turkish companies that locate within the free zone to import materials from outside the zone and then export finished products abroad, while enjoying the tax advantages.Manufacturing companies can obtain 45-year operating licenses, while trading companies are able to procure 15-year operating licenses.

ESBAS embraces the ‘build, operate and transfer’ business model.  In addition, there are many services for tenants.  ESBAS can provide security, water, power, stock management, processing services, trash, and an industrial kitchen that serves 18,000 (and delivers) meals a day.  There are five banks located within the zone.  There is a world-class child care facility, medical and dental clinics, a concert and sports hall, and a nursery to support the ornamental plants and trees for the well landscaped grounds.

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