Amid the current global financial turmoil, Turkey's relatively stable macroeconomic environment is in a better shape than many of its counterparts in the emerging world. Seven years after the huge currency and banking crisis at the start of the decade, Turkey has remained resilient this time during the financial tsunami, while other emerging markets around Central and Eastern Europe (CEE) are seeking outside assistance. Indeed, the Turkish government ended its formal IMF programme in May 2008, although a new deal for financial aid cannot be ruled out, in a precautionary move to provide a lifeline if the situation warrants.

Seven years of strong growth have also made the Turkish economy the eighth biggest in Europe, where population growth keeps up internal demand and exports become more diversified, with the top five export markets taking 36% of exports in 2007, down from 46% in 2002. In the financial sector, Turkish banks that survived the previous crises have shown a high average capital-adequacy ratio and relatively few non-performing loans, while the external debt fell from over 70% of GDP in 2002 to below 40% in 2008, and foreign-exchange reserves climbed to almost $80 billion by October 2008.

Despite stronger economic fundamentals, no wonder the Turkish stock market and the lira have taken a pasting during the current global financial crisis. As elsewhere, Turkey's GDP growth has slowed sharply, sectors that have done well in recent years, like automobiles, textiles and white goods, are exposed both to the current EU recession and to rising competition from the Chinese mainland. Yet Turkey's 70-million-strong consumer market, expanding higher-income class, sizable industrial sector, together with its relatively sound banking sector and enhanced economic tenacity and pliability, hold promise for Hong Kong exporters over the medium to long term.

Evidently, Turkey's market potential is much more than the picture revealed by the macro data, as the purchasing power of the country's 70 million people is concentrated mainly in major cities, especially Istanbul, where a cluster of higher-income consumers is propping up the demand for Hong Kong-style products. The large size of certain Turkish manufacturing sectors, such as textiles, clothing, construction materials and electronics, despite a slower near-term growth outlook, is expected to maintain certain demand for various industrial inputs.

Apart from industrial development, Turkey is a logistics centre in the region, and ranked as one of the most attractive countries among global investors. The EU-Turkey Customs Union came into force in 1996, under which Turkey and the EU have abolished all customs duties, other surcharges and import quotas levied on most manufactured products from each other.

Turkey has also adopted the EU's Common External Tariffs imposed on imports from third countries and economies. Products imported from sources other than the EU and Turkey can thus move freely within the EU and Turkey, if all import formalities have been complied with and custom duties, or charges having an equivalent effect, have been levied in the importing country.

Product-wise, Hong Kong's toys, gifts and premium, watches and selected consumer electronics could have a market in Turkey, given the limited and less competitive production there. There is also some input demand for parts and components from local industries in the country. But it is a difficult market for clothing, which is expected to remain challenging even after the expiry of the textile/apparel safeguards by the end of 2008, as other protectionist measures such as anti-dumping orders may be erected or increased thenceforth.

While Turks are largely Muslims, they usually have a European outlook along with a strong preference for European-style items. Consumers, in most cases, possess a mature brand culture, and men and youngsters closely follow the latest digital trends. Meanwhile, Turkey has a young population, characterised by youngsters and younger professionals with higher disposable incomes. But large household sizes have prompted families to purchase lower-priced items for their children in view of budget constraints, and some popular toys among Western consumers like video games have yet to become a big hit in Turkey.

Turkish traders are increasingly interested in buying competitive Chinese products on the back of intensified competition in their domestic market and the volatile external environment. But they are generally inexperienced in sourcing from the Mainland. There are also concerns about quality problems as well as communication issues regarding direct sourcing from China.

Many Turkish companies are inclined to purchase Chinese products via Hong Kong. They generally recognise that Hong Kong companies, which are able to communicate in English effectively, can provide better quality control and services (delivery, logistics and shipping arrangements), thus offering better assurance on quality and delivery. This is despite the fact that Hong Kong products are a bit more expensive than local Chinese goods. But Hong Kong companies should take heed of Turkey's unfavourable sentiment towards Chinese imports, small orders and trade-financing problems, while financial volatility and political developments are also noteworthy.

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