Turkey and Shanghai Cooperation Organization

Turkey, candidate member for European Union (EU) since 2005, has recently started thinking
that it is time to look for new opportunities. The fact that EU has been unfair for Turkey about
various issues such as free pass in Schengen zone and also economic crisis that EU has deeply
suffered made Turkish people reconsider their opinions about EU. Shanghai Five, which is
known as Shanghai Cooperation Organization (SCO) is a hot issue right now and Prime Minister
of Turkey has mentioned about the possibility to be a part of the cooperation, instead of EU,
even though it is assumed a really slight possibility.
The reason lays behind preparing the work is to identify countries that are members of SCO and
show comparison in terms of some macroeconomic indicators between the organization
members and Turkey, without any subjective mentions. Turkey, attended to last meeting of the
Cooperation in 2012 as an observer, is also in talks with Russian Federation and China about the
integration to the organization.
Shanghai Cooperation Organization which was formerly known as Shanghai Five was created
by Russia, China, Kyrgyz Republic, Tajikistan and Kazakhstan in 1996. After addition of
Uzbekistan in 2001, the organization has become Shanghai Cooperation Organization.
The official languages of SCO are Russian and Chinese, as it might be guessed. Beside members
of SCO, observer nations, dialog partners and guest countries are also welcome to SCOs
meetings. The list of the countries and their status in SCOs meetings are listed below.
Observer Countries Dialog Partners Guest Countries
Afghanistan Belarus ASEAN (Association of Southeast Asian Nations)
India Sri Lanka CIS (Commonwealth of Independent States)
ran Turkey Turkmenistan
Mongolia
Pakistan
Resource: http://www.sectsco.org
Summits of SCO, which are organized annually started, in Shanghai (China) in 2001 and the last
summit was held in Bishkek, the capital of Kyrgyz Republic, on December 5
th
2012.
The comparison has been done in 15 different indicators (Cost to Export, Cost to Import,
Employment Ratio, Export Volume Index, Export Value Index, Import Volume Index, Import
Value Index, net FDI, FDI inflows, FDI outflows, GDP, GINI Index, GDP growth,
Unemployment and Population) in order to compare better Turkey with the Cooperation
members.
After China (with population of 1.34 billion), Russia is the biggest country in SCO, in terms of
population, while Kyrgyz Republic has the lowest with its 5.5 million people.

Figure 1. Population Turkey and SCO excluding China (2004-2011)
Resource: The World Bank
The population of China is growing faster and faster every year. In a short time as 8 years,
China's population grew around 50 million, which is around two third of Turkey's population.
Figure-2. Population - China (2004-2011)
Resource: The World Bank
China's GDP has been rising sharply every year and reached more than 7.000 billion of US $ at
the end of 2011. Meanwhile, Russia had also an increasing trend between 2003 and 2008. Even
though the global crisis affected Russia in 2009, they overcame this threat and saw their GDP
around 1,800 billion of US $ in 2011. Turkey followed the same path with Russia, despite the
tackle in 2009, they made well to put their GDP level almost 800 billion of US $ at the end of
2011.

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120,00
140,00
160,00
2004 2005 2006 2007 2008 2009 2010 2011
Population (million people)
Russian Federation
Turkey
Kyrgyz Republic
Uzbekistan
Kazakhstan
Tajikistan
1270
1280
1290
1300
1310
1320
1330
1340
1350
2004 2005 2006 2007 2008 2009 2010 2011
Population (million people)
China
Figure-3. GDP (2004-2011)
Resource: The World Bank
According to GDP change as percentage, it is obvious that China, Uzbekistan and Kazakhstan
are the only countries that did not have a single decrease in their performances between 2003 and
2011. GDPs of both Russia and Turkey had fallen in 2009 due to crisis, but they recovered
themselves but with a slight difference: Turkey's GDP change had been greater than Russian's.
Figure-4. GDP Growth (2004-2011)
Resource: The World Bank
GINI Index simply indicates the difference between poor people and rich people in the country.
The measure is between 0 - 1, which getting to 0 means that economic differences between
people in the country is decreasing while 1 means the huge differences in economic level of the
people. Even though there is only one available data for China in terms of GINI Index, it is
estimated that the index rate would be much higher (getting to 1). According to the common year
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2004 2005 2006 2007 2008 2009 2010 2011
GDP (current , million US$)
Russian Federation
Turkey
Kyrgyz Republic
Uzbekistan
China
Kazakhstan
Tajikistan
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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
GDP growth (annual %)
2004
2005
2006
2007
2008
2009
2010
2011
for other members of SCO (2009), Kazakhstans GINI Index is the best while Turkeys
performance is also significant; at the end of 2008, Turkeys index has decreased to 0.37. No
data was available for Uzbekistan.
Figure-5. GINI Index (2004-2009)
Resource: The World Bank
Paul Ashworth, the chief North American economist for Capital Economics, mentions that the
best measure of labor market conditions is employment population ratio which is a statistical
ratio measuring the proportion of the country's working-age population (ages 15 to 64 in most
OECD countries) that is employed. This also includes people that have stopped looking for work.
Among members of SCO, China has the best employment rate according to the figure 6 showing
the employment to population ratio (15 and older). Approximately 70 % of Chinas population is
employed while Turkey has the lowest rate by around 42 %.

















0
5
10
15
20
25
30
35
40
45
Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
GINI index
2004
2005
2006
2007
2008
2009
Figure-6. Employment Ratio (2004-2010)
Resource: The World Bank
Unemployment, which is critical for economies, indicates the share of the labor force that is
without work but available for and seeking employment.
Comparing to total labor force, China has the best unemployment ratio by having around 4%
while Turkey has the highest by almost 12% at the end of 2010. No data was available for
Uzbekistan and Tajikistan.
Figure-7. Total Unemployment (2004-2010)
Resource: The World Bank
The figure 8 illustrates the cost to export; which simply means how much a country would pay in
order to export to these countries listed in the figure. Per container prices show that Tajikistan is
the most expensive country in SCO by its more-than-8.000 $ cost to export, due to the sharply
increasing prices of main export-import products. Kazakhstan, Uzbekistan, Kyrgyz Republic and
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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Employment Ratio (%)
2004
2005
2006
2007
2008
2009
2010
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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Unemployment, total (% of total labor force)
2004
2005
2006
2007
2008
2009
2010
Russian Federation follow Tajikistan, respectively. China sparkles as the best country to start
export among others by having the lowest cost to export while Turkey has close numbers to
China. Tajikistan is considered as the worst.
Figure-8. Cost to Export (2005-2012)

Resource: The World Bank
Similar to the term of cost to export, cost to import measures how much it would cost to
import into the country and it is shown in Figure 9 below. Tajikistan, again, has the most
expensive prices per container for import to the country with its unstable economy. Uzbekistan,
Kazakhstan, Kyrgyz Republic and Russian Federation follow Tajikistan in the same order. With
its low labor force and price policy, China has the lowest costs for import and also a plus here:
Turkey again has a significantly close cost of import prices to China.
Figure-9. Cost to Import (2005-2012)

Resource: The World Bank
$0
$1.000
$2.000
$3.000
$4.000
$5.000
$6.000
$7.000
$8.000
$9.000
Cost to Export ($)
2005
2006
2007
2008
2009
2010
2011
2012
0
1000
2000
3000
4000
5000
6000
7000
8000
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10000
Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Cost to Import ($)
2005
2006
2007
2008
2009
2010
2011
2012
Export volume indexes are derived from the volume index series of United Nations Conference
on Trade and Development (UNCTAD) and they are the ratio of the export value indexes to the
corresponding unit value indexes. The World Bank sets the index of 2000 as 100.
As it could be known easily, China has the highest export volume among all countries of SCO,
and also one of leading countries in the world. Another significant point is that Turkey is also
better than the rest of the all members of the organization.
Figure-10. Export Volume Index (2004-2011)
Resource: The World Bank
Export values are the current value of exports converted to U.S. dollars and expressed as a
percentage of the average for the base period. The World Bank sets the index of base period as
100.
As it is seen in the figure, Kazakhstan has the most valuable export among other countries. Main
export of Kazakhstan is oil, but another important fact is that Kazakhstan is the leading exporter
of uranium, which is used as a fuel in nuclear reactors. China, Russian Federation, Turkey,
Uzbekistan and Kyrgyz Republic are following Kazakhstan, respectively. Among all these
countries, Tajikistan has the lowest export value.






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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Export volume index (2000 = 100)
2004
2005
2006
2007
2008
2009
2010
2011
Figure-11. Export Value Index (2004-2011)
Resource: The World Bank
Import volume indexes are derived from the volume index series of United Nations Conference
on Trade and Development (UNCTAD) and they are the ratio of the import value indexes to the
corresponding unit value indexes. The World Bank sets the index of 2000 as 100.
The import volume has been increased for all countries in SCO and also for Turkey. Import
Volume Index was assumed 100 for 2000, Russian Federation has the highest import volume
index with 500, while Turkey and Tajikistan have the lowest with around 200. China has almost
the same index with Russian Federation. This figure also indicates how eager countries are to
welcome export products.
Figure-12. Import Volume Index (2004-2011)
Resource: The World Bank
0,0
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Export value index (2000 = 100)
2004
2005
2006
2007
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2010
2011
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Import volume index (2000 = 100)
2004
2005
2006
2007
2008
2009
2010
2011
Import value indexes are the current value of imports (c.i.f.) converted to U.S. dollars and
expressed as a percentage of the average for the base period (2000). The World Bank sets the
index of the base period as 100.
Even though Russian Federation has the highest import volume index, in terms of the values,
China leads in the organization with and index value almost 800, while Kyrgyz Republic and
Kazakhstan are at almost the same level with China. Turkey has the lowest import value index
around 420, which is the lowest just before Uzbekistan.
Figure-13. Import Value Index (2004-2011)
Resource: The World Bank
According to definition of The World Bank for Foreign Direct Investments (FDIs), foreign direct
investment is net inflows of investment to acquire a lasting management interest (10 percent or
more of voting stock) in an enterprise operating in an economy other than that of the investor.
Foreign direct investment is assumed as the sum of equity capital, reinvestment of earnings,
other long-term capital, and short-term capital as shown in the balance of payments.
In terms of net Foreign Direct Investments (FDIs) as Balance of Payments in US Dollar ($),
China is the most effective country among all six countries of SCO and Turkey. With its crucial
performance at FDIs, Turkey has positive numbers for last 8 years while Russia has been facing
problems with FDI flows last 3 years.




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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Import value index (2000 = 100)
2004
2005
2006
2007
2008
2009
2010
2011
Figure-14. Net Foreign Direct Investment (2004-2011)
Resource: The World Bank
According to the figure 15 showing countries' foreign direct investment net flows as % of GDP,
six countries of SCO are examined. The results show that except Tajikistan, all other five
countries are more effective than Turkey in terms of attracting foreign direct investments into
their countries. Data which were taken from The World Bank show that these five countries
performed better than Turkey in 2003 until 2005. In the last three years Kyrgyz Republic has
been performing extraordinary performance by reaching to 12 % of GDP derived from foreign
direct investments. Also Kazakhstan had an increasing trend of its performance for attracting
FDIs until 2009, even though they had a sharp fall in 2010, it is possible to see that Kazakhstan
will be able to have its old trend again.
Even though Tajikistan had a strong trend for attracting foreign direct investments into the
country between 2004 and 2008, net inflows of FDIs for Tajikistan dropped dramatically in the
last three years due to corruption and economic mismanagement. Turkey, one of recent strong
players for FDIs, has a positive trend and increases to 2 % of its GDP as net FDI inflows in 2011.














$(50.000,00)
$-
$50.000,00
$100.000,00
$150.000,00
$200.000,00
Foreign direct investment, net (BoP, current US$)
2004
2005
2006
2007
2008
2009
2010
2011
Figure-15. Foreign Direct Investment Net Inflows (2004-2011)
Resource: The World Bank
Even though Kazakhstan had ups and downs, still they followed an increasing trend in their
outflowing FDIs (in terms of % of GDP) and are assumed as having the best performance
between 2003 and 2010 with its peak in 2010. Also, Russian Federation has a fixed FDI outflow
between 2007 and 2011 with 3.5 % of its GDP. Meanwhile, Turkey had been making baby steps
since 2003 about FDI outflows. No data is available for Uzbekistan and Tajikistan on The
World Bank database.
Figure-16. Foreign Direct Investment Net Outflows (2004-2011)
Resource: The World Bank


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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Foreign direct investment, net inflows (% of GDP)
2004
2005
2006
2007
2008
2009
2010
2011
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-2,00
-1,00
0,00
1,00
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Russian
Federation
Turkey Kyrgyz
Republic
Uzbekistan China Kazakhstan Tajikistan
Foreign direct investment, net outflows (% of GDP)
2004
2005
2006
2007
2008
2009
2010
2011
Strength and Weakness
The table shows performances of the countries in order to view the comparison in all terms of
indicators mentioned above. 1 is assumed as the best among others while 7 (could be 5 or
6 at some indicators, due to lack of data) is the worst.
Turkey China Russia Kyrgyz
Republic
Kazakhstan Tajikistan Uzbekistan
Cost to Export 3 2 4 5 1 6 7
Cost to Import 3 2 5 6 1 4 7
Employment
Ratio
4 7 3 6 1 2 5
Export Volume
Index
6 2 5 4 1 3 7
Export Value
Index
3 4 6 5 2 1 7
Import Volume
Index
1 6 4 5 2 3 7
Import Value
Index
4 6 2 7 1 3 5
FDI, net 6 2 4 - 1 3 5
FDI, inflows 5 6 1 3 4 2 7
FDI, outflows 1 4 5 - 3 2 -
GDP 2 3 7 5 1 4 6
GINI Index* 5 4 3 - - 1 2
GDP, growth 7 2 6 3 1 4 5
Unemployment** 4 5 3 - 1 2 -
Population 2 3 7 4 1 5 6
*The data was taken for the year of 2007.
**The data was taken for the year of 2010.

Conclusion
Even though this work tries to show only the comparison between Turkey and members of SCO,
there are few points to be underlined. This work does not imply subjective words to suggest
whether to be a part of SCO. The conclusion only covers the notes of what Turkey might get if
they would be part of the organization.
Turkey has been trying to have close ties with China, a big threat for all export-based and
developing countries, in terms of trade with new protocols. One of the main reasons to consider
SCO as beneficial to Turkey is the possibility to have better trade offers that Turkey would get
with China instead of single protocols. This would put Turkey in a position as a strategic partner
for China, rather than a competitor.
Russia, the main natural gas exporter to Turkey, is another reason to jot down the organization as
a big plus for Turkey. If it is thought that one of the main reasons why Turkey has a large
amount of current deficit is the energy import, than it must be pointed out that Turkish
integration to the organization would make Russia look much better ally to Turkey in terms of
energy trade.
New investment cooperation could be created as well: trade (both export and import) between
Turkey and Kazakhstan has been rising in the last three years. Turkey that will have two new
nuclear stations in Sinop and Mersin would benefit from this cooperation by acquiring uranium
and oil with better conditions.
To understand the current trade between Turkey and Kazakhstan, latest data from the Turkish
Ministry of Economy are taken: Kazakhstan ranked 31st among Turkey's most preferred exports
destination and 27th among Turkey's major importers in 2011, in terms of merchandise trade.
Along with Russia, China and Kazakhstan, the other members of the organization would also
encourage Turkeys main trade focus by diverting it to new destinations. It must be remembered
that integrations to different organizations/zones always provide new opportunities!
The links of countries investment agencies are listed below.
Turkey - http://www.invest.gov.tr/tr-TR/Pages/Home.aspx
China - http://www.investinchina.gov.cn/index.html
Kazakhstan - http://invest.gov.kz/
Uzbekistan - http://www.investuzbekistan.uz/
Tajikistan - http://www.tajinvest.tj
Russia - http://invest.gov.ru/en/
Kyrgyzstan - http://www.kyrgyzinvest.com/en/general.php