Economy
Türkiye, Pakistan to turn diplomatic momentum into stronger trade ties
Türkiye and Pakistan, which recently played a leading role in facilitating an understanding as mediators in negotiations between Iran and the U.S., are now turning their intensive diplomatic engagement toward expanding economic cooperation, according to a report on Tuesday.
According to information obtained by Anadolu Agency (AA), Pakistani Prime Minister Shahbaz Sharif will pay an official visit to Türkiye on July 2-4, accompanied by ministers and business representatives.
Sharif, who will visit at the invitation of President Recep Tayyip Erdoğan, is scheduled to hold bilateral and delegation-level meetings, while a Türkiye-Pakistan Business Forum will also take place.
Against this backdrop, the two countries, which have significantly strengthened ties in recent years, particularly in trade, the economy, the defense industry and energy, are expected to elevate their cooperation to a new level.
During their talks, Erdoğan and Sharif will review political and diplomatic relations while placing particular emphasis on economic cooperation, the AA report indicated.
The business forum, attended by business leaders from both countries, will focus on the investment climate in Türkiye and Pakistan, sectors with strong growth potential, and bilateral trade and investment opportunities. Business-to-business meetings will also explore new avenues for cooperation.
The discussions are expected to center on four key areas: information technology and telecommunications, oil and precious minerals, a special economic zone planned to be allocated to Türkiye, and the privatization of Pakistan’s electricity distribution companies.
Ministers responsible for these investment sectors are also expected to participate in the forum.
Last week, Ankara said it would support Pakistan’s electricity privatization and power sector reform efforts through three newly signed cooperation agreements, with Turkish institutions set to provide expertise in transmission systems, electricity market operations, distribution monitoring and capacity building.
“We will share our experience to the fullest and do our best to support you in this highly important and sensitive process of privatizing Pakistan’s electricity sector,” Energy and Natural Resources Minister Alparslan Bayraktar said at the time.
Joint transport, energy projects on the agenda
President Erdoğan visited Pakistan in February last year as part of his South Asia tour.
The visit resulted in the signing of 24 agreements covering a broad range of sectors, including defense, energy, agriculture, trade, industry and communications.
During Sharif’s visits to Türkiye later that year, both sides also implemented decisions aimed at deepening economic ties.
Moreover, expanding transportation cooperation remains a priority on the Ankara-Islamabad agenda.
The two countries, particularly focused on road and rail connectivity, plan to revive the Islamabad-Tehran-Istanbul freight train route. Joint projects along the Middle Corridor, the China-Pakistan Economic Corridor and the Development Road route are also among the initiatives under discussion.
In addition to transport, the talks will address projects designed to strengthen energy cooperation.
Türkiye and Pakistan have already signed an oil and gas exploration and production agreement covering Pakistan’s onshore and offshore areas.
Ahead of Sharif’s visit, officials also discussed ways to facilitate Turkish companies’ participation in Pakistan’s privatization tenders, opportunities for local partnerships, and strategic steps to expand existing investments.
Türkiye’s experience and sectoral expertise in privatizing electricity distribution assets in recent years were shared with Pakistani counterparts. New decisions on these issues are expected during the visit.
Trade target set at $5 billion
Pakistan, one of Türkiye’s priority export markets, accounted for more than $1.2 billion in bilateral trade last year. Of that total, Turkish exports amounted to $866.5 million, allowing Türkiye to maintain its position as a net exporter in bilateral trade.
Ships and floating structures, and vehicles accounted for the largest share of exports at $303 million.
They were followed by cotton and cotton products at $150.2 million, and boilers, machinery and mechanical appliances at $95.5 million. Together, these three categories totaled $548.6 million, representing 63.3% of Türkiye’s exports to Pakistan.
During the first four months of this year, Türkiye’s exports to Pakistan reached $196.4 million, while imports from the country totaled $103.5 million.
The two sides hope that new agreements to be signed during the visit will pave the way toward achieving their long-standing goal of raising bilateral trade to $5 billion.
Turkish contractors undertake $3.5B in projects
According to the latest figures, Turkish investors have invested more than $2 billion in Pakistan.
Turkish contractors have undertaken projects worth $3.5 billion in the country, while Pakistan-based companies have made nearly $700 million in direct investments in Türkiye. These investments span sectors including automotive, electronics and telecommunications.
Following their recent diplomatic efforts that helped pave the way for an understanding in Iran-U.S. negotiations, Türkiye and Pakistan are now expected to use the high-level meetings scheduled for early July to open a new chapter in economic cooperation.
The European Union’s proposed Industrial Accelerator Act (IAA) – aiming to boost production in strategic sectors – will be decisive in the future of production and supply chain ties between Türkiye and the bloc, business leaders argued.
The flagship framework lies upon a “Made in EU” specification, requiring specific shares of member states involved in procurement, state aid, and various incentive programs.
The regulation aims to support European production, especially in clean technologies, the automotive sector, batteries, steel, chemicals and critical raw materials, to reduce its dependence on China and boost its production capacity.
The regulation could impact the bloc’s supply chain ties with Türkiye, depending on the extent to which products made in the country will be recognized within the Union origin requirements criteria or “EU content.”
Türkiye is highly integrated into Europe’s production and supply chains across many sectors due to the customs union, playing an active role in sectors ranging from automotive and machinery to steel and chemicals, with Turkish industrial products holding a massive share in the EU market.
Origin question
The draft includes an approach to evaluate production originating from Türkiye as European under certain conditions, but business leaders say this amounts more to preserving the current status quo than creating a new opportunity for Turkish firms.
The draft could potentially change amid negotiations between member states and the European Parliament (EP).
The definition of European content is limited to production carried out in member states, which could harm Turkish producers by reducing their access to certain incentives and public procurement, resulting in Turkish firms benefiting less from the bloc’s industrial incentives and creating a competitive disadvantage against European rivals.
Experts said excluding Türkiye from the Made in EU specification would increase costs for Turkish manufacturers and numerous European firms that rely on Turkish suppliers.
Auto sector
The auto sector is expected to be one of the most affected by the regulation, as Türkiye is one of Europe’s major vehicle production hubs, playing a key role in the supply chains of many global automakers.
Türkiye could secure a stronger position in Europe’s green transition and clean industry investments if kept within the framework.
Mehmet Ali Yalçındağ, chair of the Türkiye-Europe Business Council at the Foreign Economic Relations Board (DEIK), stated that Türkiye has been integral in Europe’s supply and value chains for nearly three decades with the customs union, noting that evaluation products made in the country under the Made in EU approach are significant.
He said the auto industry would be the most affected as it is not limited to vehicle production but involves multi-layered value chains like battery technologies, semiconductors, critical raw materials, software, artificial intelligence production systems and energy efficiency.
He noted that Türkiye is one of Europe’s key partners in green and digital transformation due to its strong auto supply industry, advanced supplier network, engineering capabilities, electric vehicle (EV) ecosystem and investments in low-carbon production.
“It is a strategic necessity to ensure products made in Türkiye are integrated into Europe’s industrial ecosystem without being subjected to quotas, obstacles or additional barriers, not only for the Turkish private sector but also for the EU’s industrial transformation and global competitiveness,” he said.
“Excluding Türkiye would affect Turkish firms and EU firms investing in Türkiye alike, as well as European manufacturers sourcing from Türkiye, affecting the bloc’s competitive production capacity; restricting Turkish production in strategic sectors would drive up costs, reduce the resilience of supply chains and weaken the EU industry against global competitors,” he added.
Yalçındağ urged the bloc to focus on updating the customs union and implementing common industrial policies to further existing integration instead of creating new barriers.
Türkiye is seeking easier access to the Schengen area despite improvements under the European Union’s phased visa system, Trade Minister Ömer Bolat said on Tuesday.
Bolat’s remarks came following talks with EU Commissioner for Enlargement Marta Kos, who arrived in Ankara as part of a top delegation that also included EU foreign policy chief Kaja Kallas and European Commissioner for Internal Affairs and Migration Magnus Brunner.
The delegation was received by President Recep Tayyip Erdoğan and was also scheduled to hold talks with other top officials, including Foreign Minister Hakan Fidan, Treasury and Finance Minister Mehmet Şimşek and Transport and Infrastructure Minister Abdulkadir Uraloğlu.
The recurring issue of Europe’s long-promised visa liberalization scheme was highly expected to hover over the talks as frustration grows in Türkiye over Schengen visa delays and rising rejections.
Last year, Turkish nationals submitted 1.25 million visa applications for the Schengen zone, up from 906,000 in 2019, European Commission figures show. Of that number, 1.07 million were approved.
But the rejection rate has also risen – from 9.7% in 2019 to 14.6% in 2025, prompting headlines decrying a “visa crisis.”
Bolat said the phased visa facilitation mechanism (visa cascade), introduced last year, had helped reduce application backlogs and increase the issuance of longer-term visas.
“However, growing trade, tourism and educational cooperation requires a visa-free environment. At the very least, our biggest expectation is that obtaining visas will be made easier,” he told reporters.
The minister noted that simplifying the visa application process is Ankara’s top diplomatic priority until full visa-free travel is achieved.
Talks with Kos prominently featured ongoing efforts to update the customs union agreement, said Bolat.
For decades, Türkiye and the bloc enjoyed good trade ties and cooperation on migration. However, relations have been strained over multiple issues, including the prolonged process of expansion of the scope of the customs union agreement and maritime issues with Greece and Greek Cyprus.
The deeper 1990s-era trade agreement would be expanded to services, farm goods and public procurement. The current deal only covers a limited range of industrial products.
Business groups have long argued that the deal is outdated and ill-suited for today’s trade environment.
Clarity sought on ‘Made in EU’ specifications
Bolat also said Türkiye had raised concerns over the EU’s evolving industrial policy and protectionist measures amid increasing competition with the United States and China.
Referring to the EU’s proposed Industrial Accelerator Act, Bolat said the European Commission had recently decided to treat Türkiye within the scope of the “Made in EU” industrial framework, but added that important details still needed clarification.
Bolat said Türkiye’s 30-year customs union integration with the EU and its status as a candidate country should prevent any measures that undermine the free movement of industrial goods or disrupt supply chains between Turkish and European manufacturers.
The minister also highlighted Türkiye’s strategic role as a logistics hub linking Europe, Asia and Africa, saying recent conflict in the Gulf had underscored the importance of alternative trade corridors.
He said both sides agreed that Türkiye’s transport infrastructure makes it “an excellent transit corridor” and added that EU officials acknowledged the country’s progress over the past two decades and its growing importance to Europe’s defense and industrial ecosystem.
The EU delegation’s visit comes ahead of key NATO summit in Ankara next week.
Türkiye will host 32 NATO leaders, as well as officials from the Gulf and Asia-Pacific region, on July 7-8 for a summit that it hopes will emphasize alliance unity and bolster deterrence.
U.S. President Donald Trump has threatened to pull his country out of the alliance while Washington has moved to withdraw troops, planes, ships and weapons from Europe due to tensions among allies over burden-sharing, defense spending, and U.S. complaints about allies’ lack of involvement in reopening the Strait of Hormuz during the U.S. and Israeli war with Iran.
Earlier on Tuesday, Kos and Turkish Transport Minister Uraloğlu attended a closing meeting of the Strengthening Intermodal Transport Services in the Turkish Railway Sector (U-IMT) Project, a joint initiative co-financed by the EU and Türkiye.
“With the U-IMT Project, we achieved significant gains that will make our railway freight transport more competitive, increase the capacity of the Middle Corridor, and advance our cooperation with the European Union in the field of connectivity,” Uraloğlu said.
The project was designed to improve intermodal freight services in the Turkish railway sector and support a shift toward a safer, more environmentally friendly and balanced transport system.
It also aimed to prepare an action plan for intermodal freight services, identify strategic infrastructure needs, and strengthen the institutional capacity of relevant Turkish transport authorities.
Türkiye and Qatar have signed a strategic partnership agreement for a next-generation communications satellite project, a top official said on Tuesday.
The deal forms a long-term collaboration between Turkish satellite operator Türksat and Qatar-based Es’hailSat.
Transport and Infrastructure Minister Abdulkadir Uraloğlu said the agreement covers the Es’hail-3/Türksat-Biruni satellite project and establishes a long-term strategic partnership focused on capacity sharing and joint commercial growth.
The agreement was signed in Doha by Es’hailSat Chair and CEO Ali Ahmed Al-Kuwari and Türksat General Manager Ahmet Hamdi Atalay.
Under the agreement, the partners will jointly utilize the capacity of the high-throughput Ka-band Es’hail-3/Türksat-Biruni satellite, which will operate at the 50 degrees East orbital position.
The cutting-edge satellite will be built by Thales Alenia Space, the joint venture between Thales and Leonardo, the company said separately on Tuesday.
The satellite will offer high-speed broadband connectivity services across Europe, Africa, Central Asia and the Middle East.
Uraloğlu said the partnership would strengthen Türksat-Biruni’s commercial capacity, expand Türkiye’s presence in global satellite communications markets and enhance the country’s competitiveness in the sector.
The project, financed by Qatar, will add a new high-capacity satellite to Türksat’s fleet. Up to 50 gigabits per second (Gbps) of satellite capacity will be made available to Türksat, helping reinforce Türkiye’s satellite communications infrastructure, said Uraloğlu.
Under the deal, the companies will also cooperate by sharing satellite assets, ground infrastructure, distribution networks and customer portfolios, aiming to optimize capacity utilization and maximize the satellite’s commercial potential from the outset.
Uraloğlu stressed that the project would preserve Türkiye’s strategic rights over the 50 degrees East orbital slot and associated frequency allocations, with no transfer of orbital or spectrum rights. The satellite will be registered under Türksat with the International Telecommunication Union (ITU).
He said the satellite would support broadband internet, aviation and maritime connectivity, government communications and enterprise data services across the region it will cover.
According to Uraloğlu, the agreement also deepens the strategic relationship between Türkiye and Qatar by extending bilateral cooperation into the space and satellite technologies sector.
Türkiye is “evaluating all options” to boost its air defenses, including the potential purchase of Patriot systems from Washington or Franco-Italian SAMP-T systems, Defense Minister Yaşar Güler said Tuesday.
For years, Türkiye has been ramping up investments as it seeks to have its own fully fledged missile defenses. It is meanwhile producing components for its integrated, multilayered “Steel Dome” air defense system.
“Our core approach on this issue is clear: We are open to all cooperation that meets our country’s security needs, that includes technology-sharing and joint production, and that is sustainable and in line with the spirit of alliance,” Güler told an interview with Reuters.
Technical and political talks with the relevant countries are taking place “from time to time,” he added.
Güler’s remarks came ahead of a historic NATO summit in Ankara next week.
Türkiye has NATO’s second-largest army and in recent years has significantly cut its external dependence in the defense sector, developing one of the world’s leading defense industries.
European security initiatives
It has also been seeking to join many European initiatives aimed at revamping the continent’s defenses to counter Russia and the risk of a U.S. pullback from NATO.
Güler said that while Ankara, in principle, viewed European steps to strengthen defense and security as positive, these efforts lacked inclusivity and would therefore not be fully effective.
“We believe excluding such an important capacity (Türkiye) from Europe’s defense initiatives is a strategically inaccurate approach,” he said, adding that Ankara expected Europe to adopt a “visionary approach” and embrace cooperation with Türkiye.
On Monday, President Recep Tayyip Erdoğan said Türkiye must be included in all of Europe’s defense structures and that defense trade restrictions between NATO members must be removed.
“Türkiye’s indispensable contributions to European security are sometimes overlooked,” Erdoğan told parliamentary delegates from all 32 NATO member states in Istanbul. He said Türkiye wanted “to participate in all defense and security initiatives” on the continent.
At issue is Türkiye’s access to the European Union’s 150 billion euro ($176 billion) Security Action for Europe (SAFE) initiative, intended to strengthen European defense capabilities.
Within SAFE, firms from non-EU countries such as Türkiye, Britain and the United States can only supply up to 35% of the component costs of weaponry funded by the scheme.
If Türkiye wants its companies to be able to tap a bigger part of the funds, Ankara needs to sign a security partnership with the EU and then negotiate special access with Brussels – a process that would require approval from all 27 EU members.
“If we want to combat the tests we are facing, we must lift restrictions on defense industry trade while carrying out burden sharing in a balanced and fair manner,” Erdoğan said, adding Türkiye was doing its part in terms of reaching NATO’s defense spending targets.
Last year, allies agreed on a defense spending goal of 5% of gross domestic product (GDP) by 2035.
Güler said Türkiye was committed to that goal and was gradually increasing its spending to meet it, adding that Ankara aimed to meet all its capability targets by 2029.
He said the priority areas for defense spending were drones, anti-drone systems, air defense and missile systems, naval projects, unmanned systems and cyber capabilities, adding that the “Steel Dome” integrated air defense system would be completed “as soon as possible.”
The system, first announced in July 2024, foresees integration of locally developed missile batteries, radars, electro-optical sensors, communications modules and command-and-control centers.
It aims to provide integrated protection against low, medium and high-altitude threats through land-based and sea-based air defense platforms and sensors developed at home.
NATO security landscape stance
Türkiye will host 32 NATO leaders, as well as officials from the Gulf and Asia-Pacific region, on July 7-8 for a summit that it hopes will emphasize alliance unity and bolster deterrence.
U.S. President Donald Trump has threatened to pull his country out of the alliance while Washington has moved to withdraw troops, planes, ships and weapons from Europe due to tensions among allies over burden-sharing, defense spending and U.S. complaints about allies’ lack of involvement in reopening the Strait of Hormuz.
Güler said NATO is adjusting to a shifting security landscape and suggested that the U.S. is not seeking to leave the alliance.
He said priorities for the summit would be showing allies’ increased defense spending, taking steps towards a stronger transatlantic defense industry, reaffirming unity within the alliance and boosting support for Ukraine.
“NATO continues to be an unparalleled and fundamental platform for Euro-Atlantic security and defense. We evaluate the period we are going through not as a crisis, but as a process of adjusting to the changing security environment,” Güler said.
Washington had “no intention of withdrawing” from NATO, he said, but rather wanted European allies and Canada to assume more responsibility for European security.
“It is expected that contacts and efforts on creating a concrete road map to strengthen the European pillar will intensify at the summit,” Güler said, adding that while Ankara backed a fairer burden-sharing scheme, its priority was preserving the unity of the alliance.
NATO has been under unprecedented strain, with some European allies concerned that Washington may withdraw outright or is working to fill gaps from the reduction of U.S. forces.
Güler said Washington played a central role in the bloc’s security and deterrence and that it was of strategic importance to preserve the trans-Atlantic bond.
“NATO’s current nuclear sharing arrangements and the U.S. role of extended deterrence remain fundamentally important to the security of the alliance,” he said.
Türkiye’s unemployment rate stood at 8.2% in May, unchanged compared to the previous month, the country’s statistical authority said Tuesday.
The number of unemployed people age 15 and over rose by 9,000 month-over-month to 2.88 million, according to the Turkish Statistical Institute (TurkStat).
The jobless rate was estimated at 7.0% for men and 10.5% for women, the institute said.
Youth unemployment, covering the 15-24 age group, climbed 0.4 percentage points to 14.8% in May.
Meanwhile, the number of employed people surged 285,000 from the previous month to 32.46 million, while the employment rate was up 0.4 percentage points to 48.5%.
The labor force participation rate also rose 0.4 percentage points to 52.8%.
The labor underutilization rate, which includes time-related underemployment, potential labor force, and unemployment, was up 0.9 percentage points to 31%.
Türkiye’s solar electricity generation reached its highest level of the year on Monday, according to industry data.
The daily output totaled 193,695 megawatt-hours (MWh), the Turkish Electricity Transmission Corporation (TEIAŞ) figures showed on Tuesday.
The previous solar electricity record was set on June 24 at 186,488 MWh.
The surge signals the beginning of a summer record streak.
Türkiye’s installed electricity capacity rose to 125,410 megawatts (MW) as of the end of April, driven by a rapid growth in renewable sources such as solar and wind. Renewables accounted for 62.5% of that.
Solar energy has been the fastest-growing segment, having reached 26,769 MW and accounting for 21.3% of total installed capacity. Wind power increased to 15,075 MW, representing 12% of total capacity.
Türkiye aims to reach a combined 120,000 MW of installed solar and wind capacity by 2035, as is seeks to gradually reduce its carbon emissions to zero by 2053.
The TEIAŞ data showed daily power consumption in Türkiye rose by around 17.3% on Monday compared to the previous day, totaling nearly 1.1 million megawatt-hours.
Hourly electricity consumption peaked at 52,572 megawatt-hours at 3 p.m. local time (1200 GMT) and fell to its lowest level of 33,273 megawatt-hours at 6 a.m. local time (0300 GMT).
Electricity production amounted to almost 1.1 million megawatt-hours on Monday, up 16.9% from the previous day.
Dam-based hydro plants accounted for around 23% of total electricity generation, while solar and imported coal plants contributed 17.8% and 15.5%, respectively.
On Monday, the country’s electricity exports totaled 9,974 megawatt-hours, while imports amounted to 4,016 megawatt-hours.
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