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Why Gulf states hold key to Turkey’s investment vision 2 mai 2013

Posted by Acturca in Economy / Economie, Middle East / Moyen Orient, Turkey / Turquie.
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Financial Times (UK) Thursday, May 2, 2013, p. 13                                                  Türkçe

By Georges Elhedery and Selim Kervanci

Ankara has few resources to fund its ambitionsbut help is at hand, write Georges Elhedery and Selim Kervanci

Turkey has a $350bn investment list. On top of the list, is a new airport in Istanbul, at an estimated $9bn, and $106bn to upgrade the Turkish electricity sector

Ankara, however, has comparatively little in the way of domestic resources to fund these ambitions by 2023, the 100th anniversary of the modern Turkish Republic .

But there is an abundant source of funds close to home in the form of the assets held by the Gulf states. These countries’ cumulative current account surpluses over the past few years (2000-2012) reached $1.8tn. There are many calls on these funds but in Riyadh, Doha, Kuwait City and Abu Dhabi there are ample pools of assets looking for a profitable home.

Infrastructure is one of the sectors targeted by the sovereign wealth funds. In the case of Turkey, they generally see added benefits of being able to benefit from growth and potential credit re-rating.

Arab investment into Turkey is well established – and growing.

In January, Taqa of Abu Dhabi, a state-owned entity, announced a $12bn deal to develop lignite coalfields to generate electricity, representing 40 per cent of Turkey’s total, in the Afsin-Elbistan region of south-eastern Turkey.

Significantly, the deal followed closely on an announcement last year by Ali Babacan, the deputy prime minister, that, in order to reduce dependence on gas generation, generous incentives are now on offer to companies developing new power plants burning domestic Turkish coal.

Activity has not been confined to the power sector.

In March, Commercial Bank of Qatar bought a controlling share in Alternatifbank, while, in January, Burgan Bank of Kuwait acquired Eurobank Tekfen.

And, of course, STC of Saudi Arabia is a major holder of shares in Turk Telekom which operates the Avea mobile service.

Arab real estate investors have also been attracted by a relaxation last year of Turkey’s property laws which means that foreigners can buy without their home markets being open to Turkish purchasers.

Emaar of the UAE is a large-scale investor via its new project in Libadiye on the Anatolian side of Istanbul. Emaar also has a project on the European side of Istanbul, launched in 2010.

The Kuwait Investment Authority has invested in the Cevahir shopping mall in Istanbul, while Landmark of the UAE has just acquired a controlling stake in Park Bravo Dis Ticaret, a retailer. Aabar, owned by the International Petroleum Investment Company of Abu Dhabi, has a stake in a poultry company.

More though could be done. Total foreign investment in Turkey was $10bn last year (down from $16bn in 2011) of which the countries of the Mena region accounted for only 12 per cent while $7.7bn came from Europe.

Negotiations on a free-trade agreement between Turkey and the six members of the Gulf Co-operation Council are stalled after four rounds, as the Arab side conducts a « scientific » study to examine the impact of an accord. Restrictions are still in place on sales of agricultural land in Turkey and of land abutting the country’s borders.

The Turkish side is certainly keen to bolster the relationship. Speaking at the Turkish Arab Economic Forum in Istanbul last month, Ahmet Davutoglu, Turkey’s foreign minister, called for « maximum economic integration ». Mr Davutoglu urged Arab companies and people to come and work in Istanbul and develop the city’s influence on the global stage.

Turkey may need all these avenues of funding to advance its 2023 Vision. By then the country hopes to record a GDP of $2tn – more than double today’s figure; to increase annual Turkish exports to $500bn; to hit a foreign trade volume of $1tn; and to be a top 10 world economy (it is currently 18th).

If those goals are to be reached, Turkish businesses will need state-of-the-art services in sectors ranging from telecoms to power generation to airports, roads, dams and bridges. The Gulf states are in a position to help. Georges Elhedery is HSBC’s head of global markets, Mena, and Selim Kervanci is head of global banking, HSBC Turkey

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