Arab investors find Turkey a very hospitable market
ISTANBUL – Gulf investors seeking a home for their petrodollars are turning their gaze on Turkey, encouraged by a government in Ankara which favors Arab ties and strong economic growth. Prime Minister Recep Tayyip Erdogan, whose roots are in political Islam, has shifted his foreign policy increasingly eastward and investors say his visits to the Middle East, and to the oil-rich United Arab Emirates (UAE) in particular, have encouraged investment. Ozkan Yavasal, vice president at Daruma Corporate Finance, says it all started with Erdogan’s visit to the UAE last September, days before the EU opened membership talks with Ankara. «The first interest starts with the government-to-government talks and then the business community follows,» Yavasal told Reuters on the sidelines of a Turkish-Arab Economic Forum, sponsored by Erdogan and attended by Middle Eastern ministers. «Politics determines the business,» he said in Istanbul. Previous Turkish governments have generally focused more on Europe and the United States, with the exception of a government in the late 1990s whose campaign agenda included the creation of a pan-Islamic currency. Privatizations due this year and next – which will include electricity distribution, state-owned Halkbank, ports and sugar factories – are expected to attract further Arab investment. Turkey’s part state-owned petrochemicals firm Petkim is also seen as coming up for sale. Deals so far have included the $6.55 billion purchase of former monopoly Turk Telekom by Saudi Oger Telecom and a $500 million project to build twin towers in Istanbul as part of a planned $5 billion investment from state-owned Dubai Holding. Emaar Properties is also developing in Istanbul. «The business Gulf community is looking at Turkey as a place that could sustain higher levels of growth… They are looking to grow by acquisitions and they’re looking primarily at countries within their proximity within the areas they understand,» investment bank Shuaa Capital CEO Iyad Duwaji told Reuters. Economic growth estimated at 6 percent this year, an end to rocketing inflation, and a population of 70 million add to Turkey’s underlying appeal. Turkey is secular but predominantly Muslim. «Petrochemicals, utilities… there would definitely be people looking at this,» Duwaji said, referring to privatizations. Arab interest was also been seen in mobile firm Telsim. Kuwait’s MTC, the UAE telecom firm Etisalat and Dubai’s Emaar all bid for the company late last year, but were beaten by Britain’s Vodafone. Sharia banking Turkey’s Islamic banks – one of which has just listed on the stock market – are possible targets for Gulf investors, who pioneered the model. Dubai Bank is in the process of becoming sharia-compliant and could be interested in buying a Turkish bank with the same non-interest-paying structure. «We are looking at opportunities… the only way in is to purchase an Islamic institution,» said Stephane Masini, manager of capital markets and business development at the bank. Meanwhile, Dubai Investment Group, part of state-owned Dubai Holding, is looking at Turkey’s Sekerbank, according to an investment banking source. Investors will not just be bringing money into Turkey, but want to encourage Turkish companies to raise capital on the newly launched Dubai International Financial Exchange (DIFX). Shuaa Capital, for example, which is opening a liaison office in Turkey, is making that part of its strategy here. DIFX Chief Operating Officer Nasser Alshaali said the bourse was talking to a handful of Turkish companies about listings although he declined to say whether he was talking to the government about possible privatization listings. «Turkey is one of the major economies with the greatest untapped potential in the region,» Alshaali told Reuters. He agreed that political support from Ankara contributed to Gulf investors’ aggressive pursuit of Turkish assets. «A sophisticated investor always looks at several levels of risk,» he said. «City and country risk adds another layer and what this kind of support… does is minimize that cross-border risk or country risk, which boosts investor confidence.»
