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Turkey, the fifteenth largest economy of the world, is suffering in recent times from an unfinished business breakthrough. After a boom of six consecutive years, the Turkish economy is now confronting tough conditions of economic crises in the new world.
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source: www.kwintessential.co.uk
Turkey's major distress is lagging export numbers with European Markets, not toxic assets, bad loans, or Ponzi schemes. In December 2005, industry export figures declined sharply, by almost 25 percent. The significant decrease in demand from European markets hit exporters harshly; in 2008, Turkey's export figures yielded USD 130 bn and import figures at USD 200 bn.
As the country loses ground in Europe, which is Turkey's main foreign trade partner with 46 percent of total export, several Middle Eastern countries have arisen as new partners for the country. During the past six years, Turkish businesses have increased its trade volume with Muslim countries in Middle East, Africa and Central Asia. Trade with the OIC (Organisation of Islamic Countries) has reached a total of USD 58.2 billion as of November 2008, which is a 52% increase when compared with a total of $38.1 billion for the same period in 2007.
There has also been an increase in Turkey's permanent business activities. According to the Turkish Treasury's report, foreign direct investments from the Gulf region, Near and Middle Eastern countries have jumped from USD 495 million in the January - October 2007 period to USD 1.9 billion in the January-November 2009 period. In addition, Middle Eastern companies have established 471 new companies in Turkey throughout that time period.
Rush to retail, energy and healthcare
The retail sector in Turkey has generated USD 165 billion in total sales in 2008, and is projected to reach USD 200 billion in 2010. Retail growth has been accelerated by new shopping mall investments in the country's emerging Anatolian cities. Last year, because of BC Partners leadership (major Private Equity player), private equity consortiums were able to acquire Turkey's primary retail company, Migros. BIM, Turkey's second most lucrative retail company, attracts investors from the Gulf. With plans to expand to North Africa, BIM aims to open new stores in Morocco in 2009.
Private equities, especially from the Gulf region, are searching for companies to invest in energy, healthcare and education sectors. "There are opportunities that exist in Turkey despite the currency… so will you see us buying companies on the stock market and taking them private? Without question, yes," says Arif Naqvi, CEO of Abraaj Capital, a -Dubai based private equity firm managing USD 7,5 billion.
A representative from NBK Capital, another Gulf private equity firm, told Capital Magazine that the company is looking forward to completing several productive acquisitions in the second half of 2009. It seems that PE firms project a positive outlook because many previously-successful companies lack working capital and represent terrific investment opportunities. Though mostly successful, such firms were exposed to heavy debt rollovers in 2009 and are in need of help. Bitter sales numbers only exacerbate their problems.
Exchange rates opportunity
The Turkish Lira has depreciated nearly 40 percent against the US dollar, and 30 percent against the Euro in the last 3 months. This new situation has therefore made company values more attractive for dollar bidders. Simultaneously, tourism expenses will be cheaper for tourists in 2009, which would further assist in increasing the value of the Lira as well as Turkey's economy.
Because of the depreciation of the Turkish Lira (TL) against the Dollar and the Euro, domestic manufacturing is gaining strength against a losing import volume. Turkey's foreign trade structure has been focusing on importing cheaper raw materials from dollar zone and re-exporting them as finished goods. Hence, the undervalued Lira will make importation of raw material difficult. "Export was very easy before the crises, but now domestic producers have favorable conditions," says State Minister Prof. Dr. Naz?m Ekren, economy policy-maker of Ak Parti Government.
From refinery privatisation
to oil exploration
Koc Holding, the largest conglomerate in Turkey, is now preparing for an oil production business in the Middle East. It had acquired the formerly public oil company Tupras, Turkey's refinery giant, in 2005. "Iraq is known to have around 10 percent of the world's proven oil reserves. We want to be part of the consortiums that will be established in the country. We see participating in oil production projects," says Erol Memioglu, the Energy Group President of Koc Holding, to the media. Koc Holding acquired formerly public oil company Tupras, Turkey's refinery giant, in 2005.
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by DinarStandard.ccom
Privatization, full speed
ahead
In 2009, the Turkish government plans to continue its privatization program at full speed. Fifteen electricity distribution companies will be privatized. The Renewable Energy Law, currently under the Turkish Parliament's consideration in accordance with the EU norms, will bring new incentives to wind energy producers. For example, the Gas distribution company IGDAS, which is owned by the Istanbul Municipality, is expected to be privatized in 2009.
In 2008, electricity production and distribution privatization deals were particularly lucrative business activities for Turkey, amounting to USD 6..1 billion. According to a survey conducted by the Price Water House Coopers office, during 2009, it was a majority of European energy companies who were expectant to negotiate new energy deals in Turkey. Unfortunately, it seems that Middle Eastern and OIC companies are not interested enough in energy privatizations in Turkey.
Flights kick off to Muslim
cities
While business relations are becoming stronger with OIC countries, in 2008 Turkey's semi-public airline firm, Turkish Airlines (THY), has started new flights to many distant cities which include some Muslim cities among them. In addition to hundreds of current destinations, THY is now directly flying to Nairobi, Dakar in Africa, Mashad, Mumbai in Asia and even to Sao Paolo in Latin America. For the January - October 2008 period, the company has generated USD 2.8 billion in revenue.
New world's energy providers
Kazakhstan and Azerbaijan, both oil and natural gas rich countries, are very eager to expand in Turkish and Western markets. Kazakhstan's state oil company, KazMunayGas and Azerbaijan's state oil company, Socar, are trying to get legal permission to establish an oil refinery in Turkey. Socar acquired Turkey's largest petrochemical company, Petkim, which was privatized in 2007.
As the two country's revenues are mainly reliant on oil and natural gas export, the credit crises and sinking oil prices have affected their economies negatively. With oil prices at USD 140 per barrel just before the credit crises began, KazMunayGas has signed numerous credit contracts with Western Banks. Now, declining oil prices will bring the company under pressure. Due to the foreign credit squeeze, Kazakh banks have tightened credit conditions in domestic markets. According to the IMF report, oil exploration investments in both countries may be delayed.
Bright future despite crises
The Turkish business world has dropped its growth target rates for automobile, construction and textile industries, especially in 2009. Businesspeople have reported to media that they believe businesses will slow down until into the second half of 2009, following which trade volumes will rise. At the same time, investors are waiting for lower share prices in order to invest in lucrative companies. Because of the crises, many mergers and acquisitions among foreign and domestic industrial companies in Turkey take place. An upward trend will inevitably begin again following such mergers and acquisitions.
The country, running a trillion dollar GDP based on purchasing power parity, is the fifth largest economy of Europe after Germany, UK, France, Italy and Spain, respectively. Turkey is a bridge market for OIC country companies who plan to enter European markets. In addition, it is also a base for Western companies who seek to expand in Middle East and Central Asia.
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