Ready at the Beachhead

Why did Yıldırım Holding choose Colombia as its first step into Latin America?

BRIC is an acronym invented for the dynamic emerging economies of Brazil, Russia, India, and China, which epitomize economic growth moving from developed to developing countries. However, that was some 10 years ago. The new term being used now is CIVETS, which stands for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. For years, Colombia had been closed to investors, not only because of its heavily regulated economy, but also due to economic instability and an unstable internal security environment. It has now become the world’s fourth biggest exporter of coal, and the country is keen to exploit its mineral resources by giving mining concessions and regulating the industry. Yıldırım Holding made its mark initially in the coal trading business, and we are also very active in coke production in that country. Therefore, it is natural for us to direct our attention to Colombia because of its desire to do business with foreign companies, and we feel that we can bring synergistic capabilities that combine mining, coal trading, coal production, port construction, operation, and erecting energy power plants using coal.

What are Colombia’s strengths and challenges as a place to invest and do business?

Some people say that Colombia is the next Brazil, and from the performance over the last few years we can see that the country is growing at a fast pace. It is the hidden investment gem in South America, opening up to foreign investments and increasing tourism. Much of the growth in the Colombian economy can be attributed to the government focusing on creating a favorable business climate. For example, the ease of doing business index in Colombia is higher than in Brazil. Also, its geographic location on the north-west tip of South America, with ports on both the Caribbean Sea and in the Pacific Ocean, is a major advantage as it provides easy access for imports and exports. To a large extent, the Colombian economy’s growth and development has been powered by infrastructure investment. This is welcome news to investors such as Yıldırım Holding because you need roads to haul the minerals or coal and bring them down to the ports for export. One other very valuable feature of Colombia is that it has one of the most qualified workforces in Latin America, with an adult literacy rate of 93%. The labor force is both highly qualified and competitive. However, the labor market suffers from a rigid employment infrastructure.

Colombia has recently displaced Russia as the largest supplier of thermal coal for power generation. What potential does this imply for Yıldırım’s import/export activities?

Colombia now ranks as one of the top coal producing countries in the world. We opened our Colombian office back in 2011, and we have been very active in searching for favorable deals with local Colombian coal companies. Our activity will continue unabated regardless of what happens in Russia or in China. Our first energy investment will be the 200 MW coal-fired power plant to be erected next to our Eti Krom ferrochrome production facility in Turkey, and it is most likely that this plant will be using imported coal from Colombia. We have also been very active in 2012 with coal trading and coke in Colombia, and have bid for some major coal and coke contracts in Turkey. We will continue to build on this activity, and seek mutually beneficial opportunities with Colombian producers in the years to come.

In 2010, Colombia received upward of $3.24 billion in mining investment. What makes Colombia a favorable destination for exploration?

About a decade ago, Colombia was not known as a mining destination. However, now it is crowded with giant mining and exploration companies as well as the smaller junior players, putting the country on track to become an international mining powerhouse. Certainly, the perception that the countryside may not be safe for mining is now changing because Colombia is safe and politically stable. Of course, at the top of the list is coal mining primarily for export purposes, which are operated by hundreds of small coal operators. Aside from coal, Colombia has gold and nickel deposits, and the largest nickel mine in Latin America. The glitter of gold has attracted more of the junior miners. The Colombian government is also encouraging and giving priority for the exploration of phosphates, potassium and magnesium ores, uranium, and iron. The government is encouraging foreign investors to come to Colombia, and the government has set aside close to 3 million hectares of land for exploration. This is welcome news for mining companies such as Yıldırım Holding because we have one of the most established mining records in the world, and we would like to create joint ventures and partnerships with local Colombian partners to do exploration and mining.

How are Colombia’s new public-private partnership (PPP) laws and increased infrastructure spending shaping potential for port investment and development in the country?

In order to become the fourth largest coal exporter in the world, Colombia had to figure out a way to improve its ports and the country’s overall infrastructure. To a large extent the growth and development of the country in recent years has been primarily powered by investments made in the infrastructure segment, and the funds for these projects have been raised by PPPs. When it comes to the ports, Cartagena and Buenaventura are the most competitive ports for coking coal. On the other hand, Barranquilla handles more metallurgical coke. There are a few other ports such as Bahí­a Cupica, Bahí­a Solano, Golfo de Tribugá, and Bahí­a Málaga on the Pacific Coast, which will require further port developments. With the recent acquisitions of the Port of Gemlik (Gemport) and the Port of Rota (Rotaport) on the Sea of Marmara in Turkey in 2012, Yıldırım Holding and its subsidiary, Yılport Holding, are now becoming substantial port operators not only locally in Turkey but also globally. It is our intention to explore port construction, development, and operational opportunities in Colombia because we can bring valuable insight and operational expertise as a major up-and-coming global port operator.

What is your medium-term outlook for the Colombian economy, and what does this signal for Yıldırım’s activities in the country?

What the Colombian government has been able to achieve in recent times has certainly been remarkable. A large share of the total investments in the country has been allocated to the oil and mining sectors, and in the improvement of the country’s infrastructure, such as highways and ports. Advances in terms of business attractiveness have also been supported by a massive improvement in the security situation, increased financial market stability, and tax incentives. All these factors make us very optimistic regarding the growth prospects of Colombia in the medium term. In 2013 and beyond, we feel Colombia will be able to grow at a healthy pace of 4% to 5% per year, and there will be many opportunities for our company to enlarge our business in Colombia and extend beyond coal trading and coke production. Our synergistic capabilities, having been operating in 10 different sectors in Turkey and elsewhere in the world, furnish us with a unique proposition to bring to Colombia, and that is to provide a “one-stop shop” from mining to logistics, port construction to operations, and coal and coke production to erecting power plants.

What is your vision for Yıldırım Holding’s global expansion?

If one reviews the most successful international companies, one can identify five features which also apply to Yıldırım Holding, and therein lies its vision for global expansion. First, Yıldırım Holding envisioned itself as a global concern from the very beginning as it grew in the 1990s first by trading coal with Russia, and then with China and later with South Africa, and now Colombia. So, in our global vision, there is a commitment to do business globally and utilize global sourcing with active market participation by leveraging our global expertise and partnerships to gain a competitive edge and improve our value-adding market share. Second, is the ability to choose the proper market entry so that you can be profitable and viable very soon. We at Yıldırım Holding firmly believe that our technical, legal, tax, and financial due diligence process has worked well for choosing the right partner, the right project, and the right entry beachhead. Third, the shining international companies are likely to become engaged in joint ventures, acquisitions, manufacturing, and operations overseas closer to their markets. Yıldırım Holding’s acquisition of Vargön Alloys, a Swedish ferrochrome manufacturer, in 2008 had this primary objective of producing ferrochrome closer to the European and American stainless steel markets. Fourth, Yıldırım Holding’s vision is the commitment to be respectful of local culture and to employ foreign nationals, encouraging multi-country careers and leadership development. The fifth point is to be able to find a happy balance between global and local organizational structure, promote cross fertilization between the center and the commercial units, encourage interconnectedness, bring in the expertise gained from overseas to further enhance the business practices at home, and lead centers of excellence.

© The Business Year – January 2013