TURKEY - Economy
Chairman, Global Investment Holdings
As well as being actively involved in business development at the company level, Mehmet Kutman serves on the boards of directors of several of Global Investment Holdings operating subsidiaries and affiliates, including Global Port Holdings, Ege Ports, Port Akdeniz, Bodrum Cruise Port, Izmir Port, and energy sector companies involved in natural gas distribution and hydroelectric power generation. He also serves on the board of directors of Alarko REIT, a BIST-listed real estate investment trust. He is a member of the Turkish Industrialists’ and Businessmen’s Association (TÜSİAD) and the Foreign Economic Relations Board (DEİK).
We did well because we expanded internationally, adding five new international ports to our portfolio and becoming the largest cruise port operator in the world. We also more than doubled our compressed natural gas business, which is now ready to embark on international expansion. We have also sown the seeds of future growth by completing value-enhancing investments in our mining business, which will move us up the value chain.
EU countries will remain Turkey’s top international trade and investment partners for decades to come. Despite political ups and downs, the levels of collaboration have steadily increased. In terms of defense, we have been together in NATO for more than 50 years. There are also numerous areas in foreign policy, counter-terrorism, and immigration where Turkey and the EU are consistently cooperating. Over the past decade, Turkey has also adopted many of the standards and best practice criteria in EU legislation known as the acquis communautaire. Yet today, we recognize that there are two major issues. The first is that Turkey’s accession negotiations have stalled. And secondly, the EU is in a serious economic crisis, which is in the process of spreading to Turkey. I will leave politics to the policy makers on both sides, but in terms of business I see a strong role for EU-Turkey cooperation, especially during these troubled times. I believe that the EU-Turkey trade relationship can be deepened by including construction services, agricultural products, free trade with third countries (especially with NAFTA), and increased visa-free mobility for Turkish citizens and vehicles into the current Customs Union framework. I see four areas of natural advantage that should be built on. With an advantaged energy supply position, low real interest rates, and a young, productive, and competitive labor force, Turkey can become a base for EU companies to manufacture energy-intensive products. Secondly, Turkey’s proximity to the EU and strong logistics fleets also mean our country can expand its role as the flexible and quick top-up producer in the value chain, e.g. for textiles or auto parts. Then, in neighboring developing markets, Turkish companies offer a distinctive product and service mix that can be a real alternative to the EU’s often over-engineered and over-priced product/service mix. This offers grounds for EU companies to use Turkey as a launch pad to grow in third countries. Finally, Turkey is on its way to becoming a world-class hub for natural gas and for passenger air traffic. Cooperation here can improve Europe’s diversity of energy supply and connections. For Turkey, building on these four distinct competitive advantages by cooperating with EU countries will enable our firms to integrate better with the global economy, gain scale, move up the value chain, and increase the high-tech content of their products. Finally, Turkey has two core areas where its full economic potential is far from being achieved: agriculture and mining. We need to learn from Europe on crop diversity, agricultural efficiency, moving up to agri-industrial products, opening up new markets, health and safety, and growing key talent, to name a few.
Turkey is a big country, with a relatively young population. This can be a huge competitive advantage, but as the country ages, in 15 years, we could start facing the problems that most European countries are facing right now. That is why the economic reforms, announced by the Prime Minister, are very important. Before 2002 the Turkish economy was vulnerable, with economic policy makers often reacting to economic crises, rather than acting purposefully and proactively to build a better future. In 2002, with the new economic program and a new majority government, political stability became the norm. With these two crucial anchors in place, Turkey’s position at the crossroads between Europe and Asia, with young demographics and a relatively skilled labor force, could become an unbeatable competitive advantage. As a result we could, and I believe will, be the manufacturing hub not only for European, but also Central Asian, Middle Eastern, and African markets. Keeping our workforce educated and motivated to work, as well as a fundamental reform of the pension system in Turkey are especially important in this regard.
Turkey is an attractive large market, centrally positioned, with business-friendly legislation, a growing middle-class consumer base, and consistent growth. Yet today, much of the interest also stems from the fact that international investment yields are close to zero, and the loose monetary policies in large OECD countries mean that there is excessive money in the market. This era is fast coming to an end; therefore, the level of interest in Turkey is not likely to remain constant. It is for this reason that I believe we have to succeed in completely reforming our legal system. With that and other reforms announced by the prime minister, there is no doubt in my mind that Turkey will rank as one of the most attractive emerging markets to invest in for the next decade.
If Turkey can stay on its current course for another decade—and I am confident that it will—the future of the country will be very bright. There will be bumps; there will be major bumps. But for too long the wealth, and decision-making process was in the hands of a select few. Starting in 2002 and onward, we entered an era where the masses were able to voice themselves. The idea of a protest like Gezi Park, which had a profound effect on society with its goods initially and bads later on, happening back in the 1990s was inconceivable. Now, the people have a voice. At the same time I could never imagine a woman with a headscarf attending a public school in the 1990s—new sections of society are able to express themselves now. People complain, but I lived in this country in the 1970s and 1980s and I remember not having a voice. Compared to decades past, Turkey has made great improvements. And frankly, some of the opinions and criticisms that are being voiced here would not even be possible in the Western World—there would be libel suits. I am also pleased and encouraged by the fact that Anatolian cities like Kayseri, Gaziantep, Denizli, Konya, Maraş, Urfa, Rize, Eskişehir, Erzurum, and many more are creating globally competitive companies and strengthening our country, once dominated by the Istanbul metro-line HQ’s. I am not just saying this, as we at Global have invested in most of these wonderful cities.
This interview will be published in ‘The Business Year: Turkey 2015’. To change your subscription information, log on at www.thebusinessyear.com and navigate to My Page.
© The Business Year – April 2015
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