Turkey’s journey to become the EBRD’s largest market

By Olga Rosca
@olgarosca


Long before we knew the country, we knew its vibrant companies

The EBRD has been investing in Turkey since 2009. But our relationship with Turkey did not start in Turkey.

It started all over the EBRD region where Turkish companies went to invest.  And they went to many places where investors from western Europe did not rush. 

 

The Bank’s first partners in Turkey

Visitors arriving by air to Georgia’s capital Tbilisi and Batumi, a city on the Black Sea, cannot fail to notice the logo of TAV, a Turkish airport holding founded by Akfen Holding. The modernisation of both airports was carried out by TAV Urban Georgia in 2006 and 2007 and was financed by the EBRD in partnership with the International Finance Corporation (IFC).

On a hot summer’s day, a Russian, Kazakh or Moldovan – or indeed Serbian or Ukrainian – may cool down with one of 12 beer brands produced in these countries by Turkey’s Anadolu Efes, member of Anadolu Group, that are exported to these countries. Drinking Coca-Cola may evoke an image of the US, but in over a dozen countries in the EBRD region  the drink will have been bottled by a company belonging to the same company - Anadolu Efes - or indeed produced by Coca-Cola İçecek, a Turkish company, whose expansion the EBRD financed in places like Kazakhstan, Mongolia, Tajikistan and Turkmenistan.

The glass producer Şişecam is another example. The Bank’s cooperation with the company dates back to 1997. Since then the EBRD has financed Şişecam’s operations in Bulgaria, Russia, Ukraine and later in Turkey with over €385 million. Today, the Bank is a 15 per cent shareholder in Paşabahce, Şişecam’s internationally renowned glass tableware unit. With EBRD support, Şişecam also launched a glass recycling scheme. Green and white glass recycling containers bearing the logos of both Şişecam and the EBRD are now a common sight in Istanbul, Ankara, Antalya and Gaziantep.

Hands full with projects

So when the EBRD’s Board of Governors approved Turkey’s request to become a country of operations the Bank already had a solid record of cooperation with Turkish corporates abroad. The first EBRD investment in Turkey was made in 2009 and today, just seven years later, it is the largest EBRD country in terms of investment.

A lot is being done because there is a lot to do – we focus on sustainable energy and infrastructure; we work to strengthen the competitiveness of the private sector and to deepen capital and local currency markets; and we also promote regional and youth inclusion as well as gender equality across our investments.

We have an especially successful cooperation with Turkish banks, through which we finance small and medium-sized enterprises, energy efficiency improvements for businesses and households, smaller renewable energy projects and women-run enterprises – in fact, the EBRD’s flagship Women in Business programme originated in Turkey and has since been rolled out in several other countries.

Promoting high quality growth

The EBRD’s pioneering Turkish partner Akfen Holding is a particularly good example of how the Bank and its partners are boosting the Turkish economy and transforming whole sectors with best practices. Afken’s CFO Kadri Samsunlu says: “The EBRD has educated us on the importance of the quality of our growth. With the Bank’s support and guidance we have focused on financial, social and environmental sustainability. We have improved transparency and accountability, learned to better deal with decision makers, regulators, and other stakeholders and were able to become a best practice example for other companies.”

When the port of Mersin, operated by a joint venture between Akfen and PSA International issued a Eurobond (in fact Turkey’s very first infrastructure bond) the EBRD acted as an anchor investor and catalysed investment by others. Due to its success this bond issue has become a blueprint for other infrastructure investments in the country.

Another company in the holding, TAV Group, has built a brand new high-tech and energy-efficient terminal at Izmir airport with an EBRD loan. On top of many attractive features, the terminal has garnered international recognition for the fact that 99 per cent of the old building was reused and recycled in the construction of the new one.

Deep capital markets for stronger economy

Akfen continues to keep the sustainability bar high. Most recently, it has consolidated all its renewable energy projects in a separate unit, Akfen Renewable Energy, where the EBRD has acquired a 20 per cent stake.  As a shareholder, the Bank will help advance the new company’s corporate governance and competitiveness and help it almost triple the size of its renewable portfolio, with the ambition of becoming one of the largest producers of renewable energy in Turkey. When this role is complete, the EBRD will seek to exit in a public listing, leaving real value and potential in the company.

Exiting its investee companies through IPOs helps deepen capital markets in the country, which is one of the Bank’s priorities in Turkey.

Last year, in an expression of the EBRD’s support for Turkey’s comprehensive capital market reform programme, the EBRD acquired a 10 per cent stake in the country’s unified stock exchange Borsa Istanbul. As a shareholder with a board nominee, the EBRD is working to improve the efficiency and liquidity of Borsa Istanbul and help it become a leading exchange in terms of the number of listed companies and market capitalisation, reflecting the full potential of the Turkish economy.

Looking ahead with confidence

Turkey’s reform path has not always been a straight line as is the case with many other countries. Therefore, over time the EBRD has intensified its engagement as an investor and its work with the authorities on public policies. There are always lessons to be learned and shared.

Mehmet Şimşek, Turkey’s Deputy Prime Minister, put it succinctly at an investment summit dedicated to Central Asia in Istanbul this year, organised by the EBRD and FT: “Turkey used the dynamism of the private sector. We made great progress. But we are not complacent. Turkey needs further reform to improve investment conditions, to improve business environment. We are eager to share our experience of getting from a country with a broken economy, heavily reliant on FDI, to a country which both welcomes foreign investment and is itself an investor.”

Jean-Patrick Marquet, Director for EBRD operations in Turkey, adds: “Recognising Turkey’s role as a gateway to a wide and diverse region spanning Central Asia, the Western Balkans and the southern and eastern Mediterranean, the EBRD will continue boosting the country’s economy and work with Turkish companies at home and abroad to benefit the people living in Turkey and in its extended neighbourhood.”