Id dt turkey feature 2013 part 2

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In association with the UK’s biggest selling quality newspaper - The Daily Telegraph iD presents

Symbols of Turkish Excellence in the World Part II

The nation has seen great democratic and economic changes - but there is still a long way to go. Discover how its people and enterprises are driving the country forward in this digital version of the 6-page special as published inside The Daily Telegraph on 12 July 2013.

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1C@ RJH@I RCJ C<Q@ C<? IDI@ <=JMODJIN By Laura Donnelly Health Correspondent

C<I>@GGJM N<TN =JJFN ><I =@ =<G<I>@? RDOC HJM@ >PON DI NK@I?DIB <I? R@GA<M@ THE Conservative Party will not introduce any tax rises if it wins the next election, George Osborne has signalled. Moving to dampen speculation that new tax rises were being planned secretly, the Chancellor said that Conservative proposals instead involved further spending and welfare cuts. Mr Osborne, for the first time, outlined the tax arguments that his party will put forward at the election in 2015. The commitment is a clear attempt to differentiate the Tories from the Liberal Democrats and Labour who have not ruled out tax increases after the election. Mr Osborne also said he would unveil plans for a tax break for married couples later this year, but he declined to say when it would be introduced. The comments come after the Institute for Fiscal Studies warned that millions of middle-class workers face stealth income tax rises of ÂŁ600 each after the next election to fill a ÂŁ25billion hole in the Government’s finances. The economists said that the Government could have to raise ÂŁ10billion from such increases because of the difficulty in finding deeper reductions on top of the ÂŁ11.5billion cuts announced in last month’s 2015-16 spending round. Speaking at a lunch organised by the Parliamentary Press Gallery, Mr Osborne said that the cuts already set out in March’s Budget meant that he would not have to bring in more taxes to balance the books. The Chancellor said “the path of fiscal consolidationâ€? could be completed through cuts in expenditure by the Gov-

ernment. “That is my Budget book and I stand by it and I think this can be delivered through spending and savings both in welfare and in departments, and there is no need for tax rises to contribute to that fiscal consolidation,� he said. Mr Osborne added that it was up to both Labour and the Liberal Democrats “to explain, therefore, what taxes they might put up�. The possible introduction of a transferable tax allowance between married couples moved a step forward when Mr Osborne said he would announce plans in this year’s Autumn Statement. David Cameron has come under pressure from Conservative back benchers to fulfil an election promise to offer the tax breaks, and last month said an announcement could be expected “very shortly�. There was speculation that he was being held back not only by opposition from the Liberal Democrats — who secured a provision in the Coalition Agreement allowing them to abstain on the issue — but by a lack of enthusiasm from the Chancellor. Mr Osborne insisted that he was personally committed to the tax break. “David Cameron campaigned to be leader on that promise and I was his campaign manager,� he said. “I am absolutely committed to introducing it, the Government is committed to introducing it and I think you can expect to see it in the Autumn Statement.� A senior government source has briefed The Daily Telegraph that the most likely date for its introduction is April 2015, which would be in the middle of the general election campaign. Asked if the plan would be introduced Continued on Page 2

Jessica Fitch and Bertie Bear met the Queen yesterday at the Coronation Festival in the gardens of Buckingham Palace. The seven-year-old, from Cheltenham, Glos, also persuaded the Prince of Wales and Duchess of Cornwall to pose with her Page 3

By Steve Hawkes Consumer Affairs Editor

ICE cream van drivers have won a victory in their battle for survival, after being told that they can play their chimes for longer. The Government yesterday said it would relax rules so that vans’ jingles can ring out for up to 12 secISSN 0307-1235

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onds at a time, as opposed to the current four. The move came despite fierce opposition from the Noise Abatement Society and will help a flagging industry. Unfortunately, the new rules will not take effect until the autumn, meaning that through the summer heatwave sellers will have to get by with short, sharp blasts of Greensleeves or The Happy Wanderer. There are currently just 500 mobile ice cream vans plying their trade on the streets of Britain, down from a quarter of a million in the Seventies. Some councils have banned them on obesity grounds, while others

are forcing drivers to change their vans every five years to help reduce carbon emissions. The government shake-up — which it says will reduce red tape — is the first change to the “Code of Practice on Noise from Ice-Cream Van Chimes� since 1982. Ice cream vans will still be banned from playing their chimes after 7pm, when a rival vehicle is trading, or within 50 metres of schools, hospitals and places of worship. They will also have to keep the chimes lower than 80 decibels and cannot sound them more than once every two hours in the same street. Sales melt: Page 3

MORE than one in three abortions carried out last year was on a woman who had previously had the procedure, official figures show. The statistics for last year disclosed that dozens of women had undergone at least nine terminations. The figures show that a record 37 per cent of all abortions in England and Wales last year were repeat procedures. More than 4,500 women had had at least four abortions, 1,334 were on at least their fifth and 33 women had nine or more terminations. Anti-abortion campaigners said last night that the rise in repeat terminations was “a tragedy�. The figures raised fears that the procedure was being used as a form of contraception, they said. The Department of Health figures show the total number of abortions fell slightly last year, by 2.5 per cent, with a total of 185,122 carried out. Of those, more than 66,000 were repeat abortions, compared with 54,603 a decade earlier. The figures also disclose a sharp rise in the number of pregnancies aborted because of disability, with a 17 per cent rise in such cases in a year, to 2,308 last year. Abortion agencies said the rise might reflect advances in foetal screening detecting abnormalities sooner. However, pro-life campaigners said they were “deeply concerned� by the trend. The statistics show that the number of abortions among teenagers fell sharply, with 12,783 among those under 18, compared with 14,599 the previous year. However, the number among women in their 40s rose to a record 8,426 cases last year – up 20 per cent in a decade. While the number of single women having abortions rose slightly since 2002, the figures show a tripling in the number among women with partners. More than 86,000 women with a partner had abortions last year – almost half the total number of terminations. Ann Furedi, chief executive of the British Pregnancy Advisory Service, said the figures on women with repeat abortions could be misleading. Often they were responding to different circumstances from an unwanted pregnancy as a teenager to an unexpected pregnancy in their 40s. She said many agencies treated women from eastern Europe, “where abortion is seen as a method of birth control�.

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By Chris Irvine and Tom Parfitt in Moscow

‘This is not the time to put up our pay. We should wait till the whole country’s distracted by Kate’s baby’ MPs’ pay backlash: Page 4 Editorial Comment: Page 21

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THE Kremlin is returning to typewriters in an attempt to avoid damaging leaks from computers, it has been claimed. A source at Russia’s Federal Guard Service (FSO), which is in charge of safeguarding Kremlin communications and protecting President Vladimir Putin, claimed that the return to typewriters has been prompted by the publication of secret documents by WikiLeaks, the whistleblowing website, as well as Edward Snowden, the fugitive US intelligence contractor. The FSO is looking to spend

486,000 roubles – around ÂŁ10,000 – on a number of electric typewriters, according to the site of the state procurement agency, Zakupki. An FSO source told Izvestiya newspaper: “After scandals with the distribution of secret documents by WikiLeaks, the exposĂŠs by Edward Snowden, and reports about Dmitry Medvedev being listened in on during his visit to the G20 summit in London, it has been decided to expand the practice of creating paper documents.â€? Directives to the defence minister and Mr Putin, are still printed on paper, a defence ministry source said. Nikolai Kovalev, the former direc-

tor of Russia’s Federal Security Service, told Izvestiya: “From the point of view of security, any means of electronic communication is vulnerable. “You can remove any information from a computer. “There are means of defence, of course, but there’s no 100 per cent guarantee they will work. “So from the point of view of preserving secrets the most primitive methods are preferable: a person’s hand and a pen, or a typewriter.� However, another expert said that paper documents were still unreliable because they could be stolen or photographed, or could go up in smoke in case of a fire.

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Symbols of Turkish Excellence in the World

UK stocks advanced to a five-week high after the Fed chairman Ben Bernanke said the bank’s monetary policy would support growth for the forseeable future. MARKET REPORT B7 >>

DALTON Philips, the chief executive of Wm Morrison Supermarkets, has pledged to put the food retailer on a “level playing field� with its rivals within two years by opening more convenience stores and modernising its technology. In an impassioned defence of his strategy, Mr Philips said Morrisons

was “five even 10 years behind� its rivals when he arrived in 2010, but now plans to aggressively expand its convenience store and online businesses to catch up. Morrisons is likely to have 300 convenience stores around the UK by 2015, Mr Philips confirmed at a strategy briefing in London. The retailer has just 20 M Local convenience stores at present, but plans to have 100 by the end of the

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0OMPBBGDIB 1CDM? JA NCJKK@MN [I@<M =<IFMPKO>T\ A THIRD of Morrisons customers are “one pay cheque away from bankruptcy�, Dalton Philips has said. Speaking on Sky News last night, Mr Philips played down hopes the UK

economy was recovering, warning that Morrisons customers – totalling 9m a week – have been “scarred� by events of the past few years. He said: “It’s been very difficult. We’ve got a pound that is

decreasing in value, that will put pressure on fuel, which means the household budget will get hit again. We’ve got a third of our customers one pay cheque away from bankruptcy.�

pen and paper to order stock. However, tablet devices are now being given to supermarket assistants to order stock. “When completed, our business and stores will go from having the worst systems to the best, leapfrogging a generation,� said Mr Philips, who called the plan a “radical evolution�. The scale of

year by opening at least two a week. It is also expanding into online retailing through a tie-up with Ocado, which is costing the company more than ÂŁ200m and lasts for 25 years. In addition, Mr Philips said the Bradford-based company was spending ÂŁ300m to modernise technology that was “firmly stuck in the 20th centuryâ€?. At present, staff count cash by hand and use a

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By Malcolm Moore in Beijing and Denise Roland

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G4S is facing a criminal investigation after it billed the taxpayer millions of pounds to electronically tag criminals who had died, left the country or gone back to jail. Chris Grayling, the Justice Secretary, has called in the Serious Fraud Office after it emerged G4S and rival security firm Serco overcharged the government by tens of millions for non-existent tags. Ministry of Justice sources said that although they typically had 15,000 offenders on a tag at any one time — after being released from prison or put on a community order — G4S and Serco had been charging them for 18,000, meaning one in six cases was spurious. Mr Grayling said that so far there was no evidence the firms had acted criminally. The new scandal involving G4S — widely criticised for its failure to fulfil security requirements at the London 2012 Olympics — saw ÂŁ180m wiped off the company’s market value as shares closed down 5.6pc at 213p. Mr Grayling told MPs that G4S had refused to co-operate with an investigation into the “wholly indefensibleâ€? billing errors, leading to him calling in the SFO. Serco is not facing an SFO inquiry because it had agreed to allow auditors access to its files, as well as pulling out of current tendering competitions, the minister said. However, its shares fell 8pc to 626½p, wiping ÂŁ270m from the company’s market value. It also emerged that Ministry of Justice civil servants face disciplinary action as five years ago they

failed to act on information which may have identified the scandal. Mr Grayling told MPs: “I am angry at what has happened and am determined to put it right ... this is a wholly indefensible and unacceptable state of affairs.â€? Overcharging for tagging began at least eight years ago and possibly dates back to 1999, he added. G4S and Serco have been barred from applying for any more government contracts until the completion of a series of reviews announced by Mr Grayling. The Cabinet Office will also scrutinise all existing contracts the companies hold in Whitehall. The full scale of the tagging scandal came to light after Mr Grayling brought in external auditors on May 17 after an internal review unearthed what he described as a “significant anomalyâ€?. The chief executive of G4S, Nick Buckles, resigned his ÂŁ1.2m-a-year post on May 20. He had been criticised by MPs for “making it up as he went alongâ€? in the run-up to the Olympics. Mr Grayling said: “I should state that I have no information to confirm that dishonesty has taken place on the part of either supplier. But I am asking the Serious Fraud Office to consider whether an investigation is appropriate into what happened in G4S, and to confirm to me whether any of the actions of anyone in that company represent more than a contractual breach.â€? Ashley Almanza, Mr Buckles’ successor, said: “We are determined to deal with these issues in a prompt and appropriate manner.â€? Fast Retailing, the owner of the Uniqlo A Serco spokesman said the com- clothing brand that sponsors beaten pany would repay any amount Wimbledon finalist Novak Djokovic, is agreed with the government. more than doubling its US presence

with 10 new stores, after reporting a 22pc jump in net profit over the first three quarters. Japan-based Fast booked net profits of 88.4bn yen

(ÂŁ591m) in the nine months to May. Operating profit rose 4pc to 124bn yen on sales of 885.8bn yen, an increase of 19.1pc.

GLAXOSMITHKLINE has come under attack in China where authorities say the company’s employees have “confessed� to charges of bribery and tax law violations. Executives at Britain’s biggest pharmaceuticals company stand accused by the Chinese government of “serious economic crimes� by allegedly offering bribes to government officials, doctors and others to clinch drug sales and higher prices. The company is also suspected of using fake receipts in breach of Chinese tax laws. “There are many suspects, the illegal behaviour continued over a long time and its scale is huge,� the ministry said, adding: “Following initial questioning, the suspects have confessed.� The investigation, which was personally ordered by one of China’s most powerful politicians, poses a serious threat to the future of GSK’s business in China. At least 30 GSK employees, including five or six executives, are currently under house arrest and constant surveillance, according to one source familiar with the situation. Among these is the company’s legal counsel in China, who has been cut off from communication with the company’s head office. “They cannot defend themselves,� the source said. At least one British national is involved and is being given consular assistance, according to the Foreign Office. Late last night in China, GSK was locked in emergency meetings with its advisers over the situation. Meanwhile, back at Glaxo’s British headquarters, officials were left in a state of confusion over developments in China. A spokesman for the company said yesterday’s statement was “the first official communication GSK has received� from the Chinese authorities in relation to the investigation. She added that the company had found “no evidence of bribery or corruption of doctors or government officials�, but that it would co-operate with the Chinese Continued on B5

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The Dow closed in positive territory as investors heaved a sigh of relief to hear that Ben Bernanke was backing continued monetary stimulus.

FULL LISTING B7 >>

FULL LISTING B7 >>

,+)&+" <I OC@ /JT<G *<DG KMDQ<ODN<ODJI ?@GDQ@M BJJ? M@OPMIN telegraph.co.uk/ personalfinance

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GEORGE OSBORNE has defended his controversial Help to Buy mortgage scheme by claiming Sir Mervyn King endorsed it before stepping down as Bank of England Governor. Rounding on critics of the subsidised loan plan, the Chancellor insisted to the Treasury Select Committee

that Help to Buy would not cause a house price bubble and that it was already helping the economy. Mr Osborne claimed he held “lengthy discussions� before the March Budget with Sir Mervyn, who never objected to the proposal. “He has been supportive, including in this respect, of things we are doing to repair the broken financial

ÂŁ3.5bn Amount of shared equity loans committed by the Treasury to housebuyers in Help to Buy

transmission system. If he had said, ‘I strongly object to this scheme’, that probably would have killed it,� the

Chancellor said. The claim that the former Bank of England Governor was a backer of the plan comes as a surprise following his apparent earlier criticism. “This scheme is a little too close for comfort to a general scheme to guarantee mortgages,� Sir Mervyn said in May. Under the plan, the Continued on B3

By Alistair Osborne

TALKS to create a ÂŁ1.9bn UK soft drinks champion have gone pop after Britvic swiftly rejected a new merger proposal from Irn-Bru maker AG Barr that was below its current share price. Barr returned on Tuesday with a revised proposal that would have given Britvic shareholders 65pc of any

combined group – a small increase on the original 63:37 ratio the pair had agreed before the Office of Fair Trading surprisingly referred the deal to the Competition Commission in February. With the commission clearing the deal, Barr returned to find its new approach swiftly rebuffed by the owner of Robinsons, J2O and Fruit Shoot brands.

Yesterday, a “disappointedâ€? Barr said all talks were off and it did “not intend to make an offer for Britvicâ€?. Shares in Britvic fell 10 to 512p, valuing the company at ÂŁ1.25bn, while Barr rose 0.5 to 522p, where it is worth ÂŁ603m. On that, Britvic shareholders would be entitled to 67½pc of any merged group. Britvic chairman Gerald Corbett, who was seeking at

least 70pc of any merger, had insisted a new proposal had to reflect Britvic’s improved prospects following the appointment of a new chief executive, Simon Litherland, who was cutting ÂŁ30m costs. “There would have been some eyebrows raised in the City if we had accepted a proposal below the market price,â€? he said.

*<EJM NC<F@ PK AJM *D>MJNJAO By Katherine Rushton

MICROSOFT has launched a last-ditch attempt to catch its technology rivals in the mobile and tablet market, with a massive company shake-up. The IT business founded by Bill Gates was organised into numerous fiefdoms, and focused on building software. However, yesterday it halved the number of engineering divisions from eight to four, each one tasked with speed-

ing hardware and web services to market. In a letter entitled “One Microsoft�, chief executive Steve Ballmer told staff: “We are rallying behind a single strategy as one company — not a collection of divisional strategies. We will see our product line holistically, not as a set of islands.� The hotly anticipated restructure claimed a number of senior scalps. Kurt DelBene, president of Microsoft Office, will retire after more than 20

years at the company. Craig Mundie, Microsoft’s onetime chief research and strategy officer, will follow him out of the door next year. Meanwhile Windows chief Julie Larson Green will take control of all of Microsoft’s hardware, and Terry Myerson, who was formerly in charge of the Windows Phone, will be head of all Microsoft’s operating systems. Final chance for Ballmer: B5

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PART II

Monumental Changes Afoot

By Graham Ruddick

MICHEL EULER

Friday, July 12, 2013

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02 04 06 Entrepreneurship Key to Unlocking Future Potential Real Estate Lifestyle Creators

Telecoms & Transport Size Matters

Business Building Bridges

During a keynote speech to the EurAsiaMed division of the Confederation of Italian Entrepreneurs Worldwide (CIIM) in Istanbul, Ali Babacan, Turkey’s Deputy Prime Minister for Economic & Financial Aairs outlined what he considered to be potential risks to the Turkish economy in the coming 5 years. According to Babacan the biggest issue remained “the deficits in the legal bases of the economyâ€?. He confirmed that, “These will be overcome with the ‘fifth and sixth judicial reform packages’ which the government has started to outlineâ€?. In light of the recent demonstrations, all steps aimed at bringing about greater human rights will be seen as positive and - in the eyes of many - cannot come about soon enough.

n April this year, the company formerly known as Istanbul Stock Exchange changed its name to Borsa Istanbul (BIST). It should be understood that this was DR IBRAHIM TURHAN no simple rebranding Chairman & CEO eort, instead it was an of Borsa Istanbul epochal transition in the organisation’s history and saw the stock exchange transform itself into a fully integrated entity, gathering all Turkish exchanges under one umbrella. Helping Istanbul gain global financial centre status by transforming Turkey’s capital markets is no small task, and leaves little margin for error. Yet the mantle has been grasped and the plan is forging forward. After weeks spent exploring a strategic partnership with several high-profile international players - including Deutsche Borse, the CME Group and the London Stock Exchange Group’s Millennium IT - Chairman and CEO, Dr Ibrahim Turhan has finally made his choice. Early this month he signed with NASDAQ OMX Group and enthusiastically referred to the tie-up with the US operator as, “A notable milestone for our exchange, for Turkey, for the surrounding region and for the entire industry. Our objective is to position Borsa Istanbul as a leading, integrated multiasset exchange, and to provide a cutting-edge platform serving issuers, investors and traders globallyâ€?. The deal involves the adoption by BIST of the entire suite of NASDAQ OMX’s exchange technology products and many perceive this sharp stepping-up of its overall capabilities as the sign of a firm commitment to reach new heights. Beyond the technology and knowledge transfer, the new collaboration is also expected to benefit BIST liquidity-wise. Additionally, it will enhance its international profile and overall appeal to investors. The new partners wish to consolidate an enduring relationship for the joint exploitation of commercial opportunities across the Eurasia region. Turhan is targeting an IPO by early 2016, a necessary step if Istanbul is indeed to become a world-class finance centre within the next 10 years. Currently, the government owns 49% of BIST shares while the remaining 51% are held by a treasury stock. The plan is to divest a stake of up to 41%. On numerous occasions Turhan has underlined how the Turkish bourse has failed to capitalise on Turkey’s record rise during the past decade. Moreover, he has emphasised that without the support of a mature and well-developed capital market, it will be impossible for the economy to keep growing at this pace or find the necessary funding for the various megaprojects in the pipeline. Turhan expects the disclosure of BIST’s high-profile tech deal to begin reassuring international investors about Turkey’s long-term future and how bright the prospects are counterbalancing its reputation as having a chronically high current account deficit - and to start changing the trend for the better and for good.

"Our objective is‌to provide a cuttingedge platform serving issuers, investors and traders globally�

BY MICHELE GRIMALDI & SORCHA HELLYER Addressing rewards. Moreover, the progressive trajectory of exports - with investors at the CIIM gathering in April, Babacan was candid in his Turkstat reporting a rise in 2012 to $152.6bn up from $36.1bn in assessment, “Turkey has achieved a lot in terms of democratisation 2002 - demonstrates that market diversification is paying o. In and the economy in the last 10 years, but we know we still have 2002 nearly 60% of Turkey’s exports were destined for the EU a way to go,â€? he remarked. Certainly, all eorts to harmonise whereas it now stands at under 40%. Trade to Africa and the the market economy in line with what Babacan calls “Olympic Middle East, on the other hand, has climbed from approximately standardsâ€? will be vital. The nation’s 5th bid to host the Games, this 15% to 35%. At the Uludag Economy Summit held in Bursa earlier time in 2020, comes at a crucial phase in its history. Winning it this year, Babacan underlined that; “The latest financial crisis has would be a boost to the country’s image and - in concrete terms shifted the balance of economic strengths from the west to the east. In the next several decades, Asia and Africa will be increasingly - to the infrastructure of Istanbul. Such progress would important regionsâ€?. He also emphasised that, “Europe, not only serve this world-class event, but also the Japan and the US will continue to have a significant share in preparation of the city as it aims to become one of the global trade. However, economic strength continues to shift top 10 financial centres in the world. For Borsa Istanbul from the west to the eastâ€?. (BIST) to be in these echelons, “The first condition Turkey derives much of its success from its ability to is Turkey’s legal base,â€? said Babacan, indicating the embrace both sides of the world simultaneously. But necessity for the entire framework to be in place and how that success impacts the lives of the populace ready to cater for what many consider to be Turkey’s seems to be at stake. Besides almost tripling its big leap forward. GDP in recent years, the OECD cites Turkey as Thanks to its strong commitment to fiscal one of the countries that has reduced income discipline, the country turned its fortunes around inequality levels quite considerably. However, the after 5 decades of IMF bailouts and loans. As a extent to which the general population is actually result, there has been a massive reduction in feeling the eects and benefits of Turkey’s poverty with both local and international plaudits decade-long stellar performance could be called crediting Erdogan’s government. Widely touted into question. Indeed, this is an issue that many globally as the “Turkish economy’s silent captainâ€? emerging economies around the world have in international circles, Babacan’s political career been grappling with or are currently facing. took o when in 2002 - at the age of 35 - he was Unrest from Rio to Istanbul may have dierent appointed Minister of Economy and became connotations but much of its roots are the same. the youngest member of the cabinet. As well The will of the citizens to be heard - and for their as successfully steering the country through expectations to not simply be managed but also tumultuous times and a multi-tiered reform met - has become globally apparent. The timing of process, Babacan also later served as Minister these protests is hardly a coincidence. Both Brazil of Foreign Aairs. Turkey, to all intents and and Turkey have witnessed dampening outlooks purposes, displays an incredible ability to be a in their economies, further compounded by pivot in the region and will undoubtedly continue speculation that the US Federal Reserve is about to seek to capitalise on its geo-strategic and geoto reign in or cut o stimulus measures. political importance. What Turkey does not need right now, On a macroeconomic level the downward ALI BABACAN is for foreign investors to get jittery. FDI and trend of inflation and unemployment are proof Deputy Prime Minister for international engagement has played a vital role that the government’s policies are reaping Economic & Financial Aairs

in helping the Turkish economy to develop and the government must be mindful that a flight of capital would be detrimental to all sections of society. The truth is, that the exceptional growth the country had experienced for the last 10 years was not sustainable in the long term and a slowdown was inevitable. But that does not mean that the nation’s star is on the wane. If the country can continue to be a beacon of hope and foster democratic reform then it can make an indelible mark on the world. In many ways the private sector is leading the way through free enterprise. As Je Homan puts it, “Turkey has no excuses for not delivering successful outcomes. There are business angel networks and smart entrepreneurs here. We should see a lot of value created by Turkish entrepreneurs soon.â€? Homan is certainly in a good position to spot one of his own. He is a serial entrepreneur and an internationally recognised innovator who has been a founder and CEO of a number of start-ups and high growth companies, including Priceline.com, uBid.com and ColorJar. His work involves building entrepreneurial ecosystems in emerging nations on every continent and he recently visited Turkey as Global Advisor for the GIST initiative. GIST - Global Innovation through Science & Technology - is a fast-growing enterprise that seeks to identify and nurture entrepreneurs in 54 countries. Homan acknowledges that these days there is a new era of business taking shape, “What drives this generation is dierent. I came from a time where everybody measured each other - all the American movies were about making money and Wall Street during the 1980s. Now this generation is driven by values and social change. They actually want to make the world a better place.â€? This is undoubtedly an encouraging evolution and it is no less the case in Turkey. GIST is working closely with Turkish partner organisations and entrepreneurs to build the next generation of successful tech ventures in ICT, healthcare and energy - all areas that will engender societal improvements. The trip to Turkey saw Homan participate in the launch of the Entrepreneurs Club, sessions with Turkish angel investors at Galata Business Angels as well as share experiences with the tech entrepreneurs at the Etohum Accelerator and Ozyegin University. Homan is evidently proud to be sitting alongside Ali Sabanci - Chairman of Pegasus Airlines - on GIST’s Advisory Group and is eusive about Turkey’s potential, “If you look at the conditions necessary

Delivering Brand Promise

achievements and sustainable growth, “If being successful to achieve success than maintain it; the challenge isn’t easy, replicating success is where the real challenge for Turkey going forward is to keep building on its lies. It requires a mix of vision, application and strategy, success and make sure it is sustainable.â€? a principle that applies to people and governments When asked what further ingredient makes Turkey alike. One of Turkey’s biggest potentials lies in a recipe for success, Kent refers to what he calls “the the enterprising spirit of its men and women. golden triangleâ€? - namely the business society, Volatility is the future and we all need to find a the NGOs and the government. He sees these way to cope with it. Turkey has learned to cope interdependent components as playing a critical with unstable situations on multiple occasions role in the eective functioning of any sociothroughout its history and that, in my opinion, economic system, and cites Turkey as a prime is what gives Turkish entrepreneurs an edge example of that. “During the years I worked over their counterparts from other areas of in Turkey, I learned that the relations and the world.â€? compromise between these three forces Coca-Cola has been active in Turkey are crucial for doing business and achieving since the early 60s and its regional resultsâ€?, he said in his opening speech at the headquarters in Istanbul now oversees 90 2013 Uludag Economic Forum. dierent markets. This alone demonstrates Kent describes Turkish entrepreneurs the enormous belief the beverage company as bold, flexible, agile and swift, “They has in the metropolis. With his Vision 2020 have learned to endure multiple crises envisaging a doubling of the company’s and operate in extremely unpredictable revenues from the staggering $46bn conditions. As a result, they are able to mark reached in 2011, Kent is lucid in his undertake and complete projects faster perceptiveness and ambitions. He is also than anyone else.â€? He also points to the one of Turkey’s most authoritative global “quality of entrepreneurshipâ€? as a factor MUHTAR KENT ambassadors - and proud to be so. of capital importance for a country’s Chairman & CEO of Coca-Cola

“The latest financial crisis has shifted the balance of economic strengths from the west to the east"

Chairman & CEO of Coca-Cola, Muhtar Kent shares his thoughts with iD on the challenges and rewards of being global and what Turkey has to oer the international community.

A

born globetrotter, Kent is the US-born son of a Turkish diplomat. He spent much of his childhood and adult life travelling the world and, as such, he learned to be flexible and adaptable. At the same time he has nurtured his innate cosmopolitanism by tying his entire professional life to what many consider the global company par excellence, Coca-Cola. Despite spending nearly 70% of his existence outside Turkey, Kent remains very much a Turk at heart; “When I started my career at Coca-Cola in the late 70s, Turkey was hardly a topic of discussion in conversations with my American, British, French or German peers. But things have changed quite a bit since then, and wherever I go in the world now people show an increasing curiosity and interest in this country. In the space of just a decade Turkey has built a reputation as one of the most dynamic and stable markets in the globe.� Kent often compares Turkey to Mexico, “As China’s growth slows down and India faces infrastructure challenges, it is

Turkey on one side and Mexico on the other, that are glowing as the shiniest business and investment stars in the world. Both countries have shown strong resilience and dynamism in the face of the recent global crisis and benefit from an unmatched geostrategic location - one at the centre of the American continent and the other at the crossroads of the EMEA and Asian region.� Kent - who this year celebrates his 5th anniversary as head of the soft drinks giant - climbed the corporate ladder from step one all the way to the top position, so he certainly knows what it is like to attain and maintain leadership status. Being in charge of a manufacturing conglomerate that claims a presence in 207 countries (basically the entire world, except Cuba and North Korea), has 770,000 staff and over 68m Facebook fans is indeed no small task. When asked what it takes to build a strong brand and how that applies to Turkey, he mentions his favourite quote: “A brand is a promise, a great brand is a promise kept�. Indeed, Turkey has so far delivered on its promises, but as he points out, “It is notoriously easier

for entrepreneurship to flourish and grow, Istanbul has it all. Smart people with access to good education and investors like Galata Business Angels exist. You have all the components of the ecosystem needed to be successful.â€? What Homan seems to be pointing to is the fact that opportunities abound in Turkey and are there to be seized. It also appears that the business sector and talented individuals not only have a chance - but also a duty - to set the standards and make change happen. “When it comes to Turkey, it is a significantly better environment and market than it seems but people do not know that. Investors are making assumptions based on other problems in the region,â€? Homan remarks. “Turkey could do a much better marketing campaign by saying: Here are the conditions to be successful as an investor and here are the conditions in Turkey,â€? he emphasises astutely, intimating that the fit between one and the other couldn’t be better.

“It is notoriously easier to achieve success than maintain it; the challenge for Turkey going forward is to keep building on its success and make sure it is sustainable�

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AN INDEPENDENT FEATURE BY IMAGE DIPLOMACY DISTRIBUTED BY THE DAILY TELEGRAPH - JULY 2013

Symbols of Turkish Excellence in the World

1

PART II

Monumental Changes Afoot

I

02 04 06 Entrepreneurship Key to Unlocking Future Potential Real Estate Lifestyle Creators

Telecoms & Transport Size Matters

Business Building Bridges

During a keynote speech to the EurAsiaMed division of the Confederation of Italian Entrepreneurs Worldwide (CIIM) in Istanbul, Ali Babacan, Turkey’s Deputy Prime Minister for Economic & Financial Affairs outlined what he considered to be potential risks to the Turkish economy in the coming 5 years. According to Babacan the biggest issue remained “the deficits in the legal bases of the economy”. He confirmed that, “These will be overcome with the ‘fifth and sixth judicial reform packages’ which the government has started to outline”. In light of the recent demonstrations, all steps aimed at bringing about greater human rights will be seen as positive and - in the eyes of many - cannot come about soon enough.

n April this year, the company formerly known as Istanbul Stock Exchange changed its name to Borsa Istanbul (BIST). It should be understood that this was DR IBRAHIM TURHAN no simple rebranding Chairman & CEO effort, instead it was an of Borsa Istanbul epochal transition in the organisation’s history and saw the stock exchange transform itself into a fully integrated entity, gathering all Turkish exchanges under one umbrella. Helping Istanbul gain global financial centre status by transforming Turkey’s capital markets is no small task, and leaves little margin for error. Yet the mantle has been grasped and the plan is forging forward. After weeks spent exploring a strategic partnership with several high-profile international players - including Deutsche Borse, the CME Group and the London Stock Exchange Group’s Millennium IT - Chairman and CEO, Dr Ibrahim Turhan has finally made his choice. Early this month he signed with NASDAQ OMX Group and enthusiastically referred to the tie-up with the US operator as, “A notable milestone for our exchange, for Turkey, for the surrounding region and for the entire industry. Our objective is to position Borsa Istanbul as a leading, integrated multiasset exchange, and to provide a cutting-edge platform serving issuers, investors and traders globally”. The deal involves the adoption by BIST of the entire suite of NASDAQ OMX’s exchange technology products and many perceive this sharp stepping-up of its overall capabilities as the sign of a firm commitment to reach new heights. Beyond the technology and knowledge transfer, the new collaboration is also expected to benefit BIST liquidity-wise. Additionally, it will enhance its international profile and overall appeal to investors. The new partners wish to consolidate an enduring relationship for the joint exploitation of commercial opportunities across the Eurasia region. Turhan is targeting an IPO by early 2016, a necessary step if Istanbul is indeed to become a world-class finance centre within the next 10 years. Currently, the government owns 49% of BIST shares while the remaining 51% are held by a treasury stock. The plan is to divest a stake of up to 41%. On numerous occasions Turhan has underlined how the Turkish bourse has failed to capitalise on Turkey’s record rise during the past decade. Moreover, he has emphasised that without the support of a mature and well-developed capital market, it will be impossible for the economy to keep growing at this pace or find the necessary funding for the various megaprojects in the pipeline. Turhan expects the disclosure of BIST’s high-profile tech deal to begin reassuring international investors about Turkey’s long-term future and how bright the prospects are counterbalancing its reputation as having a chronically high current account deficit - and to start changing the trend for the better and for good.

"Our objective is…to provide a cuttingedge platform serving issuers, investors and traders globally”

BY MICHELE GRIMALDI & SORCHA HELLYER Addressing rewards. Moreover, the progressive trajectory of exports - with investors at the CIIM gathering in April, Babacan was candid in his Turkstat reporting a rise in 2012 to $152.6bn up from $36.1bn in assessment, “Turkey has achieved a lot in terms of democratisation 2002 - demonstrates that market diversification is paying off. In and the economy in the last 10 years, but we know we still have 2002 nearly 60% of Turkey’s exports were destined for the EU a way to go,” he remarked. Certainly, all efforts to harmonise whereas it now stands at under 40%. Trade to Africa and the the market economy in line with what Babacan calls “Olympic Middle East, on the other hand, has climbed from approximately standards” will be vital. The nation’s 5th bid to host the Games, this 15% to 35%. At the Uludag Economy Summit held in Bursa earlier time in 2020, comes at a crucial phase in its history. Winning it this year, Babacan underlined that; “The latest financial crisis has would be a boost to the country’s image and - in concrete terms shifted the balance of economic strengths from the west to the east. In the next several decades, Asia and Africa will be increasingly - to the infrastructure of Istanbul. Such progress would important regions”. He also emphasised that, “Europe, not only serve this world-class event, but also the Japan and the US will continue to have a significant share in preparation of the city as it aims to become one of the global trade. However, economic strength continues to shift top 10 financial centres in the world. For Borsa Istanbul from the west to the east”. (BIST) to be in these echelons, “The first condition Turkey derives much of its success from its ability to is Turkey’s legal base,” said Babacan, indicating the embrace both sides of the world simultaneously. But necessity for the entire framework to be in place and how that success impacts the lives of the populace ready to cater for what many consider to be Turkey’s seems to be at stake. Besides almost tripling its big leap forward. GDP in recent years, the OECD cites Turkey as Thanks to its strong commitment to fiscal one of the countries that has reduced income discipline, the country turned its fortunes around inequality levels quite considerably. However, the after 5 decades of IMF bailouts and loans. As a extent to which the general population is actually result, there has been a massive reduction in feeling the effects and benefits of Turkey’s poverty with both local and international plaudits decade-long stellar performance could be called crediting Erdogan’s government. Widely touted into question. Indeed, this is an issue that many globally as the “Turkish economy’s silent captain” emerging economies around the world have in international circles, Babacan’s political career been grappling with or are currently facing. took off when in 2002 - at the age of 35 - he was Unrest from Rio to Istanbul may have different appointed Minister of Economy and became connotations but much of its roots are the same. the youngest member of the cabinet. As well The will of the citizens to be heard - and for their as successfully steering the country through expectations to not simply be managed but also tumultuous times and a multi-tiered reform met - has become globally apparent. The timing of process, Babacan also later served as Minister these protests is hardly a coincidence. Both Brazil of Foreign Affairs. Turkey, to all intents and and Turkey have witnessed dampening outlooks purposes, displays an incredible ability to be a in their economies, further compounded by pivot in the region and will undoubtedly continue speculation that the US Federal Reserve is about to seek to capitalise on its geo-strategic and geoto reign in or cut off stimulus measures. political importance. What Turkey does not need right now, On a macroeconomic level the downward ALI BABACAN is for foreign investors to get jittery. FDI and trend of inflation and unemployment are proof Deputy Prime Minister for international engagement has played a vital role that the government’s policies are reaping Economic & Financial Affairs

in helping the Turkish economy to develop and the government must be mindful that a flight of capital would be detrimental to all sections of society. The truth is, that the exceptional growth the country had experienced for the last 10 years was not sustainable in the long term and a slowdown was inevitable. But that does not mean that the nation’s star is on the wane. If the country can continue to be a beacon of hope and foster democratic reform then it can make an indelible mark on the world. In many ways the private sector is leading the way through free enterprise. As Jeff Hoffman puts it, “Turkey has no excuses for not delivering successful outcomes. There are business angel networks and smart entrepreneurs here. We should see a lot of value created by Turkish entrepreneurs soon.” Hoffman is certainly in a good position to spot one of his own. He is a serial entrepreneur and an internationally recognised innovator who has been a founder and CEO of a number of start-ups and high growth companies, including Priceline.com, uBid.com and ColorJar. His work involves building entrepreneurial ecosystems in emerging nations on every continent and he recently visited Turkey as Global Advisor for the GIST initiative. GIST - Global Innovation through Science & Technology - is a fast-growing enterprise that seeks to identify and nurture entrepreneurs in 54 countries. Hoffman acknowledges that these days there is a new era of business taking shape, “What drives this generation is different. I came from a time where everybody measured each other - all the American movies were about making money and Wall Street during the 1980s. Now this generation is driven by values and social change. They actually want to make the world a better place.” This is undoubtedly an encouraging evolution and it is no less the case in Turkey. GIST is working closely with Turkish partner organisations and entrepreneurs to build the next generation of successful tech ventures in ICT, healthcare and energy - all areas that will engender societal improvements. The trip to Turkey saw Hoffman participate in the launch of the Entrepreneurs Club, sessions with Turkish angel investors at Galata Business Angels as well as share experiences with the tech entrepreneurs at the Etohum Accelerator and Ozyegin University. Hoffman is evidently proud to be sitting alongside Ali Sabanci - Chairman of Pegasus Airlines - on GIST’s Advisory Group and is effusive about Turkey’s potential, “If you look at the conditions necessary

Delivering Brand Promise

achievements and sustainable growth, “If being successful to achieve success than maintain it; the challenge isn’t easy, replicating success is where the real challenge for Turkey going forward is to keep building on its lies. It requires a mix of vision, application and strategy, success and make sure it is sustainable.” a principle that applies to people and governments When asked what further ingredient makes Turkey alike. One of Turkey’s biggest potentials lies in a recipe for success, Kent refers to what he calls “the the enterprising spirit of its men and women. golden triangle” - namely the business society, Volatility is the future and we all need to find a the NGOs and the government. He sees these way to cope with it. Turkey has learned to cope interdependent components as playing a critical with unstable situations on multiple occasions role in the effective functioning of any sociothroughout its history and that, in my opinion, economic system, and cites Turkey as a prime is what gives Turkish entrepreneurs an edge example of that. “During the years I worked over their counterparts from other areas of in Turkey, I learned that the relations and the world.” compromise between these three forces Coca-Cola has been active in Turkey are crucial for doing business and achieving since the early 60s and its regional results”, he said in his opening speech at the headquarters in Istanbul now oversees 90 2013 Uludag Economic Forum. different markets. This alone demonstrates Kent describes Turkish entrepreneurs the enormous belief the beverage company as bold, flexible, agile and swift, “They has in the metropolis. With his Vision 2020 have learned to endure multiple crises envisaging a doubling of the company’s and operate in extremely unpredictable revenues from the staggering $46bn conditions. As a result, they are able to mark reached in 2011, Kent is lucid in his undertake and complete projects faster perceptiveness and ambitions. He is also than anyone else.” He also points to the one of Turkey’s most authoritative global “quality of entrepreneurship” as a factor MUHTAR KENT ambassadors - and proud to be so. of capital importance for a country’s Chairman & CEO of Coca-Cola

“The latest financial crisis has shifted the balance of economic strengths from the west to the east"

Chairman & CEO of Coca-Cola, Muhtar Kent shares his thoughts with iD on the challenges and rewards of being global and what Turkey has to offer the international community.

A

born globetrotter, Kent is the US-born son of a Turkish diplomat. He spent much of his childhood and adult life travelling the world and, as such, he learned to be flexible and adaptable. At the same time he has nurtured his innate cosmopolitanism by tying his entire professional life to what many consider the global company par excellence, Coca-Cola. Despite spending nearly 70% of his existence outside Turkey, Kent remains very much a Turk at heart; “When I started my career at Coca-Cola in the late 70s, Turkey was hardly a topic of discussion in conversations with my American, British, French or German peers. But things have changed quite a bit since then, and wherever I go in the world now people show an increasing curiosity and interest in this country. In the space of just a decade Turkey has built a reputation as one of the most dynamic and stable markets in the globe.” Kent often compares Turkey to Mexico, “As China’s growth slows down and India faces infrastructure challenges, it is

Turkey on one side and Mexico on the other, that are glowing as the shiniest business and investment stars in the world. Both countries have shown strong resilience and dynamism in the face of the recent global crisis and benefit from an unmatched geostrategic location - one at the centre of the American continent and the other at the crossroads of the EMEA and Asian region.” Kent - who this year celebrates his 5th anniversary as head of the soft drinks giant - climbed the corporate ladder from step one all the way to the top position, so he certainly knows what it is like to attain and maintain leadership status. Being in charge of a manufacturing conglomerate that claims a presence in 207 countries (basically the entire world, except Cuba and North Korea), has 770,000 staff and over 68m Facebook fans is indeed no small task. When asked what it takes to build a strong brand and how that applies to Turkey, he mentions his favourite quote: “A brand is a promise, a great brand is a promise kept”. Indeed, Turkey has so far delivered on its promises, but as he points out, “It is notoriously easier

for entrepreneurship to flourish and grow, Istanbul has it all. Smart people with access to good education and investors like Galata Business Angels exist. You have all the components of the ecosystem needed to be successful.” What Hoffman seems to be pointing to is the fact that opportunities abound in Turkey and are there to be seized. It also appears that the business sector and talented individuals not only have a chance - but also a duty - to set the standards and make change happen. “When it comes to Turkey, it is a significantly better environment and market than it seems but people do not know that. Investors are making assumptions based on other problems in the region,” Hoffman remarks. “Turkey could do a much better marketing campaign by saying: Here are the conditions to be successful as an investor and here are the conditions in Turkey,” he emphasises astutely, intimating that the fit between one and the other couldn’t be better.

“It is notoriously easier to achieve success than maintain it; the challenge for Turkey going forward is to keep building on its success and make sure it is sustainable”

2

TURKEY FEATURE - JULY 2013

WWW.IMAGEDIPLOMACY.COM

CONSTRUCTION & REAL ESTATE Agaoglu’s career path is impressive to say the least. He founded his first company, Akdeniz Construction and Training Services Co Ltd, in 1981 at the age of 27 Conceived as a “metropolitan oasis” with a focus on comfort, convenience and ease of commuting, My World Europe provides its residents with a soothing escape from their frantic lifestyle and increasingly aloof daily routines.

ALI AGAOGLU – Founder & Chairman of Agaoglu Group

The Architect of Dreams Since the enactment of a new real estate law in August 2012, investors from 183 countries have been allowed to buy property in Turkey without any restrictions. This measure represents an important emancipation from the former reciprocity rule that until now limited the purchase of real estate to citizens of nations with which Turkey shared mutual agreements.

F

urthermore, the recently implemented regulation allows owners to request an extension of their residency permit from 90 days to 1 full year, regardless of the size of their investment; a timeframe that will most likely become indefinite, should they choose to go the permanent ownership route. The new legislation is already starting to bear its fruits; reportedly, over the past 8 months around 2,000 units were sold to investors from the Gulf region alone, and industry officials predict an overall Foreign Direct Investment (FDI) inflow in the neighbourhood of $300bn, over the next decade. Government officials can only view such a trend favourably, as the attraction and retention of FDI is a key pre-requirement for Turkey’s long sought-after EU membership. Taking this into account, the Turkish property market - currently ranked among Europe’s top 5 and accounting for 4% of GDP - presents excellent long-term growth prospects and prices are expected to further rise in the years to come. The sharp hike in demand for real estate is particularly felt in Istanbul, as the sprawling metropolis of 15m inhabitants retains its magnet-like power, relentlessly drawing immigrants from across the region. According to recent reports, Istanbul’s property sales exceeded 24,000 units in Q4 of last year, representing nearly a 25% increase from Q3. All this hasn’t escaped the attention of Ali Agaoglu, who as the Founder and Chairman of Agaoglu Group is one of Turkey’s biggest

real estate developers with an estimated fortune of around $2.1bn. The self-made tycoon, recently ranked Turkey’s 10th richest man by Forbes, is a fervent believer in the long-term attractiveness of the Turkish real estate market. Given the country’s rapidly expanding economy, large population and unique demographics - 50% of Turks are under 30 years of age - Agaoglu doesn’t see any risk of a housing bubble in the foreseeable future, or a deceleration in the demand for quality property. On the contrary, he exudes plenty of confidence about his upcoming prospects and has every reason to - since the new reciprocity law was enacted he has reportedly sold nearly $350m worth of residential property to Arab investors alone, and aims to increase Gulf sales by an additional 140% in the months to come. It is an ambitious target, albeit one that seems well within his reach. Two of his latest, most iconic residential complexes - “Maslak 1453” and “My Europe” - are billed as the new standard-setters in Istanbul’s property market, promising to satisfy even the most sophisticated palates. Agaoglu’s career path is impressive to say the least. He founded his first company, Akdeniz Construction and Training Services Co Ltd, in 1981 at the age of 27. Thirty years down the road, he is in the driver’s seat of a thriving conglomerate of 30 companies and 10,000 employees, with activities spanning from construction and real estate, to energy and tourism, and his pace of growth shows no signs of slowing down. It is a dynamism

that the market appears to both appreciate and reward, with enduring customer loyalty and constant new business prospects. In May of this year, Japanese Credit Rating Agency JCR evaluated Agaoglu Group as “investable”, on the basis of its outstanding sale rates, brand awareness management, successful investments in the energy sector and overall financial performance. It is this type of hard-earned recognition - supported by a number of authoritative industry surveys - that over the years has earned Agaoglu Group the reputation of “most respected brand in Turkey’s construction industry”. The mogul’s antennas, known to be permanently set to “scan”

The Turkish property market currently ranked among Europe’s top 5 and accounting for 4% of GDP - presents excellent longterm growth prospects and prices are expected to go up further in the years to come

mode, are today pointed towards a plethora of large-scale projects, including upmarket residential complexes, hotels, holiday resorts and power plants. Without a doubt, the most challenging one is the Istanbul International Financial Center (IFC-Istanbul), a 2.5m-square metre integrated urban complex located in the Atasehir district. It was launched by the government in 2009 as part of its Ninth Development Plan covering 2007-2013 and immediately accorded top priority status, as the city aspires to become a regional - and eventually global - financial hub. The project has so far spurred a sizeable wave of interest from foreign institutions across the globe and will feature a mixed portfolio of residences, office space, a Topkapi Palace-style Ottoman building and a Grand Bazaar. In addition, three state banks, the Central Bank of Turkey, the Banking Regulation and Supervision Agency (BRSA) and the Capital Markets Board (SPK) will totally or partially relocate to it. Not only would the magnitude of this development be intimidating to most developers, but its sheer composition too. It is a challenge however, that Ali Agaoglu feels fully equipped, and eager, to undertake. Home to the world’s top financial centre and with a threecentury-long tradition and worldwide leadership in a wide range of financial services, including Islamic Finance, Britain has been an active and enthusiastic supporter of IFC-Istanbul since the very beginning. In March of this year, Lord Mayor of the City of London,

My Club is an all-inclusive health & lifestyle club which forms an integral part of all Agaoglu complexes. It features state-of-the art sports, leisure and entertainment facilities that cater to the growing needs of an ever more discerning clientele.

FACTBOX Agaoglu MY WORLD EUROPE Developed over 200 decares of land 17 blocks, 3,080 residences, 20 twin villas Three Main Sections Pool Residence, Arena Residence and Golf Residence

Maslak 1453 Istanbul brings to fruition the warm feeling of community sharing, in a sophisticated and cosmopolitan setting.

130m-long and 1,600-square metre swimming pool, open-air shopping centre, 9-hole golf course, the most environmentally-conscious project ever done: all residences equipped with state-of-the-art thermal insulation system. Natural gas cycle station system helps minimise energy consumption

Agaoglu MASLAK 1453 Istanbul 24 towers, 3 distinct types, 4,147 residences 2 shopping malls, fashion centre, cafe & restaurants, art centre, theatre Dedicated reception for each tower for maximum security and comfort Direct connection to parking lots via lifts

Agaoglu MY CLUB Fitness & Life Centres Gym, cardio, pilates, personal training, spa & beauty centre, tennis

Construction, Real, Estate, Energy and Tourism Wide international experience and expertise 30 companies, over 10,000 employees, including 320 architects and engineers Construction Sector 32-year-long know-how, over 10,000 apartments, villas, hotels, holiday resorts and social clubs, restoration and renovation projects, power plants Energy Sector 18 companies, licence portfolio of 1350MW, major investments in renewable energy sources Tourism Sector Portfolio - 2 hotel and resort developments in Uludag and 2 hotels in Istanbul. Under construction - 8 hotel projects in Istanbul and 1 resort hotel in Bodrum

Given the country’s rapidly expanding economy, large population and unique demographics - 50% of Turks are under 30 years of age - Agaoglu doesn’t see any risk of a housing bubble in the foreseeable future, or a deceleration in the demand for quality property Roger Alderman Gifford visited Agaoglu’s construction site with a delegation headed up by Leigh Turner the British Consul General in Istanbul, and was not short of words of praise and encouragement about the ambitious undertaking. Describing it as “a bridge between east and west”, Gifford reiterated the full commitment of the UK - and the City of London in particular - to lend all its experience and expertise to the setting up of the required physical, regulatory and technical infrastructure for its successful outcome. In a project of this magnitude, the challenges to overcome are numerous, starting with the funding. This is what prompted Agaoglu to strike up a partnership with Aktif Bank in order to raise - for the first time in Turkey’s history - the necessary capital for the financing of a project via the issuance of a Sukuk sale, or Islamic bond. The market was again quick to accept Agaoglu’s invitation and total demand exceeded the $155m mark on the first day alone. Up against an initial target of $2bn, the magnate’s wheel of fortune seems to keep turning in the right direction.

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TURKEY FEATURE - JULY 2013

3

CONSTRUCTION & REAL ESTATE

Istanbul International Financial Center

Question & Answer

In an interview with iD, Hasan Rahvali, CEO of Agaoglu Group, shares his thoughts on the real estate sector in Turkey and the leading construction company’s role in the market

in the form of a more accessible market price. As an example, the current price per square metre for our properties is around $2,700-$3,000: one third of this goes to the government and the landowner, another third - which means about $1,000 - is our cost per square metre, and Q A series of surveys cite Agaoglu Group the remaining $1,000 as the most respected brand in is our profit. This sort Turkey’s construction industry. of breakdown tells you What, in your own words, defines HASAN RAHVALI – CEO of Agaoglu Group that our business is a the “Agaoglu” brand today, and very profitable one. what makes your products worth There may be other projects like ours in the market, although the investment? their average price per square metre would be around $6,000. A Since the dawn of time, housing represents one of the primary That means that with us, our customers can buy it for $3,000 necessities of mankind and therefore one of the most important and resell it at a higher price. Having said that, price of course is long-term investments of our lifetime. In response to this not the only aspect one should consider when buying real estate; primordial need, and in pursuit of the security it provides, people the quality of a certain property and the concept behind it, are are willing to commit significant portions of income to the purchase equally important factors. A key trademark of our group is that of their homes. Previously the word housing essentially referred we try as hard as possible to integrate city life into our properties. to accommodation, these days it has expanded to embrace the Before developing our “Maslak 1453” project for instance, we ran concepts of socialising and lifestyle. So, while 30 years ago we just 4 different market surveys and learned that people are starting to used to ask our prospective clients how many rooms they wanted get bored with shopping malls and they would like to go back to or for how many people, nowadays we request them to answer at street shopping. The street concept this project features is 100% least 50 questions in order to understand what is the right product bigger than the largest shopping mall in the country - 1,453 metres for them. The number of rooms and the size of an apartment or long, as the name suggests. This gives people the opportunity to a villa are no longer main factors in the purchase of real estate; experience once again open air shopping - on an entirely different instead it’s the “social interaction element”. Also, housing today scale, yet with a familiar dimension. However, transforming this concept into reality did not come should respond to the necessities of an entire family, and that includes children and grandparents. Finally, it needs to function about by itself. Indeed, the process of running a number of inas a facilitator of relations among neighbours. In our residential depth surveys and interviewing around 8,000 people, dividing complexes, homeowners are provided easy access to sport, leisure them into different income segments and asking them all kinds of and entertainment facilities, shopping and other social venues; all questions, was critical to understanding their requirements. The our projects are conceived and developed with that vision in mind. outcome was that we sold 2,200 units in just one campaign, over a In 1989, Agaoglu Group launched a new concept of housing period of only 4 weeks. I would like to add that our job is not done under the brand “My” and our tagline “Architects of Life” has with the sale; at Agaoglu Group we guarantee unlimited afterworked very well to that effect. As a result, we are no longer sale technical support. Furthermore, in our “My Club” concept perceived as mere real estate developers but rather as “designers our clients can access state-of-the-art sports, entertainment and of lifestyles”. Another differentiating factor of our group is that, cultural facilities as well as a series of activities that are specifically while developing our projects, we are committed to making them designed for kids. financially accessible to the market. This is exemplified through our other slogan: “Everybody deserves to have a good life”. Since 1989 Q Istanbul International Financial Center (IFC-Istanbul) is our mission has been that of increasing people’s living standards possibly the most ambitious and far-sighted project being within their same income level. Today, I can say with confidence developed in Turkey at this time. Knowing the importance of this initiative for the international image of Istanbul, how that we have succeeded in doing that. does it feel to have been handed such a huge responsibility? Q How do you manage to successfully deliver quality in your A We have strongly believed in the vital importance of this massive developments? project from the outset for it is a pillar of our government’s A Effectively managing ventures comprising thousands of ambitious 2023 vision and Agaoglu Group is its leading residences requires a strong organisational structure. In our large- construction player. When the Lord Mayor of the City of London, scale developments, every block is assigned to a different quality Alderman Roger Gifford, visited the site back in March, he spoke control manager and all construction materials employed are enthusiastically about the development and also reiterated the subjected to rigorous quality control procedures. The key is for a UK’s commitment to help Istanbul become a regional and global highly skilled professional to be allocated an individual segment financial hub. Turkey needs the IFC badly, given its dynamic and of the operations, yet to retain direct control of the overall project fast-growing population, unsaturated market and the plethora of megaprojects that will require massive international financing. under the supervision of our top management. So far we have not been able to attract sufficient amounts of Q From your point of view what are the core strengths of your capital from abroad, which is why this project is critical to further improve Turkey’s ability to entice foreign direct investors. At the group with regards your competitors? same time Turkey’s saving rates are insufficient. When we add A Firstly, even though we are the leaders in our sector we together all our banks deposits it only totals about $800bn. We acknowledge our competitors’ success. Our main comparative need significant capital infusion from other countries, if we want advantage is our cost-effectiveness through the use of economies to maintain the level of development and continue producing of scale. Let’s take for instance our “Maslak 1453” project, which more. We clearly cannot sustain our pace of growth exclusively comprises 4,800 residences; for large-scale projects like this we through bank loans or the support of our government; the do not ordinarily have many competitors. At the land acquisition international market is the only place where we can access the stage the standard request is 50%; we offered 35.5% and won the macro figures we need. Turkey is far from independent from the rest of the world. tender. This means that we managed to cut our costs by almost half, and later we were able to transfer this advantage to our customers On the contrary, it is more and more at the centre of it. The IFC

is not just a physical investment: infrastructure, technology, tax advantages, promotion, human resources and a legal framework in line with international standards are all key aspects in the successful completion of a project of this scale. We thoroughly appreciate the support of London as the world’s leading financial centre and are convinced that this will be a win-win situation for both sides in the end. Additionally, the management of the IFC is a very important business. We are also planning to cooperate with the Lord Mayor of the City of London in this area. Q About your financial performance, in 2012 your group reported a staggering 130% growth in sales and a 50% growth in assets. Now that a new law has been enacted, allowing Turkish developers to sell property to foreigners, what is your outlook for Agaoglu Group in the coming 12-24 months? A Our sales to foreign customers are on a par with our domestic demand. In April, we made a sale worth $190m to one single individual from the Gulf, the first $150m of which has already been paid. Since the new law was enacted, we have sold 1,400 properties to foreigners. Our future target is to reach $1bn in sales to foreigners and I believe this figure is well within our reach. In 2014, once the sales of the IFC start, we will set our targets even higher. By then, it will most likely have exceeded the $1bn mark. Q Agaoglu Group is also active in tourism, energy and education; could you mention some of your most noteworthy projects in those areas? A We have a large real estate project in Bodrum, spreading over an area of 9.5m square metres, where we have so far developed over 5m square metres of real estate for our European and American clients. We started construction in 2005 and although it was a bit delayed due to the economic crisis of 2008, the infrastructure is ready and in place. We are preparing an 18-hole golf course covering an area of 1m square metres and have built a dam to be able to deliver water to our properties. Should any supply problem arise, we can filter water from the sea. We invested $150m in more than 5m plants, including over 220,000 palm trees. We are not using any chemicals that could harm the plants but, thanks to our cooperation with local universities, we are employing special bugs that fight harmful bacteria. We believe this project will contribute to turning Bodrum into a first-class international tourism destination. Our “My” concept hotels and resorts are widely appreciated as they cater to the leisure, health and business needs of an increasing number of people. On the energy front, we have hydroelectric power stations in Amasya, Bingol and Georgia with a 300MW production capability, and a licence for a 1,000MW wind energy plant. Our properties are equipped with cogeneration and trigeneration facilities, so they are able to produce their own electricity which not only fully respects, but also protects, the environment. Finally, with regards to education we are planning to open a university soon and cooperate with leading universities of the calibre of Harvard, Yale and so on.

Visit of Lord Mayor Alderman Roger Gifford

From left to right: Leigh Turner (UK Consul General), Alderman Roger Gifford (Lord Mayor of London), Ali Agaoglu (Founder & Chairman of Agaoglu Group), Onder Halisdemir (CEO of Aktifbank) & Hasan Rahvali (CEO of Agaoglu Group)

“The City of London and the UK are wholly supportive of the development of Istanbul as a financial centre, as that is vital to Turkey’s continuing development as an economic force, especially as a bridge between the east and the west. That is good for Turkey and Istanbul, but it is good for the UK and the global economy as well. The success of that development will depend on having the right infrastructure buildings equipped with the right technology and accessed by high quality transport systems” ALDERMAN ROGER GIFFORD Lord Mayor of the City of London

Q Why should British people invest in Turkey and why specifically in Agaoglu Group? A Turkey presents excellent untapped opportunities to investors, and a cost-quality ratio that is more attractive than elsewhere. If you compare Istanbul to London for instance, property here is on average less than half the price. Our nation has undergone a deep and thorough transformation process during the past 10 years and as a result it is now much better integrated with the rest of the world. In addition to Istanbul, I recommend Bodrum for to its great climate and unique natural setting. The world is getting older and in Turkey elderly people can benefit from high quality health services at very competitive tariffs; our purchasing power parity factor is still very advantageous. Istanbul, Bodrum and Turkey in general offer investors a highly remunerative venue for the placement of their capital.

Official visit to IFC construction site: Ali Agaoglu with Lord Mayor of London Alderman Roger Gifford and UK Consul General Leigh Turner

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TURKEY FEATURE - JULY 2013

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TELECOMS & TRANSPORT

The Numbers that Speak Volumes At 783,562 square kilometres Turkey is more than 3 times the size of the UK. Often thought of as populous - 75m versus the UK’s 62m - Turkey’s population density is actually a low 98 people per square kilometre against the UK’s 260. For such a country to grow socio-economically and inclusively there must be a concerted push for greater accessibility and connectivity. It is perhaps therefore unsurprising that so much importance in Turkey has been attached to the upgrading of its infrastructure, to address both current needs and future demand. The allure of expansive, enthralling and often frustratingly congested Istanbul is undisputed; the nation’s commercial capital is the beating heart of the economy. However, the metropolis is just part of the wider nationwide development required for the country’s future economic and social health.

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n fact, Turkey’s position - at the crossroads of Europe economic cycle only in the late 20s. From then until and Asia - renders it of significant geo-strategic the official liberalisation of the market in 1983, the importance. It shares a total of 2,648km of borders national flag carrier Turkish Airlines (THY) operated with its 8 neighbours: Armenia (268km), Azerbaijan under monopolistic conditions. Notwithstanding (9km), Bulgaria (240km), Georgia (252km), Greece the launching of THY’s privatisation process, private (206km), Iran (499km), Iraq (352km) and Syria airline companies continued to face numerous (822km). According to Turkey’s Investment Support bureaucratic obstacles and complications, which and Promotion Agency (ISPAT), the ports and preserved THY’s dominant status for a further 20 years. terminals on Turkey’s 8,333-kilometre-long As a result domestic air transportation entered coastline serve as the entry and exit points for into a long period of stagnation. In October 2003, over half the nation’s imports and exports. The not long after his appointment, Yildirim saw to it country enjoys an enviable location for global that the barriers - which had until then prevented trade, situated as it is on 3 key bodies of water, private airline players from entering the market BINALI YILDIRIM namely the Mediterranean Sea, Aegean Sea were finally removed. Minister of Transport, and the Black Sea as well as the Bosphorus, Besides liberalising the market, Yildirim Maritime Affairs & Dardanelles Straits and the Sea of Marmara. By also simultaneously reduced the tax burden on Communications 2019 Turkey intends to have one of the world’s domestic air transport and alleviated airport top 10 ports, increasing container capacity to 32m TEUs (twenty- service charges across Turkey. The decision bore an immediate foot equivalent units) and developing transfer ports on all seas, effect on ticket tariffs, boosting both the number of internal air which would in turn be connected to railways. travellers and the frequency of existing flights to unprecedented Water will play a big part in Turkey’s development. Indeed, levels. Additionally, the new airlines opened up entirely different the country’s topography, surrounded on three sides by seas, is routes, to which THY had never flown before, prompting the considered highly conducive to hydroelectric power generation. market to grow in all directions. Conjecture has it that, with 25 river basins, Turkey has 16% But to return to earth - on the subject of connectivity, travel of Europe’s theoretical hydropower potential and 1% of the is just one important element. The other critical factor - without world total, which explains why Statkraft SF (Europe’s largest any doubt - is telephony. Indeed, communications in general, hydropower producer) is in the process of increasing capacity whether by phone or by internet, have become indispensible to and trading with 2 more power plants in Turkey. It is clearly a our everyday lives. We have become so dependent on technology strategy to counterbalance negative growth rates and diminishing that it would be difficult to imagine progress in a country that does profitability in western European markets. And power will be not have world-class ICT infrastructure. Turkey is no exception. In vital for the kind of expansion that the length and breadth of fact it has a huge, rapidly expanding telecommunications market Turkey is gearing itself up for in readiness for Vision 2023 which and according to the Minister, investments in the electronic is the government’s development plan for the centenary of the communications sector in 2012 came to over $2.9bn. founding of the republic. It includes an ambitious panoply of Turk Telekom Group, the nation’s top telecoms and technology mega-scale infrastructure projects, many of which are already provider, accounts for 45% of market revenues and leads the underway and due for delivery in the next few years. The goal way in fixed and broadband connections, with 14m and 7.1m lines is to transform Turkey into one of the world’s top 10 economies respectively. It is targeting 5-7% turnover growth in 2013 driven and this requires equally massive investments in ICT, airports, by positive Q1 results in both broadband (+12%) and mobile bridges, ports, roads and railways. (+17%) segments. The group already has the biggest network and The responsibility for overseeing the sectors of communications, highest number of fibre-optic connections nationwide. With 20.3m maritime, rail, and road transportation, civil aviation, aeronautics subscribers at the end of Q1 this year, it looks set to increase its and space technologies in Turkey lies with Binali Yildirim. In his remit share in the future, as Turk Telekom Group’s CEO, Hakam Kanafani as Minister of Transport, Maritime Affairs & Communications there points out, “We think that the amount of data being used on the is also the implementation of the infrastructure required to ensure internet is maybe 10% or 15% of what we will see in the next 2-3 everything runs smoothly and is ready to respond to future demand. years. Most networks around the world are under-dimensioned and It’s easy to see that he has a big task on his hands. Appointed a the demand for data will always be higher than what a company decade ago, the continuity and commitment Yildirim has brought to plans. That’s why the fixed access network will be of paramount the role have been contributing factors to Turkey’s progress. importance for all broadband communications, including mobile A pertinent example of how his determined approach has broadband and especially for 4G technology.” impacted positively on the country’s outlook is the civil aviation Kanafani predicts the uptake will be exponentially higher in sector, which started gaining1 31.05.2013 importance Turkey due to the growing population, rising incomes and the The_Daily_Telegraph_2.pdf 09:55:41in the country’s

diversification of metropolitan areas, “As the industry leader we can contribute significantly to this trend from the supply side. At the moment, we register increasing demand not only from major urban centres like Istanbul and Ankara but also from relatively smaller ones like Samsun and Trabzon etc. These cities have higher growth rates than our main metropolises due to a catch-up effect.” Rolling out and delivering its valued services to the masses is part of award-winning Turk Telekom’s core mission to invest in all the regions of Turkey. Kanafani explains, “Besides our commercial targets we also have a social responsibility towards our country because we are a national brand - in fact one of Turkey’s most recognisable brands - which gives us a countrywide role to play and we are proud of this. Our most crucial undertaking is to help digitise the nation.” The far-reaching impact of connectivity is paramount explains Kanafani, “We have launched our fibre-optic projects throughout Turkey - in all 81 provinces. This demonstrates the depth of our commitment to the nation. During the 20th century internet was essentially about browsing, whereas in the 21st century that paradigm has changed; internet today has become a platform where customers can do just about anything - research, conduct

business, study, create, communicate with friends and loved ones, build social and cultural bridges…And I believe this momentum will continue.” Moreover, the development of a knowledge-based economy clearly needs the full commitment of ICT entities. Thankfully this is the case with Turk Telekom Group, as Kanafani expounds, “Investment in education and healthcare has stimulated tremendous growth in the data required for R&D, implementation, commerce, e-government and so on. Against this backdrop good companies must make sure that they offer the right value to the customer. We consider this to be the responsibility of our company.” It is exactly this kind of attitude and dedication to the country’s development, and to the customer per se, that has allowed Turk Telekom to garner the top spot in “Turkey’s Most Valuable Brands” - a study by Brand Finance, the world’s leading brand valuation company headquartered in London. According to the 2013 report, Turk Telekom has a brand value of $2.4bn beating off competition from 2 banks - Akbank (at $2.12bn) and Isbank (at $2.01bn). It is an award that Turk Telekom has now won for the last 5 years and with this kind of nationwide recognition, its success looks set to continue.

Power will be vital for the kind of expansion that the length and breadth of Turkey is gearing itself up for in readiness for Vision 2023

Riding the Wave of Progress Founded in 1963 as a construction materials trading firm, Yildirim Group has grown, in the space of just 5 decades, into one of Turkey’s fastest developing business conglomerates, with total assets amounting to $3.4bn, an annual turnover of $1.07bn and a global workforce of over 7,000.

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t the helm today is Robert Yuksel Yildirim - a “shipping man at heart” as he likes to be described. He holds a master’s degree in mechanical engineering and spent years in the US, working in the high-tech sector before returning to Turkey in 1993 to take charge of the business. At that time, coal trade was about to boom regionally, following the fall of the Berlin Wall and the privatisation of Russia’s state-owned enterprises. Yildirim quickly spotted the potential of getting into the coal trading business. It was a move that marked the beginning of a diversification process which continues to this day and has been studded with a long string of accomplishments, propelling the company into the big league. Still a family business, managed by 3 brothers, the group’s interests today span across 5 continents and 10 different sectors, including port management, shipping and shipbuilding, mining and ferroalloys, fertilisers, coal and coke, construction and private equity. “Our main competitive strength is our lightningfast opportunity assessment and decision-making process,” says Yildirim. His analogy is not without significance since the word Yildirim means “thunderbolt” in Turkish, so the choice is clearly not accidental. Recently named the 46th most influential man in the global shipping industry by Lloyd’s List, a leading publication of the maritime sector, Yildirim is a prime example of Turkish entrepreneurship, one with a genetically imprinted drive to achieve. When asked what keeps him going today, he candidly admits, “I am more success-oriented than money-oriented; when I smell a valuable opportunity I am usually swift at taking action. Converting a new deal, especially a large-sized one, into a success is what motivates me the most nowadays.” Yildirim attributes the confidence of Turkish businessmen - as well as their adaptability and resilience to ups and downs to the hard lessons Turkey learned during its multiple financial crises. Valuable experience such as this has made him an expert at identifying and seizing opportunities right in the middle of a storm. Working with Japanese and American companies, at an early stage in his career, likely endowed him with the ability to zero in on any given problem with scientific rationality and act upon it with steadfast determination. Certainly, the self-assurance and

“Our present network, coupled with our collective experience and know-how, provide the necessary conditions for our group to go global” ROBERT YUKSEL YILDIRIM President of Yildirim Group optimism he exudes today are backed up by his remarkable track record as a serial deal-closer. In 2010, the group invested $500m in the purchase of 20% of CMA CGM, the world’s 3rd biggest container shipping company. A further $100m investment this year has increased its share to 24%. “At the time of our acquisition, the company reported a $6.5bn debt and we had to sit down with 72 different banks to organise its restructuring programme,” emphasises Yildirim. After that the company took a 50% stake in Malta Freeport - a major transhipment and logistics centre in the heart of the Mediterranean - and undertook a venture capital investment in a Belgian player involved in the operational leasing sector. The group has so far committed over $2bn to strategic acquisitions and to the upgrading of its factories, making it one of Turkey’s largest worldwide investors in absolute terms. Yildirim views his home country as a powerful platform for regional and international expansion, “As Turkey becomes increasingly expensive for us, Europe and the USA are getting more affordable. Our present network, coupled with our collective experience and know-how, provide the necessary conditions for our group to go global,” he says. On the wave of the government’s plans to cut Turkey’s reliance on energy imports - which cost the state more than $25bn a year - Yildirim Group is building a 200MW coal-fired plant in the east of Turkey nearby its existing ferrochrome plant, and is pursuing additional licences for 2 other plants of 600MW and 650MW in the Marmara region. Yildirm’s almost obsessive determination for expansion and accomplishments is only matched by his equally strong commitment to add value and make a difference in what he does. That is, perhaps, what defines the essence of Turkish entrepreneurship today.

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TURKEY FEATURE - JULY 2013

5

AVIATION & INFRASTRUCTURE

An artistic impression of Istanbul's third airport

Democratisation of Air Travel Pays Dividends As consolidation pervades the global airline industry, there are some countries with carriers that are bucking all the trends with phenomenal results. Turkey, positioning itself as a regional hub with a growing domestic market and increasing tourism arrivals, lands safely in the latter category.

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SAS Holding - an investment group engaged in civil aviation, real estate, retail & entertainment, food and healthcare presciently identified this potential when it bought Pegasus Airlines in 2005. In the space of only 8 years the carrier has since managed to establish itself as Turkey’s undisputed low-cost flying leader. Its Chairman, Ali Sabanci, is a third generation member of the Sabanci dynasty who - despite his lack of previous experience in the sector - was able to operate a complete turnaround of the company’s fortunes in a manner few would have expected. The decision to purchase Pegasus (at the time a small charter airline with a fleet of only 14 aircrafts) came 2 years after the government deregulated domestic aviation, in 2003. Prior to this - rather inexplicably - not a single private airline had taken advantage of the unfilled gap, so when Sabanci spotted the opportunity he was quick to grab it. Pegasus’ twin migration strategy has paid off in a big way. Not only has the company successfully transformed itself from a low-cost carrier to the lowest-cost carrier but most importantly, it has engineered an inspiring reversal in its fortunes by subverting its market segmentation and its clients’ consumer patterns. In 2005, 97% of its turnover came from chartered business whereas by the end of 2012, 96% of its 13.6m passengers had used its regular scheduled flights. “Pegasus Airlines’ highly innovative approach extends to several areas,” Sabanci explains, “Two months after taking over this business we launched a profit-sharing ALI SABANCI scheme. It was intended to Chairman of Pegasus Airlines reward our people for helping us create value and profit. This concept, while being largely adopted elsewhere - especially by western economies - was almost unheard of in this part of the world. Our decision to offer our staff basic pay plus bonuses was very well received, and has so far worked as a potent motivator for everyone, leading to a significant acceleration of our business and overall results. Now, if other airlines want to keep up with us, they have to match these conditions,” he concludes. “A further distinctive feature of Pegasus,” Sabanci continues, “Is our convenience factor. For us, growth is only possible if we keep our costs low. If we become a small brother to Turkish Airlines (THY) - by offering business class service or certain fancy services that are not in our philosophy - we risk confusing our customers, as that is not what they expect from us. We have to be the lowestcost provider of seats, because we believe that aviation travel should not be a luxury.” Sabanci looks at the path ahead with unwavering optimism,

“Our growth potential is huge, in both domestic travel - where low-cost penetration is only 26% against a target figure of approximately 40% - and in international air travel; since we are the only proper low-cost airline operating between Germany and Malaysia, where low-cost penetration is currently around 11%.” The company keeps a close eye on the market by running customer surveys twice a year, “Research shows that the 3 things our customers value the most are: cheapest prices, on time performances and new aircrafts. With us, they know that if they buy early, they buy cheaper. Punctuality-wise, even though last year our numbers went down slightly from 94% to 92%, we are up there with the very best. In terms of our fleet, our aircrafts are 3.7 years old on average so they still smell new. Having new planes means we burn fuel efficiently and enables us to keep our prices lower than our competitors.” Efficiency is surely an aspect of relevance to Sabanci, “We operate our aircrafts close to 12 hours a day and statistics show that we are doing this about 40% better than Ryanair and 20% better than easyJet,” he remarks. In the last 3 years Pegasus Airlines has opened up routes to 26 new international destinations and Sabanci is justifiably proud of what has been achieved by his company, “Since domestic air travel in Turkey was liberalised, the pie grew 4 times and prices have gone down significantly. Over the past 8 years, we have carried 53m passengers, of which nearly 40m have flown for less than $50 and another 14m for less than $25. We feel we have definitely helped democratise air travel.” He continues, “In the future I expect 2 things to happen: airplane travel will be largely liberalised across the region and, domestically, we will see a two-horse race between the full service carrier, Turkish Airlines, and the low-cost carrier, Pegasus.” In December 2012 - buoyed by its achievements and reassured by Turkey’s mid to long-term growth prospects - Pegasus Airlines placed the largest-ever aircraft order in the country’s aviation history; 100 new Airbus aeroplanes, to be delivered over the next 10-12 years, for a total of $12bn. An outlay of this sort is a strong bet on the future of Turkey and a demonstration of confidence towards its leadership. Speaking of Istanbul’s new airport project, Sabanci supports the government’s plan to turn Istanbul into a regional transportation hub. “No other major city lies at the intersection of North Africa, the Middle East, Europe and Central Asia; it is time that Istanbul takes full advantage of its geo-strategic position,” he concurs. Of the 3 airports currently serving Istanbul - Ataturk, Sabiha Gokcen and Corlu - he indicates that only the first 2 are really competing, as the latter is considered too far away at nearly 105km from the Bosphorus. Sabanci perceives the new development as a sort of a blessing in disguise for his company, “The 3rd airport - planned to be the largest in the world with a passenger capacity of 150m - will most likely render Ataturk obsolete,” he predicts, “Leaving the field open for Sabiha Gokcen to further expand. When that happens, we will make sure we are ready to play our best cards.”

“Over the past 8 years, we have carried 53m passengers, of which nearly 40m have flown for less than $50 and another 14m for less than $25. We feel we have definitely helped democratise air travel”

Regional Partner of Choice Hamdi Akin belongs to that special breed of entrepreneurs that could be named “quiet doers”. Soft-spoken, yet outspoken, Akin founded Akfen Holding 37 years ago when he was only 22, shortly after graduating from Gazi University as a mechanical engineer. He discovered his entrepreneurial talent early on and has not given himself much time to sit around since. As a result, today he is one of Turkey’s leading infrastructure investors, active in construction, energy, tourism, airports and seaports, employing a collective workforce of over 30,000, across a network of more than 60 companies.

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ver since the Turkish government began tendering large concessions and undertaking privatisations - about a decade ago - Akfen has striven to use its strong local know-how and experience to land some of the most important infrastructure contracts. Akin’s focus has consistently been on high-profile assets and concessions, especially if they are in conditions of near monopoly, as well as projects with limited vulnerability to economic cycles or competition. When asked to what he thinks of his country’s growing status as a leading economic force in the global arena, Akin acknowledges the good job done by the Erdogan administration in setting the country on a trajectory of steady growth. He is, of course, aware though that the international community - after following Turkey’s success with interest for a number of years - was suddenly taken aback by the anti-government protests over the Gezi Park issue. As a leading Turkish entrepreneur and a global investor himself, Akin’s encouragement of foreign businesses to keep looking at Turkey as their partner of choice in the region, is certainly one that should not be overlooked. In recent years, Akin’s investment horizon has expanded well beyond Turkey’s borders into Central Asia and the Middle East. Naturally he has also been keeping a close eye on the evolution of Greece’s multi-billion euro privatisation program,

HAMDI AKIN Chairman of Akfen Group

Akin’s investment horizon has expanded well beyond Turkey’s borders into Central Asia and the Middle East. Naturally he has also been keeping a close eye on the evolution of Greece’s multibillion euro privatisation program which includes the sale of key strategic assets in the infrastructure, transport, energy and water sectors, as well as some islands. With a $2.6bn revenue target to meet by the end of this year, the pressure on Greece to sell its assets is high and Akin knows it. And although it is expected that there will be a tide of offers and competition will be fierce, Akin realises that not everyone is equipped to handle the magnitude of opportunities. As such, he hopes that his companies’ broad capabilities and proven expertise will help secure some of the largest and most lucrative contracts. As the Founder, Chairman and shareholder of Turkey’s leading airport construction company - TAV - Akin is well aware of how

challenging it can be to gain a foothold in certain areas of Europe’s economy. He recently voiced his frustration about having been prevented from obtaining licences to operate European airports, and thus get a chance to compete in the European market. Candidly he referred to a supposed “lack of reciprocity” from Europe, despite Turkey having opened its market to European companies and indicated the issue as having political roots, linking the only foreseeable solution as Turkey’s accession to the EU. When asked for his opinion on the current climate across the eurozone, Akin’s only terse comment was, “I think that Turkey’s EU accession would be a very good thing for Europe”.

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TURKEY FEATURE - JULY 2013

BUSINESS

Generating the Right Opportunities Although Turkey’s future accession to the European Union looks unclear, many Turks have long understood - and continue to appreciate - how critical good relations with the EU are. It continues to be the country’s mainstay export market; meanwhile Turkey also offers European nations a springboard into the region.

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espite having spent most of his life outside Turkey and having built his fortune abroad, Unal Aysal decided to return to his motherland as an investor and make the country his home again. He founded his business, UNIT Group, as a trading company in 1974 in Brussels, Belgium and for the past 30 or so years he has overseen its growth into a diversified group of 23 companies with activities spanning across Turkey, Eastern Europe and the Middle East. In terms of progress and reform, Aysal highlights how Turkey has been heading in the right direction during the last 12 years, reaching a level of stability - in political and economic terms - that most of its neighbouring nations envy. “We live in a rather volatile region and political risk is a factor that must UNAL AYSAL be reckoned with,” he explains. Chairman of UNIT Group Referring to a power plant the group owns and operates near the Iranian border, he demonstrates this fact, “It was a calculated risk but we undertook it as a sort of social responsibility, given the lack of investment in the area. We are also planning to build a plant in Southeast Turkey, where development is much needed. Manpower is readily available and salaries are among the lowest in the country.” Aysal believes it is up to Turkish entrepreneurs to open the way for others, and is confident that foreign capital will flow in. “Investors should have one eye on making profit and the other on developing human resources. If we create a win-win situation, everybody will gain in the end,” he comments, indicating how special his attachment is towards his country of origin, and the kind of personal mission he is guided by. “At present, we look at all kinds of energy investments, be it hydraulic, thermal, wind, geothermal, renewable, biomass - you name it. Renewable energy only occupies 15% of our group’s portfolio, leaving the biggest chunk to thermal and hydraulic energy.” As Aysal points out, “Energy is our core business and it will remain so in the foreseeable future. Going further we will certainly be looking at broadening both our investment portfolio and field of activities, but we don’t intend to jump heavily into territories or areas we are unfamiliar with.” Today UNIT’s energy division is mainly engaged in power plant construction, electricity and natural gas generation as well as trading. However, the group also operates in the real estate, tourism and biotechnology sectors. Another major factor in the company’s 40-year-long history of expansion has been its openness to partnerships, “We have decided to join forces with a British and a Japanese partner for a private power plant project even though we could have done it alone, and we are doing the same with an Italian company for another power plant in Istanbul. We also have a big dam in Boyabat with 2 large Turkish partners. In some other cases, we have preferred to go in on a stand-alone basis; adopting different models makes you culturally rich and at the same time helps you spread the risks.” One of Aysal’s most distinctive traits is certainly his pioneering and innovative approach to each of the projects he has embarked on, ”We were the first group to have invested in private power plants in Turkey and the first one to have made a huge tourism investment back in 1983.” UNIT currently owns 3 hotel properties, including the exquisite “Les Ottomans” - possibly Istanbul’s most popular celebrity spot thanks to its outstanding waterfront location right on the Bosphorus, as well as the exclusive atmosphere and the high degree of privacy it provides. Not to mention it has what Aysal bills “the best spa between London and Hong Kong”. Additionally, Aysal is the current President of one of Turkey’s most recognisable sports brands: Galatasaray. Elected for a first mandate with a sweeping victory in May 2011, he will soon be running for a 2nd term as the club’s chief. Under his leadership Galatasaray has regained its place among the elite of European football and has won the Super Lig for the last 2 years. However, despite its 45 national trophies and 25m worldwide fans (nearly 40% of whom come from outside Turkey), football is not the only sport Galatasaray is known for. In absolute numbers, basketball and rowing may be less popular disciplines but they are followed with just as much interest and passion. Aysal underlines this, “Galatasaray is the world champion of disabled basketball - it is an achievement we are very proud of and one that significantly helps to strengthen our brand perception and loyalty factor among our supporters.” It certainly shows what can be accomplished when creating good opportunities for all is the name of the game.

“Investors should have one eye on making profit and the other on developing human resources”

Yeni Elektrik Combined Cycle Power Plant, Kocaeli Dilovasi

Directors Gabriele Villa & Sorcha Hellyer Editorial Contributor Michele Grimaldi Copy Editor Penelope Hellyer

info@imagediplomacy.com This is the second in a series of features dedicated to Turkey. If you missed Part 1 please email us at turkey@imagediplomacy.com for a digital version

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Shaping the Future Through Integration

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espite the European Union’s sovereign crisis and the unrest that resulted in a number of member states, advocates of EU accession frequently cite the process as one of the most powerful tools to influence reform agendas in emerging nations. It is said that while the implementation of EU-inspired restructuring may be arduous, it is an effective facilitator for socio-economic development including human rights, press freedom and rule of law. Little wonder then that there are many in Turkey who feel that a positive advancement on the EU integration route would help set in motion the very reforms the country needs, to bridge its current gap with the democracies of the west. An official statement made on 21 June 2013 by the Economic Development Foundation (IKV-Turkey) underlined this, “The EU process has always been a key external anchor triggering democratisation in Turkey. Thus the EU would lose a very important chance to further contribute to democratic reforms in the country by refusing to open the new chapter”. Founded in 1965 and supported by the private sector, IKV is Turkey’s most authoritative think-tank on EU-Turkey matters and features the only depository library of the EU in the country. Turkey originally applied for EU membership in 1987 but only received candidate status in 1999. It began official negotiations in 2004 at the same time as Croatia; yet while the latter is celebrating its newly minted standing as the union’s 28th member, Turkey is left on the margins. Its accession path has been tortuous - punctuated by multiple controversies and hiccups. After the latest impasse, which had lasted nearly 3 years, the two sides had recently agreed to re-open negotiations on Chapter 22, specifically addressing regional policy and structural instruments. However, following the mass demonstrations that spread through the country in late May - which, according to some, the Turkish police quelled with the use of excessive force - the initiative has again met strong resistance from some member states (most vociferously Germany) and has been halted once more. Although Turkey is still lagging behind in certain key areas

and business association) - as well as the Vice President of the of democratic development, IKV is adamant that this High Advisory Council and Honorary President of TUSIAD should not lead to further isolation; the result of International - Kaslowski has always considered Turkey which would be continued stagnation, serving to be a unique place. Not only has his experience been only to increment frustration on both sides. On positive, so too has that of his family whose members heightened engagement, IKV continued, “The EU have been allowed to climb to the highest ranks of would be most effective if it led Turkey towards Turkish business society and fill key institutional European norms and standards by offering a positions, despite their foreign background; credible membership perspective, rather “This is something that would have not been than adopting an unfavourable attitude possible in a number of other countries,” he and applying sanctions to it”. The British points out. Furthermore, his being “different” government would likely agree with this, ALDO KASLOWSKI has never been viewed as a potential threat; given its support of Turkey’s EU potential President of Organik on the contrary, it has been largely appreciated membership. Holding & CIIM EurAsiaMed as a source of enrichment. To his mind this is Someone who certainly possesses the an indication of how receptive and open the right credentials to discuss integration issues is Aldo Kaslowski, President of the EurAsiaMed division of CIIM country is towards foreign integration. One of Kaslowski’s most rewarding activities nowadays is (the Confederation of Italian Entrepreneurs Worldwide) and President of Organik Holding. The Istanbul-born industrialist, a by his own admission - his work with CIIM. Established in Rome descendant of Italian immigrants, has been a particularly ardent 10 years ago, the organisation’s primary goal is to facilitate supporter of Turkey’s assimilation into Europe, as well as a firm the development of a global business network among the vast believer in the free market economy and global competition. His community of entrepreneurs of Italian origin living abroad Turkish roots date back to the beginning of the century when - reportedly close to 65m. Kaslowski’s dedication, personal his great grandfather travelled from Italy to Istanbul in search flair and dynamism have turned CIIM EurAsiaMed into one of a better life. “In those years,” Kaslowski explains, “Foreigners of Turkey’s strongest and most effective lobbies, capable of normally entered Turkey upon an invitation by the Sultan, with the reaching further and deeper than many other more established primary purpose of filling gaps in relevant socio-economic areas. organisations, “We represent a comfortable, informal - and for Due to that, their integration occurred naturally and under the that reason effective - venue through which our members can best conditions. No double standards, nor any form of prejudice socialise, exchange ideas and build relations,” he underlines. In May 2012, CIIM organised a meeting in New York, or discrimination, were applied to them, as long as they showed a genuine desire to live in this country and respect the local culture. where Kaslowski introduced Deputy Prime Minister Ali On the contrary, they were accepted and welcomed from the Babacan to the local Italian and Italian-American business onset, feeling in turn honoured to be here.” Kaslowski continues, community. The event was so well received by both sides, “If all immigrants understood that they have duties to fulfil - before that it was decided to replicate it soon in Sao Paulo, Brazil, claiming a right - and they learned to pay respect to the nation that famously home to one of the largest Italian communities in hosts them, immigration would be much more of a resource and the world. History shows that connections are made faster, and results are delivered more consistently, when supported less of a problem around the world.” A long-time member of TUSIAD (Turkey’s leading industry by a credible source and the right platform.

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