Turkish private sector’s agility a big advantage
Barçın YinançTurkey’s private sector has displayed a peerless dynamism thanks to its agility and flexibility, according to Dimitris Tsitsiragos, an investment specialist in the International Finance Corporation.
“If you look at the performance of Turkey in the last seven or eight years, I am impressed by how quickly Turkish businesses are able to sense the direction of the markets and the shift,” he recently told the Hürriyet Daily News.
Tell us briefly about the IFC’s history in Turkey.
We have a mandate to finance private sector projects. Turkey has been a longstanding client of the IFC; Istanbul is one of the first offices we opened in the mid-1980s outside Washington. Turkey is as an important country for us; in terms of both portfolio and presence. Today it is the second-largest portfolio worldwide, with about 3 billion dollars of exposure, and the biggest office we have outside of Washington.
The Istanbul office became the office for Southern Europe and Central Asia, and in 2010 we decided to make this office an operational center for Europe, Central Asia, Middle East and North Africa.
We expanded the office significantly; we quadrupled the number of our staff. We have 200 staff with a strong Turkish corps with 45 percent of the staff made up by Turks and the rest from 40 nationalities. We are very appreciative of the government; [Deputy PM Ali] Babacan have been a big supporter of setting up an IFC office here. We set the path, we came first; the EBRD followed the U.N. in coming; they are both expanding.
Do you have any regrets?
No. Our experience has been very positive. We are able to attract high-quality staff, both national and international. The location is good; from here we cover Europe, Central Asia, the Mideast and North Africa but given the time zone, we can cover Africa – we cover Afghanistan and Pakistan as well – as the logistics are very good. We have a direct flight to places we operate, the lifestyle is good. Of course you can get day-to-day complaints like traffic.
What does the fact that you have the second-largest portfolio in Turkey tell us?
First, it tells us that Turkey has a very vibrant private sector that is quiet active both in Turkey and in the international level. Second, there are many areas of opportunities where we focus on things like infrastructure, energy security and efficiency. Another area of importance is the financial sector where we are active. Here the issue for us is access to finance; we have initiatives to provide financing to small- and medium-size enterprises and women entrepreneurs. Third, Turkey has a great geographical location, a private sector that thinks regionally and internationally.
We think regional integration is important; we promote emerging markets investing in other emerging markets. Turkish companies have been some of the first ones to do it; you have a number of Turkish companies investing in the region but also further beyond. We have financed Turkish companies in Latin America and India for example.
The fiscal years 2013 and 2014 were record years for IFC, which invested 1.237 billion dollars in 2014 for instance; what does this tell us?
We are ahead in terms of what we think we will be committing. It reflects a bit the changing market situation both in Turkey and the world. In Turkey the banks are very healthy; at the same time our aim is to mobilize funds to come to Turkey. International banks have become more reluctant after the crisis. In a way we are filling the gap, but we see it as temporary. We want to develop other sources of financing. We are trying to help some companies to go into capital markets; the most recent one is the Mersin port. Our focus is to develop capital markets in Turkey; where there are low saving rates, you want to get that up. There are large projects to be undertaken which need financing. If you access capital markets, you can create new pools of funds.
When put like that, you make it sound as if it is not so good to have these record numbers.
But there is also a positive side to it. When you look at Turkey; it is an oasis in the region in terms of growth, which means there is investment activity. There is demand for financing; in some of the other countries, the demand for financing is not there.
When you talk about the dynamism of the Turkish sector, you mentioned their regional orientation. What are other attributes that makes it dynamic?
It is the agility of the private sector. If you look at the performance of Turkey in the last seven or eight years, I am impressed by how quickly Turkish businesses are able to sense the direction of the markets and the shift. Look at the destinations of the exports; in 2008, European markets closed, and Turkish businesses very quickly moved to the Middle East; when the Middle East closed, they turned back to Europe. It’s a very challenging and difficult geography but people change quickly too; this reflects the mindset of the Turkish entrepreneur. We see the desire to upgrade the skill sets of the company; we have done a lot of work on corporate governance. There are family-owned enterprises growing fast, and they need to go to the next level; you need to see more of them.
Actually this is one area of criticism; Turkey’s biggest companies are the same ones and new, world-wide companies are slow in emerging in Turkey.
We have to recognize that as they say, Rome was not built in a day. You see new players emerging in Turkey and over time they will grow; and you see them in different areas; you see more and more companies in IT and these are new names. The government has a strong program on health and you see again new players who are now part of global networks. To me, the challenge is on the corporate governance side.
International experts seem to keep praising Turkey while local experts keep warning about the fragility of the economy. This is rather confusing for an ordinary observer.
We have to be fair; Turkey has performed well on the economy front – better than anybody else than in this region. There are still challenges. There is still opportunity for more structural reforms and the government talks about it. I think the focus should be on the competitiveness of the entrepreneurs. One can work on labor regulations; it also helps create jobs. Value-added manufacturing; that’s a place Turkey can move to in the next level.
There is, however, talk about political pressure on the private sector. The government has been specifically targeting a bank and there is also a lot of controversy about the justice system.
You can look at both sides of the coin; there is a challenge but there is also opportunity. Improving the business environment will help growth. In the process of evolution, one has to build institutions and they help a county’s path to growth; this is an area one can work on; the judiciary system falls in that area. This is part of the development process. In some areas Turkey is advanced and there are areas where there is room for improvement.
The opportunity in my mind from the private sector point is to keep moving up the scale, keep moving up in terms value-added manufacturing, capital markets development, infrastructure and corporate governance, and how one should manage to mobilize the big opportunity in the south.
You are talking about companies in Anatolia?
The ones to the south of the Istanbul-Bursa-İzmir corridor. They are more family-owned; they operate differently; but this is where growth will come from; new players will come from that area, but they are still conservative.
Since you cover a big region, what differentiates Turkey in your opinion when compared with other Muslim countries?
If you compare Turkey to the countries in the Middle East, Turkey has one big difference: in the Middle East the state is the biggest player; in Turkey it is the private sector; I think this is to the advantage of Turkey. Our advice to the Middle East is to promote their private sector; if you promote the private sector, you will improve the economy.
Who is Dimitris Tsitsiragos ?
Dimitris Tsitsiragos leads the International Finance Corporation’s international investment operations and advisory services. He also oversees IFC’s client coverage group, which forges relationships with key private sector partners worldwide.
Tsitsiragos was previously vice president for IFC’s Europe, Central Asia, Middle East, and North Africa (EMENA) region, where he led IFC’s investments and advisory services of over $13 billion.
Previously, he was director of the Middle East, North Africa, and Southern Europe department at IFC.
Tsitsiragos has extensive experience in a number of sectors – including manufacturing, services, and oil and gas. From 2004 to 2010, he led IFC’s Global Manufacturing and Services Department, where he was responsible for IFC’s activities in the areas of tourism, retail and property development. He has also worked in a wide range of regions, including South Asia, and Central and Eastern Europe, where he held several leadership positions.