Turkey Renews Push for Arab Investment

By Emre Peker

It’s a curious thing that Turkey’s growing diplomatic ties with the Arab world over the past decade haven’t yielded a glut of big-ticket investments from Middle Eastern economies.

Now Ankara, hungry for cash to feed its capital-deficient economy after a sharp economic slowdown, is renewing its bid for investment from the region’s energy-rich nations flush with cash from high oil prices.

In Istanbul this month, Turkey’s cabinet ministers lined up at the Turkey Arab forum to court Middle Eastern capital, laying out the case that Turkish companies offer better investment prospects than the red-hot economies in Asia and Latin America.

“Our economies complement each other, and it’s very important to create sources of interdependency among our economies. If interdependency is created through trade, this will help stability and security,” Turkey’s Deputy Prime Minister Ali Babacan told more than 400 officials, investors, and representatives from real estate companies, energy firms and banks, among other attendees.

Despite accounting for only $8.3 billion, or 3.2%, of all investments abroad from the Middle East and North Africa, Turkey offers broad scope for growth for Arab Investors, Finance Minister Mehmet Simsek added.

Recent months suggest the tide may slowly be starting to turn.

The Commercial Bank of Qatar bought a 71% stake in Turkish lender Alternatifbank in March. Known as A-Bank, the Istanbul-based lender had a book value of about $325 million at the end of last year and CBQ said it paid twice the as much as the firms valuation in the middle of 2012.

Other investments that have trickled into Turkey last year include Saudi Arabian private equity firm Eastgate Capital Group’s debut investment in the country with the purchase of a 49.8% stake in Fabeks Dis Ticaret AS, the textile firm produicing high-end retail apparel under the Silk & Cashmere brand. Bahrain’s Investcorp was another buyer in the apparel sector, acquiring a 30% stake at menswear retailer Orka Group to tap into a market estimated to be worth $7.4 billion. And Kuwait’s NBK Capital bought a 50% stake in Bavet, the Istanbul-based distributor of animal pharmaceuticals.

Abdullah AlFouzan, chairman of The Investor For Securities Company, the Saudi firm with more than $1 billion of assets under management, said his Riyadh-based company is planning to launch a $250 million real-estate fund within three months to buy properties in Turkey’s Black Sea province and Bursa, the industrial and agricultural hub south of Istanbul. He added that ISC is also seeking to deploy part of a $400 million fund to invest in Turkish charity endowments, which are known as waqf and enjoy tax breaks.

“We are under pressure from our clients to hunt for opportunities to invest somewhere else. We are traveling to invest across the region. We believe Turkey is an attractive investment for the next five years,” said Abdullah AlFouzan, chairman of The Investor For Securities Company, the Saudi firm with more than $1 billion of assets under management.

Yet recent buyouts pale in comparison with the government’s $6.55 billion sale of a 55% stake in Turk Telekom in 2005 to Saudi Oger Group. In the years since Ankara’s biggest state-asset sale, Turkey hasn’t clocked in another landmark deal of the same magnitude from the Middle East even though the money has continued to trickle in over the years.

For Mehmet Habbab, chairman for the past decade of the Turkish-Middle Eastern business council at the Foreign Economic Relations Board in Istanbul, stronger government support for greater trade links remains the key to help Ankara draw more middle eastern capital.

“We are at the beginning of the road to better relations. When I used to talk with Turks, they would say, ‘We don’t trust the Arabs, they joined forces with the British and stabbed us in the back.’ And when I asked Arabs why they’re not doing business in Turkey, they would say, ‘Turks governed us for centuries, and then we wanted to be independent. Now that we want to trade, Turks turn their back to us.’”