Category: Business

  • Turkey, Europe’s biggest in agriculture

    Turkey, Europe’s biggest in agriculture

    Turkey, Europe’s biggest in agriculture

    Turkish Finance Minister Mehmet Simsek said that Turkey ranked the first in Europe and seventh in the world in the aspect of agricultural growth.

    Simsek said that total support reserved for agriculture was envisioned to be increased 17.8 percent from 11.1 billion Turkish lira to 13.1 billion TL in 2013. It had been only three billion TL in 2002, he added.

    Agricultural gross domestic product, which had been 23.7 billion USD in 2002, increased to 61.8 billion USD in 2011, said Simsek.

  • One in five young people jobless in Turkey

    One in five young people jobless in Turkey

    One in five young people jobless in Turkey

    Turkey’s jobless rate had edged up 0.3 percent in December over the same month a year ago to reach 10.1 percent

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    One out of five people between the ages of 15 and 24 were unemployed in Turkey in December, with the country’s youth unemployment rate hitting 19.8 percent, data from the Turkish Statistics Institute (TurkStat) showed on Friday.

    TurkStat announced that Turkey’s jobless rate had edged up 0.3 percent in December over the same month a year ago to reach 10.1 percent. This marked the first return to double digits in unemployment figures since February 2012. The institute also stated that the unemployment rate for non-agricultural jobs had increased by 0.4 percent to 12.4 percent in December, while youth unemployment grew to 19.8 percent, a 1.7 percent increase over the same period of 2011.

    Turkey is not the only country suffering from high youth unemployment figures, one of the most critical dimensions of unemployment, socially and politically. December’s figures showed that the Turkish youth jobless rate remained below EU levels. The youth unemployment rate was 23.4 percent in the 27-member EU and 24 percent in the eurozone in December, the European statistics office EuroStat had earlier reported.

    Friday’s figures put the total number of people without a job in December at 2.79 million. TurkStat’s figures also show that Turkey’s labor force grew to 24.76 million in December, up from 23.67 million in the same month of the preceding year. The labor force participation (LFPR) rate was calculated at 50 percent in December.

    The statistics office last week announced that Turkey’s unemployment had dropped to 9.2 percent last year from 9.8 percent in 2011.

    via One in five young people jobless in Turkey | Economy | World Bulletin.

  • Istanbul Wall Street

    Istanbul Wall Street

    If you go anywhere in Europe, the one country everyone says to watch out for is Turkey. And the country’s largest city, Istanbul, is one of the hottest cities in the world.

    the-iifc-is-being-built-on-a-170-acre-site

    The country is incredibly ambitious.

    It wants to make its economy one of the 10 largest by 2023. To achieve that goal, it’s going to build a brand new financial center.

    Architecture firm HOK has just unveiled the master plan it developed for the Istanbul International Financial Center (IIFC).

    The renderings for the $2.6 billion project are beautiful.  The project is

    via Istanbul Wall Street – Business Insider.

  • The politics of taxis in Turkey, where license plates cost $580,000

    The politics of taxis in Turkey, where license plates cost $580,000

    The politics of taxis in Turkey, where license plates cost $580,000

    Taxis sit in traffic in front of the Sultan Ahmed Mosque, popularly known as the Blue Mosque, in Istanbul.

    The price gouging and barriers to employment are a disservice to Turkish citizens who could make living wages as tourism grows and to visitors who feel hustled and hassled at the idea of taking a taxi.

    -Samantha Shankman

    BY TAYLAN BILGIC, BLOOMBERG
    MAR 14, 2013 12:45 AM

    Beyond the polished Fiats and Fords parked at the Oto Center in a remote working class district of Istanbul, traders tout an investment vehicle that has tripled in value over the last nine years: license plates for taxis that fetch about 1.05 million liras ($580,000).

    Prices quoted inside stores that act as a private bourse have risen about 10 percent from 885,000 liras a year ago, with the number of permits issued by Istanbul’s government unchanged for two decades even as the population in Turkey’s commercial capital grew, according to the taksiplakasi.com website. The 4,600 liras a month paid by drivers to rent plates add another 5 percentage points of investment income, the website shows.

    Slices of permits called plates, wheels and nuts trade like bonds and lure investors wishing to comply with Islam’s ban on earning interest in a country where almost all of the 80 million population is Muslim. The licenses are an alternative to real estate and resemble investments created by bankers in Islamic finance, such as rent certificates.

    The market has become so liquid that “one can sell in half an hour and get the cash in less than a week, not much different from the Istanbul Stock Exchange,” Gursoy Atli, sales manager at Kale Ticaret, one of a handful of closely-held companies that trade licenses, said in a phone interview Feb. 19. There is little regulation and no guarantees.

    Attractive Returns

    Potential returns of as much as 15 percent look attractive in Turkey, where the yield on two-year lira debt was at 5.81 percent on March 12, down from as high as 11.59 percent in January 2012. The average interest for one-year bank deposits was at 6.88 percent, according to data compiled by Bloomberg. Turkey’s benchmark stock index returned 53 percent last year after falling 22 percent in 2011.

    The business of selling licenses has its own bourse, trading jargon, creditors, investors and website. Some cab drivers, who don’t benefit from the trading, say they’re being crushed by a handful of companies that dominate the market.

    “What we see here is a typical monopolistic market,” Eser Karakas, an economist atBahcesehir University in Istanbul, said in a phone interview on March 5. Such a market “cannot operate effectively.”

    Wheels, Nuts

    At the Oto Center, situated in the Bagcilar neighborhood below the thoroughfare that links Europe to Asia, a quarter interest in a license, called “a wheel,” could be had for 263,750 liras this month. A quarter of a wheel, or a “nut,” goes for about 65,375 liras.

    Kale, established in 1979, is “the market maker” and trades at least 20 license plates a day, Atli said.

    The roots of the trading date to April 1986, when Turkey restricted the number of taxi license plates in cities, defined who can buy such plates — it has to be Turkish citizens — and authorized local governments to increase the number as necessary, upon approval from the Interior Ministry.

    While Istanbul’s population grew to 13.8 million last year from 9.2 million in 1997, the number of taxi licenses has been stagnant at 17,353, according to an official at the Istanbul Metropolitan Municipality, who asked not to be identified, citing government policy.

    That translates to one cab per 800 people, compared with a ratio of 662 in New York and 362 in London, based on data from the city governments.

    Bank Finance

    Turkish banks have been financing the purchase of at least 1,000 taxi license plates across the country each year, according to Turkiye Finans Katilim Bankasi AS, an Islamic lender that has been extending such loans since 2009.

    “The volume of such financing totals about 25 million liras a year,” Chief Executive Officer Derya Gurerk said in an e-mailed response to questions on Feb. 21. Turkiye Finans, majority owned by the National Commercial Bank of Saudi Arabia, has itself made about 85 million liras of such loans, he said.

    While other big cities also have restricted taxi markets, “none has Istanbul’s pace of population growth and frozen number of licenses,” Karakas said.

    For some drivers, this is a ride that has to stop.

    “There’s a general assumption that the license plate owner is the person who drives the car,” Asim Golcek, deputy chairman of the Alternative Transporters Solidarity Association, which represents a growing group of unmarked, unlicensed cabs, said in an interview on Feb. 21 at the headquarters of his organization in a backstreet in the Gungoren district, not far from the Oto Center. “Nothing could be further from the truth.”

    Erdogan’s Vow

    Prime Minister Recep Tayyip Erdogan vowed to fight against the unlicensed cabs in 2011 as he took steps to deter business in the unregulated economy. “God willing, we will enact much more serious and deterrent legal measures,” Erdogan was cited as saying in Istanbul by the state-run Anatolia news agency on April 29, 2011. “We will not allow this to go on.”

    A law enacted in June last year imposed penalties, such as a 60-day ban from traffic, on those who drive regular cars for commercial purposes and also fines on those who pay for travel in such cars. Golcek’s organization estimates Istanbul has about 40,000 unlicensed cabs.

    Registered taxi drivers, who work as long as 12 hours a day, on average must pay about 120 liras ($67) a shift to license plate holders, Golcek said, adding that the figure was expected to rise after the Feb. 23 fare increase of 8 percent.

    “The driver can keep the rest to feed his family — if there’s any left,” he said. “Sometimes drivers end up paying money from their own pockets after working for 12 hours.”

    A Transport Ministry official asking not to be identified because of government policy said the matter of increasing the number of licenses is related to local authorities. An official at the Istanbul Greater Municipality declined to comment.

    License plate owners and drivers who work in their cabs have “turned into some sort of a pressure group,” with even governments refraining from taking action against the restricted market, Karakas of Bahcesehir University said. “This is a terribly unjust system, and I frankly have no idea how it can be fixed.”

    Editors: Philip Revzin and Laura Zelenko.

  • How To Play Turkey’s Shale Boom

    How To Play Turkey’s Shale Boom

    How To Play Turkey’s Shale Boom

    By Chris Mayer | 03/13/13

    I grabbed a taxi and headed up to the Le Meridien Hotel in Etiler, a neighborhood in Istanbul, Turkey. I was on my way to have breakfast with N. Malone Mitchell III. He is the CEO, chairman and 40% owner of TransAtlantic Petroleum (TAT).

    Malone’s company is the best way I’ve found to play a fascinating emerging energy story. It comes with risk, but offers a potential two–five times return on your money over the next few years…

    Let me start with the big picture in Turkey.

    The country sits on large untapped resources of shale gas. Nobody yet knows just how much natural gas Turkey might hold. One guess puts Turkey’s shale gas reserves at 20 trillion cubic meters. A fraction of that in Ukraine drew a $10 billion investment from Shell last month.

    The irony is that Turkey depends heavily on expensive imports for both oil and gas. The two nearby charts tell you all you need to know. The first shows you how Turkey imports nearly all of its oil needs. The second shows you the same story for natural gas with an even steeper curve.

    DRH_Turkey_031313

    On the day of my meeting with Malone, Reuters released a story on Turkey’s gas potential. Malone got it on his phone while we were eating breakfast and showed it to me. A key excerpt:

    With domestic gas consumption rising and [Turkey’s] geographic location meaning it is also well placed to supply international markets, major exploitable reserves could be a game changer for Turkey’s economy and highly lucrative for whoever finds them.

    “We are keen to exploit this method and we must make economic use of shale gas,” energy minister Taner Yildiz told Reuters, saying it would be a priority for the near future.

    This sets up the macro appeal of TransAtlantic. The other part of the appeal is in the micro, which begins with the talented Mr. Mitchell himself. He is a self-made oil and gas billionaire, a successful builder of companies. He is also, as I noted above, a big shareholder. And he has been buying more of late.

    I’ve been following TransAtlantic for a few years now. It has been a longtime holding of my Mayer’s Special Situations newsletter. I share it with you here because it is one of the most intriguing ideas I have in Turkey and a good way to get exposure to a unique energy story.

    It has not been a happy story to date. Over breakfast, Malone and I talked about the challenges TAT has had so far.

    There has been a big learning curve in figuring out the geology. In many ways, TransAtlantic’s experiences mimic those of other successful unconventional plays. “It can take two years of failures before it all comes together,” Malone said.

    There has also been the challenge of finding the right mix of people and getting the right systems in place. Malone told me about the intricacies of Turkish tax accounting, for instance. And he related some stories about personnel issues.

    It is always easier to draw up the blueprint than to put it into action — especially in emerging markets. On the positive side, Malone said doing business in Turkey was as easy as doing business in Texas or Oklahoma from a regulatory point of view.

    And though there have been setbacks, the plum of Turkey is as ripe as when Malone got involved in March 2008. He said Turkey then was like Texas in 1938 — a practically virginal land flush with oil and gas possibilities.

    I asked him if he was still as excited about it as he was then. “Yes,” he said, “but I wish we knew then what we know now. Knowledge comes at a price.”

    Frustrated by delays in ramping up production, the market has all but abandoned the shares. They now languish at around $1. Even just the value of its proved reserves — the so-called SEC PV-10 value — is about $1.75 per share (pretax). That gives the company no credit for whatever lies in its 5 million acres of underexplored land area. Yes, 5 million acres.

    I asked Malone what he thought the market was missing with TransAtlantic.

    “Well, the market thinks we aren’t going to do anything,” he said, thinking about that languishing share price. “The truth is if we weren’t a public company, I’d be fine about where we are.”

    Indeed, the company is in a good position in a strategic sense. It has those 5 million acres locked up on long-term leases. It was early enough that it grabbed some of the best acreage. There are only three oil companies of consequence in Turkey: the national oil company, a privately held oil company and TransAtlantic. Everybody who comes after gets the crumbs left by these three.

    Besides, TransAtlantic is already doing its bit to provide oil and gas to Turkey’s thirsty industrial base. In the Thrace Basin, TransAtlantic gas supports the city of Bursa. About 60 miles southeast of Istanbul, the Ottomans captured the city in 1326 and made it their first capital. Surrounded by forested hills and fruit orchards, it was once a Silk Road city. Today, there are nearly 2 million people in Bursa and it is home to thriving automotive and textile industries.

    And there are a couple of big catalysts on the horizon that could make 2013 the year when the cards finally turn up right for Malone and his fellow shareholders.

    First, Turkey’s unconventional oil and gas plays are getting more attention. Just a couple of days after our meeting, Malone would attend Turkey’s first shale gas and oil conference at the Bilkent Hotel in Ankara. There is an excitement in the air about what could happen in Turkey. And it is still very early.

    The buzz could help Malone as he is trying to nail down a joint venture to accelerate the development of TransAtlantic’s acreage. The JV, Malone has said before and repeated at breakfast, could be as big as the sale of Viking (the company’s oil field services arm). For reference, this sale brought TransAtlantic $164 million, gross. As the whole market cap of TAT is only about $370 million, a JV that brought in that kind of cash would be huge. (And it is gravy on top of the $1.75 SEC PV-10 value I mentioned earlier.)

    Second, the company is drilling some potentially high-impact wells. We should get the results on these wells within in the next six months. Malone was optimistic that these would bring strong results. Exciting results here could also light a fire under the stock.

    I was glad to meet up with Malone. I have confidence he will figure it out and make it work. I think he is honest. He also owns a bunch of stock — an owner-operator, for sure. His track record of success is beyond dispute. All in all, a good mix, in my experience.

    Reflecting on what TAT is building, I thought about how a bigger oil outfit will one day want to own it all. “Someday, somebody is going to want to write you a big check,” I said.

    Malone said nothing, but his expression and his eyes told all. Exactly, they seemed to say. Exactly.

    Sincerely,

    Chris Mayer

    Read more: How To Play Turkey’s Shale Boom http://dailyreckoning.com/how-to-play-turkeys-shale-boom/#ixzz2NUtPxnh0

  • In Istanbul, a New Brewpub Caters to International Tastes

    In Istanbul, a New Brewpub Caters to International Tastes

    In Istanbul, a New Brewpub Caters to International Tastes

    March 13, 2013

    By Chris Deliso

    While Istanbul has always been one of the world’s unquestionably great cities, it has never made it onto the list of prime destinations for beer lovers.

    Helping to change this sorry situation has been English couple Philip and Jill Hall, who together with Turkish partner Sedat Zincırkiran established the Bosphorus Brewing Company last November. Since then this spiffy new pub, which produces its own beers and serves home-cooked meals to a mixed Turkish and international clientele, has become a roaring success.

    Despite being situated in a business district far from the touristy heart of the old city, the brewpub has developed a faithful following in only four months of operation, which seems to be increasing by the week.

    According to the BBC’s Philip Hall, “as the locals are starting to develop a taste for craft beers, we are seeing around eighty percent Turks, and twenty percent foreigners!” (Photo courtesy Bosphorus Brewing Company)

    A Pub for ‘Community-building’

    We caught up with the Halls on a recent standing-room-only Friday night at the pub, where they explained the concepts behind its creation, amidst the revelry of many happy drinkers. Philip had been working as general manager of a chemicals company in Istanbul for several years when he got the idea to try something new.

    After renovations which involved “completely ripping out” the premise’s former inhabitant, a restaurant, the brewpub opened its doors on 14th of November 2012, says Jill. As she is proud to point out, “this was the same date that the BBC began broadcasting in 1922.”

    Of course, a love of good beer and a desire to enjoy flavors beyond the limited offerings from ensconced giants Efes and Tuborg was a major factor. But there was another reason for making this considerable new investment.

    “I wanted the brewpub to become a community-building initiative, a call for creativity,” says Philip, implying the effect that similar international-flavored ventures have had in other countries. Indeed, with its large expat community, Istanbul would seem a perfect place to open a brewpub.

    “At first, we thought that we would be basically targeting foreigners living in Istanbul,” says Philip, “and in the beginning the ratio of foreigners to Turks was indeed about fifty-fifty. But now, as the locals are starting to develop a taste for craft beers, we are seeing around eighty percent Turks, and twenty percent foreigners!”

    Catering to Complex Tastes: the BBC’s Offerings

    This development of tastes is a notable challenge for anyone wishing to break into the beer market in sultry Mediterranean and Balkan countries, where the warmer climes dictate a preference for lighter beers (note Greece’s ‘holy trinity’ of Amstel, Heineken and Mythos).

    This has meant that the BBC’s flagship brews tend to be on the light side; they include the Istanbul Pale Ale, a typical IPA, Haliç Gold, similar to a Belgian ale, and Içmedik, a fresh and crisp lagered ale. Yet there is also the full-bodied Karbon Stout, the B4 Bitter, and recent favorite Yabangee, a rich and hoppy brew with the characteristics of those traditionally produced in Burton Upon Trent in England. It is thus kind of cultural sophistication and diversity that the Halls wished to contribute to Turkey today.

    “We want to be creative but it is a bit difficult, since Turkish tastes are relatively conservative,” notes Philip. Nevertheless, the resident brewmeister keeps perpetually active, tinkering with new formulas, ingredients and recipes to increase the BBC’s range. Incredibly, everything is produced on the premises, which are more on the side of adequate than enormous.

    Istanbul’s new microbrew option specializes in light beers and friendly local service (Photo courtesy Bosphorus Brewing Company)

    The BBC’s goal is to have a rotation of new beers, in addition to their regular brews, available for two-week periods.

    “We take on board customer suggestions,” says Jill, “and thus we can see which are most popular.” This helps them to see which beers are likely to be worthy of permanent production.

    In some cases, just a bit of technical tinkering seems to have been adequate for adjusting to local tastes. For example, says former chemical engineer Philip, “with the IPA, all it took was just to reduce the temperature and carbonation levels.”

    He is quick to add that “we didn’t want to compete with Efes- we had a different concept.” Nevertheless, it seems that the BBC’s sudden success has not gone unnoticed by both Turkey’s powerful brewing interests, and its conservative opponents of alcohol in general, which opens a fascinating window into local culture today.

    Challenges and Restrictions

    Although it is impossible to say whether the success of Istanbul’s modest brewpub had anything to do with it, the government on January 14, 2013 changed a law affecting any bar that self-produces on the premises. The government thus stopped giving brewing licenses under the guise of “protecting the health” of citizens. This reasoning has been stated for many similar anti-alcohol government decisions since 2003, when the Islamist AK Party took over.

    Many suspect, however, that there are other reasons for these restrictions. Turkish journalists, such as Kadri Gürsel recently have discussed restrictions on alcohol in public spaces that have been gradually implemented by the government since 2003. Many Turks believe that the laws are actually meant to stigmatize and gradually eliminate all consumption of alcohol in the country on religious grounds. It is unlikely that the millions of secular-minded Turks will ever let this happen- to do so would be catastrophic for Turkey’s appeal as an international destination to most tourists. (And for Christ’s sake, even the Arabs come to Turkey to drink in peace).

    However, in an ironic twist that shows the convergence of high-level interests, anti-alcohol government regulators and the big alcohol producers also see common cause in keeping down local production. Along with the BBC, there are only a couple other local beer producers in the entire country, including the now franchisedTAPS, open since 2002. Local production is a direct threat to the lucrative import tax that the government rakes in on imported alcohol, and for Turks to develop a taste for locally-produced beers in large numbers would damage this revenue stream.

    Happy patrons on a typical night at the BBC. (Photo courtesy Bosphorus Brewing Company)

    At the same time, big brewers like Efes and Tuborg naturally would like to limit their competition, especially when it is turning out a superior product. Thus anything that can restrict the production of alcohol is beneficial for the giants- even if it means siding with the anti-alcohol ideologues in power.

    Ensuring Sustainability

    For now, however, the Halls see everything as going well. “We are pouring 3,000 glasses of beer per week,” says Philip. “That’s twice the volume of some London pub owners I know!”

    He is also confident that the BBC will retain its dedicated following in the summer, when the city typically empties out for the holiday season. “We are a unique place,” he says, “so people will still visit us in summer too.”

    However, considering the vagaries of local politics, he also acknowledges that it may take more than the newfound tastes of sophisticated Istanbullu to keep operations sustainable. “We do need the support of the expat community, and the foreign embassies, at least to patronize the pub,” Philip says. Any community-building that may derive laterally from that could also provide a layer of protection too.

    The BBC Logo, as devised by the Istanbul-based creative agency THOSE Creatives (Simon Johnson, Martin Hinze and Innes Welbourne)

    Despite the challenges of operating in Turkey as it is today, given the rising popularity of the BBC, its presence on social media and fun side events, it appears likely that it will remain a contender for years to come- much to the delight of resident and visiting lovers of fine beers.

    Getting There: The Logistics

    Contacts/Map: Bosphorus Brewing Company has contact info (and Google map)on this page.

    Address: Esentepe Mah., Yıldız Posta Cd., Emekli Subay Evleri No: I/IA, Gayrettepe, İstanbul

    Nearest Metro: Mecidiyeköy (10-15 min. walk)

    Reservations: Strongly suggested on weekends. Dial (0212) 288 6499 locally

    Balkanalysis-Bosphorus-Brewing-Company-Feature-light-beer