Category: Business

Iraq stops registering Turkish firms amid row over Hashemi

By Aseel Kami

BAGHDAD | Thu Sep 13, 2012 12:12pm EDT

(Reuters) – Iraq’s Trade Ministry has stopped registering Turkish companies, it said on Thursday, as the neighbors sparred over Ankara’s refusal to send back a fugitive Iraqi vice president who was sentenced to death in absentia.

The ministry insisted the move was made for “regulatory and statistics” purposes, but Turkish businesses in Baghdad were worried the decision was taken because of the dispute between the two capitals and a government source told Reuters it was political.

Vice President Tareq al-Hashemi can remain in Turkey as long as he needs to, Prime Minister Tayyip Erdogan said on Tuesday. An Iraqi court sentenced Hashemi to death by hanging on Sunday after being convicted of running death squads, a charge he says was politically motivated.

Iraq is Turkey’s second biggest export market after Germany, with trade volume reaching nearly $12 billion in 2011, Turkey’s economy minister said during a visit to northern Iraq early this year.

But Iraq’s Prime Minister Nuri al-Maliki and Turkey’s Prime Minister Tayyip Erdogan have publicly traded insults several times this year as relations have soured.

Kadhim Mohammed, an advisor in the ministry of trade, said the decision to stop registering companies – which will prevent any new Turkish firms opening in Iraq, but should not affect existing ones – had “nothing to do with politics”.

“There are some administrative and regularity problems,” Mohammed told Reuters. “It is a mere business thing

He said the measure was ordered by the trade minister on Wednesday and did not know how long it would last.

A government official who works on trade issues, however, told Reuters the move was motivated by politics.

“The decision was taken for political reasons since Hashemi is there and also due to the last visit of the Turkish foreign minister to Kirkuk,” he said.

Last month, Iraq said Turkey had violated its constitution by sending its foreign minister without permission to visit Kirkuk, a city at the heart of a dispute between Baghdad and the country’s autonomous Kurdistan region.

The Turkish embassy in Baghdad told Reuters it had been informed that a temporary freeze would be applied to all foreign licensing eventually, but that those from Turkey were being covered first because Turkey is Iraq’s biggest trading partner.

According to the trade ministry, 1,529 foreign companies are registered in Iraq, up from 109 before the U.S.-led invasion in 2003.

(Reporting by Aseel Kami; Editing by Barry Malone and Robin Pomeroy)

via Iraq stops registering Turkish firms amid row over Hashemi | Reuters.

September 16, 2012
The Clone Wars of Istanbul

The entrance to the Markafoni offices were vast and empty. They were on the outskirts of Istanbul, somewhere even the cab driver could not find.   The reception desk was new, the Marcafoni logo behind it still factory polished, and the expanse of warehouse space to left of it blocked only with a few bushes.   The company’s logistics team had moved out less than two weeks before, and the all the emptiness—it felt like acres of it—was to be converted to office space for Markafoni and its subsesidiaries. The building smelled like ambition.

The man driving the operation was Sina Afra, a german educated 44 year old that had been managing director of Ebay Turkey. He founded the fashion flash sales company in 2010, and it has quickly become the largest ecommerce site in Turkey, with 8 subsidiaries that operate all over the Black Sea region. Markafoni alone sells upwards of 600,000 articles a month.

The company is sitting on top of one of the fastest growing ecommerce markets in the world.   Online sales make up only 1.5% of the Turkish retail market, according to Mr. Afra, but he predicts that there will rise to 6 or 7 percent in the next four years.   But they are far from the only ones trying to get at the market.

“Turkey is a country of digital Darwinism,” said Sina, referring to the intense competition for market share in each tech vertical.

70 other flash sales sites have sprung up since 2010, and 150 groupon clones. A visit to the Startup Factory, Istanbul’s only incubator, yielded startups cloning everything from Quirky to Talkbin. Almost all of them are doomed to failure before ever getting out of Beta. Almost none had an original idea.

The reason is that despite a city of 17 million people, the angel community is smaller than Princeton’s crew team, and about as tight knit. “There are about 20 serious angels, and 1000 qualified startups,” said Emre Kurttepeli, founder of Galatta Business Angels and MyNet, Turkey’s largest internet property. The numbers are indeed a bit scary for someone trying to break into the tech industry. “There have been less than fifty major deals made,” Cem Sertoglu, on of Turkey’s leading VC’s, told me.   Even if you do get an investment—it’s expensive. Emre estimated that a 500,000 dollar investment would buy about 30% equity stake in an angel round. But getting an investment is hard. “Startups will talk to anyone with money,” he said emphatically.

At the Startup Factory, Istanbul’s leading incubator, startups expressed their frustration.   “It’s really difficult to get investors. They’re like banks, they want a proven idea,” said Dilfer Nasir, co-founder of TinkFabrik, a crowd-sourced manufacturing site. TinkFabric eventually garnered a small investment from a large Turkish Multinational. “Entrepreneurs have been taken advantage of legally and financially. They often didn’t know their options very well.” said Tugce Ergul, founder of Turkbridge, a nonprofit dedicated to bringing investors to turkey and educating entrepreneurs, and a partner at Startup Labs.

Things are starting to change. Kleiner Perkins and Tiger Global have made some significant investments in B and C rounds.   Cem is graduating from investing his and his friend’s private money to founding one of the city’s first VC firms, Young Turk Ventures, which is capitalized at just under 30 million. Major exits have also jumpstarted cash flow and advertised opportunity in the city. The money is flowing in, if only your company can get big enough.

But the problem of the angels persists, despite the fact that conditions seem to be ideal for encouraging investing. Term sheets generally favor the investors, and the long term capital gains tax for Turks is a whopping zero. The problem, according to Emre, is that many Turkish investors don’t know how to value tech companies, and aren’t willing to swallow investing in companies with no revenue.

But even the elite club of twenty angels in Istanbul tend to be risk averse; they stick to proven business models. The costs and risks of real innovation is left to the Californians. “Models are replicated as a matter of course in business. For the internet business, I think the topic is a silly debate,” said Cem. Their attitude has created a tech community with a single goal: to clone startups and sell them to foreign companies who want a foothold in the Turkish market.

It’s a controlled risk model that stands to make a lot of money, given the explosive growth to come in Turkey. It’s even good enough to trigger a small “reverse brain drain,” a phenomenon that everyone I interviewed mentioned with pride.   But the truly ambitious will follow easier money that gives them a little more leeway.   Until angel capital starts to really flow in Turkey, and angels come who are willing to accept a higher margin of risk, Istanbul will remain short of its potential. It will not found a company that will become a global force, nor one that disrupts an accepted way of doing business. And in an economy of 80 million people whose average age is 29, the potential is enormous.

It is a good time to enter Turkey as an investor. Over the next few years, more companies will become profitable, and a larger amount of the retail economy will move online. Traditional business will start to feel the pinch of their encroached market share enough that they will begin to build their own bids for internet market share, most likely through acquisitions. Nonprofit organizations like Turkbridge, and thought leaders already in the market will bring in more foreign capital as the market booms. In short, the money will come soon enough, and the profits and investors with it. The market will mature. What will not come by itself is a culture of risk taking. Turkey needs a real cowboy investor, someone with enough money and guts to back the crazy ones. Until the cowboy comes, Istanbul will find it tough to attract the best talent, or to create truly disruptive companies that do not have to fight with foreign ones for market share.

September 16, 2012
Guest post: Turkey – resource poor?

The country in Europe with the most potential in renewable energy must establish a world-leading manufacturing base in the sector, writes Matthew Vogel of Alternatif Investments.

The Turkish government’s goals for 2023, the centenary of the Republic, include several in the energy sector. With huge dependence on Russian gas and questions about the outlook for diversification (whether Azeri or Iranian gas would be more reliable is a question), the AK Government must exploit the country’s renewable energy resources, which are actually much greater than the 2023 targets, more than double.

Meeting those targets alone would shave up to 1 per cent of GDP off the current account balance, not to mention the stable capital flows that could finance it. Because Turkey’s structural energy problem is so large and so widely understood, strategic and institutional investors would embrace a more open and fast-paced approach to investment in it.

Turkey has the second biggest onshore wind and solar potential in Europe, and third biggest geothermal potential, but development has been slow. Despite several wind power licensing rounds in the past decade, the last in 2007, with a potential for close to 10GW of installed capacity, only 1.8GW have been installed so far. Indeed, the 10GW 2014 interim target for wind power in the energy ministry’s 2009 strategic plan is far out of reach.

There are a number of issues to consider. As mentioned by the Global Wind Energy Council, Turkey’s main obstacles for development are its complex and bureaucratic administrative procedures. But there are other issues as well.

Turkey’s industrial organisation is dominated by local oligarchic structures, where foreign strategic involvement is limited. The renewables sector is no different. Most licenses have ended up in the hands of non-strategic investors – many are a portfolio item for diversified holding companies or in the hands of smaller local concerns, without the expertise to develop sites or present bankable business plans, who are reluctant to collaborate with strategic partners. Licenses were sought as a “trade,” as if they were a security that could be flipped for a profit, before any thought of building a wind farm. The most basic of financial and technical analysis has not been undertaken on a large number of such licenses. A more aggressive approach by the government to facilitate a secondary market that allows the transfer of such licenses to committed renewable firms would be fruitful.

The pending 2013 solar round may leave solar licenses in a similar state to wind licenses, despite some new pre-qualification measures. Local investors are expected to overwhelm the 2013 round’s relatively small 600MW license amount (Germany installed 7.5GW of solar last year alone). Small allocations would reduce the profitability of operations and their attractiveness for major strategic players.

While low feed in tariffs are not the most important issue, they are generally the lowest in Europe and among the lowest in the world: 7.3 US cents per kilowatt hour for wind and 13.3 cents for solar and geothermal, with modest top ups for a complicated local content system. For better or worse, the wind FIT has been below the average market price for electricity over the past three years. Unlike many countries in Europe that are fiscally stretched, Turkey can afford some modest level of subsidies for such a strategic issue.

With the European renewables sector facing a slowdown, this is a golden opportunity for Turkey to make its case. The authorities should encourage global renewables manufacturers to relocate to what should be a large market and export base. One only has to look at share prices to note the cost and demand pressures facing wind turbine and solar panel manufacturers in the US and Western Europe.

It is worth noting that the Government has a goal of reaching 3 per cent of GDP in R&D spending, from less than 1 per cent of GDP presently (OECD average is 2.5 per cent). Large onshore operations of renewable energy companies would certainly nourish the R&D outlook. FDI into such a technology-driven sector would be a quantum leap in value added and a big boost to employment.

In renewables, Latin America, South Africa, and the Gulf present lucrative and, for the time being, better opportunities than Turkey – they have had much success in these markets. Brazil, as of 2011, has three wind turbine manufacturing facilities, with another two under construction; Turkey has none and no indications that there are any on the drawing board. In May, Saudi Arabia announced plans for $109bn of solar investment over the coming 20 years, and will start with 2GW of licensing in the first quarter of 2013.

Closer to home, Romania is installing wind at a faster pace than Turkey. With just a single 14MW farm installed in 2009, it is widely expected that over 2GW will be reached by the end of 2012. Romanian wind is being developed by a who’s who of leading European energy players. Romania has achieved this despite its financial sector being crippled and a great deal of political turnover. Turkey has no such financial or leadership obstacles.

While foreign investors should be less worried about macro stability, rule of law and other basic investor rights, the World Bank’s ease of doing business ranking, where OECD member Turkey has slipped from 60 in 2010 to 71 in 2012, highlights the problems. Ernst and Young’s Renewable Energy Attractiveness Index paints a similar picture. As indicated by energy minister Taner Yildiz, efforts are being made to streamline processes for the development of renewables. To remember a slogan of sorts that Turkish progressives used in describing the constitutional reform referendum in 2010, “Yetmez ama Evet!” (Not sufficient, but yes!)

Matthew Vogel is Managing Partner at the renewable energy and agriculture investment firm Alternatif Investments, based in Istanbul. Alternatif Investments holds energy licenses and develops and invests in wind, geothermal and solar power. Previously he was Head of Emerging EMEA Research at Barclays Capital, and at the World Bank.

Related reading:
Turkey turns to coal and nuclear power, beyondbrics
Turkey GDP growth: from go-go to gold, beyondbrics
Football finance: top Turkish club plans hydropower plant, beyondbrics
Wind power in China: Turbine talent seeks overseas outlets, FT

September 15, 2012
IBM Expands in Turkey and Poland

IBM Expands in Turkey and Poland – Analyst Blog

Referenced Stocks: ACN, CAGR, HPQ, IBM, MSFT

In accordance with its expansionary policy, IT major International Business Machines Corp. ( IBM ) recently opened a couple of new branch offices in Turkey and Poland. The new offices are expected to boost its presence in the fast growing markets of Middle East, Central and Eastern Europe.

The two new branches in the cities of Adana and Bursa expand IBM’s growing network in Turkey. IBM already has a significant presence in the country with offices in Istanbul, Ankara, and Izmir. In Poland, the new offices are located in the cities of Krakow and Poznan that further expand the companies reach in the country. IBM currently has offices in Wroclaw, Katowice and Warsaw.

The new branches will help IBM to penetrate the regional IT markets and win contracts from both public and private enterprises in different verticals. Further, the new offices will help IBM to support the small and medium sized business sector in the regions. Regional governments are also expected to utilize IBM’s expertise in transforming their IT capabilities going forward. This will ensure steady order flow over the long term, in our view.

IBM and Emerging Markets

IBM’s policy of expanding into the fast growing regions of Africa, Middle East, Central and Eastern Europe is expected to offset ongoing sluggishness in the Western European markets. According to Gartner, IT spending in the Middle East and Africa is expected to reach $244 billion in 2012, with Saudi Arabia, Turkey and South Africa accounting for nearly 35% of this spending.

Moreover, Central and Eastern Europe are expected to spend approximately $158.0 billion on IT in 2012. Poland’s share is expected to be approximately 11.8% in 2012. According to research firm IDC, the Polish IT market will grow at a compound annual growth rate (CAGR) of 4.3% over the 2010-2015 period, achieving a value of $11.82 billion by 2015.

We believe that IBM will continue to focus on consolidating its presence in these emerging markets in order to capture the significant growth potential going forward. Moreover, expansion into these markets will also diversify IBM’s revenue base beyond the BRICS (Brazil, Russia, India, China and South Africa) countries, which contributed 19% of its revenue in 2011.

The company has opened nearly 100 new branch offices in non-BRIC regions during 2011. The company has also opened data centers, banking centers and research facilities in a number of African countries as well as in Singapore, Japan, Korea, Hong Kong and Vietnam.

Moreover, IBM is targeting the academic segment through relationships with universities for imparting information technology training to students, thereby boosting its socio-economic relevance in these regions. This is evident from the fact that IBM is already collaborating with a number of Polish universities in order to develop cloud computing technology.

Our Take

IBM expects growth markets to contribute 30.0% of its total geographic revenue by 2015, up from 21.0% in 2010. We believe that IBM’s aggressive expansionary policy will help it to achieve this target over the long term.

We also believe that IBM’s continued focus on global expansion will provide it with a significant competitive edge over its rivals including U.S. companies such as Microsoft Corp. ( MSFT ) , Accenture plc ( ACN ) and Hewlett-Packard Co. ( HPQ ) and also over smaller local companies operating in any given region.

We have a long-term Neutral recommendation on the stock. Currently, IBM retains a Zacks #2 Rank, which implies a short-term Buy rating.

via IBM Expands in Turkey and Poland – Analyst Blog – NASDAQ.com.

September 15, 2012
‘Turkey can become region leader in digital economy’

Turkey has the potential to be the regional leader in the world’s digital economy, said Niklas Zennström, chief executive officer of the London-based international venture firm Atomico.

Zennström (2nd R) has attended a dinner party given by Hanzade Doğan Boyner (4th L) and met figures from Turkish firms.

Atomico wants to make investments in Turkey, Zennström said at a dinner party Sept. 13 given by Hanzade Doğan Boyner, the Doğan Online founder and chair, and her spouse Osman Boyner, chairman of BD Automotive.

“We, as Atomico, believe that Turkey, which has the potential to become a regional leader in the digital economy, will be a regional technology hub. We will help some firms in our portfolio become active in Turkey,” he said, adding that Turkey is an exciting market for all the firms in Atomico’s portfolio.

Swedish entrepreneur, Zennström, is known for creating Skype, an innovative internet technology that allows users to make phone and video calls and send instant messages over the internet. Zennström’s Atomico invested in more than 50 innovative internet ventures including Rovio, Jawbone, Fab, Wrapp and Klarna.

Zennström has come to Istanbul to attend events organized as part of Atomico’s Global Open Office activity. The activity aims to bring internet entrepreneurs and public officials together. The company and Istanbul Bilgi University had also jointly organized a panel discussion on entrepreneurship and innovation on Sept. 13. Atomico aims to introduce firms in its portfolio to the Turkish market.

“We have been active in Turkey for one year. We have not made any investment there yet. We are mostly interested in technology firms. We want to make investments there. We, as Atomico, are after the next big thing,” he said at the event organized by Boyner.

Doğan TV Chairwoman Arzuhan Doğan Yalçındağ, Doğan Holding Chairwoman Begümhan Doğan Faralyalı, Hürriyet Gazetecilik Chairwoman Vuslat Doğan Sabancı, Vodafone Turkey Executive Board Director Serpil Timuray, Denizbank General Manager Hakan Ateş and Garanti Bank General Manager Ergun Özen were among the dinner’s attendees.

September/15/2012

via BUSINESS – ‘Turkey can become region leader in digital economy’.

September 15, 2012
Iran Imports From Turkey Surge To $8 Billion YTD – $3.2 Billion Worth Of Bullion In Q2 2012

Posted on September 11, 2012 by Mark OByrne| 9 Comments

Some $3.2 billion of Turkey’s $4.4 billion of gold sales to Iran in
the first half of the year were in bullion form.

People, companies and banks in Iran are buying gold as a safe haven
against months of sanctions induced currency devaluation.

This trend looks set to continue and may even intensify if Israel
attacks Iran in the coming months.

*Today’s AM fix was USD 1,731.00, EUR 1,352.77 and GBP 1,081.33 per ounce.
Yesterday’s AM fix was USD 1,732.75, EUR 1,355.09 and GBP 1,082.63 per ounce.

Silver is trading at $33.57/oz, €26.36/oz and £21.02/oz. Platinum is trading at $1,602.75/oz, palladium at $668.20/oz and rhodium at $1,025/oz.

Gold fell $8.80 or 0.506% in New York yesterday and closed at $1,729.20. Silver closed in New York at $33.57 down 0.06%.

Cross Currency Table – (Bloomberg)

Gold inched higher on Tuesday as investors await the German ruling on the eurozone’s bailout fund and a possible US Fed decision on QE3. There are expectations of a pullback by market participants, including clients, but what tends to happen after break outs like this is that gold continues to surprise to the upside and buyers only buy with conviction after gold is at record highs in dollar terms and again making some headlines.

0800 GMT tomorrow is the German constitutional court decision as to whether Germany can contribute to the European Financial Stability Mechanism.

The court has already rejected a last bid by Peter Gauweiler to delay the case (because of Draghi’s pledge of unlimited funds to buy government bonds) and its decision tomorrow is crucial to the future of the euro and the eurozone.

If Germany does not ratify the ESM treaty, the ESM and other bailout measures may be thrown into chaos leading to considerable market volatility tomorrow. A no vote would likely see a considerable increase in risk aversion.

Last week, Mario Draghi announced the ECB was ready to buy unlimited quantities of short-term government bonds of nations signed up to rescues from the ESM or the temporary European Financial Stability Facility it is designed to replace.

Gold has gained almost 7% in the past month on news of the ECB bond buying plans and hints from the US Fed minutes released saying that action would be taken to stimulate the US economy if necessary.

Gold is increasingly attractive as a safe haven for investors as a hedge against inflation due to rampant money printing by central banks.

Diversification into gold continues with gold holdings in exchange-traded products backed by gold rose to a record for the fifth straight session. The amount increased 6.3 metric tons, or 0.3 percent, to 2,480.43 tons.

Credit Suisse and Unicredit have joined JP Morgan, Goldman, UBS, Bank of America and other banks in revising upwards their gold forecasts.

Gold will advance to $1,775 an ounce in three months and $1,850 in 12 months, Credit Suisse Group said in a report which was picked up by Bloomberg.

UniCredit sees gold returning to $1,900/oz an ounce towards the end of 2012.

UBS increased its near term precious metals prices on “strong” likelihood of QE3, given the poor payrolls report. UBS raised the 1 and 3 month gold price estimate to $1850/oz from $1700. Silver to $37/oz from $32/oz and $35/oz respectively previously

Central bank demand internationally continues and demand for gold in the increasingly volatile Middle East remains robust as seen in data from the Istanbul Gold Exchange.

It showed that Turkey’s gold imports were 11.3 metric tons last month alone. Silver imports were 6.7 tons, the data show. Much of these imports may be destined for Iran where imports have surged an astonishing 2,700% in just one year – from $21 million to $6.2 billion.

In the first seven months of this year, Turkey’s exports to Iran have also skyrocketed to $8 billion, up from $2 billion in the same period last year. And it is widely believed that the major portion of the increase, which is $6 billion, stems from the export of gold.

There is speculation that the Iranian central bank is buying gold and that they may be accepting gold in payment for oil and gas in order to bypass western sanctions.

Turkey is paying for the oil and natural gas it is importing from Iran in gold, Turkish opposition deputies have claimed, drawing attention to the enormous increase in Turkey’s gold exports to Iran in 2012.

“Gold is being used as an instrument for payment. Under the guise of exportation, gold is being sent to Iran in exchange for oil,” Sinan Aygün, a deputy from the Republican People’s Party (CHP), has told Turkish daily Today’s Zaman.

Iranian people, encouraged by the state are also buying large quantities of gold and saving in gold in order to protect against inflation and the devaluation of the Iranian real.

Turkey’s total gold and precious stone exports have amounted in the first seven months of 2012 to nearly $8.9 billion, while the figure was only $1.8 billion in the same period last year. Some $3.2 billion of Turkey’s $4.4 billion of gold sales to Iran in the first half of the year were in bullion form.

Iranians purchased $4.8 billion worth of gold in 2012′s second quarter, up from roughly $1 billion in the first quarter of the year.

Iran appears to be circumventing western sanctions in this way.

The rise marks the continuation of a gold buying spree that saw sales in the first half of 2012 grow more than eight fold over the first half of 2011.

The US is said to be uneasy about Iran’s skyrocketing purchases of Turkey’s gold and has been following the sales closely.

There are rumours that Iranians purchase Turkish gold via third parties in order not to be noticed and that they entrust the purchased gold to the Central Bank of Iran (CBI), again via third parties.

The Central Bank of Iran supports the purchases to order to create an “economy of resistance” in the face of increasing sanctions from Western countries.

Iranians have turned to gold as a method of saving in the face of tightening Western sanctions.

People, companies and banks in Iran are buying gold as a safe haven against months of sanctions induced currency devaluation.

This trend looks set to continue and may even intensify if Israel attacks Iran in the coming months.

September 12, 2012