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Interview: “to Focus On Turkey’s Investment Environment” The Turkish Perspective, April 2019

I like to share the full interview, which we did with Presidency Investment Office’s Magazine; “The Turkish Perspective”, details are on my Linkedin post.

Turkey is a prominent country by the advantages that it offers foreign investors. Large and small many foreign companies determine Turkey as their focus due to these advantages. So, what about Turkey’s unknown advantages and post-investment processes?

LET’S SAY YOU abandoned your investment plan in a company in Turkey. Then this company increased its value incredibly within 1 year. Think about the regret you will experience and be prepared to Turkish companies’ surprises. We discussed the investment anatomy of Turkey with Managing Partner of Grow in EMEA, Ali Rıza Babaoğlan, who witnessed similar investment stories.

Let’s begin with an unspecific question. What unknown advantages Turkey has besides its well-known advantages?
What kind of charms do investors see we’re not aware of? To compare the investment values of countries in the world; issues such as the ease of starting a company, ease of getting construction or building permits, access to the most basic requirements such as transportation and electricity, credit and tax advantages are taken into account. The World Bank, accordingly, annually publishes the assessment of the ease of investment and scores of the countries. However, there are issues that are not measured here, and these are usually generated after investment. For example, the population is one of these issues. Another is the ease and distance to the larger populations. We have a very young and active population. It is also important to find valuable, trained labor force in terms of consumption. In addition to this, there is quick access to places with large population density, such as the European Union, Russia, the Middle East and Central Asia. These are the advantages that make the difference compared to other countries.

Which position does Turkey hold on a global scale by the ease of investment?
When we look at World Bank’s related report, Turkey is still the 43rd country by a score of 74.33 still in 2019 and comes in front of countries such as Bulgaria, Romania and India. The average of Europe and Central Asia is 72.34 which shows that Turkey positioned at above the average.

Which areas the investments made in Turkey shift to? What are the sectors you can call advantageous areas?
According to the data of the Central Bank, between 2003 and 2017, -35 of each- 100 investment, which we look at in the distribution of foreign investments coming to our country, goes to finance sector, -24 to the manufacturing sector,- 12 to energy sector and -8 to technology field. The remaining -21 is divided as -6 to Retail, -4 to Transportation and -3 to Construction. We are working with the aim of increasing the share in sectors such as technology and energy which we believe will provide added value.

The countrywide distribution of this investment is 11.9% from the UK, 11.6% from the Netherlands, 9.4% from the Gulf, i.e. the Middle East. In addition to our expertise in Technology and Energy, we follow the opportunities from different fields on behalf of our investors. For example, we have analyzed different sectors in Turkey through a Kuwaiti investment group that reached us and later became our client and have investigated the health sector in detail which they are interested in.

So what problems investors experienced entering the Turkish market?
Investment is directly related to trust. Every investor wants to develop and grow by investing in areas that he or she can trust. None of the investors would like to invest all or majority of his existing capital, usually they’d like to take small steps at the beginning. When we look at our country, there are many issues that can offer opportunities to investors and provide diversity. However, issues such as the lack of informing investors correctly and language and communication problems can be experienced from time to time. This can frighten investors who are trying to warm up in small steps and prevent them from signing up for larger investments from time to time. Investors should be able to work with the right and effective consultancy firms and to prevent the loss of funds while trying to grow their funds.

How do you see the progress of investments in Turkey and in the world? How do you evaluate the current reflexes of investors?
According to the United Nations’ UNCTAD data, despite the relative global economic and commercial growth, global investment flows decreased by 23% in 2017 from US $ 1.86 trillion in 2016 to US $ 1.43 trillion. The main determinant in this decline is the decline of investments in developed countries. Global mergers and acquisitions also decreased by 23% to US $ 666 billion. New investments made from scratch saw the lowest annual level since 2003 and saw the figure US $ 571 billion with a decrease of 32 percent. This can be considered as a negative indicator on a global scale in terms of long-term growth dynamics. However, in 2018, we invested in technology and directed our investors to this field.

An interesting story regarding this issue happened in the process of introducing a company named REM People to a group of investors in the field of Retail Technologies. The respective investor group was interested in the company, many meetings were held in detail, and then the investment was abandoned, stating that the company’s solutions were not mature enough to grow abroad. Of course, it is important to note that the 2018 fluctuations and the decrease in investment appetite in the global arena also have an effect. But then we invested in project because we believe in the company. In other words, we invested in a company that we found and believed for our investors. Afterwards, the company started to grow abroad, including the Middle East, Asia and Europe with the support we provided. Then they’ve started to receive great offers and clients and created powerful success stories again and again, thus we received the Highest Exporting Enterprise Award presented by Minister of Trade Ms. Ruhsar Pekcan and Chairman of Turkish Exporters’ Assembly Mr. İsmail Gülle.

As a partner and investor of the Company, we also took place at the event. Then, when we started to meet again with the related investor group, they realized that the company value had increased and that they had missed a great opportunity. Taking this as a reference, we use our ability to act quickly and effectively as a boutique and result oriented company; we find kind of businesses that we would invest in and present them to our clients. In most projects, we get shares or we are encouraged by the investor and we are building JVs together.

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What kind of investment opportunities available abroad, what kind of advises you can give to Turkish investors?
For a long time, I have been an active member of Outbound Investments Business Council of Foreign Economic Relations Board (DEİK) and Execution Board Member of Kuwait Business Council. According to the Foreign Investments 2018 Index, which has been published every year by our business council, the global foreign investment amounted to US $ 4.1 trillion in the 1990-2000 period, and this rate increased by 5.4 times to 22.4 trillion US dollars between 2000-2017. In the same period Turkey, on the other hand, raises the number of investments made abroad by 24-fold and reaches a level of USD 40 billion. According to the report, the United States, which was the winner of the past two years, has transferred the leadership to the United Kingdom this year. Turkish companies, which are trying to globalize their investments, have determined the UK as a base through an intermediary company they established or direct investments.

The United Kingdom became an attractive place to invest in through especially its proximity to Turkey and ease of access to consultants within the frame of issues such as international law, finance and investment. The country stands out with its tax advantage compared to other developed western countries, flexibility in the process of establishment and ease of use of the currency. In 2017, 18% of the transactions of foreign investments and acquisitions of Turkish companies were realized in the UK. We, as Grow in EMEA, offer direct support and services for the globalization of Turkish companies starting from the Middle East and commercialization in the world arena. Especially in regions close to our culture, there are great chances and job opportunities for middle-level investors. We believe that investments in countries such as Kuwait, Bahrain, Saudi Arabia, the United Arab Emirates and Qatar, where individual relations are also important, will be more prominent in the future as important issues of our Turkish business people.

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Managing Partner of Grow in EMEA,Ali Rıza Babaoğlan

Who is Ali Rıza Babaoğlan?
“I am an investment expert who has received Computer Engineering and MBA training and has maintained almost all of my professional life on investment consulting. I worked as a Manager for SAP, IBM, and Director of LinkedIn. Finally, while I was working for LinkedIn, we held plenty of works to establish and develop a market in Turkey and get into different markets. We were the investors thereby I had the opportunity to learn every aspect of investment through experience.

In Grow in EMEA which I’m the Managing Partner of, we provide guidance and support services to foreign investors who are interested in our country, especially in the Technology and Energy sectors since 2015. For the last four years, we have encouraged the investors of six different nations to invest in our country with twelve different investments. We invest in companies as well with our clients, especially in the technology sector. We have investments and company sales stories. Some of these have become well-known success stories in the industry.”

You can read about the original interview on above issue of The Turkish Perspective on page 24 – 25 and 26

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