IB KURELI ILAN 16 20x27cm.ai 1 31/08/16 18:45

2-3 içindekiler 2_Layout 1 22/09/16 13:52 Page 2

Coup attempt’s Turkish Banks Rise and Fall of effect on exports were successfully managed Everything minimal global and regional risks

Yavuz Canevi Mehmet Büyükekşi Hüseyin Aydın Forum Istanbul President, Turkish Chairman of the Board, The Chairman Exporters Assembly Banks Association of Turkey 04 32 34 Publisher On behalf of Özgencil Yayıncılık Tanıtım Organizasyon A.Ş Turkey: A country of Stronger and more Multidimensional ÖZGÜR ÖZGENCİL vast potential and reformist after the failed support for the sustainable growth coup attempt economy Editor in Chief & General Coordinator LÜTFÜ KEREM ÖZGENCİL

Deputy Editor SONGÜL ŞİRİN

Art Director BİLAL LEKESİZ

Executive Board Dr. Hasan Basri Göktan Hakan Ateş Ümit Leblebici Executive Chairman, CEO, DenizBank CEO of Prof. Dr. ASAF SAVAŞ AKAT Şekerbank Financial Services Group Türk Ekonomi Bankası (TEB) TEVFİK ALTINOK OSMAN. S. AROLAT 38 42 46 YAVUZ CANEVİ GAZİ ERÇEL TURKEY 20 OSMAN ERK Victory of a heroic nation Assoc. ALİ İHSAN KARACAN Dr. EKREM KESKİN TURKEY 24 ERTUĞRUL KUMCUOĞLU What is a state of emergencey as it pertains to Turkey? ASLAN ÖNEL ECONOMY 26 Prof. Dr. GÜL GÜNVER TURAN Turkey’s economy has proven to be resistant against shocks Prof. Dr. İLTER TURAN INVESTMENT 52 Prof. Dr. T. GÜNGÖR URAS Minister of Economy Nihat Zeybekci met international direct inverstors ZEKERİYA YILDIRIM INVESTMENT 56 IFC’s record breaking investments in Turkey Editorial Office FINANCE 60 İnönü Caddesi, Marmara Apt. 45/1 34437 Gümüşsuyu / İstanbul - Turkey Domestic savings have to be increased e-mail: [email protected] INVESTMENT 64 Phone: +90 (212) 241 70 84 - 85 Great transportation projects are going full force Printed by REAL ESTATE 70 Mim Ofset Basım The effects of urban transformation and ‘impressive projects’ on the economy Litros Yolu, II. Matbaacılar Sitesi ZE - 4 Topkapı / İstanbul / Tel: +90 (212) 612 44 04 TECHNOLOGY 76 World’s first smart village in Aydın Type of publishing: Local, periodical, yearly TOURISM 80 Turkish Airlines Open Antalya 2016 2-3 içindekiler 2_Layout 1 22/09/16 13:52 Page 3

ECONOMIC DIALOGUE TURKEY CONTENTS OCTOBER 2016 // YEAR 32 // ISSUE 64

Cover: Interview with Deputy Prime Minister Mehmet Şimşek: “There is lots of work to be done” Page 08

The Central Bank of the Republic of Turkey (CBRT): Turkish Economy: From Rebalancing to Price Stabilitiy Page 14

Portrait

82Turkish Musician Awarded International Secularism Prize Fazıl Say

Heritage 86 Discover the Beauty of Ancient Lycia 4-7 yavuz canevi 4_Layout 1 21/09/16 21:24 Page 2

perspective Rise and Fall of Everything 21st Century’s complex and ‘matrix-like’ structure is a good proof of the fact that our current ‘multi-polar’ world is in badly need a kind of leadership based on ‘collective mind’ and ‘sharing spirit’. This is the major challenge for the world.

OUTLOOK

YAVUZ CANEVİ Chairman of Forum Istanbul - Chairman of Türk Ekonomi Bankası (TEB)

04 October 2016 Economic Dialogue Turkey 4-7 yavuz canevi 4_Layout 1 21/09/16 21:24 Page 3

perspective

lobalization was the key word for the well being of the world population of both emerging countries as well as developed countries, until 2008 Global Financial Crisis. Since then economists have started to criticize heavily globalization because of the fact that it did not deliver what it was G believed to deliver, instead it has caused: • Maldistribution of gains nationally and internationally • It has increased inequality between rich and poor • It has reduced the growth of global trade and almost buried the WTO spirit • It has encouraged regional trade packs like TTIP, TPP • EU to break up with Brexit leading the way

In fact, we have been witnessing some counter-intuitive outcomes such as rising terror and Islamophobia, rising nationalism, racism and protectionism, US Presidential race, Russia’s increasing role in the Syrian war, a strange failed coup d’état in Turkey, the sustainability of negative interest rates and stimulus-economics and last but not the least creative destruction of deepening global digitalization and interconnectivity. On top of all these the lack of global leadership that we enjoyed during the 80’s did not help to find a global solution. At the same time, so called global institutions (Bretton Woods) were not capable of coping with this globalization driven financial and economic developments. Let us admit that the shift of economic power from the old word to the new world, like China, India is requiring a totally new approach which requires a new definition of global leadership who is prepared for a shared wisdom of which the world is lacking currently. 21st Century’s complex and ‘matrix-like’ structure is a good proof of the fact that our current ‘multi-polar’ world is in badly need a kind of leadership based on ‘collective mind’ and ‘sharing spirit’. This is the major challenge for the world. As the Nobel laureate economist Stiglitz puts it this is time to think about ‘’taming the globalization’’.

Economic Dialogue Turkey October 2016 05 4-7 yavuz canevi 4_Layout 1 21/09/16 21:24 Page 4

perspective

National Outlook Rise and Fall of Coups d’état In the last 60 years Turkey has faced couple of ‘’Coups d’état.’’ People in Turkey like me who have witnessed all of them since 1960, almost believed and convinced that this era was over, until July 15, 2016. On that particular night something strange occurred that no one properly described it. A group out of the Turkish military forces who is known as the strongest defender of secular democratic Unfortunately Turkish transformation including massive republic tried to attempt a ‘’Coup Governments for the last 40-50 infrastructural investments, d’Etat’’ and failed. Thanks to the years also fell for the same support of SMES, improvement in citizens who rushed to the streets misconception and time to time health services, expansion of and squares to protest. cooperated with the forces of trade and export sector and Now we understand that those moderate Islam in Turkey development of tourism. No plotters have been silently and without knowing their real doubt Turkey has transformed disguisedly implanted in the arm agenda. itself from Europe’s sick man into forces as well as other government This failed Coup d’Etat attempt one of its most vibrant institutions, from judiciary to the reminded one thing aned at th economies. However no one education and security forces for same time revealed another thing. denies the middle income trap the last 40-50 years by Gulenist It reminded that the Turkey’s and the need for new generation movement. These people could vulnerability to the military of reforms today. not be the representatives of intervention was still there, Indeed, what has occurred in traditional Turkish military. In fact despite the markets perception of July 15, does not reflect only a these plotters did not meet any the opposite for decades. power struggle between model of human being not to However it also revealed that in government and its challengers, mention soldiers. They are a kind the society, there is a newly it also highlights the of GMO, i.e. Genetically Modified developed, highly strong middle- determination of the new “middle Organism, who are brainwashed class. This new asset of the class” to ensure that Turkey does and robotized by those who society proved to be willing and not revert to a political system believed and claimed themselves able to be mobilized against that would damage its recent as “moderate Islam” and by extremist threats and stability economic and political gains. We unfortunately the promotors of destruction s. Therefore Turkey’s should really read correctly this the moderate Islam in the western vulnerability to any coup d’Etat is new middle class power. Because world. In fact EU and i n general out of question today, once for all. they have prospered due to the Western World, rather than Turkey owes this new ‘’Asset’’ free, deregulated and encouraging a secular, democratic to AKP’s political economy. In decentralized open market Turkey, they preferred to support fact over the past nearly two environment. So, they will not an unrealistic model of “Moderate decades, Turkey has gone support regime that fails to Islamist Turkey.” through a remarkable advance its interests and deliver

06 October 2016 Economic Dialogue Turkey 4-7 yavuz canevi 4_Layout 1 21/09/16 21:24 Page 5

perspective

In retrospect as FITCH stated recently, overwhelming public opposition to the coup attempt and subsequent unity of major political camps was the most important and valuable outcome of this failed attempt. This could and I sincerely believe will lessen political instability. That is why time is ripe for a dnew, forwar looking social contract to establish a more deepened and institutionalized democratic platform. This is another rare opportunity again to consolidate economic prosperity. Therefore a secularism and Islamism, Turkey’s strength. If Turkey prosperous and inclusive democracy and autocracy. manages to do this in short democracy is the only way out for That is why Turkey has been so period of time the image of the Turkey and it would restore a patient to use EU anchor for the country will be quickly restored model that the countries of the last 55 years to be part of the and international markets wider middle East desperately western values which are a perception will reward Turkey. need, not the ‘’Hypothetical combination of secular In fact long time stagnation of Moderate Islam’’. democracy with a free market growth, negative interest rates, This is why EU anchor is economy. However EU has been low yield s in the developed world important. In other word, EU dragging its feed and keeps on caused serious frustration anchor is the easiest and safest marginalizing the country. This leading to a strategy shift for the way to guarantee further was simply not fair due to the fact international institutional democratization and that Tur key is too intertwined investors and fund managers, strengthening and improving the with the west: toward EMs like Turkey which credibility of the country. In Economically Turkey’s main have been traditionally avoided. reality, credibility trap is much trading partner is EU reaching It is true however that this was a important and crucial than $150 billion, six times larger than ‘’Push factor’’ shift rather than middle income and productivity Russia. Foreign Direct ‘’Pull factor’’ At this Juncture, for trap. Investment and portfolio an EM, it is extremely crucial that In fact EU anchor is still investment also %90 comes from it carries an ‘’Investment Grade’’ remains a kind of ‘’Life Jacket’’ the west, Turkey is one of the by at least two Rating A gencies. for Turkey because it is inclusive Loyal members of the Western Turkey is aware of this critical of major structural reforms, like Security alliance, like NATO. issue and is trying to push further democratization, freedom Therefore, EU and the West hardly a new generation reforms of speech, rule of law, good (USA) have no excuse not to keep which will improve the governance, improved business Turkey in their secular productivity and push the growth environment and transparency. democratic camp. 50 years of upward in sustainable way. Let us face it, patient and marginalization of Therefore Turkey is determined Turkey happens to be in a the country has caused a big to combine push and pull factor strategic location where conflict disappointment already. It is time to have competitive advantage brews between the forces of to rethink. among the EMs. EDT

Economic Dialogue Turkey October 2016 07 8-12 mehmet şimşek 5_Layout 1 21/09/16 21:21 Page 2

Interview with Mehmet Şimşek, Deputy Prime Minister Republic of Turkey “There is lots of work to be done” We have launched comprehensive structural reform agenda in order to reach targets in Medium Term Programs. With the help of reforms we will increase the contribution of productivity and investments, decrease the current account deficit and ultimately upgrade from an upper middle income country to a high income country and increase the welfare of our society.

What kind of a picture do you get functioning of economy and markets when you evaluate the economic wi thout allowing any contrary effect to indications before and after the emerge. Thanks to our well-established coup attempt of July 15? What was financial markets and measures taken the effect created by the coup by our government and relevant attempt on the economy? Were institutions, the impacts were these effects surmounted? measurable and short-lived. In a very The failed coup attempt was an short period of time we have seen a extraordinary stress test for our quick recovery in our financial markets. economy. As a response we have This impetuous normalization is a clear immediately taken all necessary indication of our economy’s strong and measures to ensure efficient solid macro fundamentals.

08 October 2016 Economic Dialogue Turkey 8-12 mehmet şimşek 5_Layout 1 21/09/16 21:21 Page 3

economy

The real sector and daily obligation whatsoever. There was two general elections held last business activity in Turkey have a modest slowdown in economic year, increasing geopolitical not experienced any significant activity in the second quarter of tensions in our region, weak impact stemming from this 2016. Nevertheless, in July, performance in o ur trade partners deplorable development. Turkish industrial production declined and the volatility in global economy keeps functioning significantly due to less working financial markets. efficiently in its natural way. days compare to last year and the In the first quarter of 2016 GDP In the first week following the effect of unsuccessful coup growth realized as 4.8%. Domestic event, the Turkish Lira has attempt. However, we have a demand was buoyant. However, depreciated 6% against USD and strong export growth in August. the contribution of net external 5% against EUR while BIST100 So we expect that the negative demand was negative because of decreased by 13% and effect of failed coup attempt on relatively low demand in export government domestic bond economic activity will be markets mostly due to the yields increased by 90 bp since temporary. relations with Russia, geopolitical July 15. In addition, the country We have full determination to tensions around us and weaker risk premium has deteriorated keep going with the rest of the demand in oil exporter countries. somewhat as Turkey’s CDS reform agenda. There is lots of In the upcoming period, one of (5 years) premium increased by work to be done and we are eager the main downside risks on 60 bp during the same period. to materialize our commitments growth arises from tourism sector. Turkey experienced almost USD 1 to our society and international Tourism industry has been billion worth of portfolio outflow community. affected negatively by Russian from equity and government sanctions and domestic bonds held by non-residents in Turkey has shown a better developments in 2016. However, the second half of July. performance than most the improvement in relations with Together with the favorable countries with regarding to Russia is anticipated to limit this outlook of global risk appetite, economy in 2016. What will be negative effect to some extent in the market indicators exhibited a Turkey’s economic growth the upcoming months. tendency of strong rebound. As realizations by year’s end? Will Furthermore, in the upcoming of September 7, 2016 Turkish Lira the targets predicted in the period coup attempt might create has depreciated 1.6% against USD medium term program be a moderate slowdown in and 2.6% against EUR while realized? consumption and in investment BIST100 decreased by 6.3% and In 2015, Turkish economy grew demand via expectation channel. government domestic bond by 4.0%, more than twice the In the Medium Term Program yields increased by 30 bp since growth rate of EMs excluding (2016-2018), growth rate projection July 15. In addition, the country China and India (1.7%). This for 2016 was 4.5%. When the global risk premium has deteriorated growth was achieved in spite of and domestic factors are taken slightly as Turkey’s CDS (5 years) into account, growth rate could premium increased by 12 bp realize below 4% in 2016. We have during the same period. launched comprehensive We expect a significant amount structural reform agenda in order of capital inflow in the coming to reach targets in MTPs. With the months due to the new cash help of reforms we will increase repatriation law, put into force on the contribution of productivity August 19th. We want our citizens and investments, decrease the abroad to bring their assets back current account deficit and into Turkey with no tax ultimately upgrade from an upper

Economic Dialogue Turkey October 2016 09 8-12 mehmet şimşek 5_Layout 1 21/09/16 21:21 Page 4

economy

middle income country to a high asserted resilience to external concretizing the information income country and increase the shocks during unfavorable global regarding to financial position welfare of our society. financial conditions since mid- and credibili ty of issuers via 2013 although many analysts rating. Thus, they should focus on In spite of Turkey’s better listed Turkey among most analyzing macroeconomic performance than most vulnerable countries. fundamentals rather than cyclical countries with regard to Therefore, as Turkish situation. In addition, some economic indications, these government, we insist on our failures in the evaluations of are not reflected in the credit claim that Turkish economy is credit rating agencies ratings of the rating agencies. underestimated regarding to its particularly before the global How do you regard the position and performance. Very crisis have observed which led to attitude of rating agencies soon after the coup attempt of questions about their reliability. toward Turkey? July 15, a similar action was taken Thus, there is no doubt that the Turkey made great progress in by S&P that downgraded Turkey’s market participants make good transforming its economy into a credit rating which did not find use of many tools apart from stable, dynamic and well- consistent response in the credit ratings to analyze the functionin g market economy markets. Investor perception credibility of countries. In this thanks to the prudent about Turkey did not deteriorate regard, I would like to emphasize macroeconomic policies and significantly after the S&P’s haste that credit ratings agencies comprehensive structural reforms downgrade. I would comfortably should pay greater attention to implemented in the last fourteen state that the S&P’s latest rating reflect the true picture of years. Turkey has strong action lacks reasonable basis financial position and credibility macroeconomic fundamentals while no significant deterioration to their ratings. such as solid fiscal position, has been observed in the resilient and profitable banking country’s macroeconomic You have emphasized the sector and sound households indicators. reforms Turkey should make in balance sheet with no open FX Credit rating agencies are many platforms. What are your position. Turkish economy has expected to fulfill a function of priority reforms in economy

10 October 2016 Economic Dialogue Turkey 8-12 mehmet şimşek 5_Layout 1 21/09/16 21:21 Page 5

economy

management? For the including Turquoise Card, • We will give support for international investors, what incentivized R&D, and intr oduced employees with high skills and will be the attractive aspects of “Dowry and Housing Accounts qualifications, the new incentive system? Schemes” and a project-based • We will introduce project- Our ultimate goal is to upgrade flexible investment incentive specific tax incentives Turkey from an upper middle scheme. including corporate tax income country to a high income With the help of these reduction and exemptions. country and increase the welfare regulations, Turkey will become On the o ther side, we put th of our society. Thanks to the the 14 country in the World emphasis on encouraging strong support from different Bank’s Ease of Starting a households to save more via, Business Index from its current segments of society after the • Severance pay reform, failed coup attempt, we have rank in 94th place. • Auto-enrollment in private speeded up the reform process As of September, a more pension system, and put a strong will to boost flexible, project-based incentive • Dowry and First Time House investment and savings with system is put into force in order Buyers Schemes. eagerness. So far, we have made to support strategic investment fast progress in accomplishing projects. In this context; our reform agenda. We passed • We aim to reduce the How would you describe a Bill on improving investment bureaucratic burden of the Turkey to international climate, introduced automatic investors, investors in spite of the enrollment to private pensions, • We will cover the state impression that is created established a Sovereign Wealth, insurance premium share of the for Turkey? implemented labor market investors up to 10 years, Turkey has been passing flexibility / participation • We will decrease the energy cost through a challenging period enhancing regulations, enacted of investor companies by a since mid-2013. It was the “International Workforce Law” determined portion, political stability brought by the gov ernment that enabled a smooth transition during this period. By implementing decisive, well-designed and prudent macroeconomic policies, the stability and confidence has been restored in the economy wide. All institutions of Turkey are on job as regular. Efficient functioning of economy and markets has been ensured in Turkey for more than a decade. Thus, Turkish economy has managed to maintain its robust position despite unfavorable environment. Turkish banking sector is safe and sound with strong capital structure and high asset quality. Turkish households

Economic Dialogue Turkey October 2016 11 8-12 mehmet şimşek 5_Layout 1 21/09/16 21:21 Page 6

economy

enjoy good financial position that Turkey has been perceived At times, certain circles are with low indebtedness no of as an economic success story to a stating that Turkey is moving which is FX denominated. wider extend in the international away from the EU. Is Turkey Turkish government keeps platforms with comprehensive really moving away from pursuing well-disciplined public econo mic transformation the EU? finance. No deterioration has achieved since early 2000s. Turkey continues to take been experienced in debt service There is no doubt that Turkey resolute steps towards full performance of corporate sector has a huge potential in terms of membership. Development of despite recent fluctuations in economic growth and democracy and human rights, financial markets. development. With its vivid institutionalization of free Turkish corporate sector has economy, Turkey can easily realize market economy and sufficient margins to absorb the its potential. In the long run establishment of modern life possible negative effects of perspective, Turkey has some standards in every field are unfavorable developments. I advantage both in demographic among the most fundamental shoul d emphasize that effects of structure and capital stock dynamics of Turkey's EU extraordinary events and external indicator. As Turkish government, policy. shocks remain limited to we have been constantly Among 33 chapters 16 of financial markets and short-lived introducing reforms to improve them have been opened an thanks to Turkey’s strong Turkey’s competitiven ess by one of them has been closed fundamentals and measures addressing macroeconomic temporarily. The opening of the taken by the government and challenges and improving chapter 33 was seen as institutions. investment and business climate. significant since it is usually In addition, macroeconomic Therefore, I am confident to opened when a candidate nears developments have been closely state that Turkey will continue membership, meaning it was monitored by relevant attract international investments contributing to “keeping the institutions, and all measures will with its strong macroeconomic accession process alive.” We're be taken swiftly if deemed fundamentals and promising committed to the EU accession

necessary. I would like to remind potential. process. EDT

12 October 2016 Economic Dialogue Turkey

14-19 merkez bankası 6_Layout 1 21/09/16 21:18 Page 2

economy TURKISH ECONOMY: FROM REBALANCING TO PRICE STABILITY Turkey has achieved considerable success in recent years in delivering a rebalancing in the economy. Timely and targeted macro prudential measures have contributed to the sustainability of economic growth. As a consequence, the growth rate has been remarkably stable despite the massive global and geopolitical shocks.

he global financial crisis The heightened volatility in has led to a reassessment capital flows during the post-crisis Tof macroeconomic policy period has led to significant formulation across the globe. challenges especially for Countries have expanded their emerging economies by policy toolkits in recent years to worsening policy trade-offs. Such deal with macro financial risks. an environment made additional

14 October 2016 Economic Dialogue Turkey 14-19 merkez bankası 6_Layout 1 21/09/16 21:18 Page 3

economy

macroeconomic and financial policy tools more valuable. Therefore, many central banks have incorporated financial stability into their monetary policy framework. Against this backdrop, the Central Bank of the Republic of Turkey (CBRT) and the country’s regulatory authorities have taken a number of steps in recent years to bolster the resilience of the economy and to provide it with a sustainable and stable growth path. The CBRT developed and adopted a new strategy by end- 2010, in which reserve Murat Çetinkaya, Governor of Central Bank of Turkey requirements, an interest rate corridor and liquidity auspices of the FSC, the Turkish percent between 2011 and 2015, management were actively economy has become more and has withstood many episodes included in the policy toolkit. resilient to global shocks. Since of global turmoil since 2011, such Moreover, a formal Financial 2011, the current account deficit as the European banking crisis, Stability Committee (FSC) was has been on a steady declining the Fed taper tantrum and the rate founded to respond to macro- trend and the sensitivity of hike, the Chinese rebalancing and financial risks in a more economic activity to capital flow the recent geopolitical risks. systematic and coordinated volatility has fallen considerably, In the period after 2011, several fashion. Accordingly, the Banking implying a more balanced and steps have been taken for loan Regulation and Supervision sustainable growth path. growth, aiming to preserve Agency has als o taken a financi al stability and to improve comprehensive set of measures to A Balanced Macroeconomic financial deepening contain excessive leverage and to Environment simultaneously. It should be improve households’ financial The Turkish economy has stressed that these steps have position. The new policy achieved important progress in produced valuable results such as framework has been effective in the last few years in rebalancing diminishing current account reducing macro financial risks the economy. Both the trends in deficit and changing the credit related to external financial credit growth and the substantial composition in favor of conditions by engineering a “soft improvement in the current commercial loans. landing” of the economy since account balance without any Not only has the current 2011. It has successfully shifted disruption to economic activity account deficit reduced markedly the composition of aggregate have been major improvements in in recent years, but the demand towards a more balanced strengthening the resilience of the composition of external financing growth path without prejudice to economy. has also improved significantly. the price stability objective. Accordingly, Turkey’s economy The CBRT has used reserve Coupled with other macro now rests on a firmer and more requirement policies to improve prudential measures taken by stable footing. Growth has been the composition of bank other institutions under the stable, reaching an average of 4.4 liabilities. To this end, reserve

Economic Dialogue Turkey October 2016 15 14-19 merkez bankası 6_Layout 1 21/09/16 21:18 Page 4

economy

requirement ratios and account balance is expected to the tight monetary policy stance remuneration rates were continue in the medium term and macro prudential policies, differentiated across several thanks to the sustained fiscal household income has been dimensions, providing incentives discipline and the more prudent increasing at a faster pace than for the banking system to prefer borrowing behavior of the private household debt since 2013. (i) core liabilities over non-core sector, especially of the Therefore, household debt liabilities, (ii) long-term over households. The reduction in the payment capacity has been on the short-term liabilities, and (iii) borrowing requirement of the rise. This trend, which is expected Turkish lira (TL) over FX public sector, also reflected in the to continue in the period ahead, liabilities. reduced external financing need, bodes well for financial stability, Among these objectives, decreased the public’s role in the as well as for reducing the current lengthening the maturity of saving gap and contributed to the account deficit and controlling external debt and increasing the narrowing of the current account inflationary pressures. share of core liabilities were seen deficit in recent years. Thanks to as partic ularly essential to boost Price Stability the resilience of the financial The rebalancing in the Turkish institutions against external economy in the last five years will finance shocks. support the CBRT’s price stability These measures were effective objective through various in lengthening the maturity of channels. The decline in the external bank liabilities. As a current account deficit and credit consequence, the current account growth will contain excessive deficit is now entirely financed fluctuations in capital flows and through long term capital and FDI exchange rate volatility, and flows (Figure 2). hence contribute to reducing the The improvement in the current volatility of inflation. Moreover,

16 October 2016 Economic Dialogue Turkey 14-19 merkez bankası 6_Layout 1 21/09/16 21:18 Page 5

macro prudential measures that Recently, inflationary pressures Return to Normal Times incentivize banks to prefer long have eased due to relatively and Simplification of the term borrowing over short term, stable exchange rates and the low CBRT Policy Framework domestic currency borrowing over course of commodity prices. The The CBRT introduced a number foreign currency, and to rely on tight financial conditions are also of unconventional tools to contain core liabilities over non-core containing domestic demand and the challenges related to the liabilities helps to contain the supporting the disinflation excessively expansionary liquidity associated risks regarding process. across the globe. These tools external borrowing, also Accordingly, core inflation increased the flexibility of strengthening the monetary indicators have monetary policy, and proved policy transmission mechanism. trended downwards in the first useful in managing the impact of The CBRT has maintained a half of the year, although those rapid swings in external cautious monetary policy stance headline inflation remained financial conditions. On the other against inflatio nary pressures volatile due to unprocessed food hand, the inherently complex without hampering financial prices (Figure 3). Inflation is nature of the new tools has stability. Turkey has managed to expected to fall to 7.5 percent at complicated the communication keep inflation under control the end of 2016. The CBRT will of monetary policy through time. despite significant external adopt a gradual but decisive Therefore, following the shocks which led to a sizeable approach to bring down inflation norm alization signals by the Fed depreciation in the domestic to the target of 5 percent in the and the waning global volatility, currency since 2011. Although medium term. Accordingly, the CBRT decided to gradually pass-through effects caused the inflation expectations and the simplify its monetary policy targets to be missed on the pricing behavior will be closely framework and announced a upside, inflation remained in monitored and a cautious roadmap to that goal in August single digits, hovering around 8 monetary policy stance will be 2015. The main point of the percent in recent years. maintained. strategy is the simplification of

Economic Dialogue Turkey October 2016 17 14-19 merkez bankası 6_Layout 1 21/09/16 21:18 Page 6

economy

interest rate and liquidity policies (MPC) announcements and the A New Era in to enhance the communication Inflation Report as the main Monetary Policy and to improve the effectiveness communication documents. The The CBRT will continue to of the monetary policy. The CBRT constructed an effective commit to price stability as the CBRT’s ultimate goal through communication line with the overriding objective. To this end, simplification is to achieve a public and has reviewed the the CBRT will not only maintain narrow and symmetrical corridor strategy regularly to sustain a a cautious monetary policy but and provide funding via a single healthy and uninterrupted also work intensively to identify rate. In this respect, the CBRT functioning of this line. In order to the structural factors related to already took steps to narrow the further strengthen this price stability. In addition to the interest rate corridor (Figure 4), communication framework, the simplification of the monetary improve the predictability of the CBRT recently announced a new policy framework and adoption of TL liquidity policy and to enhance set of communication practices. a new communication strategy, the efficiency and predictability of The new set includes meetings on the CBRT will seek to increase the TL liquidity management. technical issues with investors the coordination with all relevant This new simplified setup is and analysts, regular meetings parties in dealing with structural expected to yield a more organized with investors in obstacles to achieving and transparent and predictable financial centers abroad, meetings maintaining price stability. To monetary policy framework. with chambers of industry and this end, the CBRT staff have An effective communication commerce and other corporate been visiting non-financial strategy is an essential part of sector representatives, periodic companies in order to monetary policy. Since the start of meetings organized with incorporate real-time information the implementation of the representatives of media collected from the real sector in inflation targeting framework, the institutions and the financial monetary policy decision making. CBRT has effectively utilized press, and meetings with bank One important example of Monetary Policy Committee economists. structural issues related to price

18 October 2016 Economic Dialogue Turkey 14-19 merkez bankası 6_Layout 1 21/09/16 21:19 Page 7

economy

stability is volatile food price Committee, a significant of economic growth. As a inflation. The CBRT has been improvement is expected in the consequence, the growth rate has working jointly with other volatility of food inflation in been remarkably stable despite relevant institutions to address Turkey, which will improve the the massive global and this structural problem. Recently policy trade-offs faced by the geopolitical shocks. Meanwhile, the “Food and Agricultural authorities. fiscal discipline was maintained, Products Markets Monitoring the financial system proved and Evaluation Committee” has Conclusion resilient, and inflation stayed in been founded to deal with some To sum up, Turkey has single digits. Going forward, the of the inefficiencies in the fresh achieved considerable success in CBRT will not only continue to food sector in particular. The recent years in delivering a pursue price stability as the Committee brings together the rebalancing in the economy. primary objective, but also relevant economic institutions Timely and targeted macro support economic stability to and aims to keep food price prudential measures have reduce macroeconomiyc polic inflation at stable and reasonable contributed to the sustainability trade-offs through effective levels. The Committee monitors communication and information the food market, evaluates sharing with relevant parties. activities and deals with The CBRT’s cautious policy structural issues such as licensed stance, tight macro prudential warehousing, specialized framework as well as the new commodity exchanges, communication and coordination agricultural subsidies, producer practices will help the Turkish organizations and data collection economy to reinforce its strong and compilation. Through the fundamentals and to permanently effective implementation of the reduce the inflation rate towards

policies recommended by this the target level of 5 percent. EDT

Economic Dialogue Turkey October 2016 19 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 2

turkey

20 October 2016 Economic Dialogue Turkey 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 3

turkey

Economic Dialogue Turkey October 2016 21 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 4

turkey

22 October 2016 Economic Dialogue Turkey 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 5

turkey

Economic Dialogue Turkey October 2016 23 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 6

turkey

24 October 2016 Economic Dialogue Turkey 20-25 ispat 6_Layout 1 21/09/16 21:15 Page 7

turkey

Economic Dialogue Turkey October 2016 25 26-30 ekonomi 5_Layout 1 21/09/16 21:15 Page 2

view

Turkey’s economy has proven to be resistant against shocks

The Turkish economy which has shown the biggest growth rate of 5.2 percent among OECD countries after the global crisis is expected to have a growth rate of 3.5-4 percent at year’s end despite all difficulties.

26 October 2016 Economic Dialogue Turkey 26-30 ekonomi 5_Layout 1 21/09/16 21:15 Page 3

economy

urkey’s economy is maintenance of the energy standing strong against projects and the continuation of Tshocks; coup attempt, the ongoing projects are now in terror attacks, recession in global line. economy, geopolitical tensions Yet another indication of the and the uncertainty created by normalization of the relations FED in international finance between the two countries is markets. The economy continues evident by the fact that Turkish to grow in year 2016 and the Airlines increased its daily growth is predicted o reach 3.5 flights to Moscow to 1 1 flights, percent at year’s end. thus making it its most frequent After the coup attempt Turkey destination. Russia on the other has managed to gather its hand gave permission for charter strength thanks to the measures fights and 500 thousand Russian taken in economy. The domestic tourists are expected until year’s and foreign threats were skillfully end. averted due to the measures Another country Turkey has taken by the government and the resumed good relations with is Central Bank. The transition Israel. After the severing of from USD to TL was carefully relations due to the Mavi monitored and the consumer Marmara boat incident, the confidence index recorded an Turkish Israeli trade volume has increase of 11 percent in August. reached 5 billion USD. Both One step taken by the countries are negotiating government to strengthen the touri sm, construction, oil- economy was the normalization chemical deals. If all goes of the tense situation caused by normal, the trade volume the downing of the Russian plane between the two countries is that threatened Turkish air space. predicted to exceed 10 billion The rekindling of the commercial USD in five years. activities between Turkey and Russia, the restitution of the The highest growth among tourism relations, the OECD countries after the global crisis was recorded by Turkey. As the economy management always points out Turkey is on the track for becoming a strong country with sustainable growth and high income. At this point structural reforms should be implemented and monitored for efficiency. Recent reforms included the opening of special employment offices and introduction of part time jobs to

Economic Dialogue Turkey October 2016 27 26-30 ekonomi 5_Layout 1 21/09/16 21:15 Page 4

economy

ensure the flexibility of labor The report also stated that predictions, the lowest of the past force market. Turkey has Turkish policy makers had a seven months. recorded the highest growth rate tough job due to “the clashes According to the data of of 5.2 percent among OECD taking place at the south Turkish Turkish Statistics Association, countries after the global crisis border, the tensions experienced the domestic producers’ price and the sustainability of this in the eastern Turkey, the index (YI-ÜFE) showed an success is directly related with Russian restrictions that increase of 0.08 percent. the structural reforms. Turkey’s continued until July and the Annual inflation in consumer growth rate prediction on millions of immigrants, but ins prices was 8.05 percent; domestic OECD’s Economic Analysis spite of these difficulties, a producers’ prices were 3.03 Report for Turkey is 3.9 percent growth of almost 4 is expected percent. The consumer index was for 2016 and 3.7 percent for 2017. for 2016.” 4.53 percent compared to The report states that Turkey December last year, 8.05 percent has shown remarkable resistance OECD Inflation expectation compared to same month last against the tough global With regard to the inflation year and 7.98 percent compared economic conditions and that it expectations for Turkey for 2016 to average of twelve months. can achieve more by improving and 2017, it was believed that the The expectations were 0.05 the living standards of the inflation would decrease from 7.9 percent monthly and 8.58 percent population and to increase to 7.4 percent this year and annually in consumer index. The productivity in order to attain increase from 7.3 to 7.5 percent core inflation decreased from sustainable growth. The report next year. Turkey is continuing to 8.70 to 8.41, recording the lowest also pointed out that economic fight inflation and hoping to in 11 months. reform should be targeted bring it down to 5 percent in The fact that the consumer especially in difficult times and medium term. index has started decreasing the new reforms should aim the indicates that the economy is strengthening of the economic The lowest inflation rate getting back to normal after the resistance and social harmony, for the past seven months coup attempt. improve working conditions and was in August increase the Turkish companies’ The consumer index (TÜFE) The budget is showing a participation capacity to global for August recorded a fall of strong performance evaluation chains. minus 0.29 percent beyond One of the strongest aspects of economy is financial discipline. As the global fragilities continue, Turkey is going strong on financial discipline. The budget showed a deficit of 5.4 billion TL in July 2015 but made an improvement of 5.5 billion, by adding 129 million TL this year. The primary surplus showed great performance. In July, the primary surplus was 4.3 billion TL compared to last year’s 4.7 million TL, increasing 5.6 percent and yielding 31.9 million TL.

28 October 2016 Economic Dialogue Turkey 26-30 ekonomi 5_Layout 1 21/09/16 21:15 Page 5

economy

The July budget figures Turkey ahead of 20 percent in Peru, 1.5 percent in increased by 6.1 percent and countries with regard to Bulgaria and minus 27 percent in became 42.5 billion TL. The public debts Kazakhstan. expense budget decreased by 6.6 According to IMF predictions, percent and became 42.4 million Turkey is ahead of many other The current account deficit TL. countries that have “lower level is at lowest since last 6 Budget revenues increased by investments can be made” grade. years 14.4 percent becoming 317.5 Among 23 countries that are In line with Central Bank’s billion TL for the period January- located in this group in line with data, the current deficit has July, compared to same period their GDPs, there are only 3 decreased by 1 billion 406 million last year and the expense budget countries above Turkey. USD compared to last year and increased by 12.1 percent and The public debt in GDP is became 2 billion 863 million became 316.3 billion TL expected to be 21.9 percent this USD. Consequently 12 month compared to last year. year in Turkey, while it is 7.5 current deficit decreased to 27

Economic Dialogue Turkey October 2016 29 26-30 ekonomi 5_Layout 1 21/09/16 21:15 Page 6

economy

billion 249 million TL. The deficit’s rate to GPD was wear industry made exports decrease of foreign trade balance calculated as 4,8 for 2016 and 4.6 worth 1 billion 612 million USD deficit by 1 billion 724 million percent for 2017. followed by chemical substances USD to 3 billion 764 million USD industry’s exports worth 1 billion and the decrease of the deficit in The increase trend in 207 million USD. August’ the balance of primary income by exports is expected to greatest exports were recorded 292 million USD to 442 billion continue by the automotive industry (23.4 USD had been effective in the In August the exports percent), olive and olive oil above development. increased by 6.9 percent and industry (36.4 percent). On the other hand, the balance became 11 billion 157 million Exports to 130 countries of services decrease by 560 USD. This was the highest since experienced increases while million USD and became 1 billion 28 months. According to the data exports to 102 countries 378 million USD. of Turkey’s Exporters Assembly, decreased. Some of these In non-monetary gold item, 109 Turkey’s exports became 11 countries are: Germany (17.4 million USD worth net imports billion 157 million with an percent increase), Britain (1.4 were realized on last May, while increase of 6.9 percent compared percent decrease), Iraq (4.2 the net exports this year was 505 to last year. There was a loss of percent decrease), USA (19.6 million USD. 3.1 percent in exports during the percent increase) and France The net revenue resulted by first 8 months of 2016, compared (8.3 percent increase). travel under balance of services to last year yielding 92 billion Out of 20 most frequently item, decreased by 559 million 652 million USD. During the 12 exported countries in August, the USD yielding 1 billion 222 months there was a decrease of 5 top ones were Bulgaria (82.9 million USD compared to last percent yielding 140 billion 906 percent), Israel (34.6 percent), year. million USD. and Iran (23.6 percent). Net outputs under the balance The greatest exports were The EU countries showed an of primary income, decreased by realized by the automobile increase of 12.7 percent in 315 million USD becoming 387 industry showing an increase of exports compared to last year million USD compared to last 23.4 percent and yielding 1 and Oceania countries recorded

year. The current account billion 680 million USD. Ready an increase of 48.9 percent. EDT

30 October 2016 Economic Dialogue Turkey 160819 imaj 20x27 ENG.pdf 1 19.08.2016 10:39 32-33 tim 2_Layout 1 21/09/16 21:14 Page 2

export

Coup attempt’s effect on exports were minimal

Turkish economy is growing faster than most of the OECD countries and we believe this trend will continue in the future. Turkish economy is consecutively growing for the last 26 quarters. In the first quarter of 2016, GDP growth was 4.8% and we expect the economy to continue high growth performance for a long time.

n the night of July 15th, Exporters Assembly (TİM), we OUTLOOK 2016, Turkey faced a also sent letters to all diplomatic Odishonorable and missions in Turkey, NGOs all inhumane act of terrorism and over the world, international unfortunately, this was the finance institutions and news greatest treason in the history of agencies in order to explain the the Republic of Turkey. However, situation in Turkey and ensure courageous Turkish People all them that nothing is changed in a around the country rallied against negative manner regarding MEHMET this treacherous attempt, and economy, investments or trade. BÜYÜKEKŞİ emerged victorious. Turkish Some of our exporters even held People stood strong against the video conferences from their Chairman, Turkish Exporters terror. They did not waver against plants to show their customers Assembly (TİM) the bombs or the guns that were that the production is continuing p ointed at them. The people as if nothing happened. repelled this abominable act of After the unfortunate incident, treachery with their valor, courage our Government and Central and sagacity, while furthering Bank did everything possible to their unanimity as a nation. ensure the economic stability. In the aftermath of this tragedy, Central Bank immediately issued we did not hesitate to continue a statement, declaring that they with our agenda and immediately will support the economy by any sent our trade delegation to means necessary and are ready to Panama and Guatemala on July provide liquidity if required. Yet, 16th, declaring that Turkey will not strong Turkish economy be subjugated by a handful of overcame the crisis without the militants’ treachery. As Turkish need of such measures.

32 October 2016 Economic Dialogue Turkey 32-33 tim 2_Layout 1 21/09/16 21:14 Page 3

export

Turkish economy is growing faster than most of the OECD countries and we believe this trend will continue in the future. Even though IMF lowered global growth expectations, Turkey’s remains unchanged. Turkish economy is consecutively growing for the last 26 quarters. In the first quarter of 2016, GDP growth was 4.8% and we expect the economy to continue high growth performance for a long time. Another important indicator to point out for Turkish economy is the export performance. We are happy to say that, the coup attempt’s effect on exports were minimal. Turkish exports increased by 7.6% in August. However, world trade is continuing to shrink due to weak commodity prices, especially crude oil. We expect the prices to stabilize by the end of 2016 and believe that 2017 will be a more fruitful year in every aspect. Tur key’s improving relations with Russia, Iran and Israel will benefit both trade and investments. As the normalization process officially started after our President’s visit to Russia on August 9th, we expect to see some improvement in the last quarter. Apart from these, we are also just 10 years. We believe we can potential of African markets. advancing with our goal of further increase this figure Turkey’s export got 0.87% share reaching every market in the with both Turkish Government’s in world trade in 2015. world. With this in mind, we are and TİM’s efforts. Since 2004, Turkey’s 2023 target is exports currently focusing on Africa TİM organized 15 business to get 1.5% share from world under the “Afric a Strategy” led by delegations to Africa, and we will trade. As Turkish Exporters Turkish Ministry of Economy. be organizing 7 more delegations Assembly, we will sustain our Turkish exports to Africa by the end of 2016. We want all hard work to further Turkey’s

continent increased six-fold in our exporters to benefit from the position in world trade. EDT

Economic Dialogue Turkey October 2016 33 34-37 bankalar birliği 4_Layout 1 21/09/16 21:12 Page 2

banking Turkish Banks successfully managed global and regional risks The sound structure of the Turkish banking industry effectively absorbed the effects of the coup attempt on July 15, 2016.

n the first business day after the coup attempt in Turkey, the OUTLOOK monetary and capital markets as well as the credit mechanism Ocontinued to function properly and effectively. Moreover, asset prices stabilized following a short wave of volatility and demand for the TL (Turkish Lira) increased. The sound structure of the banking industry, the positive liquidity measures taken by the Central Bank and the re verse currency substitution to TL deposits by Turkish citizens played an important role in stabilizing the markets. In fact, the volume of the transfer from FX to HÜSEYİN TL deposits in the first 10 days after the coup attempt was more than AYDIN USD 10 billion.

Chairman of the Board The Banks Association Recent economic performance of Turkey Economic growth was higher than expectations due to the support of increased domestic demand and the current account deficit narrowed with declining imports, so fiscal discipline was maintained. However, the implementation of structural reforms and inflation levels will play important roles for the growth performance in the foreseeable future.

34 October 2016 Economic Dialogue Turkey 34-37 bankalar birliği 4_Layout 1 21/09/16 21:12 Page 3

The macro-prudential and reached 2,477 billion TL, year total individual loans was 36 measures implemented over year. In the same period, the percent. Additionally, total showed their impact balance sheet increased 4 percent individual loans and 85 percent of Although at a slower rate, the in USD terms and amounted to SME loans were in TL terms. banking industry continued to USD 859 billion. Also, total assets Furthermore, 53 percent of the grow. The share of consumer to GDP ratio’s projected balance sheet was financed by loans decreased compared to total realization is 121 percent. deposits. The ‘loan to deposit loans. The growth rate of loans The balance sheet has a sound ratio’ was 121 percent. On the and deposits converged. distribution. Loans grew by 10 other hand, non-deposit funds Moreover, the cost of funds and percent with a fixed exchange financed 27 percent of total loan interest rates have been rate and the share o f total assets assets. Despite the high volatility falling in line with the decline in was 64 percent. Almost half of the in the global financial markets, the Central Bank’s lending rates. loans were borrowed by large Turkish banks continued to enterprises, and a quarter of the provide external funding. The Banking regulations are now loans were lent to both SMEs and most important share among the in compliance with Basel III individual customers. The share non-deposit funds belongs to Turkey successfully of mortgage loans compared to loans from foreign banks. completed the RCAP process Turkish banking regulations became fully compliant with the standards set forth by the Basel III rules and the implementation of the new rules began at the end of the first quarter 2016. Furthermore, the regulation on loan loss provisions became compliant with IFRS9 standards and will be implemented in 2017.

Turkish Banking Industry displayed a steady growth trend As of June 2016, total assets increased 10 per cent in TL terms

Economic Dialogue Turkey October 2016 35 34-37 bankalar birliği 4_Layout 1 21/09/16 21:12 Page 4

banking

Financial indicators Moreover, net foreign exchange percent. This ratio is 2.7 percent have been sound position (includes off balance for corporate loans, 4.5 for SME Financial soundness indicators sheet items) is USD 556 million in loans and 4.3 percent for remain quite strong: capital the long and its ratio to consumer loans. adequacy has been relatively shareholders’ equity is 0.5 The ratio of liquid assets to higher than the regulatory ratio; percent. deposits and non-deposit funds is and liquidity hovers at a somewhat When we look at the selected 19 percent. conservative level. Conversely, non- risk indicators, CAR is 15.9 The annual average return on performing loans were moderate percent while the Tier I ratio is equity is 11.9 percent. The ratio of and return on equity has increased 13.7 percent. Also, the ratio of total cost to total income is 73 slightly in the first half of 2016. non-performing loans is 3.1 percent.

36 October 2016 Economic Dialogue Turkey 34-37 bankalar birliği 4_Layout 1 21/09/16 21:12 Page 5

banking

* Current Year Annual Net Profits / ((Previous Year Shareholders' Equity + Current Year Shareholders' Equity)/2)

New investors and and Commercial Bank of China development & investment banks acquisitions (ICBC) from the People’s and 6 participation banks. In May 2015, Ziraat Katılım Republic of China, so the bank As of August 2016, the origin of Bankası A.Ş. began operations as also moved to the foreign banks non-resident banks is the USA (3), the fifth participation bank in group. Kuwait (2), The Netherlands (2), Turkey. Also with the approval of Lastly, in June 2016, Qatar UK (2), Saudi Arabia (2), Qatar (2), BRSA, Vakıf Katılım Bankası A.Ş. National Bank S.A.Q purchased Germany, France, Italy, Spain, became the sixth participation the majority shares of Finansbank Bahrein, Russian Federation, Iran, bank of Turkey beginning A.Ş. from National Bank of Pakistan, Israel, Lebanon, China, operations in February 2016. Greece. Scotland, Japan, Azerbadijan an On the other hand, T. Garanti Libya.

Bankası A.Ş. moved to the foreign General information on the For further information: banks group since the majority of Banking System in Turkey The Banks Association its shares were acquired by BBVA As of June 2016, there are 53 of Turkey, www.tbb.org.tr Spain. In November 2015, the banks operating in the banking Information for Participation banks: The Participation majority shares of Tekstil Bankası industry in Turkey. Of which, 34 Banks Association of A.Ş were acquired by Industrial are deposit banks, 13 Turkey (www.tkbb.org.tr). 38-41 şekerbank 4_Layout 1 22/09/16 13:53 Page 2

banking “Turkey: A country of vast potential and sustainable growth” Despite the slowdown in global growth and geopolitical risks, Turkey succeeded in becoming the fourth fastest growing G-20 economy with 4 percent growth in 2015. With the strengthened solidarity since July 15th and strong motivation to implement structural reforms, Turkey has the ability to achieve a growth rate of up to 4.5-5 percent. Within this context, Turkey, due to its vast potential and sustainable growth performance enhanced with structural reforms, will continue to be a center of attraction for international investors.

he ‘Inability to grow’, regarding FED’s normalization OUTLOOK which is a problem for the process, as of January 2016, when Tglobal economy and one the FED signaled to stay on hold that has been pressing for a long due to concer ns regarding time, continues to be a major issue. China’s economy for some time, Even though the Federal Reserve emerging markets once again System (FED) has been giving became the center of attraction. messages of robust economic However, sooner or later the FED DR. HASAN activity, the European Union (EU) will begin a normalization and China are still under focus process which will put a drag on BASRİ regarding the slowdown in their emerging markets, especially for GÖKTAN growth performances. This picture those with external balance Chairman of the has caused ambiguity regarding problems. Board of Directors, the major central banks’ policies In addition to the uncertainties Şekerbank and especially the FED’s monetary in the global financial markets, policy, which is crucial for after the surprise result of the emerging markets. After the first Brexit referandum, the future of signals of a shift in the FED’s ultra- the EU, o ne of Turkey’s main loose monetary policy in May 2013, trade partners, has become a emerging markets have been topic of concern. Although this experiencing slowdown in their situation is seen as a long-term growth performance. After a risk by some and an opportunity prolonged period of stress by others, it will definitely have

38 October 2016 Economic Dialogue Turkey 38-41 şekerbank 4_Layout 1 22/09/16 13:53 Page 3

banking

an impact on the EU economy. Therefore, the EU’s economic future has the potential to impact a wide geographical area, which includes Turkey.

Once again, the world has witnessed the strength of the Turkish economy When we look at the Turkish economy, the traitorous coup attempt on July 15th was defeated by the state and the nation as a union. Turkey managed to bring everything back to normal in a very short ti me, with the accurate measures taken by the Government, the Central Bank, the Banking Regulation and Supervision Agency along with the business and finance sectors by taking a solid stand of solidarity. When we look towards the past, we see that the Turkish economy has made big gains over the past 15 years. Accordingly, the financial stability, relatively low debt ratios, strong financial system and growth po tential that have continued during this period have strengthened the Turkish economy. In this respect, even with the recession in the global Turkey is a country with many technological structure of economy, Turkey with its strong opportunities and very high industrial production and growth story and vast potential, potential so with the measures improving the investment continues to be one of the safest taken, was quickly able to climate. The “Turkey Sovereign heavens for international overcome the temporary shock. Wealth Fund”, which will provide investors. The fact that credit Right after July 15th, the favorable financing to large rating agencies have kept government began to realize a infrastructure investments, the Turkey’s note at investment grade wide reform program in its “Automatic Private Pension after July 15th is just even more agenda with the aims of System”, which will be the second proof of this trust. During this increasing the savings ratio, option for public social security, time, once again, the world has providing finance for growth, tax regulations and incentives for indeed witnessed the strength of maintainin g the balance of the R&D have also all been put into the Turkish economy. budget, upgrading the place.

Economic Dialogue Turkey October 2016 39 38-41 şekerbank 4_Layout 1 22/09/16 13:53 Page 4

banking

Sustainable growth that require financial assistance cooperative members for performance enhanced with for investments. promoting rural development and structural reforms Indeed, as Şekerbank, in the agricultural production. In other Currently, the many economic immediate aftermath of July 15th words, promoting production is in indicators show that Turkey has we acquired approximately 130 Şekerbank’s DNA. We are still shown a better performance than million USD worth of syndication fulfilling our mission today. many of her peers and EU loans from international markets, Within our widespread branch countries. A stronger economy is which was also an encouraging network in 71 provinces and 97 clearly possible if we can development for our ssector. Thi off-center districts, most of our maintain the solidarity and the credit was provided by 11 banks branches have been opera ting at spirit of togetherness that from various countries, and was the same location for half a emerged especially following July perceived by financial circles as a century. We have a human 15th. We can achieve an economic sign of continued trust in the resource profile befitting of the growth of 4.5 to 5 percent with the Turkish banking sector. bank's competence in local struct ural reforms that have With the gains over the past banking. already been initiated. As a decade, we have established a We particularly finance export- matter of fact, even with all of the strong and dynamic economy and oriented SME’s and local geopolitical risks and global due to the unity that has producers in Anatolia with the fluctuations, Turkey has developed, we believe there will aim of supporting economic succeeded in becoming the fourth be no deviation from the growth based on investment and fastest growing G-20 nation with economic targets. production. 4 percent growth in 2015. In this 67% of our SME loans, which is context, even with all of the 63 years of expertise in more than half of our total credit recession in the global economy, community banking portfolio is made up of micro and Turkey, with her strong growth Şekerbank was established in small businesses. We make our history and vast potential, Anatolia 63 years ago with the resources widespread, working for continues to be one of the safest small savings of hundreds of more people to have access to havens amongs t her peers for thousands of sugar beet farming financial assistance. With the one international investors. In regards to promoting growth, the Turkish banking sector is doing all that is possible and will continue to do so in the future. As the Central Bank lowered the interest rates, banks have also lowered the credit interest rates and this downward trend will continue. As Şekerbank, we want to take our national economy even further ahead. In this respect, we will do all we can to promote production and to invigorate the economy. We will continue to bring in foreign resources and make them available to SMEs and companies

40 October 2016 Economic Dialogue Turkey 38-41 şekerbank 4_Layout 1 22/09/16 13:53 Page 5

and only microfinance program rural-urban migration. With this Turkey in 2009, in order to in Turkey, we undertake a project, we aim to merge divided finance energy efficiency pioneering role in financial agricultural lands, increase investments with favorable inclusion. efficiency in agricultural conditions and to support the With Şekerbank’s leading role production, encourage collective sustainability of natural in financing energy efficiency in farming and prevent the resources. Turkey, we have introduced 85 destruction of local culture. With EKOkredi, we have thousand customers to energy In just the last year and a half, provided over 709 million TRY saving thus far and we plan to with ‘Family Farming Banking’, of financial support in the field expand the awareness on energy we have supported in total 60 of energy efficiency thus far. efficiency by reaching out to 10 thousand farming families and Whereby, we have been able to thousand new customers yearly. provided 1.6 billion TRY in introduce energy efficiency to To summarize, for the past 63 financing. 76 thousand 399 individuals, years since our foundation, with a 7 thousand 868 SMEs, including re sponsible and people-oriented A pioneering role in tradesmen and farmers, reaching banking understanding and our sustainable development close to 85 thousand customers in trust in the future of our country, banking total. With the energy efficiency we are growing hand in hand with Furthermore, we continue to investments financed via Turkey. support energy efficiency EKOkredi so far, 25.3 billion investments with EKOkredi, kilowatt-hours of energy has been 1.6 billion TRY to 60 which we developed as a first in saved along with 5.4 million tons thousand farming families of CO2 emissions prevented. within just 1.5 years Also, within EKOkredi, over The real feature that makes 118 thousand houses were Şekerbank different is the insulated resulting in a savings preference to adopt social of 217 million cubic meters of responsibility as a way of doing natural gas. business. The best example of To protect the natural resources this is the ‘Family Farming and to increase energy efficiency Banking’ project that was in Turkey, we will continue to take launched in 2014 as a first in the leading role in sustainable

Turkey and the world to prevent development banking. EDT

Economic Dialogue Turkey October 2016 41 42-45 denizbank 4_Layout 1 21/09/16 21:11 Page 2

banking Stronger and more reformist after the failed coup attempt The country has now been going through a restructuring in the administrative ranks which is a must in the aftermath of the failed coup attempt for a healthier and more stable policymaking and public service. While this should not take long the need for carrying out structural reforms during the period is also clear.

urkey has quickly returned in the form of new loans, if OUTLOOK to normal after the approved. I did so because we, as Tmilitary coup attempt was the 5th biggest private bank and rebuffed by our nation in mid-July. the 8th biggest overall in the The authorities from the Economy country, had the responsibility Minister to the Treasury and the towards our more than 10 million Bank Regulator (BRSA) came clients and citizens of the quickly together and expressed Republic of Turkey served by our solidarity to dispel fears and 750 branch network scattered all HAKAN decrease uncertainty. The central around the country with an asset ATEŞ bank provided unlimited liquidity size exceeding $40 bn and more to banks and supported the than €20 bn of fin ancing in the Chief Executive Officer of DenizBank Financial currency by removing limits on past to the strategic national Services Group banks’ foreign currency collateral. projects such as the underwater But even before all these, the “peace” pipeline from Turkey to banking system’s resilience and the Northern Cyprus for drinking prudence in operational water, the 3rd airport (the biggest responsibility towards their clients in the world) and the 3rd bridge during the peak of uncertainty across Bosphorus in Istanbul. Our were noteworthy. People were well shareholder, Sberbank has also served for their precautionary been very supportive as always in need for cash from the ATMs. all our decisions with the close Being well aware of the urgency of follow-up of our Chairman Mr. the situation, I personally asked Gref. Thanks to all these the teams at DenizBank to pay confidence pr opping measures utmost attention to provide our and approach by the policymakers clients with all their liquidity and the banking system, the next needs from their savings and even day was business as usual in

42 October 2016 Economic Dialogue Turkey 42-45 denizbank 4_Layout 1 21/09/16 21:11 Page 3

banking

Turkey and the markets were fiscal policy saving 3% of GDP a decade. All these reforms made it functioning seamlessly. Turkey year on average since 2003 in the possible to almost double the GDP happened to have proved how form of primary budget surplus per capita as a share of its US crisis resilient she was once again were crucial structural reforms. counterpart to 20% during the thanks to her immense crisis Confidence rose and foreign period while slashing inflation and know-how, a product of years of financing began to flow into the net public debt as a share of GDP experience in managing real sector. Inflows were mostly to single digits in a sustainable volatility. through a cleaned up banking way. Yet, this resilience was not only sector with high capital adequacy The resilience that came with the result of crisis know-how. and greater transparency that this improvement in fundamentals Since the radical restructuring in came with the strict supervision was also evident during the global the early 2000s, primarily in the and prudence imposed by the crisis surfacing in the mature banking system and the public regulator and a stringent banking economies in 2008 and remaining sector, the Turkish economy had code. The share of loans to the real still at work until today. The already improved its economic sector tripled to 60% of the assets banking system and the real sector fundamentals substantially. The within ten years diversifying reacted against high volatility by central bank independence with gradually from large corporate trimming their risks. This in turn sole focus on inflation, an clients to SMEs and households. pushed the economy into a mild ambitious privatization program As a result, business inv estment recession. But as the stability yielding $50 bn in revenues, and was boosted providing almost half returned, thanks to the global most importantly a disciplined of the average growth in the past central banks’ limitless liquidity

Economic Dialogue Turkey October 2016 43 42-45 denizbank 4_Layout 1 21/09/16 21:11 Page 4

banking

support in mature economies, the Looking forward, much still examples of economic reforms. Turkish economy roared back remains to be done… Decreasing the bureaucracy in again by double digit GDP growth The country has now been going doing business and increasing the rates. All this crisis resilience was through a restructuring in the level of quick and fair decision soon recognized by Fitch in 2012 administrative ranks which is a making in the judicial system will and Moody’s a year later as they must in the aftermath of the failed be major advances. Social reforms raised the sovereign ratings to coup attempt for a healthier and are equally important. Turkey investment grade. Having seen the more stable policymaking and should not be expected to join the Turkish economy is surviving public service. While this should group of high income countries even a severe domestic political not t ake long the need for carrying unless it improves its current shock on top of all these risks out structural reforms during the status of having one of the unfolding one after another and period is also clear. These vary shortest duration of schooling in still recording a growth rate of greatly from economic to social the world with 6 years on average. around 4% in 2016, the rating and legal reforms. Broadening the Quality of education must agencies proved right to do so. tax base, fostering technological increase to have a much more It is also worth noting the fact advances and innovation to raise globally competitive human that this performance has recently the technological sophistication of capital. The labor market must be been accompanied with a much our exports, protecting more flexible and more conducive more improved macroeconomic intellectual property, improving to woman participation. risk profile in terms of current the transportation infrastructure The government is clearly well account balance being added to as to remove geographical aware of all these. They know that the fiscal discipline sustained externalities, increasing d omestic an echo system that covers from during all this turbulent global energy sources to decrease energy state incentives to new means of and local environment. Thanks to costs and overhauling the finance and legal requirements is weak commodity prices, the regulatory environment in needed to make the economy more current account deficit i s likely to fighting against the informal innovative and technologically remain below 5% of GDP this year, economy so that the small advanced. In that regard, an R&D half of that in 2011, despite the businesses can achieve economies reform package was passed just geopolitical uncertainties and a of scale and become more recently. A comprehensive new weak tourism season. productive are important Patent Law completely in line with 42-45 denizbank 4_Layout 1 21/09/16 21:11 Page 5

banking

EU and U.S. rules and regulations We will also contribute is about to be passed in the in this reform program parliament. Incentives for venture with all our means… capital, introduction of a crowd DenizBank has always acted as a funding system to support high national bank with all her assets tech start-ups and restructuring related to the Turkish economy’s the development bank also to development. As the biggest support them are all to be new foreign investment of Sberbank initiatives of the government. A abroad, we assume responsibility new legislation, just passed to facilitate economic and recently, now enables temporary financial transactions between employment that eases restrictions means striking to see that a few Turkey and Russia, the two major on part-time employment to make days after the coup attempt, two complementary forces in Eurasia, the labor market more flexible and major multibillion dollar public- striving to become global players. in line with technological private partnership (PPP) projects, We clearly note that the potential advances. Since education is key in the 3rd bridge over Bosphorus and is huge in trade, cross border reforming the labor market and the highway connecting the two investment, energy, tourism, boosting productivity the major cities of Istanbul and Izmir infrastructure and construction as government has been spending through a bridge over the well as financial services including increasingly more on the school Marmara sea were completed and banking. Since the Sberbank’s system. The share of budgetary made available to the use of our acquisition in 2012 of our bank, we spending on education rose to 19% people. The Eurasia tunnel, a 4 provided $7 bn long-term loans to in 2015 from only 9% in 2002. This lane and double deck tube 58 mega projects that are worth allowed the government to expand underwater, to connect Europe and $32 bn in all those sectors the compulsory education to 12 Asia through Bosphorus, a 1.5 km strategically important for the years, meaning that the average suspension bridge over the development of the country, schooling in Turkey will soon Dardanelles, and most importantly ranging from infrastructure to exceed the OECD average. The the giant project of The Canal education, from health to energy next area of focus will be Istanbul, a second 43 km long and from tourism to maritime and increasing the quality of education. waterway to connect the Black Sea agriculture. And as for the crucial judicial to Marmara Sea are other mega Overall, we have more than reform, new appeal courts were projects soon to be started. They doubled both our loans and established at the regional level so should add to the business morale deposits within a span of 4 years that close to 80 percent of court in the country and bolster under Sberbank ownership. cases will not go to supreme investment appetite in the private Having reinvested all our net courts, speeding up justice. A new sector. income from our business and got law on arbitration mechanisms is The rating agencies must notice even more capital from our also being prepared to further all these and appreciate the fact shareholder we boosted facilitate especially for eign direct that many other countries, even DenizBan k’s equity by 2.4 times investment into Turkey. As always, those mature ones, would not be since 2012. All these will help us to improving infrastructure is a must able to continue the business contribute and invest much more in increasing private sector usual the next day and deliver all in our country’s reform aspirations productivity and competitiveness these reforms and long-term and the quest to increase the for transition countries such as development projects under such economy’s growth potential Turkey and it is priority for our adverse conditions inside and without of course compromising government as well. It was by all around the country. on prudence. EDT

Economic Dialogue Turkey October 2016 45 46-50 teb 5_Layout 1 21/09/16 21:11 Page 2

banking

Multidimensional support for the economy In order to ensure that Turkey remains a significant economic actor in its region, it’s very important to support economic endeavors in every segment of society.

s Türk Ekonomi Bankası startups, and from SMEs to women OUTLOOK (TEB) we aim to create entrepreneurs and angel investors. Avalue for all of our As one of the major players in the stakeholders by focusing not just on Turkish banking industry, we act in growth in the financial aspect but line with our vision of being a also on productivity. On the path we “Good Bank” and we work to have embarked upon with our contribute to our country’s “Consultant Bank” approach we are economy. undertaking countless projects out A general overview of the year so ÜMİT of our awareness of our far indicates that the first half of LEBLEBİCİ responsibilities across a broad 2016 was in line with our range of fronts from innovation to expectations and forecasts. During CEO of Türk Ekonomi Bankası (TEB) sports, from financial literacy to the first six months of the year, our

46 October 2016 Economic Dialogue Turkey 46-50 teb 5_Layout 1 21/09/16 21:11 Page 3

banking

bank’s total assets increased by 7% In the 25th edition of the capacity as “the market leader in to TRL 77.2 billion while we posted “Euromoney Awards for Excellence” terms of investment and a net profit of TRL 600 million as a which are conducted by Euromoney, innovation” in the SME banking result of our operations. During the an international financial journal, segment. Likewise TEB Family same period our bank’s total and which are regarded as some of Academy received two separate deposits grew by 16% and reached the most prestigious awards in the awards in the “Social Development” TRL 47.1 billion. global banking industry, we were and “Corporate Social Loans, one of the important the simultaneous recipient of two Responsibility Project” categories measures of our support for our accolades: in the International CSR Excellence customers and the national “Best Bank for Corporate Social Awards handed out in June. In July economy, amounted to TRL 55.4 Responsibility in Central & Eastern we also received a 2016 IPRA billion and corresponded to 72% of Europe” in recognition of our Golden Award in the “Corporate our bank’s total assets. efforts on behalf of financial Responsibility” category from the literacy and “Best Bank for SMEs International Public Relations We’ve provided financial in Central & Eastern Europe” in our Association. literacy education to more than 210 thousand people through TEB Family Academy Our efforts in this year continue to focus not just on financial matters but also on areas which are non-financial but which we nonetheless see as being important to our country’s future. The aim of the “I Can Manage My Own Budget” project that we are undertaking in collaboration with the Ministry of Education is to p rovide financial literacy education to five million people over a three- year period. In addition, on May 6th we signed an agreement with the Ministry’s General Directorate of Vocational and Technical Training in Ankara under which financial- issue related content will be added to the banking and accounting curriculums of 1.2 million high school students.

International awards proved our success Our successes MEboth in S banking and in promoting financial literacy were once again confirmed by the awards we received this year.

Economic Dialogue Turkey October 2016 47 46-50 teb 5_Layout 1 21/09/16 21:11 Page 4

banking

We create economic value by bringing innovative ideas and entrepreneurs together n the first half of 2016 we continued to conduct the startup banking program that we’ve been running since 2013. Working together with the Turkish Exporters Assembly (TİM) we’re also continuing to expand the “startup house” concept Ithroughout the country. Having opened TİM-TEB Startup Houses in İstanbul, İzmir, Gaziantep, and Denizli, in May the number of these centers was increased to five with the addition of a new one in Trabzon. The aim of the training, consultancy, and mentoring services which we provide at TİM- TEB Startup Houses is to encourage would-be entrepreneurs to see and think like business-owners. That means providing them with all of the non-financial support they might need such as developing startup business models, identifying new customer- compatible revenue-streams and distribution methods that take market dynamics into account, creating synergies among entrepreneurs so that they can join forces in different ways, formulating marketing activity plans, and preparing financial statements. We provide entrepreneurs with free support at every stage from the realization of business ideas to project descriptions and from finding customers to making presentations in front of potential investors. In the case of projects with export potential, entrepreneurs benefit from TİM’s network and knowledge and experience resources in order to take their projects abroad. We also provide entrepreneurs with other opportunities such as setting up stands and making presentations at innovation events and publicizing and promoting their projects through a variety of media channels.

48 October 2016 Economic Dialogue Turkey 46-50 teb 5_Layout 1 21/09/16 21:11 Page 5

banking

We devise tailored solutions L abor Agency, we had already lent for female business owners more than TRL 160 million to more Improving the savings rate is than 4,000 customers as of the becoming increasingly more second quarter of 2016. important in our own country as Having launched TEB Women indeed it is everywhere else in the resources; we help them to Banking in order to involve women world. We believe that in order to overcome the obstacles they may in economic activity not just as achieve this we need to increase encounter in various aspects of consumers but also as producers, employment and especially the business life. we will continue to further participation of women in the We’ve also launched TEB Women strengthen this program in the workforce. Academy in order to reach out to period ahead as well. Taking this as our point of female business owners all over departure we authored another first Turkey and provide them with the Our goal is to further in the Turkish banking industry information they may need to strengthen our with the introduction of TEB develop their businesses and to put multidimensional support for Women Banking as an them in contact with women whose the economy independent business line whose successes are a source of We at TEB are fully focused on aim is to take a solution-focused, inspiration for the entire business such issues as TEB Startup integrated approach to addressing world. Through the eight separate Banking, TİM-TEB Startup Houses, all of the needs of women seeking sessions of TEB Women Academy the TEB Private Banking Angel to make a go of it in the formal that we’ve conducted in five cities Investment Platform, TEB Women economy. we’ve so far reached more than Banking, and TEB Family Academy. Through TEB Women Banking 1,200 women in business. While encouraging we support female business owners Under the “Financing and entrepreneurship and innovation in such areas as finding the Consultancy Support for Female- through such efforts on the one information they need to grow Owned Businesses” program hand we’re also helping to raise the their business, entering new being conducted by the European level of individual financial literacy markets, and networking; we give Bank for Reconstruction and and to encourage thrift throughout them access to specialize training, Development, the Ministry of Labor the country. In order to ensure that consultancy, and mentoring and Social Security, and the Turkish Turk ey remains a significant economic actor in its region, it’s very important to support economic endeavors in every segment of society. As one of the most important banks in our industry, we are continuing to develop productive business models that make effective use of alternative delivery channels in concert with a branch network that has an extensive national reach. We supply convenience, high security standards, and rich content in order to make our services more easily and quickly accessible through mobile technologies while

Economic Dialogue Turkey October 2016 49 46-50 teb 5_Layout 1 21/09/16 21:11 Page 6

banking

also ensuring that our customers world once again that nothing can anywhere between one and ten are able to reach those services withstand the national will and that years. We did not hesitate for even conveniently through every by having stood strong, we will a heartbeat to demonstrate our appropriate channel. For this reason never give up democracy. confidence in our country and its CEPTETEB, our mobile app that As a bank, we have made not people by making this decision and has become Turkey’s fastest- even the slightest change in our we will continue to do so in similar growing digital banking platform. strategy. Indeed, more committed ways in the period ahead as well. TEB has joined forces with BNP and determined than ever, we have Likewise in the period ahead we Paribas in a strategic partnership strengthened that strategy and will also continue to provide even that is evidence of that bank’s continue along the very same greater multidimensional support confidence not just in us but also in course. Every economic actor in to economic endeavors that our country. With BNP Paribas’s this country is behaving similarly. contribute to value-creating support, we will be leveraging our Structurally as well as economic and social growth and effectiveness in corporate and econo mically stable and strong, we wellbeing. As TEB we will continue commercial banking, a business line all have shown that our country to consolidate Turkey’s progress as that has long been one of TEB’s can stand up to and overcome both a regional and a global force core strengths. every sort of difficulty through not just through the financial national unity and togetherness. support that we provide the Turkey has proven that it can The financial services industry national economy but also through stand even taller and stronger has taken the first step in this all the activities that we undertake through national unity and direction in the area of mortgage out of our sense of social togetherness lending. The rate on home loans at responsibility. Our country has recently many banks has been reduced to Briefly, as TEB we intends suffered a calamity that it below 1%. TEB became one of the to go on strengthe ning its succeeded in overcoming only very first financial institutions to multidimensional support for the through the strength of its people’s do this when it announced a 0.99% economy no less than it has done will. These dreadful events have rate on loans to those wishing to in the past and continues to do nevertheless shown the whole invest in a house on terms of today. EDT

50 October 2016 Economic Dialogue Turkey

52-55 yased 4_Layout 1 21/09/16 21:09 Page 2

investment Minister of Economy Zeybekci met international direct investors

Minister of Economy Nihat Zeybekci met with members of YASED (International Investors Association) in Istanbul to discuss steps that can be taken in the forthcoming period to ensure international direct investment flow to Turkey is maintained.

52 October 2016 Economic Dialogue Turkey 52-55 yased 4_Layout 1 21/09/16 21:09 Page 3

investment

inister of Economy the country following the coup Nihat Zeybekci met with attempt. YASED members stated Mmembers of YASED that reform packages launched by (International the government and law on Investors Association) in Istanbul improvement of the investment to discuss steps that can be taken in environment passed by Turkish the forthcoming period to ensure Grand National Assembly on 14th international direct investment flow of July (Law on Amendment of to Turkey is maintained. Certain Laws for the Improvement With cooperation of YASED of the Investment Environment) and Minister of Economy, are very critical and well Consultation Meeting with appreciated in terms of International Direct Investors was maintaining flow of international organized in Istanbul on 27th of direct investments. July. In the meeting orga nized with YASED Chairman Ahmet participation of Minister of Erdem addressed the participants Economy Nihat Zeybekci, parties and stated that blowing the coup exchanged their opinion about attempt on 15th of July in unity of steps that can be taken in the all ranks of Turkish nation forthcoming period to maintain and demonstrated Turkish nation's stimulate international direct commitment to democracy, investment targeting Turkey and to constitutional system and attract value added investments to superiority of law, “We saw that, despite all social-economic and political differences, there is an extensive national consensus and strong synergy under peaceful and democratic conditions. Protecting this unity and solidarity will ensure Turkey proceeds its way with sound steps” and continued his words as follows: “Since international direct investors make strategic and consistent investments with a long- term perspective, they reach decisions by checking criteria like superiority of law, economic stabilization, infrastructure, intellectual property rights, potential of the market, qualified human resources and integration

Minister of Economy YASED Chairman with global economy. We believe Nihat Zeybekci Ahmet Erdem that the coup attempt shall not

Economic Dialogue Turkey October 2016 53 52-55 yased 4_Layout 1 21/09/16 21:09 Page 4

investment

have adverse impact on entrepreneurship within the Significance of Law on investments when required frame of free market economy, its Improvement of Investment measures are taken and young and dynamic population Environment is emphasized democracy, superiority of law and and most importantly its Erdem emphasized that social peace is protected. The fact commitment to constitutional as YASED, they believe that in that statements of our President, system that is based on superiority terms of investments and Prime Minister, Ministers and all of law. economy, the important matters official declarations are in this Most of the international direct are ensuring normalization in a direction, reassures investors. investors in Turkey have been short term and acting with The power of Turkey as the operating in our country for many common sense and within the World's 18th largest economy, relies years and have long-term, frame of legal order and on potential of our country, its consistent investments in our superiority of law: “Hereafter, the integration with global economy, country. They believe and have way is cleared for the steps to be promotion of competitiveness and faith in the future of Turkey.” taken to strengthen democracy and

54 October 2016 Economic Dialogue Turkey 52-55 yased 4_Layout 1 21/09/16 21:09 Page 5

investment

constitutional state in Turkey and Structural reforms Erdem also said: “As YASED, we to improve competitive power of shall continue have confirmed our faith in Turkey our economy. Steps to be taken in Ahmet Erdem highlighted the once again at the consultation this respect in unity shall reassure positive impact of foresighted and meeting organized with Minister of international direct investors' unifying statements of political Economy Nihat Zeybekci. Our faith confidence in Turkey” and leaders and measures taken to in potential of Turkey that we lay continued his words as follows: ensure healthy operation of the emphasis on and express continues. “We believe that the next few economy and said that fiscal As international investors, today months are extremely critical in discipline and ongoing public we were glad to hear from own terms of developments both in our investments shall support private words of our Minister that public country and abroad. We believe sector investments in the authority shall expedite its works that legislative regulations forthcoming period. and structural reforms to improve aiming to improve the investment global competitive capacity of our environment, prepared by the country, to realize its current government and passed quickly potential and to accomplish by Turkish Grand National targets for 2023 and that Assembly before coup attempt are improvement works for fiscal very important to continue discipline and investment sustainable growth of our environment shall continue at full economy and to improve our steam. In the upcoming process, competitive power. together with non-governmental As YASED, we will continue to organizations and the Ministry of support these regulations and Economy, we will continue to practices by offering our opinion contribute in all domestic and and recommendations in order international attempts to to increase the share of our accurately build the perception of country in international direct Turkey in the international

investments.” business world”. EDT

Economic Dialogue Turkey October 2016 55 56-59 ifc 4_Layout 1 21/09/16 21:02 Page 2

investment

AISHA WILLIAMS, IFC Country Manager for Turkey

IFC’s record breaking INVESTMENTS IN TURKEY “IFC has a long-term commitment to Turkey and this has not changed. We hope that our continued support will provide a demonstration effect to other financiers, encouraging them to continue to invest in Turkey.”

IFC has made record-breaking rate swaps and trade finance investments in Turkey for the across 18 projects. The biggest last three years. Your 2016 fiscal gains were seen in IFC’s equity year was completed as of 30 investments, which reached a June. How was the situation in record $625 million in new the investments of this year? commitments, an almost 70% A member of the World Bank increase over the prior year. In Group, IFC focuses on supporting addition to investing its own the development of the private funds, IFC also mobilized more sector in emerging economies. In than $300 million of financing for the last fiscal year, which ended on third party investors. IFC also June 30, IFC had a fourth provided $370 million in short- consecutive record year in Turkey, term loans to support trade investing to support sustainable finance under IFC’s Global Trade energy and infrastructure Finance Program, which enables development, improve municipal essential support and liquidity for services, promote local capital trade flows through a global markets, and help Turkish network of more than 500 bank companies increase partners, helping small and competitiveness and impact. IFC medium enterprises access the also advised businesses and global trading system. government bodies on initiatives This fiscal year also marks the to encourage private sector end of the current five-year World growth. Bank Group Country Partnership During fiscal year 2016 IFC period with Turkey, under which committed a total of $1.8 billion in IFC implements its program in the equity, long-term loans, interest country. The World Bank Group

56 October 2016 Economic Dialogue Turkey 56-59 ifc 4_Layout 1 21/09/16 21:02 Page 3

investment

aims to support Turkey’s transition to high-income status through direct financing, as well as with policy analysis and advisory services. During this period, the World Bank Group has invested a total of $9 billion in Turkey, including a significant $4.5 billion contribution from IFC to meet the program’s development goals.

Is IFC going to continue its focus on Turkey as normal? The last 12 months have been a challenging time, not just for Turkey but for emerging economies across the world. In fact, Turkey has exceeded expectations on GDP growth and it continues to perform better than many of its emerging-market peers. However, the private sector has been under greater pressure. Investor confidence has been impacted by both policy uncertainty around the scope and timing of structural reforms, as well as instability in the security environment, including repeated terrorist attacks, the ongoing war in Syria and a failed coup attempt in July 2016. External financing has become scarce and foreign direct investment flows have decreased by more than 40 percent since the peak in 2007. Despite this difficult environment, IFC has a long-term Photo by: Tolga Ferhatoğlu, Fortune Türkiye commitment to Turkey and this has not changed. Our first Europe, Central Asia, the Middle other words, we are prepared to investment in Turkey was over 50 East and North Africa. It is support Tu rkish clients by years ago and 2016 marks the 30th currently our largest office outside providing our own financing, in anniversary of our presence on the of Washington DC. addition to mobilizing funding ground in the country. In 2010, IFC At times like these, IFC is from other international investors transformed our Istanbul office focused on playing a and also providing technical into an operational center for countercyclical role in Turkey. In assistance. We hope that our

Economic Dialogue Turkey October 2016 57 56-59 ifc 4_Layout 1 21/09/16 21:02 Page 4

investment

continued support will provide a investment will help Akfen Energy helping build better and more demonstration effect to other to almost triple its renewable environmentally sustainable cities. financiers, encouraging them to energy production and utilize In fiscal year 2016, IFC made continue to invest in Turkey. Turkey’s local energy resources for $455 million in climate change sustainable generation. related investments in Turkey What are your priorities in One of IFC’s landmark promoting construction of green Turkey? investments was a $215 million buildings, boosting renewable equity investment in Ronesans energy generation capacity, l Investing in Turkish companies Holding, one of Turkey’s largest helping companies to increase for impact and long term construction and infrastructure energy efficiency and utilizing partnerships companies, to improve the innovative green financial IFC has significantly increased company’s competitiveness and instruments. IFC helped pioneer its equity shares in Turkish help accelerate its global the introduction of green companies with landmark expansion. Increasing investment mortgages into Turkey with investments. This year IFC flows from emerging markets into Odeabank and invested $50 became a 10% shareholder in other emerging markets – often million in the green and Fibabanka and invested the referred to as South-South sustainable bond issue of the Turkish Lira equivalent of US$ 110 investments – is one of IFC’s five Industrial Development Bank of million in Odeabank, a subsidiary core strategic objectives globally. Turkey (TSKB), the first such bond of Lebanon’s Bank Audi Group IFC’s investment in Ronesans issued from Turkey in through a subscription to a TL 1.0 Holding will support the Group’s international capital markets. billion capital increase by the cross-border investments in Africa, As part of the World Bank lender. the Middle East, and the Caucuses Group’s Sustainable Cities The infrastructure and energy and strengthen its sectoral initiative, IFC is increasingly sector gained an increasing share presence in industrial working with Turkish metropolitan of IFC’s equity portfolio in Turkey. infrastructure projects. municipalities, providing a mix of IFC invested in Unit Investment loans to private service sponsors NV to support its growth and l Helping to target climate and public-private partnerships, as expansion with the development of change, fostering sustainable well as advisory services to new independent power plant cities improve urban infrastructure. This projects in Europe and Middle In partnership with the World year, IFC mobilized a Euro 110 East. IFC also acquired a 16.67% Bank, a key priority for IFC in million financing package for the stake in Akfen Energy, a Turkey is supporting Turkey reach Istanbul Metropolitan subsidiary of Akfen Holding. The its climate change targets and Mu nicipality, to support the

58 October 2016 Economic Dialogue Turkey 56-59 ifc 4_Layout 1 21/09/16 21:02 Page 5

investment

construction of a new metro line energy efficiency. IFC partnered areas such as governance, best from Kabatas to Mecidiyekoy, two with Burgan Bank, Fibabank, practices and international densely populated central districts Sekerbank, Odeabank, Finansbank business standards is a priority for in Istanbul. IFC continues to scale and TSKB, providing $380 million IFC. In Turkey, IFC organizes and up its support cities such as Izmir, for such projects. IFC also supports sector events and Antalya and Bursa on project committed $370 million to Turkish roundtables to facilitate dialogue, development and finance in areas banks under its Global Trade share know-how and interact like waste water management and Finance Program (GTFP), which with various stakeholders. transportation. broadens access to finance for In FY 2016, IFC has organized companies and reduces risks for a Fin-Tech roundtable, and l Partnering with financial local banks. Innovation marketplace and a institutions to increase access Waste Management Roundtable to funding l Building a stronger private bringing together industry In 2016, IFC continued its sector ecosystem through experts, clients and regulatory partnership with Turkey’s banks knowledge institutions. and financial institutions to IFC is the world’s largest increase access to finance for development institution that l Supporting Refugee and small and medium enterprises and focuses on the private sector. Host Communities increase investments in areas that Sharing its global knowledge and During this year, IFC also are essential for Turkey’s expertise and promoting networks launched efforts to work with its sustainable development; such as that can contribute to its clients in clients and Turkish authorities to address the needs of Syrian refugees and host communities in Turkey. IFC’s response is part of a broader agreement between the Government of Turkey and the European Commission, with the support of international finance institutions, to address the challenges posed by the refugee crisis. Complementing measures being undertaken by the World Bank Group, IFC’s program, which will be implemented over the next three years, will focus on supporting entrepreneurship and employment opportunities for Syrian and Turkish communities through technical support to financial institutions and small and medium enterprises in affected cities as well as advice on streamlining the regulatory environment for new

businesses. EDT

Economic Dialogue Turkey October 2016 59 60-63 tcma 4_Layout 1 21/09/16 21:01 Page 2

finance

Domestic savings have to be increased Shortage of savings and the fact that existing savings have very short maturities take the lead among the fundamental problems of the national economy. In order to decrease Turkey's dependence on foreign capital, domestic savings have to be increased. Achieving the desired result in the short term is possible through development of incentive systems.

ince the beginning of In the last decade, Turkey has OUTLOOK financial crisis, several demonstrated impressive Smeasures have been taken economic development. In line in the global arena. World with the government’s goal of economies attempt at new reform becoming a global finance center, initiatives in an effort to recapture significant steps have been taken their pre-crisis performances. Yet, towards this aim. We witness economic growth and inflation important developments in the rates still are not at desired levels national economy aimed at İLKAY in many developed economies. strengthening the consistent ARIKAN After the crisis, commercial structure. banking became highly regulated In July, a group of renegade Secretary General Turkish Capital Markets and that led to a more officers from T urkey's military Association (TCMA) conservative loan policies.d An sought to impose their will on the that's where capital markets are citizens and on our democracy supposed to step in. through an armed coup d’etat.

60 October 2016 Economic Dialogue Turkey 60-63 tcma 4_Layout 1 21/09/16 21:01 Page 3

finance

However, the attempt was hastily s ystems and operations of all of political and social rights and defeated due to the firm solidarity the money market and capital liberties, the democratic society and the mobilization of all market institutions, including and the decisive implementation segments of the society, including Borsa Istanbul, Istanbul Custody of macroeconomic and structural political parties, media, civil and Settlement Bank, Central reforms. society, and the many institutions Registry Agency and Turkish Turkey’s economy grew by 4% of Turkey. All of these bodies Capital Markets Association (compared to the world average expressed their total refusal of the functioned smoothly without any growth rate of 3.1% according to violations of the coup d’etat, their interruptions following the IMF estimates) in 2015, which complete attachment to the attempt, which demonstrates the caused it to be one of the world's constitutional order, the operational capabilities of best-performing emerging principles of the rule of law, Turkey’s financial system. markets and this trend is fundamental liberties an d human The fatal incident's negative expected to continue in the rights, which altogether make up impact on Turkey's financial following years. As long as the indispensable pillars of a markets has been short-lived. Turkey continues to grow, democratic republic. There has been no notable investors will continue to be Despite this unfortunate event, decrease in bank deposits, no interested in Turkey, 4% growth at we strongly believe that, the significant increase in credit the time of regional terrorism Turkish democracy as well as its demand, and no restrictions on risks cannot be neglected. economy continues to remain capital movements. Shortage of savings and the fact resilient and will emerge After the attempt, that existing savings have very reinforced by this incident. It's representatives of most short maturities take the lead crucial to look at the bigger prestigious organizations among the fundamental problems picture with a long term informed the international of the national economy. In order perspective before drawing a community of the Turkish to decrease Turkey's dependence conclusion from these coup- government’s unflinching on foreign capital, domestic related developments. The devotion to the fundamental savings have to be increased. It is

Economic Dialogue Turkey October 2016 61 60-63 tcma 4_Layout 1 21/09/16 21:01 Page 4

finance

a widely agreed fact that that every wage-earner Turkish strongly believe that the growth measures must be adopted in the citizen under 45 years will be in long-term savings allowed by short and long run to resolve this automatically enrolled in a the private pension will gain problem. Achieving the desired pension plan determined by momentum with the automatic result in the short term is possible employers. According to this new enrolment system. through development of incentive law, participants' contribution Apart from these cha llenges, systems. amount will be 3% of their earning the digital revolution is changing Turkey has about 100 billion subject to premium. the way of businesses. Disruptive Turkish lira of institutional This new law will enter into effects on our capital markets are savings, about half of it from force on 1 January 2017. We focused on mainly two areas; private pension savings (BES) electronic platforms and and the rest from mutual funds. algorithmic trading. As part of Recently, important developments algorithmic trading, high- came into being regard ing the frequency trading (HFT) encouragement of long-term operations are discussed all over savings. The Turkish Parliament the world. The good side of HFTs made the housing and dowry is the facilitation of an efficient account system into a law, which market through sound price went into force. Additionally, formation. On the other hand, voluntary private pension system when the volumes are so has replaced by a mandatory dependent on HFTs, it distorts pension scheme, which stipulates healthy price formation.

62 October 2016 Economic Dialogue Turkey 60-63 tcma 4_Layout 1 21/09/16 21:01 Page 5

finance

With respect to capital has been gaining increasing Your Hand, Future In Your markets, transformations importance all over the world. Pocket”, which is intended to regarding capital markets were “Financial Access, Financial canalize individuals to plan for brought in completion and we Education and Financial their financial future. Having moved closer to a stronger Consumer Protection Strategy” attracted a large number of structure with the new Capital covered broad and entrants from all over the Turkey, Markets Law. With this law, comprehensive requirements for the contest received 109 Turkish Capital Markets enhancing financial literacy of applications. We also maintain Association (TCMA) became the individuals so as to help them our projects on our social media biggest professional organization make informed financial channels for spreading our of financial services industry decisions. investor education initiatives to with its new structure. Financial Education Working broad audiences. We are getting Our Association is the self- Committee, which is made up positive feedback from a large regulatory institution for volunteer industry professionals number of users from different supervising the capital markets operating under our Association professions and age groups on all and establishing professional since 2012, continues with its social media channels and rules for industry professionals in projects and activities. As part of particularly on our My Money Turkey. Since membership is our investor education activities, and I (Param ve Ben) Facebook compulsory, we represent 233 we organized competitions, page that currently has nearly members that comprise banks, meetings, seminars and various 80.000 followers. Additionally, we brokerage firms, asset educational programs, as well as hosted the General Assembly of management companies and producing films and interviews the International Forum for investment trusts operating in where investors shared their own Investor Education (IFIE) in June Turkey. We regulate and oversee experiences. This year, we have 2016. We will also be hosting some activities of our members. organized the third edition of the Asia Securities Forum in the near Additionally, we offer various short film contest “Camera In future. training programs and conduct Apart from these, we a re research to share with the public. envisaging to take on a more The Association’s current active role in dispute resolution. agenda focuses on the following Therefore, we will start to use themes: Non-expansion of long- arbitral tribunal and arbitration term savings, failure to broaden method. the investment base, the limited In this way, disputes between number of corporate investors clients and our members will be and the tax issues of capital resolved more quickly. We have market activities and created a dedicated center in this instruments. Our dedicated area. These activities will be committees within the carried out with the active Association pursue their participation of all our members. activities to help with the We believe that our industry achievement of our goals. Beside will be strengthened with these committees, we have also new regulations and laws. In the targeted to create subcommittees near future, capital markets may and task forces. significantly contribute to the Financial literacy, which is one sustainability of the financial

of the Association’s mission’s, system. EDT

Economic Dialogue Turkey October 2016 63 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 2

investment Great Transportation Projects ARE GOING FULL FORCE It is foreseen that Turkey’s transportation demand will double itself until 2023, quadruple itself until 2050. Consequently Turkey got busy with transportation projects. These projects are going full force while new ones are in planning stage.

urkey is presently working on the construction of the Tmassive transportation projects, while fighting with terrorism and the coup attempt that was foiled at the last moment. Yavuz Sultan Selim Bridge and Osmangazi Bridge have opened up for transportation and Eurasia Tunnel is on the way.

64 October 2016 Economic Dialogue Turkey 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 3

The 3rd Istanbul airport, which The 3rd bridge features many private sector. It has a guarantee is going to be the largest airport novelties in the world such as eth for daily passage of 13 5 thousand in the world, is also under railway tracks being on the main vehicles. This bridge is the only construction. Çanakkale Bridge, a level. The towers have broken a bridge that allows heavy vehicle candidate to be the longest world record: Garipçe Tower on transport over the Bosphorus. bridge in the world, will begin the European side is 322 meters The bridge predicts to prevent construction next year. The 3- long, so the bridge gets the approximately 1 billion 450 level Great Istanbul Tunnel and record on the class of slanting million USD of energy and 335 Istanbul Canal projects are bridges. The Poyrazköy Tower on million USD workforce loss thus presently in the bidding stage. the Asian side is 318 meters long. a total of 1 billion 785 million Here are the massive future The Asian tower is the second USD economic loss. projects of Turkey: tallest in the world, after Millau With the completion of the Viaduct in France. The span of bridge, Marmaray and Istanbul 3rd Bosphorus Bridge: Yavuz the bridge is 1.408 meters and the metro will be integrated to Sultan Selim Bridge total length of the bridge is 2.164 connect Kurtköy Airport, The 3rd Bos phorus Bridge had meters, is the world’s longest Yeşilköy Airport and eventua lly opened up for traffic. The bridge hanging bridge that features a the 3rd Airport. connects Europe and Asia via the railway. North Marmara Highway, which The foundations of the bridge Osmangazi Bridge has is still under construction. The had been laid in May 2013 and shortened 2.5 hours of 3rd bridge is the widest bridge in the bridge was foreseen to be distance to 4 minutes. the world. It is located between completed in 36 months. Osmangazi Bridge, a Odayeri and Paşaköy, being 148 However, it was completed in 27 significant part of the Gebze – kilometers long and 59 meters months. The cost of the bridge Orhangazi - Izmir highway wide. It features 8 lanes for was 3 billion USD. It was built in project, which will cut down rubber tired vehicles and 2 lanes ‘build-operate-transfer’ model Istanbul - Izmir travel to 3.5 hours of railway. and will be operated by the has been opened on July 1. The

Economic Dialogue Turkey October 2016 65 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 4

investment

bridge took 39 months to be Orhangazi Bridge was announced that the foundations completed and 8 thousand constructed with a curve to save of the bridge will be laid on 18 workers took part in the the bird haven “Hersek Lagoon” March Çanakkale Martyrs Day construction. construction thus taking its place 2017. Çanakkale 1915 Bridge will The interior span of the bridge among constructions that are be constructed in Lapseki and is 1.550 meters and total length is respectful to nature. Gelibolu districts. It will be the 2.682 meters. It is the fourth The total construction cost of first bridge on Çanakkale Strait hanging bridge with the longest the bridge and the highway and the fifth hanging bridge in interior span in the world. There amount to 6.9 Billion USD and it the Marmara Region. are 6 lanes on the bridge. The is predicted to be saving 650 The bridge will be useful for bridge has cut down the 2.5 hours million USD per year after the the traffic between Thrace, of travel to 4 minutes. completion of the highway. Aegean and West Mediterranean Gebze – Orhangazi - Izmir The construction of the bridge regions and will help the traffic highway construction consists of has increased the cost of the coming from Europe cease going 384 ki lometers of highway and 49 nearby real estate. It is hoped that into Istanbul to cross to Asia. kilometers of access roads as well the bridge will lighten the heavy The distance in Çanakkale as the Orhangazi Bridge. The traffic load of Gebze and Strait where the bridge will be highway will be connecting Dilovası. The construction of a constructed is 3.600 meeters. Th Istanbul to Yalova, Bursa, new Organized Industrial Site in distance between the two towers Balıkesir, Manisa, Kütahya and Yalova is also underway. of the bridge will be 2.023 meters. Izmir. Half of Turkey’s The bridge will be made of two population, approximately 38 Çanakkale Bridge will be sections; the first section will million congregates in the region the longest bridge of the pass through Istanbul Silivri and the travel time from Istanbul world district, Tekirdağ Marmara to Bursa will be 1 hour, to Izmir Çanakkale 1915 Bridge project Ereğlisi, Çorlu, Süleymanpaşa, 3.5 hours and to Eskişehir 2.5 is yet another massive one. Prime Malkara districts, Çanakkale hours. Minister Binali Yıldırım Gelibolu, Lapseki, Çan, Yenice

66 October 2016 Economic Dialogue Turkey 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 5

investment

districts, Balıkesir Balya and Merkez districts, making a total of 277.599 meters. The second section will pass through Lapseki and Gelibolu districts, consisting of the strait and access roads, yielding a total of 46.816 meters. The bridge and the highways will be constructed on ‘build- operate-transfer’ basis. The bridge will feature 6 lanes and 20 junctions.

Projects that will relieve Istanbul traffic Istanbu l has a population of 15 million and is located at the meeting point of two continents. 1.6 million people move each day between Asia and Europe. One of the most significant subjects in Istanbul is the transportation, the loss of time due to the traffic. Passing from one continent to the other is most time consuming. According to the statistics of the Ministry of Transportation, Maritime and Communication, there will be 4 million persons passing from one continent to the other each day in 2023. This means even more traffic for Istanbul. Marmaray and Yavuz Sultan Selim Bridge are already tackling the problem and new investments and projects are on the way.

The Eurasia Tunnel is opening on December 20 More projects are coming to life after the opening of the 3rd Bosphorus Bridge. One of these is the Eurasia Tunnel, whose opening will be on December 20,

Economic Dialogue Turkey October 2016 67 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 6

investment

7 months earlier than planned. Bosphorus and feature railways The Eurasia Tunnel will decrease and passage for cars. The tunnel the travel from Kazlıçeşme to will have cars traveling at the Göztepe to 15 minutes. The lowest and highest levels with tunnel project encompasses subway trains in the middle level. an area of 14.6 kilometers, The subway will enter the 5.4 kilometers of it being tunnel in İncirli E-5 highway undersea. junction; pass under the The tunnel has been Bosphorus to emerge in constructed to withstand a 7.5 Söğütlüçeşme on the Asian side. magnitude earthquake. The The cars will enter the tunnel at tunnel has two levels, 2 lanes at Hasdal Junction pass under the each level. Approximately 120 year. The decrease of time to sea and emerge at Çamlık thousand vehicles are expected cross the Bosphorus w ill equal to junction. to pass through per day. 52 million hours time saved. The The tunnel is being T he tunnel built on ‘build- amount of emission of the cars constructed on ‘build-operate- operate-transfer’ model and using the tunnel will be 82 transfer’ model and is going to be financed for 1 billion 245 million thousand tons less and will completed in 5 years. The travel USD. It will be operated by the provide environmental time from İncirli to private sector for 24 years 5 contribution. Söğütlüçeşme, which is 31 months before being transferred kilometers long and has 14 to the state. Istanbul Tunnel with 3 levels station stops, will be 40 minutes. The state, on the other hand, will be a first in the world The cars will cross from Hasdal will gain 180 million TL from the Yet another project that will to Çamlık in 14 minutes. share of the passing vehicles. 38 ease the traffic between the The tunnel will be integrated to million liters of gasoline worth continents is the Istanbul Tunnel, TEM highway, E-5 Highway and 160 million TL will be saved per which will traverse under the the North Marmara Highway and

68 October 2016 Economic Dialogue Turkey 64-69 köprüler tüneller 6_Layout 1 21/09/16 21:01 Page 7

investment

is believed to be able to commute largest construction sites of the Canal Expansion Project will be 6.5 million persons per day. world, has over 17 thousand contacted for cooperation of the workers from 12 countries construction of the canal. 3rd airport will be working in shifts. 1.500 are office Istanbul Canal will be located serving 200 million workers and 14.500 are on the European side. The passengers a year construction workers. construction of the canal aims to The construction of the 3rd It is stated that the number of decrease the sea traffic on the airport is under way, the first workers can go up to 30 thousand Bosphorus which is the only way phase to be completed in the first when needed. The new airport between the Black Sea and the quarter of 2018. will provide employment for 100 Mediterranean. On the point The airport encompasses an thousand persons and provide where the canal opens to the area of 76 million 500 thousand income to 1.5 million persons Marmara Sea, a new city will be sq meters and will serve 200 indirectly. established. million passengers a year when Istanbul Canal is foreseen to be completed. Istanbul Canal longer than 40 kilometers. The It will be the biggest airport in The project was labeled as canal will be 500 meters wide at the world with regard to Recep Tayyip Erdoğan’s ycraz the surface, 400 meters wide at passenger capacity. The bid for project in 2011. However, now the the bottom and 30 meters deep. the 3rd airport, 22 billion 152 legal regulations are being taken This will enable to have the million Euros was the greatest care of as the best location is tankers that threaten Istanbul’s bid of the Republic history. The trying to be determined. The safety sail through the canal

airport now features one of the team that realized the Panama instead. EDT

Economic Dialogue Turkey October 2016 69 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 2

real estate The effects of urban transformation and ‘impressive projects’ on the economy

Haluk Sur has been involved in the construction industry for over 25 years, realizing projects with domestic and global investors and working for the adaptation of international investment standards. We had a long conversation regarding the restructuring of the Turkish construction industry, the effects of the urban transformation on the economy and recent residence sales to foreigners.

What are the effects of there have been growth of 12.6 Istanbul Canal, 3rd Bosphorus percent and growth of 8-9 percent Bridge, highways, railways, in 2010 and 2011 were impressive. underground web, high-speed However, as Turkey blossomed, trains, tubes, and numerous its substructure and constructions of hospitals, superstructure systems became schools, stadiums and insufficient. Atatürk International government buildings on the Airport, which had been Turkish economy? constructed to remain functional Turkey has made significant until 2023, exceeded its capacity improvements in the global sense thus surfaced a need for a new in many sectors since the last 13 international airport. The Turkish years, becoming one of the go vernment decided to construct developing market economies. the world’s largest airport in Particularly, during the past years Istanbul and to turn Istanbul into and since the 2008 global crisis, a transportation center. The

70 October 2016 Economic Dialogue Turkey 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 3

real estate

international airports boast an be integrated with the urban 15-20 years ago the high speed area of 22-23 sq km and the transformation program to train between Istanbul and busiest airports such as Atlanta, decentralize the density in the Ankara was only a dream but Chicago and London Heathrow city towards the outside and in today the high speed trains will have passenger capacity of 70-75 the meanwhile to create green run not only between Istanbul million. Turkey started the belts in the city especially in and Ankara but from Ankara to construction of an airport for 150 concrete areas. Konya, Ankara to Sıvas and soon million passengers on an area of There has been a great increase afterwards between Ankara and 81 sq km. The airport will be able in the highway hub in Turk ey İzmir and Istanbul and İzmir. The to facilitate new additions in the during the last 10 years. The present 1.000 kilometer capacity future years and will also feature highways increased from a few will increase to 5.000-6.000 soon. a 21st century town Aerotropolis hundred kilometers to 2.200 This is yet another impressive nearby. kilometers within the last 10-12 project. The 20th century town s, the years. The divided double roads The underground system is metropolises, developed along were around 4-5 thousand very important. There are 26 and around the subway webs but kilometers and are 22-23 cities that have populations over the 21st century towns, the thousand kilometers long today. 10 million in the world. These aerotropolises will be developing 2023 targets ate to increase cities can be divided as A and B around airports as the divided roads to 35 thousand leagues. Cities of the A league importance of airports in global kilometers and highways to such as London, New York, Paris, transportation increase. The new 7-8 thousand kilometers. Shanghai and Tokyo have town will be built at the south of the airport, on the 300 sq km land from the north of the Küçükçekmece Lake. Plans of the Istanbul Canal are also taking shape. The new airport will be connect ed to Sabiha Gökçen Airport on the Asian side by the North Marmara Highway via the 3rs Bosphorus Bridge. The two airports will be connected upon the completion of the 3rd Bosphorus Bridge and the high speed train will increase the interoperability of Sabiha Gökçen Airport, transforming it into a great hub of international transportation. The logistic facilities around the airport, the business centers, hotels, confer ence and congress facilities as well as residences will constitute a new town, a new Istanbul, at the west of Istanbul. It is necessary while doing this to 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 4

real estate

underground systems of 350-400 In over 30 large cities, new city Although tunnel passages are km. long. Shanghai is the first in hospitals are being built. All of very important, their construction the world and has a these will be large hospitals, cost and management are underground/aboveground rail having several thousand beds. difficult tasks. Certainly the new hub that reaches 500 kilometers. Tunnel passages are of utmost highway that will connect the London has a system that is 400 significance. Along with the Asian side to the European side, kilometers long. Furthermore, construction of Çanakkale Bridge including the 3rd bridge highways some cities have 8-10 lines, and the completion of the South that will connect the North London has 15-16 lines with Marmara Highway, Istanbul’s Marmara highway to the Asia passenger capacity of 4.5 million traffic and intern ational transit and Europe via TEM and E5 per day and Tokyo has a capacity transportation load will be highways, while a railway system for 7 million per day. These are considerably lighter. Istanbul’s starting in Maltepe leads to solutions to decrease the traffic industrial load will be switched to Zeytinburnu over the landfill in the cities. South Marmara turning pedestals that support a two level B league cities such as Karachi, Bandırma region into a logistic bridge of 16 lanes – 8 lanes for Jakarta, Bombay, Manila and and production center making each way, as well as rail system Cairo have populations over 10 Istanbul breathe. Marmara Sea can be a saver for Istanbul’s million and are about to have a will act as a natural highway, traffic. There are examples of this underground/aboveground hub being useful. Istanbul is no all around the world such as San of 200 kilometers. Thanks to longer the name of a city. It is one Francisco Bay Bridge, Hong Kong Üsküdar-Ümraniye and of the smallest of Turkey’s cities Tshin Ma Bridge that connects Mecidiyeköy-Başakşehir line, we in area, 5.500 sq km, however its Lantau Island to Kowloon, are also at the same position effect and economic size is very, Portugal Vasco de Gama Bridge since without that line we have very large. Istanbul boasts and Malmö Copenhagen Bridge 150 kilometers. Marmaray alone Turkey’s 25 percent GNP, 40 that connects Sweden to is a world class project. As a percent of the taxes and 65-70 Denmark. Each of these bridges Turkish citizen, I am thankful to percent of the monetary are approximately 20 kilometers President Erdoğan and AK Party movements in Turkey. The name long. government to have given us this Istanbul is now encompassing It will certainly be one of the project. the regions of Thrace, East greatest services to Istanbul and This was a 100 years old dream Marmara and South Marmara prevent people traveling small project. It is not yet completed and has become a megapolis distances and people traveling since only 14-15 kilometers are which houses 25 million people long distances being stuck being used today of the 76 including Bursa, Kocaeli, together, easing the city traffic kilometer project. But when this Balıkesir, Çanakkale and the circulation. This will certainly be project is completed and when we Thrace region. All of these are an impressive project that should reach 400 kilometers long bright instances in Turkey’s be taken on sometime soon. All railways on the 100th anniversary f uture. these projects will furnish Turkey, of our Republic, we shall take our Istanbul and the other 30 place among the A league cities metropolises with modern in the world. Other important silhouettes. The Eurasia Tunnel Turkish cities such as Ankara, constructed for rubber tired İzmir, Adana, Bursa, Kayseri, vehicles is a very significant Antalya and Konya are getting project however the fact that the their share of the impressive maintenance cost of tunnels are projects. very high and they have limited

72 October 2016 Economic Dialogue Turkey 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 5

real estate

capacity should be kept in mind. The above means 1 million Turkey is on its way becoming residences per year. At present one of the largest 10 economies the construction permits taken of the world with a GDP of over 2 have exceeded 800 thousand but billion USD and over 25 thousand all of these might not be realized. income per capita. However, building settling indicate around 700 residences You regard urban are built per year in Turkey.s Thi transformation as a crazy is going to be somewhat marginal project. What do you think of but the residence construction the process? Is the financial per year should reach 1 million so source sufficient to tear down that our cities become prosperous. From this and rebuild approximately 7 It is time to million residences? How many perspective, if 15 million establish residences are built in 15 years, years will it take? What is the cooperation with employment rate required by the economic growth will be 3 the source? What will be the country funds trillion USD. gain of Turkish economy? Founding Turkey’s country fund The construction and real Urban transformation program will give Turkey a chance to estate sector has a striking effect is one of the most important contact and make business with over the other sectors. Turkey Gulf countries like Qatar and projects Turkey has undertaken. can stand to gain 25-30 percent Kuwait who have country funds The gain in economic growth can VAT over this. From this point of that make a total of 4-5 trillion be calculated in trillions and will USD. If Turkey manages to draw view it will bring forth a further bring a great momentum to the 10 percent, it will make 400-500 capacity 0f 800-900 billion USD, Turkish economy. billion USD. These foreign funds as economic growth. This means The reflections of the urban can be partners in Istanbul Canal multiplying today’s Turkey by 2. transformation on the economy is or 3rd Airport projects. This is the real meaning of urban not yet at the desired level transformation but of course it however it is obvious that it has Approximately 2 million takes time. introduced s ome movement into residences are to be used via It can spread out to 15 years the residence market. Turkey’s internal migration parallel to but should not go any further for residence production is based on Turkey’s macroeconomic it will be risky. Consequently this 3 significant elements. One is the expansion. Urban transformation great big pie might not be out for population growth which forces targets 7 million residences to be eating yet. Turkey to build 500-550 thousand renewed and will take 15 years, But even its talks have created residences per year. Internal which means that 16-17 million liveliness in the econom y. This is migration is going on. residences should be built. So an impressive project not only Urbanization rate in Turkey is there should be no residence for providing safety but also for around 75 percent but the shortages in Turkey due to the economy. government is trying to increase population increase, and internal 450 billion USD is required for it to 85 percent. If the rate migration should be handled the whole process to be becomes 85 percent, it means that correctly. There should also be no completed, 30 billion per year. 10 percent of the population, 7.5 – subsidence areas or slum The direct affect of the 8 million people will be neighborhoods and the new construction sector on migrating from the rural to the houses should be earthquake employment will be close to 1 urban areas. safe. million however it is even more

Economic Dialogue Turkey October 2016 73 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 6

real estate

when the service materials, to build 600 residences at 2.600 the implemented social residence production from different factors different locations in 10 years in policies TOKİ has received offers are added. any country in the world. If the from 60 countries in the world, lower level people of Turkey can Africa, many other world Will this be realized? attain residences only through countries and even Mid America. What to do? social residence projects, we shall What they all wanted was to I must admit that it will be very have to build 2.5-3 million of realize the same model in their difficult to realize the urban these 15 million residences in own countries. You can see that transformation program without social status and the same residence has become a popular a residence settlement master amount for the middle- lower subject in the World Bank and plan or transportation. We must group in the coming 15 years. the UN today. realize that urban transformation TOKİ can build 600 thousand If TOKİ became an is not rebuilding the same residences in 10 years, that is 60 international item along with buildings after tearing them t housand residences per year and Turkish construction sector and down. Urban transformation is a we are talking about 3 million Turkish construction materials project that can be reali zed in the residences. We can realize urban sector, and opened up to the general country in general and in transformation if TOKİ world building 600 million the street in private, each in its multiplies its capacity by two. residences until year 2050, that own. Since that is not possible we have would be equal to the vastness of TOKİ has had a great success to include the private sector in the market here. Today there is a up to now. Looking from any this project, whatever we do. We potential outside that is 3 times perspective, it is not an easy task should also remember that due to the potential in Turkey.

74 October 2016 Economic Dialogue Turkey 70-75 haluk sur 6_Layout 1 21/09/16 21:00 Page 7

real estate

Are the financial sources attained with some work during sufficient? Green recycling is the last quarter. This year a When the vastness of the urban obligatory decrease of 30 percent is expected in the tourism sector transformation project is taken Let us not forget that the into account, I think that it will be cheapest energy in the world and if it does not get better difficult to finance it by is not produced energy but during the last quarter, the loss of traditional methods such as pre saved energy. The use of one income can be 10 billion USD. An sale or build and sell. There item of money for saving effort has to be made during this needs to be a variety of tools. energy instead of producing period to improve our impression Real estate certificates , Real energy yields 6.6 times on the foreign investors. estate partnerships and Real productivity. Thus instead of Having campaigns during the spending 100 million dollars to Estate Investment Funds as well last quarter can give momentum build a 50 megawatt power as Individual Retirement Funds to the sector. All should work on plant, using it to save energy the bad impr essions and make can offer alternatives and be in a building saves 335 improvements. effective. megawatt extra energy. If 7 The incentive mechanisms million residences to be There must be an effort to draw have to be alerted to add transformed are green, energy country investment funds from momentum to the project. These and water worth 26 million Qatar, Kuwait, Saudi Arabia, BAE, incentives can persuade the real USD will be saved until year Oman, Bahrain, Azerbaijan and estate owners and investors to 2023. Considering that the Iran. The total fund these funds join the transformation program. normal life span of buildings is manage is 4-5 trillion USD. If 50-60 years, the real savings Turkey manages to draw 10 will exceed 150 billion USD. Sales of residences to percent, it will make 400-500 foreigners in line with billion USD. It will be good to reciprocity principle were developments. What do you establish Turkey’s country increasing. However last year think about this? investment fund in the nearest the real estate sector that A target of 10 billion USD had future and to be in direct contact ended the year with sale of 5 been set for this year regarding with these countries. The billion USD to foreigners faced residence sales to foreigners. But messages will be more effective. a decrease due to political I believe 6 billion USD can be These foreign funds can be partners in Istanbul Canal, 3rd Airport and other giant projects. Or be partners in Kartal or Gaziosmanpaşa urban transformation projects. I must admit that presently there are no western investors around Turkey however the Gulf investors are interested. It is not enough to appear in fairs. It is important to establish contact with the investors who are here. Contacts must be made with powerful investment banks and eventually visit the investors

themselves. EDT

Economic Dialogue Turkey October 2016 75 76-79 akıllı köy 4_Layout 1 21/09/16 21:00 Page 2

technology

Vodafone Smart Village, with its digital infrastructure, will set an example in Turkish and global agriculture. WORLD’S FIRST SMART VILLAGE IN AYDIN On the occasion of its 10th anniversary in Turkey, Vodafone has initiated a developmental campaign for rural areas, a movement that could inspire others in the world. In line with the “Four Corners of Turkey” campaign strategy, Vodafone Farmers Club and its partner Tabit will be founding the world’s first smart village in Aydın and setting an example to all other countries. The Smart Village will be supplied with all facilities such as modern green house implementations, modern fruit growing, modern stockbreeding and all kinds of digital technologies. The main aim is to reduce the migration from the rural areas to the cities by increasing the sustainable productivity. Vodafone Smart Village is aimed to expand by domino effect to lead the digital development campaign to 38 thousand villages in Turkey. The Smart Village will be founded on 298.000 sq. meters with an investment of approximately 23 million Turkish Liras in 10 years.

Beekeeping

Smart pasture

Technology center Greenhouse

Education center

Cultivation in shade-net

Orcharding

76 October 2016 Economic Dialogue Turkey 76-79 akıllı köy 4_Layout 1 21/09/16 21:00 Page 3

technology

odafone continues its investments in Turkey’s Vrural zone on its 10th anniversary with the Digital Transformation Movement. Vodafone targets rural development by initiating the digitalization of agriculture in Turkey. In 2009 Vodafone initiated the first social business model within the structure of the Ministry of Food, Agriculture and Livestock by introducing the Vodafone Farmers Club program which is being u sed today in 6 Vodafone countries. Now Vodafone will be founding the world’s and Turkey’s first smart village in Aydın, Koçarlı town, Kasaplar village. Vodafone Turkey and Tabit will invest 23 million Turkish Liras in 10 years to the smart village program. The smart village will be founded on 298.000 sq. meters of land and will feature modern greenhouse implementations, batch milking and cooling, water and fertili zer execution centers, soil analysis labs and other facilities to make farmers tasks easier. Gökhan Oğuz: “We are targeted to change Turkey’s The first smart village is aimed continuing our investments in grading in the world with regard to be a model for others in Turkey a decisive manner to agriculture and made it our and elsewhere in the world. The He stated that they are responsibility. Along with our program aims to make farming a supporting Turkey’s business partner Tabit, we have coveted job and reduce the transformation and development initiated the Vodafone Farmers migration from the rural areas to and added: “As Vodafone, we Club in 2009. And today, we are the urban areas. The smart have started to digitalize reaching out to 1, 4 million village program was introduced individuals initially and will farmers in Turkey and 3 million in a meeting attended by continue with homes, institutions farmers in the world with this Vodefone CEO Gökhan Öğüt and even cities. We are going program that is being used in 6 and Tabit foundi ng partner forward with our “Four Corners of Vodafone countries. We are now Tülin Akın. Turkey” campaign. We have founding the first smart village in

Economic Dialogue Turkey October 2016 77 76-79 akıllı köy 4_Layout 1 21/09/16 21:00 Page 4

The farmers’ income will increase 40 thousand TL every year The Smart Village will be a 10 year project that aims to monitor the increase in productivity in the first two years and implement the sustainable structure in the next four years. The project predicts 20 percent in vegetative production costs, 22 percent in stockbreeding costs, as well as 30 percent income increase in stockbreeding and 10 percent increase in total production. It is targeted to have an increase of 40 thousand TL per household in 2 years. At least 20 percent is targeted in agricultural irrigation and water and soil contamination will be prevented.

Aydın with an investment of 23 “Vodafone Smart Village is a Vodafone Smart Village program million TL. We are providing model that will trigger 62 million we hope to make farming a strategic support to this smart dollars worth agricultural favored profession and decrease village. This support will trigger economy with the help of the migration from the rural to the digital transformation and technology. With this project, we the urban areas. We believe that will also make Vodafone’s 10th are targeting an increase of this will be an example, a model year in Turkey memorable. The approximately 40 thousand TL for other villages in Turkey and Smart Village will be merging per house within two years. On other Vodafone countries. We are traditional agricultural methods the other hand, we will be able to targeting a domino effect that with the possibilities of advanced attain sustainable agricultural will eventually encompass all 38 technology.” sources by preventing soil and thousand villages in Turkey.” water contamination thanks to “The Smart Village will the systems we are setting up A new generation rural life set up an example for the here. Yet another target that we model will be established whole world” find very significant is social Smart Village will feature the Öğüt continued by saying that development. We are aiming to new generation model where they aimed to develop the elevate the level of welfare in technology supports the social economic, environmental and rural areas. There will be social development and innovation. social development of the and educational programs for the There will be modern fruit farmers with the Smart Village children, the young people, and orchards, vegetable growing project. He said: the women. Thanks to the fields, greenhouses, and

78 October 2016 Economic Dialogue Turkey 76-79 akıllı köy 4_Layout 1 21/09/16 21:00 Page 5

technology

vegetable growing in fields, Life Camps and Agricultural Ghana, Kenya, Tanzania and New vegetable and fruit depots, cold Technologies Summit programs. Zealand. The Farmers News storage, batch milking and Package introduces 88 products cooling systems and grazing Vodafone Farmers Club in 957 districts in Turkey. On the pastures as well as follow-up has reached out to other hand, 1.1 million different centers, water and manure 1,4 million Farmers contents were shared until today centers, stockbreeding center, Under the patronage of the and 871 thousand short messages soil and leaf analysis labs, Ministry of Food, Agriculture and have been sent. There have been workshops, training facilities, Livestock, and with the 38 thousand advertisements on social life and sports centers. cooperation of Agricultural Farmers Advertisement Bulletin. Credit Association, the Vodafone Vodafone Farmers Training Truck The internet of objects will Farmers Club has reached out to has visited 495 districts and be put into use 1,4 million farmers in Turkey and reached 9 million persons. Being Turkey’s first technology 3 million farmers in the world Vodafone Farmers Guide was implementation village, the since 2009. The pr ogram has 890 downloaded by 16 thousand Vodafone Sma rt Village will use thousand members in Turkey and users. 32 thousand farmers are smart devices at every step in many more in six Vodafone benefiting from the Farmers agriculture and stockbreeding. countries such as Egypt, India, Health Package. EDT All automation systems will be executed via mobile devices and will report to one center. Irrigation automation, greenhouse automation, manure control automation, poultry house automation, frost automation, milk automation, beekeeping automation, pedometer automation, early warning automation will be using the internet of objects to make life easier for the farmers.

There will be socialization and educational programs Programs pertaining to learning, socialization and fun will be closely monitored in the Smart Village. There will be camps for children, adolescents, women and men in which “one lives and learns”. There will also be Mature Farmers Training Programs, Vocational Experience Sharing Programs, Young Farmers Programs, Child Farmers Programs, Nature and Natural

Economic Dialogue Turkey October 2016 79 80-81 tiger woods 2_Layout 1 21/09/16 20:59 Page 2

tourism

Tiger Woods scheduled to appear at the Turkish Airlines Open Antalya 2016 for its fourth edition

Turkish Airlines, Europe’s best airline for six consecutive years according to Skytrax, will present the fourth edition of the Turkish Airlines Open – where fourteen times major champion Tiger Woods is scheduled to appear from 3rd to 6th November. The first of three Final Series events on the 2016 European Tour season will welcome one of the biggest golf stars of all time.

80 October 2016 Economic Dialogue Turkey 80-81 tiger woods 2_Layout 1 21/09/16 20:59 Page 3

tourism

Regnum Carya Golf Resort, Antalya

iger Woods, now 40 Tiger Woods has played in venue. Measuring 7,186 yards, years old, has had an two previous Turkish Airlines the course winds its way through Tunprecedented career events. In the year 2013, Tiger the eucalyptus trees, serene during his 20 years on tour. He also hit a golf ball from Europe lakes and subtle undulations. has won 105 tournaments, to Asia across the iconic bridge With a mixture of short strategic including 14 ‘majors’. This fall in Istanbul, a great feat not to be holes and demanding long holes Tiger Woods will be back in forgotten. the winners will have their work Turkey for the third time. This year the players will be cut out if they are to lift the The tournament will take competing over the new layout trophy on Sunday. place in the Antalya region at a of the beautiful Carya GC. The Past Champions of the event new venue, the stunning Belek region in Antalya is include Victor Dubuisson (2013, Regnum Carya Resort. Tiger renowned for its golf courses 2015) and Brooks Koepka (2014), Woods is set to attend the 2016 and breath taking surroundings and this year with the scheduled Turkish Airlines Open, together along the Mediterranean attendance of Tiger Woods the with the top 70 players in the coastline. Located just 25 Turkish Airlines Open is one Rac e to Dubai standings, to minutes from Antalya airport, tournament that is surely not to fight for a prize fund of $7m. Carya Golf Club is a fitting be missed. EDT Thanks to the greatest golf star in the world’s plans to compete in Turkey, along with many other leading players, this year’s tournament promises to be another entertaining and dramatic week of golf. “We are proud to support a top-class golf event, such as the Turkish Airlines Open 2016, and pleased to know that Tiger Woods chose Antalya as a key part of his competitive come back.” explained M. İlker Aycı, Chairman of the Board and the Executive Committee of Turkish Airlines.

Economic Dialogue Turkey October 2016 81 82-85 fazıl say 4_Layout 1 21/09/16 20:59 Page 2

culture&portrait Turkish musician Fazıl Say awarded International Secularism Prize Born and raised in Ankara, pianist and composer Fazıl Say is one of the most distinctive artists to emerge from Turkey in the last twenty years. His works blend folk traditions from his homeland with elements of Western classical music. Say’s musical vocabulary, like the geography of his native country, is situated between Europe and Asia. Le Figaro raves, “Say is not merely a pianist of genius undoubtedly he will be one of the greatest artists of the twenty-first century.”

orld-renowned Turkish pianist Fazıl Say was Wawarded the “2015 International Secularism Prize” (Prix de la Laïcité) by the France Committee of Secularism on October 26, 2015. The event was hosted at the Paris Municipality Building with the attendance of FrenchPrime Minister Manuel Valls and Paris Mayor Anne Hidalgo, along with other guests. “Secularism is a concept identified with the Republic [of Turkey] founded by the courageous leader [Mustafa Kemal] Atatürk, in my home country, Turkey. It stood as an upper justice, which has given freedom to a range of philosophical approaches ensuring equal rights to its people dispersed under different beliefs and ethnic origins, both to believers and non-believers, aiming at taking part in the international scene competition in science, arts, sports and many others.” Say said in his speech.

82 October 2016 Economic Dialogue Turkey 82-85 fazıl say 4_Layout 1 21/09/16 20:59 Page 3

culture&portrait

The role of arts in an ‘imperfect’ world “The world is not perfect, however arts will contribute positively to this situation,” said Say, referring to a “mindset of terror.” “In the beginning of 21st century, it is tragic for all of us to witness how the mindset of terror has reached a barbarous, inhuman point. The responsibility of this situation is the balances of power, both in the East and West. The threat is big; we are aware of the threat,” he said. “Time will show if arts will succeed in contributing to this imperfect world,” the famous pianist added. “We should all make an effort to more direct, more open, more contact with free creative make this world a peaceful place exciting; in short, they go straight processes and forms is seen as that we would like to leave to our to the heart. Which is exactly the source of the immense children, grandchildren,” he said. what the composer Aribert improvisatory talent and the Turkish MP and NSS honorary Reimann thought in 1986 when, aesthetic outlook that make Fazıl associate Şafak Pavey was during a visit to Ankara, he had Say the pianist and composer he awarded the National Secular the opportunity, more or less by is today. He has been Society's Secularist of the Year chance, to appreciate the playing commissioned to write music for, prize in 2014. of the sixteen-year-old pianist. He among others, the Salzburg immediately asked the American Festival, the WDR, the Dortmund About Fazıl Say... pianist David Levine, who was Konzerthaus and the Schleswig- The Turkish pianist and accompany ing him on the trip, to Holstein and Mecklenburg- composer Fazil Say was born in come to the city’s conservatory, Vorpommern festivals. His work Ankara and studied piano and using the now much-quoted includes compositions for solo composition at the state words: ‘You absolutely must hear keyboard and chamber music, as Conservatory of his home city. him, this boy plays like a devil.’ well as solo concertos and large- With his extraordinary pianistic Fazıl Say had his first piano scale orchestral works. talents, Fazıl Say has been lessons from Mithat Fenmen, who From 1987 onwards, Fazıl Say touching audiences and critics had himself studied with Alfred fine-tuned his skills as a classical alike for more than twenty-five Cortot in Paris. Perhaps sensing pianist with David Levine, first at years, in a way that has become just how talented his pupil was, the Musikhochschule Robert rare in the increasingly Fenmen asked the boy to Schumann in Düsseldorf and later materialistic and elaborately improvise every day on themes to in Berlin. This formed the organised classical music world. do with his daily life before going aesthetic basis for his Mozart and Concer ts with this artist are on to complete his essential piano Schubert interpretations, in something different. They are exercises and studies. This particular. His out standing

Economic Dialogue Turkey October 2016 83 82-85 fazıl say 4_Layout 1 21/09/16 20:59 Page 4

culture&portrait

technique very quickly enabled him to master the so-called warhorses of the repertoire with masterful ease. It is precisely this blend of refinement (in Bach, Haydn, and Mozart) and virtuoso brilliance in the works of Liszt, Mussorgsky and Beethoven that gained him victory at the Young Concert Artists international competition in New York in 1994. Since then he has played with all of the renowned American and European orchestras and numerous leading conductors, building up a multifaceted repertoire ranging from Bach, through the Viennese Classics (Haydn, Mozart and Beethoven) and the Romantics, right up to contemporary music, including his own piano compositions. Guest appearances have taken Fazıl Say to countless countries on all five continents; the French Fazıl Say’s upcoming concerts Ankara, Turkey newspaper Le Figaro called him ‘a 09 Oct 2016 Congresium Ankara Genève, Switzerland genius’. He also performs 14 Oct 2016 Victoria Hall Muri, Switzerland chamber music regularly: for 15 Oct 2016 Kloster Muri Festsaal Graz, Austria many years he was part of a 17 Oct 2016 Congress Graz, Stephaniensaal Graz, Austria 18 Oct 2016 Congress Graz, Stephaniensaal Milano, Italy fantastic duo with the violinist 26 Oct 2016 Conservatorio di Milano – Sala Verdi Offenbach, Germany Patricia Kopatchinskaja. Other 28 Oct 2016 Stadthalle Offenbach Heilbronn, Germany notable collaborators include 29 Oct 2016 Festhalle H armonie Dortmund, Germany 30 Oct 2016 Konzerthaus Dortmund Maxim Vengerov, the Borusan Fribourg, Switzerland Quartet of Istanbul and the cellist 09 Nov 2016 Salle Equilibre Bern, Switzerland 10 Nov 2016 Kulturcasino Bern Nicolas Altstaedt. Bern, Switzerland 11 Nov 2016 Kulturcasino Bern Tokyo, Japan From 2005 to 2010, he was artist 17 Nov 2016 Kioi Hall Nara, Japan in residence at the Dortmund 22 Nov 2016 Musik Saal Akishino Osaka, Japan Konzerthaus; during the 2010/11 25 Nov 2016 Osaka Symphony Hall Osaka, Japan 26 Nov 2016 Osaka Symphony Hall season he held the same position ew York, USA he Performing Arts N at the Berlin Konzerthaus. Say 01 Dec 2016 Tilles Center for t New York, USA was also a focal pointe of th 03 Dec 2016 Carnegie Hall New York, USA 04 Dec 2016 The Performing Arts Center programme of the Schleswig- The Netherlands 16 Dec 2016 Muziekgebouw/Amsterdam Holstein Musik Festival in the Salzburg, Austria 27 Jan 2017 Stiftung Mozarteum, Großer Saal summer of 2011. There have been Salzburg, Austria 30 Jan 2017 Stiftung Mozarteum, Großer Saal further residencies and Fazıl Say festivals in Paris, Tokyo, Meran,

84 October 2016 Economic Dialogue Turkey 82-85 fazıl say 4_Layout 1 21/09/16 20:59 Page 5

culture&portrait

Hamburg, and Istanbul. During Say gave a successful concert 2015/2016 season the Alte Oper the 2012/13 season Fazıl Say was with Orpheus Chamber Orchestra Frankfurt invited him to be their the artist in residence at the at Carnegie Hall, New York, that artist in residence. Hessischer Rundfunk in Frankfurt was followed by a tour with His recordings of works by am Main and at the Rheingau concerts all over Europe. In 2014 Bach, Mozart, Beethoven, Musik Festival 2013, where he was he was t he artist in residence at Gershwin and Stravinsky have honoured with the Rheingau the Bodenseefestival, where he been highly praised by critics and Musik Preis. In April 2015 Fazıl played 14 concerts. During their won several prizes, including three ECHO Klassik Awards. In 2014, his recording of Beethoven’s piano concerto No. 3 and Be ethoven’s sonatas op. 111 and op. 27/2 Moonlight was released, as well as the CD ‘Say plays Say’, featuring his compositions for

piano. EDT 86-96 likya 11_Layout 1 21/09/16 20:57 Page 2

heritage

Discover the Beauty LyciaOF ANCIENT “Take a blind man to Lycia, and he’ll immediately know from the smell of the air exactly where he is. The acrid perfume of lavender, the pungent fragrance of wild mint and thyme, will tell him.”

l Cevat Şakir “Fisherman of Halicarnassus”, Famous Turkish Author

86 October 2016 Economic Dialogue Turkey 86-96 likya 11_Layout 1 21/09/16 20:57 Page 3

ycia; the historical name of Great and absorbed Greek the Tekke Peninsula, culture. Later, Lycia became a Lwhich juts into the province of the Roman Empire. Mediterranean on Turkey’s The Romans developed many southern coast and the home to cities and ports, linking them the ancient Lycians who were one with paved roads and equipping of the most enigmatic people of them wit h theatres, baths, forums, antiquity. temples and ceremonial gates. Although little historical record From the 4th Century, Christianity has been left behind them, what took hold and, as the Roman has been discovered reveals empire crumbled, many fascinating people culturally Byzantine monasteries were distinct from the rest of the founded in the Lycian hills. ancient world. The Lycians were a Lycian graves and ruins abound democratic but independent, on the peninsula and the Lycian warlike people, with a developed Way passes about 25 remote art style and a high standard of historical sites. living. Their strategic position Here are some examples that gave them unique opportunities can be visited either for sea-trade and (at times) for independently or on a tour, piracy. After Persian rule, the making for a very nice day out in Xanthian Obelisk Lycians welcomed Alexander the gorgeous nature;

Economic Dialogue Turkey October 2016 87 86-96 likya 11_Layout 1 21/09/16 20:57 Page 4

heritage

The Harpy Tomb in Xanthos. Xanthos repopulated but the same but was deserted during the first Xanthos was the capital city of gruesome story repeated itself in wave of Arab raids in the 7th the Lycian Federation and its 42 BC when Brutus attacked the century. greatest city for most of Lycian city during the Roman civil wars Xanthos and Letoon are often history. It was made famous to in order to recruit troops and seen as a "double-site", since the the Western world in the 19th raise money. Brutus was shocked two were closely linked and century by its British discoverer by the Lycians' suicide and Letoon was administered by Charles Fellows. It is very old - offered his soldiers a reward for Xanthos. finds date back to the 8th century each Xanthosian saved. Only 150 Letoon was the sacred cult BC, but it is possible that the site citizens were rescued. center of Lycia, located less than may have existed during the Xanthos became the seat of an 10 km to the south of Xanthos. Bronze Age or during the first archbishopric in the 8th century, Xanthos-Letoon is one of the centuries of the Iron Age. most remarkable archaeological The history of Xanth os is quite sites in Turkey. For this reason, it a violent - the Xanthosians twice has been registered in the demonstrated the fierce UNESCO World Heritage Sites independence of the Lycian list. people when they chose to Xanthos is not far from Patara commit mass suicide rather than and a trip to Letoon or Xanthos submit to invading forces. The from Kalkan, Kaş or Fethiye could Xanthosian men set fire to their easily be combined with a trip to women, children, slaves and the beach and/or ruins there. It is treasure upon the acropolis easy to find by car, just off the before making their final doomed main highway and well-marked. attack upon the invading Xanthos' landscape is quite Persians. Xanthos was later beautiful, especially in spring.

88 October 2016 Economic Dialogue Turkey 86-96 likya 11_Layout 1 21/09/16 20:57 Page 5

he Nereid Monument, a very large and elaborate Lycian tomb dating from about 380 BC, an interesting mix of T Greek and Lycian styles. Now in the British Museum. It was carried away by Sir Charles Fellows, the most well known early explorer of Lycia. 86-96 likya 11_Layout 1 21/09/16 20:57 Page 6

heritage

Letoon Letoon was the sacred cult center of Lycia, its most important sanctuary, and was dedicated to the three national deities of Lycia - Leto and her twin children Apollo and Artemis. Leto was also worshiped as a family deity and as the guardian of the tomb. Letoon lies less than 10 km to the south of Xanthos on a fertile plain. According to a legend told by Ovid the latin poet, the nymph Leto was loved by Ze us and gave birth to her twins fathered by local shepherds attempted to frogs. Letoon was a sanctuary him, Atemis and Apollo on the chase her from the water - until precinct and not actually a city, island of Delos. Zeus' jealous she turned them into frogs in and seems to have had no major wife Hera pursued Leto and retaliation. settlement associated with it at chased her with the twins to This mythology has been a any period. It was administered Anatolia where she came to the popular subject in art. There are a by Xanthos and was the spiritual place of Letoon. Here she tried to lot of paintings of the Ovid's heart of Lycia, its federal quench her thrist at a spring but legend of shepherds turned into sanctuary and the place of

90 October 2016 Economic Dialogue Turkey 86-96 likya 11_Layout 1 21/09/16 20:57 Page 7

Latona and the Lycian Peasants, ca. 1605, by Jan Brueghel the Elder.

national festivals. Letoon was the beliefs and in the 5th century AD Kekova-Simena center of pagan cults activity a chuch was built using stones Region until perhaps the 5th century AD from the old temples. The ancient Lycian sunken city when Lycia was ravaged by Arab An inscription found at Letoon of Simena is often referred to as attacks and the area started to silt refers to the establishment of the Kekova-Simena. The city is a up with sand brought by the cult as well as its rules for charming mix of ancient, X anthos River. It is believed to monthly and annual sacrifices - medieval and modern history have been abandonded by the 7th offenders against this were found making it interesting as well as century AD. guilty before Leto, her children beautiful. In ancient times Archaeological finds date back and the Nymphs. The Lycian cult Simena was a small fishing to the late 6th century BC. During of Leto was one of the many village and was later an outpost the Archaic and Classical periods forms of the wide-spr ead mother- of the Knights of Rhodes (7th-5th century BC) the site was goddess religion which (formerly of St. John). probably sacred to the cult of an originated in ancient Anatolia The ancient city of Simena was earlier mother goddess (Eni and spread throughout the once of two parts - an island and Mahanahi in Lycia), which was ancient world. It is noteworthy a coast al part of the mainland. later superseded by the worship that a woman was allowed to On the mainland the charming of Leto. preside over the national fishing village of Kaleköy ("castle During Roman Times, the assembly that was held each village") stands today, its Emperor Hadrian founded an autumn at Letoon - perhaps a buildings mingling with ancient emperor worship c ult at the site. reminder of the ancient and medieval structures. The top Christianity later replaced pagan matriarchal customs in Anatolia. of the village is dominated by a

Economic Dialogue Turkey October 2016 91 86-96 likya 11_Layout 1 21/09/16 20:57 Page 8

Lycia’s sunken city Simena.

well-preserved castle built by the Knights of Rhodes partially upon ancient Lycian foundations. Inside the castle is the smallest amphitheatre of Lycia. At the eastern end of the village is a Lycian necropolis with a cluster of some very nice sarcophagi overlooking the sea and surrounded by ancient olive trees. Near the harbour of Kaleköy is another sarcophagus, popping up from the water. Across the bay, along the island are the half- submerged ruins of the residential part of Simena, caused by the downward shift of land by the terrible earthquakes of the 2nd century AD. Half of the houses are submerged and staircases descend into the water. Foundations of buildings and the ancient harbor are also seen below the sea.

92 October 2016 Economic Dialogue Turkey 86-96 likya 11_Layout 1 21/09/16 20:57 Page 9

heritage

Tlos Best-known for its fortress- topped acropolis, with its rock- cut tomb-covered sides and its 360 degree panoramic views. As one of the six principal cities of Lycia (and one of the most powerful), Tlos once bore the title under the Roman empire of 'the very brilliant metropolis of the Lycian nation'. It is one of the oldest and largest settlements of Lycia (known as 'Tlawa' in Lycian inscriptions) and was eventually inhabited by Ottoman Turks, one t he names of three of them are its slope are several Lycian of the few Lycian cities to known: Bellerophon, Iobates and sarcophagi and many house and continue it existance through the Sarpedon, famous Lycian temple-type rock-cut tombs cut 19th century. There is evidence legendary heroes. A Jewish into the face of the hill. The that Tlos was a member of the community is also known to have influence of many cultures upon Lycian Federation from the 2nd existed with its own magistrates. Tlos has resulted in an century BC. Two wealthy Tlos lies on the east side of the interesting collage of structures. philanthropists, one of which was Xanthos valley, and is dominated It is a romantic place with lush Opramoas of Rhodiapolis, were by its acropolis. This rocky nature and many of the buildings responsible for much of the outcrop slopes up from a plateau are vine-covered (especially the building in the 2nd century AD. with a charming village, but ends large bath), it would have been Inscriptions tell us that the on the west, north and northeast the perfect location for any citizens were divided into demes, in almost perpendicular cliffs. On romantic painter. 86-96 likya 11_Layout 1 21/09/16 20:57 Page 10

Rock-cut tombs in Myra.

Myra grounds with beautiful gardens Anatolia (Myra lost one-third of Myra was a leading city of the and had an inner court defined by its population to it in 542-3 AD), Lycian Union and surpassed columns, an altar and a statue of Muslim raids, flooding and Xanthos in early Byzantine times the goddess. Not a trace of it earthquakes, Myra was mostly to become the capital city of remains today, however, since St. abandoned by the 11thcentury. Lycia. Its remains are situated Nicholas (the bishop of Myra in What remains is very impressive about 1.5 km north of today's the 4th century AD) in his zeal to - a large theatre with the Demre, on the Kaş-Finike road. In stamp out paganism in the backdrop of Myra’s famous rock- ancient times this area was region, had the temple of cut tombs. The sight of these is probably farmed extensively, for Artemis, along with many other quite striking. export and trade with the interior temples, completely destroyed. of Lycia. The date of Myra's Myra’s harbour Andriace was a Pinara foundation is unknown. There is major trans-shipment point for The beautiful site of Pinara was no literary mention of it before grain from Alexandria - grain one of the three major cities in the 1st century BC, when it is said came from the plain near Myra, the Xanthos valley and one of the to be one of the six leading cities and was also possibly brought in six principal cities of Lycia. of the Lycian Union. by boats, to be shipped onwards Settlement at Pinara existed as The city is well known for its from Lycia. The Eastern Roman early as the 5th century BC. amphitheatre (the largest in emperor Theodosius II made It was probably founded as an Lycia) and the plethora of rock- Myra the capital of the Byzantine extension of the overpopulated cut tombs carved in the cliff Eparchy Lycia until the city fell to Xanthos. According to above the theatre. the caliph Harun ar-Rashid in 808 Manecrates, a 4th century BC Myra once had a great temple AD after a seige and quickly went historian, the leaders of Xanthos of the goddess Artemis Eleuthera into decline. Then, early in the felt their city was overpopulated (a distinctive form of Cybele, the reign of Alexius I Comnenus and so they split the city into ancient mother goddess of (1081-1118 AD), Myra was three group s, settling one at Anatolia), said to be Lycia's overtaken by Seljuk invaders. Pinara. largest and most spl endid Because of the terrible In the Lycian Federation Pinara building. It was built on large plague that swept through was one of the six cities with the

94 October 2016 Economic Dialogue Turkey 86-96 likya 11_Layout 1 21/09/16 20:57 Page 11

heritage

most voting power. It became the Patara’s oracle at the renown was frequently called "the centre of bishopric in the temple of Apollo was said to rival chosen city" and "the metropolis Byzantine era but declined in that at Delphi and the temple of the Lycian nation." Around importance and was abandoned equaled the rep utation of the 138 BC Patara had a population in the 9th century. famous temple on the island of of about 20,000 and ranked There is no other Lycian site Delos. It was believed that among the top cities of Anatolia quite like Pinara with its Apollo lived at Delos during the after Ephesus. untouched, gorgeous mountain summer but spent his winters at In Christian history Patara is setting of fragrant pines, ancient Patara. Omens were interpreted famous for being a place of St. olive trees, wildflowers, thyme- in these two towns during the Paul’s missionary work at the scented breezes and its stunning respective seasons. end of his third missionary view over the Xanthos valley Following its capture by journey as he changed ships en Alexander the Great Patara route to Jerusalem. Patara was Patara became an important naval base also the birthplace of St. Patara was the major naval and as well. Alexander promised the Nicholas (born c.260-280 AD), trading port of Lyci a, located at revenues of four cities, including bishop of Myra and the future the mouth of the Xanthos River, Patara, to one of his Santa Claus. In Byzantine until it silted up and turned into a commanders, thus its value at times, Patara became a Titular malaria-plagued marsh. Beautiful that time is quite clear. see of Lycia and a suffragan of 12 km-long Patara Beach is an During the Roman period, Myra. easy 10-15 minute stroll away Patara was the judicial seat of the Piracy and looting had started from the major ruins at Patara. Roman governor, and the city in the Late Roman Agey and b Patara was a very wealthy city became the capital of both the the mid-7th century the Arabs due to trade and was one of the Lycian and Pamphylian had built a fleet that challenged six principal cities of Lycia. provinces at one time. Patara Byzantine naval supremacy in

Amphitheatre in Pinara.

Economic Dialogue Turkey October 2016 95 86-96 likya 11_Layout 1 21/09/16 20:57 Page 12

heritage

World famous Patara Beach. the eastern Mediterranean. Their the 15th century and the Sultan Among them, liberated from raids eventually pretty much Cem signed a treaty there in the many hundreds of truckloads finished off Lycia. 1478/9. Church and chapel of sand that covered it, is the Patara, still held on but was excavations point towards even parliament building where the eventually reduced to a mere greater shrinkage of the village elected representatives of the village. The townspeople were and an increase in poverty. Lycian League met. It has rows of forced to retreat to a small area Eventually, with too little stone seats arranged in a on the edge of the harbor and to manpower to keep the sand out semicircle, the same build walls to create a protected of the harbor, it silted up, became arrangement used in the inner port; by this time the city plagued with mosquitoes and chambers of the American was very much shrunken. malaria and that finished it off. Congress. Written records of the 9th Much of Patara remains Its stone-vaulted main century show that while Patara undiscovered, buried in the entrances are intact, and so is the was still an important place, it shifting sand, including the thronelike perch where the was a village. famous Temple of Apollo. elected Lyciarch, the effective In the 10th century is became a However, some very exciting president of the League, sat. naval base of the Byzantine excavations have been going on Another recent discovery is the Empire. Its port is reported to revealing many structures remains of what may be the oldest

have been used through at least previously hidden by the dunes. lighthouse in the world. EDT

96 October 2016 Economic Dialogue Turkey