Turkey and the UAE will develop closer economic ties and increase cross-border investment.
Turkey seeks closer link to Emirates
Turkey and the UAE will develop closer economic ties and increase cross-border investment despite the financial crisis and lingering disputes over US$80 million (Dh293.8m) in unpaid contracting bills, a prominent Turkish businessman says. Direct investments from the Gulf into Turkey accounted for only 2 per cent of overall foreign investment in the country, said Korhan Kurdoglu, the chairman of the Turkish-UAE Business Council.
And Mr Kurdoglu said only between 1 and 2 per cent of the GCC's total foreign investment went to Turkey, a state of affairs he expected would improve. "It makes sense for both sides, for Turkish corporations to invest in this region and for Gulf corporations to invest in Turkish companies that will be coming back to this region to invest," he said. "So it will have a multiplier effect." Turkish companies already have strong trade ties with many GCC countries including the UAE. It is Turkey's 11th largest trading partner, with exports to the Emirates valued at about $8 billion last year.
Dozens of Turkish contracting companies have worked on property and infrastructure projects in the UAE, including the Dubai Metro. Turkey's Yapi Merkezi joined a consortium led by three Japanese firms to build the elevated train system, which opened in September. "There are a lot of small [Turkish] companies [in the UAE] and every day it is increasing," said Mr Kurdoglu, who is also the president of the Turkish conglomerate Ata Holding. "The highest presence is from the contracting side. Turkish contractors are now second in the world [in size] after China."
But the contracting and construction industries have felt the sting of the financial crisis keenly as property values dropped by an estimated 50 per cent this year in Dubai and ambitious developments were put on hold. The dip in construction has led to a sharp decline in Turkish exports to the UAE, more than half of which have historically come in the form of steel reinforcing used in the construction industry.
Mr Kurdoglu said exports this year have dropped to $2.3bn from last year's high of $8bn largely because of the construction slowdown. Turkish contractors are also among those owed money for work already completed by struggling property companies in Dubai. British and Japanese contractors have made a political and diplomatic issue out of unpaid bills, which are estimated to be in the billions of dollars - much more than the $80m the Turkish Contractors Association estimates is owed to its country's firms Mr Kurdoglu said.
"We will continue to support [the UAE] and we are in this crisis together with the GCC, so there is not a big problem with big unpaid cheques," he said. While companies from Turkey already have roots in the UAE, investors from the Emirates are only beginning to view Turkey as a prime target. The country has a young population - the average age is about 27 - and a vibrant economy, as well as historical ties to the Gulf, all of which have helped it draw a number of large investors in recent years.
St Martins Property, a British firm owned by the Kuwait Investment Authority, bought the Cevahir Shopping Centre in Istanbul in 2007 for more than $500m. Abraaj Capital, the Gulf's largest private equity firm, last January linked up with a Turkish company to buy a majority stake in Acibadem Healthcare Services and a related health insurance provider. Invest AD, an Abu Dhabi Government-owned investment firm, last month bought a stake in the Turkish logistics firm Ekol Lojistik for ?50m (Dh264.9m).
Invest AD saw an opportunity to help a good Turkish business expand its footprint across the region, including into the GCC, said Serkan Kizil, the firm's senior vice president for private equity. With Invest AD's help, Ekol is already in talks to bring its business to Egypt and the UAE. "The more the two countries start working together, not only on the government level but in private enterprise, and the more the trust environment keeps improving, more investments will come," Mr Kizil said.
"More investment will come to the GCC and there will be more GCC investment in Turkey to generate returns and bring back know-how. That will only improve and that is just starting to happen." email@example.com