Cab licences are hot investments, outperforming the stock market, and serve as a barometer of economic progress. Thomas Seibert reports from Istanbul
In Turkey, taxis are now driving the economy
ISTANBUL // With five mobile phones and three fixed line telephones on his desk in a little prefabricated shed at a taxi stand outside a hospital in Istanbul this week, Mevlut Macit was busily sending taxis to clients in the Bagcilar neighbourhood, a map of which hung on the wall behind him.
A former taxi-driver himself, Mr Macit, 49, ended his driving career when he sold his official licence to operate a taxi, or "plate", as the Turks call it, three years ago to raise money to buy an apartment. He now works as a dispatcher at the taxi stand, receiving a small percentage of the earnings of the roughly 100 drivers who operate 48 cars.
Selling his licence seemed like a good idea at the time, but now Mr Macit is kicking himself.
"I got 560,000 Lira (Dh1.1million) for the plate," said Mr Macit, adding he was baffled about what has happened to the price of taxi licences since. "Today, I could sell it for twice as much."
Taxi licences in Istanbul have become red-hot investment items, far outperforming more traditional businesses or listings on the stock exchange. Some Turks believe that the booming price is a barometer of the country's economy progress.
The price for a taxi licence in the city has tripled over the last nine years to 1.2m Lira (Dh2.3m) today, according to Gursoy Atli, sales manager for Kale Taksi, one of the roughly 20 companies that buy and sell taxi licences in Istanbul. The trade with licences is legal and also involved renting out licences to taxi drivers.
"It's a question of supply and demand and everything is connected to the economy," Mr Atli said this week.
"If the economy goes well and people trust the economy, prices for taxi licences will rise because people with money are looking for opportunities to invest. If the economy goes downhill, prices for plates will fall. The price is a barometer for the state of the economy itself."
In that sense, Istanbul's taxi licence bonanza is an extreme reflection of the economic boom Turkey has enjoyed in recent years.
The Turkish economy has more than doubled in size since 2003, with GDP reaching US$1.36bn (Dh5bn) last year. In the meantime, Turkey has been transformed from a backwater on the edge of Europe to a member of the G20, the group of the world's 20 strongest economies, bringing wealth to the new middle class.
Mr Atli said the upwards trend in licence prices began when the Justice and Development Party (AKP) of prime minister Recep Tayyip Erdogan came to power in late 2002. Demand for licences came not only from within Turkey itself, but also from Turks in western Europe eager to find lucrative investments.
"Right now, hot money is looking for a good place," Mr Atli said, in reference to funds invested for a short-term profit that can easily be transferred somewhere else. "The stock exchange has had its run. The same goes for gold and real estate. Now it's taxi licences."
Istanbul's authorities have kept the number of taxi licenses in this metropolis of around 15 million people steady at about 17,500 for the last 20 years and have not issued any new ones. With Istanbul's population increasing steadily, rising demand has sent licence prices soaring.
Some investors buy licences and set up small businesses, with family members taking turns driving one car. Other buyers rent licences to taxi drivers for a monthly fee and wait for the right moment to sell again, Mr Atli said.
Outside Mr Atli's office in a sprawling industrial zone of car repair shops near a motorway on Istanbul's western periphery, a man was looking at a used taxi that was for sale.
"This will be my fourth taxi," he said with a broad smile. The man, who did not give his name, said renting out taxis as a license holder was good business.
"You just sit there and earn money."
Not everyone is happy, however.
Mr Macit said Istanbul taxi drivers are paying a going-rate of 5,000 Lira (Dh9,560) a month to rent a licence - a price so steep that drivers have to work very hard to earn around 1,000 Lira a month for themselves.
"Some of our people work 28 days in a month, twelve hours a day," Mr Macit said. Many cars in Istanbul were battered because they had to be on the road continuously.
"When I started out as a driver, I used a bank credit to buy the licence from the municipality and then worked off my debt. That would be impossible with today's prices. It has become a rich man's playing field."
Mr Macit said his brother, who left the taxi business a few years ago but had kept his licence, called him a few hours ago to say he was selling his licence now, capitalising on the staggering prices.
But Mr Macit and others are certain the bubble will burst sooner or later.
Yahya Ugur, the president of the Istanbul Taxi Chamber, a drivers' union, said the price rise for licences was the result of pure speculation.
"I don't think the price rise is logical," he said. "It is just money going around, one day it will all collapse, just like a stock exchange," he added.
But Mr Atli, the taxi licence sales manager, said he saw no reason to be pessimistic. After all, Istanbul's municipality had promised to put a taxi stand next to all the more than 20 new metro stations that the city wants to build in the next ten years. A rising number of shopping malls in the city also means that business for taxis will continue to grow.
"If the economy stays on track, prices will continue to rise," Mr Atli said.