20 September 2012
A plump investment opportunity in Turkey
Turkey has hung out its “for sale” sign at just the right time to grab the attention of Arab investors in the market for new destinations to deploy their record energy revenues.
A new Turkish property law came into effect in May, making it easier for Arabs to buy property thanks to the removal of the rule of reciprocity under which only citizens of countries allowing Turks to acquire property there could enjoy the same privileges in Turkey. The new legislation also increased more than tenfold the amount of land foreigners could own.
This is the latest in a series of reforms that have transformed the Turkish economy since 2002 and contributed to attracting more than US$100 billion (Dh367.31bn) in foreign direct investment over the period.
The economy in Turkey, which straddles Europe and Asia, has tripled in size in a decade to almost $800bn, propelling per capita income above $10,000 a year and bolstering a youthful, middle-class budget that has an appetite for leisure and luxury. Significant improvements in such a short period have registered Turkey on the global scale as an exceptional emerging economy, the 16th-largest economy in the world.
The Turkish government is bustling with confidence after years of successful reforms and may subscribe to the thesis that three is a lucky number. As of the end of June, the country could boast the presence of some 30,333 foreign companies, almost 10 per cent of which were from the Arabian Gulf states.
It is almost certain, as long as there is economic and political stability, a country such as Turkey will always be an engine for growth, especially as it is the government’s stated ambition to again triple the size of the economy by 2023. That will provide many opportunities and companies based in the Middle East and North Africa (Mena) should look to Turkey with its gains in income and stability, as an attractive market of 75 million people.
The Arab leisure industry is one natural sector to lead this next wave of investment in Turkey, which has recently displaced Britain as the world’s sixth-most popular tourist destination, according to the World Tourism Organisation. Almost 30 million international arrivals last year generated revenue of more than $23bn.
Hotel operators from the Gulf have moved to take advantage of this opportunity, with the UAE’s Jumeirah Group and Rotana Hotels and Saudi Arabia’s My Tuana having announced investment plans in the country this year. Jumeirah was the first out of the blocks when it signed an agreement with Demsa Group, based in Turkey, to take over the management of Istanbul’s historic Pera Palace Hotel, which was built in 1892 to accommodate passengers on the famous Orient-Express train from Europe.
Probably one of the big trends we can expect over the next decade is a greater correlation between Mena and Turkey’s trade patterns, especially if Ankara succeeds in securing a free-trade agreement with the six-member GCC sooner rather than later. Turkey has set an ambitious goal of $100bn of annual trade with the GCC by 2023, which could appear more realistic if it turned to the Arab states to source a much greater share of its $60bn in annual energy imports.
The success Ankara has had in implementing major structural reforms over the past 10 years represents a considerable achievement.
As its Arab neighbours continue to open the doors to international trade, the opportunities for deeper economic alignment with Turkey will continue to multiply.