Turkey earned record revenues from foreign direct investment (FDI) and privatisation in 2005, as, for the first time, the nation entered the big leagues in drawing international capital, according to the Foreign Investors Association (YASED).
In 2005, the country attracted $9.65bn in FDI, about 3.5 times more than in 2004, bringing the total foreign investment registered in Turkey since 1954 to $30.2bn, YASED reports. Still, this was a tiny sum when compared with China, which drew $94.6bn in 2004 alone, along with Hong Kong, according to the World Investment Report of the United Nations Conference on Trade and Development.
The start of Turkey’s membership talks of the EU in October galvanised mergers and acquisitions (M&A) in the country, and has drawn the attention of foreign investors.
“The EU anchor will remain the main theme behind increasing FDI inflows and M&A activity in Turkey in the coming years, as previously witnessed in other EU accession countries,” says Gökçe Kabatepe, managing director of investment banking at Raymond James Securities Turkey, in a report on the Turkish economy
Mr Kabatepe notes that foreign investment poured into the Czech Republic, Hungary and Poland during negotiations for full EU membership.
Other experts agree. “It is no longer a dream for Turkey to attract more than $10bn in FDI every year. It is a fact,” Saban Erdikler, chairman of YASED, said recently.
But most of the foreign investment that entered Turkey last year was not in new industries, but rather went into the privatisation of state companies and acquisitions of existing Turkish companies.
Telecom sales
Turkey’s banking and telecommunications sectors attracted the most foreign investment in 2005, with Arab, Russian and British companies leading the way. The UK’s Vodafone won the tender for Telsim, the nation’s second largest mobile phone services company, with a $4.55bn offer.
The number of private and state companies sold or merged with other corporations, along with companies that offered shares to the public in 2005, reached 180, according to a report published by the US internet information company ISI Emerging Markets.
In November 2005, the government concluded the biggest privatisation in Turkish history, when it transferred ownership of a 55% stake in former fixed phone line monopoly Turk Telekomunikasyon (Turk Telekom) to the Arab-dominated Oger Telecoms Joint Venture Group for $6.55bn.
In another big transaction, Alfa Telekom Turkey, owned by Russia’s giant Alfa Group, purchased a 13.22% share in Turkcell, Turkey’s number one mobile phone services company, in November 2005, from private financially ailing Turkish conglomerate Cukurova Holding. The share transfer to Alfa Telekom Turkey was made in line with a $3.3bn finance package agreed between Cukurova Holding and Alfa in July 2005.
State sell-off
Excluding sales being carried out by a state banking receivership fund and the bankruptcy administrations of several banks, Turkey earned a record $8.2bn from the sale of state assets in 2005, six times more than in 2004, according to the Privatisation Administration (OIB), the main state agency responsible for selling state assets.
In addition to selling a majority interest in Turk Telekom, the OIB sold the state aluminium manufacturer Eti Aluminyum and the Oymapinar hydroelectric dam to CE-KA Insaat, a Turkish contractor, for $305m.
It also sold government shares in a Turkish Cypriot airlines company, a cigar manufacturer, a passenger liner, three fertiliser concerns, leather and footwear producers, textile companies and a holiday village.
The OIB also sold a 34.5% stake in state petrochemical concern Petkim for $287m, in a secondary public offering, and transferred ownership of the Atakoy Group of companies, operator of a seaside Istanbul shopping mall, a marina and a hotel, to a group of ship owners for $120.5m.
In the first two months of 2006, the OIB carried out $7.3bn in sales of state assets, including the sale of a 51% stake in oil refineries concern Tupras for $4.14bn, and a 49.62% interest in the country’s biggest steel manufacturer, Erdemir, for $2.96bn to Turkish investors.
Turkey’s privatisation drive in 2006 is expected to shift from major state economic enterprises to the energy sector. The OIB is expected to turn over Turkey’s 21 electricity distribution regions, as well as sell 29 large hydroelectric dams and thermal energy power plants to the private sector.
Botas, the state petroleum pipeline company, aims to begin transferring its natural gas import rights in 2006. It also plans to sell 56 small river hydro power dams. TABLE: MAJOR STATE ASSETS SOLD 2004-2006 BY AGENCIES OTHER THAN PRIVATISATION ADMINISTRATION
