by Andrew Jay Rosenbaum
ANKARA
A senior figure from a Dutch development agency has described Turkey – with an investment portfolio of $360 million – as “an important country”.
Frederik Kummersteiner, director of Infrastructure, Manufacturing & Services at the Netherlands Development Finance Company (FMO), was speaking to Anadolu Agency this week, ahead of a Turkish Central Bank decision on interest rates.
FMO is one of the most important private sector development agencies in the world, with an investment portfolio of €8 billion [$8.7 billion], spanning 85 countries.
Turkey is an important investment target for the agency, Kummersteiner said, saying their focus had shifted to funding green projects.
“Despite the recent turmoil, Turkey remains a country with a generally well-educated and entrepreneurial population,” he said, adding:
“Its judicial and legislative institutions are well developed and there is a well-functioning market economy.
“Moreover, Turkey is geographically in a favorable position as it fulfills a bridge function between Asia and Europe,” Kummersteiner commented.
In Turkey, FMO’s focus sectors are energy, financial institutions, agribusiness, infrastructure, manufacturing and services, Kummersteiner added.
“FMO continues to invest in all of these sectors in Turkey. Some notable recent examples include Reka, an Istanbul-based vegetable oil producer, and Soke, an Istanbul-based flour producer in the agribusiness sector,” the FMO director said.
The FMO has also provided banks with a “green line,” a fund made available to Ankara-based Sekerbank and Istanbul-based Bank Pozitif, to fund renewable energy, energy efficiency and other green projects, Kummersteiner explained.
“Another project under development is related to a solid-waste management company which converts municipal waste, animal waste and packaging waste into commercial organomineral fertilizer, compost and biogas.”
Still another recent project is the investment, alongside the European Bank for Reconstruction and Development, in 61 million Turkish liras’ ($20.8 million) worth of bonds issued by the Turkish car rental company Intercity.
Along with this kind of support, FMO aims to mobilize funding from commercial banks and other development banks into Turkey to support private sector development, he added.
For Kummersteiner, rewards balance risks in Turkey.
“I believe that over the next couple of years we’ll see further development of Turkey’s capital market, which will make it easier for local companies to access funding by issuing bonds or other commercial paper.
“From a risk perspective, fluctuations in the lira value vis-à-vis the dollar and euro, as well as strong interest-rate fluctuations, have the potential to cause serious problems for financial institutions and corporates, but FMO trusts that Turkey will further improve its profile,” Kummersteiner said.
Overall, there are some issues which will affect all emerging markets, Kummersteiner pointed out.
“First, we are likely to see a normalization of monetary policy in the U.S. with interest rates slowly increasing again. This will have its effect on emerging markets that could see a pull of dollar liquidity to the United States and further local currency weakness.
“The global markets have been flooded with low-cost funding over the past years and we have to see how a monetary tightening will work out for some economies,” Kummersteiner said.
Developments in China will also be critical for all emerging markets, he continued.
“Growth in China might slow further, and that will have an impact on commodity prices and global trade, which in turn will impact many of the markets FMO is active in,” Kummersteiner warned.
At home, there are geopolitical challenges in the FMO’s main market, the EU, which could affect Turkey.
“After facing the Greek debt crisis and the conflict in Ukraine, Europe’s unity is now challenged by mass migration from Syria, Iraq and other areas of conflict and poverty.
“How this issue will further develop will also determine the EU’s relationship with neighboring emerging markets like Turkey, Russia and countries in the Middle East,” Kummersteiner said.
“Despite these challenges, we remain cautiously optimistic for 2016 and will continue to invest in entrepreneurs that are building a better world: a greener world with less poverty,” Kummersteiner concluded.
