ANKARA
Turkey is the largest receiver of funds from the European Bank of Reconstruction and Development. The bank has invested €5.195 billion in 140 projects in the country. These range from finance to infrastructure, from energy to support for small- and medium-sized business.
Founded in 1991, the European Bank for Reconstruction and Development (EBRD) was founded to create a new post-Cold War era in central and eastern Europe, furthering progress towards 'market-oriented economies and the promotion of private and entrepreneurial initiative'.
EBRD President Sir Suma Chakrabarti joined the bank in 2012. Born in 1959 in West Bengal, India, Sir Suma has extensive experience in international development economics and policy-making, as well as in designing and implementing wider public service reform. Most recently he held the position of Permanent Secretary at the British Ministry of Justice and was its most senior civil servant. Prior to this, from 2002, he headed the UK’s Department for International Development (formerly the Overseas Development Administration (ODA) ) where he worked closely with economies undergoing substantial reform in eastern Europe, the former Soviet Union and the Middle East and North Africa.
In an exclusive interview with The Anadolu Agency, Sir Suma discussed how he viewed the evolution of the Turkish economy and how the EBRD was working to support Turkish development.
AA: The EBRD publications on Turkey suggests that its industry has become more competitive in recent years. But the level of input from high technology continues to be low in Turkish industry. Why exactly has it become more competitive?
EBRD President Sir Suma Chakrabarti:
Turkey is a fast growing economy and its large corporates are seeking to stay competitive on the global market. While industries have increased productivity, to truly scale up competitiveness they need to innovate. The EBRD sees great potential for innovation for Turkish companies. We have already invested in research and development at leading companies like Ford Otosan, Turk Traktor, Vestel Elektronik and we’ll continue providing debt and equity to support innovative companies and FDI which introduce new technology and know-how to the local market.
Innovation can take many forms – the introduction of new products, the implementation of new production processes or the use of new organisational practices or marketing innovations. Competitiveness can also be achieved through greater energy efficiency and higher standards of corporate governance.
AA: Currency issues, meaning lira volatility, still represent a major challenge for Turkey. What policies do you think, would provide more stability?
EBRD President Sir Suma Chakrabarti:
Currency movements have a significant impact on national economies. While policymakers in emerging markets have only limited impact on global trends, such as those caused by perceived tightening of US monetary policy, they can do their part in the domestic area. Credible institutions reassure investors that policies in Turkey remain solid, credible structural reforms reassure that growth and competitiveness are sustainable in the long term, and improvements in the business environment attract investors to come to Turkey. All these measures help stabilise investors’ confidence in Turkey and have a positive impact on the country risk premium, thus maintaining the stability of capital flows and the exchange rate in the long term.
AA: The EBRD supports the expansion of Turkish exports to neighboring countries. How could such expansions be achieved?
EBRD President Sir Suma Chakrabarti:
Turkey has strong export potential in a very wide era of sectors and products. This ranges from first class agricultural produce to industrial cutting-edge technology. The county’s potential is enormous; the question is how to unleash it? The key to success is developing value-added exports which will be competitive on the global market. This requires investment in greater energy efficiency, higher corporate governance as well as research and development and innovation.
One of the EBRD’s top priorities is to help Turkish corporates, in particular in manufacturing, services and agribusiness sectors, through both debt and equity investment, to stay competitive globally.
AA: Turkey seeks to achieve the transition to value-added exports; is this working, and will it be possible?
EBRD President Sir Suma Chakrabarti:
The EBRD has proved that transition to value added exports is possible.
To give you just one example, Ford Otosan is using EBRD financing to develop – in close cooperation with Turkish universities and suppliers – a new super efficient engine to be used in heavy cargo trucks. Our investment is also helping the company to develop new truck models and increase the production capacity at its plant in Inonu, Eskisehir in north-western Turkey, to serve the needs of the domestic market and meet demand in export markets. And Ford Otosan sells to about 80 countries!
I am looking forward to seeing more companies follow this example. As for the EBRD, we are actively supporting local and foreign investors, bringing with them technology and knowledge transfer and help Turkish companies integrate into global value chains.
AA: If agribusiness in Turkey has “unrealized potential,” (EBRD transition report) how can it realize that potential?
EBRD President Sir Suma Chakrabarti:
With Turkey’s fertile soil and fine balance of sun and rainfall, farming is possible almost everywhere. The agribusiness potential is indeed huge.
We note however limited long-term financing options, particularly for SMEs in the sector. The EBRD is providing some of this much needed finance to agricultural enterprises through our partner banks. As recently as in December 2014 we provided a $127.5 million financial package to Isbank to support SMEs, including agricultural businesses.
Easing access to finance for primary agriculture is crucial for the further development of the sector. It will allow for investments at company level aimed at increasing quality and energy efficiency. The EBRD is working with the Ministry of Food, Agriculture and Livestock to create an environment for competitive and sustainable financing mechanisms for SMEs family farmers.
In addition, the sector could benefit from a rationalisation of tariff protection and privatisation of state-owned enterprises.
AA: Are there still legal or technical obstacles to development in Turkey?
EBRD President Sir Suma Chakrabarti:
Turkey has come a long way in overcoming some regulatory challenges. Creating an enabling environment for the implementation of Public-Private Partnership is just one example.
The new regulations – developed with the EBRD – have opened the way for the private sector participation in Turkey’s impressive pipeline of infrastructure projects. The EBRD has financed some of them: the landmark Eurasia Tunnel under the Bosphorus, the new and environmentally-friendly domestic terminal at Izmir airport and most recently, the Adana hospital, the first project under our dedicated €600 million framework backing the Turkish vast hospital-building programme.
Challenges however remain and the country still needs to reduce its dependence on energy imports, improve regional infrastructure, scale up private sector competitiveness, deepen local capital markets and promote regional, youth and gender inclusion.
Helping overcome these challenges will be the EBRD’s priorities over the next several years.
AA: Energy is, of course, the great challenge for Turkey. The EBRD has supported wind energy, but the potential for hydro power is also great. How does the EBRD choose which alternative technologies to support, and how should Turkey prioritize them?
EBRD President Sir Suma Chakrabarti:
The EBRD is a great supporter of renewable sources of energy, of which Turkey has plenty. The country has pledged to generate 30 percent of its total installed capacity from renewable sources by 2023.
We are looking to finance renewable energy projects in wind, solar, biogas and geo-thermal and hydro, which are all equally important. Our goal is to promote private sector investment in renewables and we will continue acting as a catalyst investor and working to improve the investment climate in the sector.
Only last week Energy Minister Taner Yildiz unveiled a renewable energy action plan for Turkey which has been developed together with the EBRD. The document sets out measures which – when implemented – will open many new opportunities for investment, including by the EBRD.
As we move forward, we have already started working with the Energy Ministry on an action plan to increase energy efficiency across industries.
AA: The EBRD has done much to support the financial sector in the country. Can you talk about how this will evolve?
EBRD President Sir Suma Chakrabarti:
Turkey has a well-developed financial sector which is indispensable for a well-functioning economy. One important task is to reach out to small private businesses and provide them with the finance they need to grow. We currently work with eleven banks which on-lend our funds to SMEs across the country.
Access to finance remains a challenge for women, young entrepreneurs and micro entities.
We are helping Turkish banks to increase access to these underserved segments. For example, in October last year – together with the Delegation of the European Union to Turkey, the Ministry of Labour and Social Security of the Republic of Turkey and the Turkish Employment Agency – we launched a Women in Business program for Turkey. It is a comprehensive package which combines loans with technical support and advisory services for women entrepreneurs in Turkey. We are proud to report that three local banks – Vakifbank, Finansbank, Isbank – have already joined the programme and we expect more lenders to follow.
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