TBY talks to M. Rifat Hisarcıklıoğlu, President of the Union of Chambers & Commodity Exchanges of Turkey (TOBB), on entrepreneurial spirit in Turkey, the role of the Turkish diaspora, and the informal economy.
TBY How would you characterize the Turkish entrepreneurial spirit?
M. RİFAT HİSARCIKLIOĞLU Turkey is an emerging economy that has experienced an average annual economic growth of 6% over the last seven years. It owes its economic achievements to the entrepreneurial culture of the Turkish people. Turkey does not have oil or natural gas like many of its neighbors, but one of its greatest resources is its entrepreneurship. Aware of this fascinating potential, TOBB has established two very active groups: the Women Entrepreneurs Board in 2007 and the Young Entrepreneurs Board in 2009. These groups were created to promote entrepreneurship and encourage potential businesspeople to turn into active entrepreneurs. According to an international survey in Europe, Turks top the list for entrepreneurial spirit in Europe. The research indicates that half of the Turkish population has a positive attitude toward establishing their own businesses. This clearly shows that Turks are born with a great gift, and the Turkish government has also been promoting entrepreneurs effectively. Thanks to the improvement in business regulations, most of the antiquated bureaucratic barriers have been lifted. Now, a business enterprise can be set up as part of a six-stage process in less than a week, while in 2001 an entrepreneur needed to go through 19 stages, which would take about two-and-a-half months. The regulations have borne fruit; the rate of institutional entrepreneurs in the 18-64 age group has more than doubled, up from 4.8% in 2008 to 10.7% in 2010.
What role can TOBB take in leading other similar associations in the Middle East, given that the private sector drives much of Turkey’s bilateral relations?
Since its foundation, Turkey has been a role model for countries in the Middle East, with its stable democracy, distinct history, and close ties to Europe. Today, Turkey’s reputation for stability is burnished by economic prosperity, and our regional role has positively affected TOBB’s relationship with its counterparts in the Middle East. Enhancing bilateral and multilateral economic relations has always been an important aspect of our international agenda. For the same reason, TOBB has established the Chamber Academy to develop the capacity of chambers of commerce and industry of Middle Eastern countries. In the process, we have hosted 22 high-level chamber representatives from 20 Islamic countries in order to exchange our knowledge and experiences.
What are the most significant achievements of TOBB and its business councils?
Our grassroots chamber network has been among the catalysts of the private sector-led transformation. The chambers are the main representation mechanism for the business community, and TOBB is the highest-level body of the Turkish private sector. The 1.4 million members of TOBB are served through 365 local chambers and commodity exchanges, as well as 59 assemblies. Moreover, via the Women Entrepreneurs Board and Young Entrepreneurs Board, TOBB plays an important role in the future of entrepreneurship in Turkey.
In addition to supporting domestic, political, and economic reforms, TOBB has always been an outward-looking actor while developing sound regional integration policies. Our objective is to increase the visibility of the Turkish private sector. This is a branding issue. The more people trust in the virtues of Turkish entrepreneurs, the easier it will be for us to do business abroad. Enhancing bilateral and multilateral economic relations is also an important aspect of our international agenda. The Foreign Economic Relations Board of Turkey (DEİK) and its bilateral business councils with 101 countries have been the driving force behind our market development and penetration strategies. In line with this strategy, DEİK also started to establish sectorial business councils to provide guidance to market players in the international arena. In cooperation with public authorities, we successfully adopted the Asia-Pacific Strategy, the Latin America Strategy, and the Opening Up To Africa Strategy.
What role do you believe female entrepreneurs play in sustaining economic growth?
We understand that without this important half of our labor force we cannot be one of the 10 largest economies in the world. TOBB established the Women Entrepreneurs Board to develop the profiles of women entrepreneurs, both in quality and quantity. Nowadays, we support around 4,000 businesswomen who are organized in all 81 provinces of Turkey.
By the end of 2012, we are aiming to exceed 10,000, thereby reinforcing our council as one of the largest women entrepreneurs’ organizations in the world. Nationwide calls for women to join the labor force have driven the employment rate of women up from 27% in 2010 to 31% in 2011. However, this rate is still too low for an entrepreneur-spirited country, and we still have a lot of work to do.
What are the greatest challenges facing Turkish business?
The challenge for our business is rooted abroad, specifically in Europe. The eurozone crisis has severely affected Turkey’s trade and capital inflows potential. We are trying to diversify our markets, which will eventually make the Turkish economy stronger. Over the last few years in particular, we have taken steps to enter the markets of Africa, Asia, and Latin America.
How can the pieces of the Turkish diaspora fit together?
The key to Turkey’s successful and rapid economic progress is the number of Turkish-origin businessmen operating abroad. The economy has grown strong, and now is the time for a strong diaspora. Today, we resemble a jigsaw puzzle; I use this metaphor to highlight the divided structure of Turkish people living abroad. Although each of us holds one piece, we are disorganized, and cannot form a complete picture. This hampers the mutual benefits that we could provide to the Turkish business community domestically and abroad. Fortunately, we have started to put the pieces back together. In doing so, we have established the World Turkish Business Council, which was attended by more than 2,200 Turkish-originated business people from 81 countries in 2011.
Moreover, we are developing a diaspora strategy with the relevant government authorities. In the near future, I firmly believe we will be stronger.
How are Turkish industries balancing the power shift from the eurozone to the Middle East?
Thanks to the reform process initiated by Turgut Özal in the 1980s and accelerated after 2001, Turkey has become the most important economy in the region. The EU has been of critical importance to Turkey’s progress over the last 15 years. The role of the Customs Union between EU and Turkey is also a significant factor that helps us to become an important actor in the global economy. Today, Turkey is a three-hour flight away from most countries between Italy and China, and Turkish industry stands as the largest in this $10 trillion region. This attests to the increasing organizational capability of the business community, which has greatly broadened the country’s regional influence.
As the dominant industrial power in the region, our FDI has recently become more concentrated on Middle Eastern countries. After 2009, Turkish FDI doubled to reach $7 billion, and our companies have been investing millions of euros across the Balkans. Our investments have been focused mainly on ICT, transportation, and banking, with the total amount exceeding $22 billion over the past decade. Between 2000 and 2010, more than 3,000 Turkish companies invested abroad, striking a balance between Europe and the Middle East, in terms of our industrial investments in the region.
How would you assess the government’s measures to address the informal economy and meet EU standards?
Informality is still a significant issue, despite recent declining trends in the share of informal workers. We are pleased to see that the government has started to implement an action plan to fight the informal economy with the support of the business community.
This action plan aims to implement several legal, financial, and administrative measures to eliminate the informal economy, achieving policy priorities that comply with EU standards.
What changes to the Turkish Commercial Code (TCC) should foreign investors be aware of?
The new TCC is not simply a change of the law; it is a change of mentality, understanding, and approach in our commercial activities. International standards will rule the country’s business life. The new code integrates Turkish commercial regulations with EU legislation, and puts into effect a number of generally accepted financial reporting and auditing principles. These guidelines pave the way for democracy among shareholders, introduce new concepts such as transaction auditors, and facilitate the use of IT tools. Company mergers, divisions, and conversions are all to be regulated in accordance with EU law, which will benefit both foreign and domestic investors.
The position of minority shareholders will also change drastically. Each shareholder in a company will have inspection rights for major transactions. The law will boost auditing standards and transparency, eventually increasing the number of investment and acquisition targets in a market where, historically, private equity funds have found themselves chasing a limited field of targets. Compliance with the new law, as well as trends in renegotiations, buyouts, consolidation, and stock market activism, are expected to attract more business opportunities for foreign investors.
What measures is TOBB taking to lobby for changes on behalf of SMEs?
TOBB has initiated many projects and lobbied for a variety of regulations for SMEs. Firstly, a considerable service capacity was built for SMEs within the Business Development Center’s project, with the financial support of the EU. Today, these centers are located across 19 provinces in Turkey, and they help SMEs to gain access to funds, find new markets, enhance their capacity for innovation and project planning, and provide necessary training and expertise. Secondly, TOBB supported the creation of a credit guarantee system with the goal of increasing access to credit for SMEs. This scheme provides credit guarantees for bank loans.
Moreover, we are working with the government to design and implement an “SME Strategy and Action Plan,” which formulates a road map for SMEs with the aim of applying policies at a national level and enhancing the competitive power of SMEs as Turkey harmonizes with the EU. Finally, we are lobbying for a new issue called “think small first.” This legislation takes SMEs’ interests into account at the very early stages of policymaking.
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