TBY talks to Hüsnü Özyeğin, Founder & Chairman of Fiba Group, on the Turkish economy and the benefits of diversifying risks.
TBY To what extent has the eurozone crisis presented an opportunity for Turkish business?
HÜSNÜ ÖZYEĞIN The eurozone crisis represents an opportunity for Turkey in the sense that Turkey and a few BRIC countries will be the sites of growth for corporations. However, because of the eurozone crisis, the banks will have to withdraw themselves from Europe as well as the BRIC countries because the European banks have constraints on adequate capital and funding for 2012 and perhaps 2013 as well. It will be negative for Turkey and the BRICs in the sense that they will not be able to borrow as much from the banks, and corporations will not be able to borrow as much from European banks. At the same time, cash-rich corporations can invest in Turkey, because it’s a growing country with certain industries that are very attractive for investors. The most prominent is energy.
The Turkish economy has been called a "catch-up" economy by economists in the sense that a lot of things that have already developed in Western countries are just developing in Turkey. One example is shopping centers and the retail business. These did not exist in Turkey 15 or 20 years ago. Now, these businesses—as well as real estate—are driving Turkey’s growth.
With inflation now approaching 10%, the current account deficit is, in real terms, the second largest in the world. Is the Turkish economy in danger of overheating?
The Turkish economy may have overheated, but I have full confidence in the economic team of our government. They have taken quite a few measures to cool the economy. They are trying to balance what I call the “Bermuda Triangle": the foreign exchange price, the current account deficit, and interest rates. The current account deficit is coming down and the economy is cooling. I think in the last quarter of 2011 and the first quarter of 2012 this will be more evident. Turkey cannot manage an $80 billion or $90 billion account deficit, but it can manage a $40 billion to $50 billion deficit. In other words, $50 billion to $60 billion is a maximum, though $40 billion to $50 billion is better. Our energy bill is that much—about $50 billion per year. Our current account deficit should not be more than our energy bill. It should be less than our energy bill. This is how the math works.
Fiba Group is investing in energy—especially renewables. Why is this such an attractive market?
Energy is one of the most exciting growing businesses here. We’re becoming involved with renewable energy, especially wind. Turkey actually has the second highest wind capacity in Europe after Scotland. Germany only has a 25% to 30% wind load factor potential, depending on the location. In Turkey our potential is 35% to 45%. This makes a big difference in the renewable energy business. Turkey also has the second highest solar capacity after Spain. Solar energy technology is still expensive, but it has room to come down. The government doesn’t want to subsidize solar energy until technology prices are lower.
What is the potential for Turkey to start contributing to renewable energy technology?
At the moment, Turkey imports all of the necessary materials. At the same time, some companies in Turkey are beginning to produce the parts. Turkey is making in-roads in this industry. It’ll take some time, but production has started. Now, companies are trying to certify the parts with the large companies that assemble these components: GE, Vestas, and Nordex. They have to be internationally certified so that they can use these components in the production of wind plants. This is the stage we are at right now in terms of technology.
With the current economic crisis in Europe, how does Fiba Group’s Credit Europe Bank stay competitive?
Credit Europe Bank operates in several countries, so it has the opportunity to move its business from one country to another in terms of funding and banking. We are fortunate in Russia and in Turkey as they are two growth markets. Russia grew 4.2% in the last nine months, and Turkey grew more than 8%. When a country grows at 5% per year, the banking industry grows by 25% to 30%. Romania is not growing, and we had a bank there as well. We stopped lending there and are currently putting our resources in Russia and Turkey. When you diversify as far as the countries you are invested in, you can come up with the optimal mix.
What about Fibabank in Turkey? What role can it play in the very competitive Turkish banking market?
The banking market is competitive, but it’s also growing and there are a lot of opportunities. Since we just re-entered this market about a year ago, we don’t try to do everything. We are only involved in the SME business, commercial business, and client-related treasury activities. We plan to go into retail banking slowly in 2012 when our IT infrastructure is complete. As a commercial bank, you must have very flexible and scalable technology.
What do you think that the future of banking technology will be in Turkey?
I think the technology of the Turkish banking sector should be commended. The use of technology by Turkish banks ranks among the top two or three in the world. I’m very proud of the fact that Turkish banks are so successful with technology.
What do you think drives that success?
I think it’s the people in the industry. The banking system hires university graduates and trains them to keep up with what’s happening in the world. It uses good consultants and technology providers. We have very successful GSM and telecommunications companies, which is very important. Turkcell, Türk Telekom, and Vodafone are some of the leading companies in the world in terms of technology. We have good partners like Cisco and IBM. We can invest in our technological sophistication. The banking industry uses these advisors, consultants, and equipment manufacturers in an effective way.
You mentioned university graduates. As the founder of Özyeğin University, what impact will the school have as an entrepreneurial incubator?
We don’t just try to give our students an academic education, we want them to be extroverted and curious. Between high school and business life, university is a passageway. We want to make that very rewarding. We are the first university that has an undergraduate program in entrepreneurship. I think that the whole world thinks that the saviors of the world economy will be entrepreneurs. If you look at the US, the major companies shed 3 million employees in 2010 because they discovered that during the crisis they can produce the same goods and services with fewer employees. Three million became unemployed from major industrial corporations, and entrepreneurs and small businesses then hired these 3 million. That’s why US unemployment is still around the 9% level and it didn’t go up. Entrepreneurship in Turkey, in the past two or three years, has grown exponentially. There have been more write-ups, conferences, and articles than in the previous few decades. I think people caught on to this and the government, universities, and private sector have caught on to this as well. I think that universities are the catalyst between the government, the private sector, and entrepreneurs. At Özyeğin University we try to couple with industry, and namely TÜBİTAK, which funds R&D. We also try to encourage students to become entrepreneurs. That’s why we have what we call an entrepreneurship factory in the university. Young men and women apply with their projects, and if these projects are found to be worthwhile then successful entrepreneurs and professors mentor them to move their projects forward. If they can reach a level where they can be commercialized, then we find angel investors to support them further. We try to bring their ideas to a more advanced stage.
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