MORE THAN ON THE RADAR

Turkey 2011 | ECONOMY | GUEST SPEAKER

TBY talks to Bader M. Al Sa'ad, Managing Director of the Kuwait Investment Authority, on Turkey's attractiveness as a destination for FDI inflows.

Bader M. Al Sa’ad
BIOGRAPHY
Previous to his appointment as the Managing Director of the KIA, Bader M Al Sa’ad was the Managing Director of one of the leading investment companies in Kuwait, The Kuwait Financial Center. He also has experience in various positions at the Bank of Kuwait and the Middle East. In addition to being Managing Director of the KIA, he is also the Chairman of the Executive Committee of the Board of Directors.

Kuwait has always had a strong and very close relationship with Turkey—culturally, socially and politically. Since 2005, this relationship was further strengthened through closer economic ties when the Kuwait Investment Authority (KIA) significantly increased its investments in Turkey.

Turkey has always been on the radar of the KIA, and we have owned a stake in the Arab Turkish Bank since 1975. Turkey, with a population of more than 75 million straddling one of the world's busiest sea-lanes across two continents, is expected to play a greater global role economically and financially. This is further supported by Turkish demographics—more than 25% of the population is 14 years or younger.

In 2005, the KIA undertook a comprehensive review of its Strategic Asset Allocation, and Turkey was identified as one of the countries with significant potential—especially in its financial sector, which includes banks, financial services, and insurance companies. Financial institutions were a natural choice as banks invariably act as a proxy for the economic growth of a country, and Turkey is no exception. A part of the KIA's review process included a comparative analysis between those economies expected to grow at low single digits versus those emerging markets with high growth expectations. Turkey is a dynamic country that, other than in 2009, has continued to grow spectacularly.

In addition to the financial sector, the other sectors that the KIA has considered for investments in Turkey include real estate, infrastructure, and consumer-related businesses.

This confidence in Turkey's potential was validated by the resilience shown by the Turkish economy during the recent financial crisis of 2008-2009, which impacted the global economy badly. While most of the leading global financial institutions were severely impacted in the storm of the Great Recession of 2008/09, Turkish financial institutions emerged stronger and healthier from this crisis. Turkish sovereign credit was also rewarded for its reforms, and its credit rating was actually increased from C in 2005 to B/BB in 2010. In fact, statistics show that capital inflows into Turkey increased over the past few years, which is another vote of confidence by the international financial community in Turkey's economic policies and its openness in encouraging foreign direct capital investments.

I believe that the term BRICs, indicating high growth emerging economies, should be renamed as BRITCs, since Turkey is going to be an indisputable contributor to global economic growth in the coming decades.

During the financial crisis, the KIA saw increased investment opportunities where we were able to participate in the share capital of some of the leading Turkish institutions as well as acquire prime real estate in Istanbul, a leading international city with a population of more than 12 million representing nearly 17% of Turkey's total population.

From a low exposure in Turkey in 2005, the KIA increased its participation in leading blue-chip listed Turkish entities through different external fund managers. Simultaneously investing in the shares of listed entities on the Istanbul Stock Exchange, the KIA also took direct stakes in the financial and real estate sectors. The KIA's investments in Turkey, over only a few years, increased by various multiples into hundreds of millions of US dollars. This was due to significant fresh funds allocated to Turkey as well as the organic growth of the KIA's investments. As an example, one of our investments in a financial institution has more than tripled in value in less than three years

The KIA believes in Turkey. We believe in the future of Turkey. Turkey has numerous well-known advantages, and the KIA has identified several factors that we are confident will continue to help Turkey prosper:

•Turkey has one of the most well regulated, highly capitalized, and extremely efficient banking sectors globally.

•Turkey has undertaken a series of economic reforms that have helped the country face the current, as well as expected, crises with greater resilience than most of its neighbors.

•Turkey has a highly vibrant economic environment with a history of entrepreneurship and business interests regionally as well as globally.

•It has an active private sector with professional managers who have proven themselves in good and bad times.

•Turkey has unparalleled natural geographic comparative advantages with a mobile and literate young population who are comfortable in the West as well as in the East.

•Turkey's ongoing reforms with the goal of becoming a member of the EU.

The KIA will continue to invest in Turkey in those sectors, industries, and companies where the investment opportunities are attractive—and if the price is right.