Turkey is going through an exciting phase. In a period of global economic recession, Turkey has been the fastest growing economy in Europe for two out of the past three years, and is even projected to post a respectable GDP growth rate of 4% for 2013. What impact has the construction sector had on this economic prosperity?
The construction sector has developed very rapidly, especially since 2000. It grew by around 6% every year, and it had around a 15% impact on Turkey’s GDP. It also created a lot of jobs – we employ two million people directly in the construction sector, apart from our suppliers. So it has had a huge positive impact, both on the employment side, and on the GDP growth side. This does not just come from domestic demand in Turkey – although we have had very dynamic domestic demand in Turkey, Turkish contracting companies come second after China with regard to the number of international projects they carry out around the globe. We earn a lot of revenue from international projects that are carried out by Turkish contracting firms.
Given the recent events that have taken place in Istanbul and throughout Turkey, do you think that investor confidence in the international community has been shaken? If so, what do you think needs to be done to regain the trust and confidence of the international community in the Turkish economy?
In terms of the real estate sector, you may be aware of the fact that last year we enacted the reciprocity law in Turkey, and with this law, foreign investors can come and buy real estate in Turkey. This created some new demand from foreigners to buy real estate, and there was a lot of interest from the Gulf region in particular. Because of this, Agaoglu opened an office in the Gulf region. We have created a new structure there so that we can be closer to the Gulf investors.
As for the protests, it was a democratic right of the people and a manifestation of democracy in Turkey, because we have a well-established and very mature democracy, and people are totally free to express their opinions. As you know, everything started as a result of people wanting to protect Gezi Park in Istanbul. People wanted to protect the greenery in their city. All in all, these were democratic reactions. There were some people who said that these reactions were similar to the Arab Spring, but in fact, that is impossible. In the Arab countries, people wanted a regime change. However, that is not the case in Turkey. In Turkey, people wanted to protect a park area, and for that reason, people came together and expressed their ideas.
Of course, we accept that there were some small groups who created provocations, which caused some tension, but our democracy is mature enough to overcome all these problems. Also, the foreign media exaggerated the events way too much in fact, and that is why people might have questioned it, but even during those protests, we sold two towers to a Gulf investor for over $200 million in cash, so international investors still have confidence in Turkey. Now the incidents have settled down, and we all have full confidence in our democracy that it can overcome all these difficulties.
There were also some reports stating that the police used non-proportional force against the people. There were very few incidents of this kind, and we do not condone them by any means; but in the meantime, when all of this was happening in Turkey, there were protests against the G8 Summit as well. And the British police did not act in a very gentlemanly way towards the protesters either, as far as we are concerned. So the Turkish police’s reaction was no different to the British police. When it happens in Turkey, people overreact, whereas if it happens elsewhere it is normal for the same people.
But let me underline once again that I do not condone any non-proportional use of force. The police should be more tolerant in any case, and they should have a softer approach to the people. But we have a well-established and strong democratic tradition in Turkey.
The Agaoglu Group is currently in charge of two of the largest construction projects under way in Istanbul. Why is the Agaoglu Group always so relied upon to complete Turkey’s most vital projects?
The Agaoglu Group is not just in Turkey; it is one of the strongest groups in the world in terms of our technical team and technical know-how. We also have a lot of potential to do business. We have very young and dynamic staff and we also participate in international competitions and receive awards and tenders, because the good always win.
Clearly the Istanbul Financial Centre (“IFC”) is going to have an enormous impact on the financial sector here in Turkey, but what do you think the IFC’s overall impact on the Turkish economy will be?
Turkey and Istanbul in particular has a very unique geopolitical location in the world. This enables Istanbul to have uninterrupted financial transaction services 24 hours a day. We can connect with Tokyo and do business with them in the morning, and then we can connect and do business with New York in the evening. But at the moment, Istanbul cannot make use of this unique geopolitical location at the desired level. But thanks to this financial centre project, we are going to gather together all of Turkey’s financial institutions here in Istanbul. At the moment, some of them are based in Ankara, and others in Istanbul. But we are going to bring them all together in Istanbul, including the Central Bank, and this will definitely give us a competitive edge to serve the financial markets in an uninterrupted manner as I said before.
We will be building very sophisticated buildings in the financial centre, and I can assure you that our buildings will be even more modern and sophisticated than London’s financial centre in Canary Wharf. But of course, it will not be sufficient just to build these sophisticated buildings. We need a very effective financial, legal and tax infrastructure.
This is what Turkey is preparing itself for. We are redesigning our financial, legal and tax-related infrastructure. Our ultimate goal of course is to attract international financial players and institutions to Turkey as well. We will then get the desired share from the global economy, which we sincerely believe that we deserve.
As I said, building excellent buildings will not be enough. We will need to have the required legal and tax-related infrastructure, and for that, we are cooperating with London financial centre representatives. We know that the London financial centre is one of the largest in the world, and they have a lot of know-how and knowledge. We are using the London financial centre as a role model. We have the Lord Mayor and other representatives from the financial centre and other British financial institutions coming to visit us and we visit them, so we work very closely with them. Agaoglu is also involved in the design of this infrastructure and superstructures as well. Agaoglu is also engaged in developing new financial instruments such as sukuk.
So you are once again leading the way and setting the trend by pursuing initiatives to fund the IFC through Islamic financial instruments such as sukuk. Could you tell us a little about this?
Issuing sukuks was a symbolic initiative by our company. We already have strong funding in place to finance the IFC, but in order to make savings in Turkey, we wanted to develop new financial instruments. At the moment, bank deposits in Turkey amount to 900 billion, and when the banks want more loans, they go for syndication loans in Turkey.
There are also lots of dollars from the oil sector in the Gulf region, and we wanted to attract that money as well. As you may know, we lack diversity in terms of financial instruments in Turkey. The reason why we issued this sukuk was in fact an initiative to deepen the financial markets. IFC is a special project, and we wanted to have a special initiative. In terms of financial instruments, of course London and the rest of the world enjoy a wider variety of financial instruments. The Turkish financial market unfortunately is not deep enough yet, so we issued the sukuk, and this will certainly be followed by real estate certificates.
We issued the sukuk for 100 million TL, but the demand exceeded our goal threefold. The demand was around 300 million TL. So our aim was to develop a track record for Turkey, not to finance the financial centre.
You have stressed that substantial publicity campaigns for the IFC must begin immediately, in order to enable the capital accumulating in the IFC to flow into Turkey more swiftly and effectively. In fact, Agaoglu is already doing this by working around the world and promoting Istanbul and Turkey as a whole through your slogan ‘Invest in Istanbul’. Can you elaborate on this?
We are partnering with the government on the IFC project. As we mentioned before, they are preparing the legal infrastructure as well as the specialised courts for financial disputes. They are also preparing the tax arrangements. The private and public sectors should work together on the promotional activities. The media will also play a major role in the promotion of the IFC via adverts, interviews and news articles. We will be working closely with the media to promote the project. The Government is also taking very rapid steps to prepare tax-related advantages and legal infrastructure. Once everything is settled and established, of course the promotional campaigns will accelerate as well.
We will then know what to promote.
We are working closely with the London financial centre as well as the financial centres in the Far East and the Middle East.
As chairman of one of the top Turkish institutions, which is building the cities of the world and whose brand is synonymous with quality and excellence globally, do you feel a responsibility to the Turkish people and the Turkish economy?
Of course I feel a responsibility for the Turkish nation and economy. After the 1960s, 70s and 80s, there was very high migration from the rural areas to the urban areas in Turkey. Unfortunately, the urbanisation was unplanned. There was rapid unplanned expansion in the cities, and this created a lot of low-quality and unsafe buildings so to speak.
Citizens have a fundamental right to housing, as indicated in our Constitution, but as I said, due to this rapid migration, the stock was not of high quality. This was not taken very seriously in the 60s, 70s and 80s, but after 2000 Turkey ensured political stability and with this came economic growth. Our GDP has quadrupled over the past decade, so the living standards of people have risen to a certain level, and people are demanding more secure and higher quality buildings. We are offering these secure and high-quality buildings to people, and this is our social responsibility.
However, this social responsibility is not just the responsibility of the Agaoglu Group, but of all construction companies in Turkey. I can say that there are dozens of construction companies in Turkey who are very competitive and well known around the world, and this is what we are trying to do with all these companies. Our mission as a Group is to offer B and C-income groups the luxury and the quality that the A-group people enjoy.
What would your final message be about Agaoglu Group or Turkey as a whole?
Turkey at present has a GDP of around $830 billion and we are currently the 16th largest economy in the world. We have goals for 2023 – where we aim to be one of the top 10 economies in the world and have $2 trillion of GDP by 2023. We have a population of 75 million, which is very young and dynamic. 70% of the population is under the age of 30 and we have set our goals for 2023 accordingly. We have full confidence in the Turkish economy, our production capacity and our population.
This is why Agaoglu will continue to invest and the public and private sectors will continue to work hand-in-hand in order to accomplish our targets by 2023. Those who invest in Turkey will win in the long run as well.