Interview: Mustafa Koç
Which sectors of the economy have attracted the most attention from the country’s holding companies and investors more generally?
MUSTAFA KOÇ: The country’s growth prospects, demographic dynamics and low penetration and consumption rates (compared to developed countries) make many sectors in Turkey very attractive to local and international players alike. The energy sector is one specific area to which the large holdings are shifting their attention. Demand for electricity is expected to increase 6-7% per year in the coming decade, so almost all the groups have focused on this sector. However, not all have the ability to execute projects in today’s financial market conditions. We see that many assets put on the market are not able to be sold. As the privatisation process proceeds, there will be consolidation and players with non-viable projects will drop out, opening the space for others.
To what extent do Turkish companies purchase foreign assets? Have the challenges in the eurozone presented opportunities in this regard?
KOÇ: The Turkish business community needs to improve its international dimension, which is currently limited. Until the 1980s, businesses were primarily focused on the domestic market. However, after the 1980s, export-oriented manufacturing picked up and Turkey became an important exporter in a number of sectors. The 2000s saw an influx of foreign direct investment that grew quickly before the 2008-09 global crisis. However, few Turkish firms took the steps to become truly international, invest abroad or build international brands. The troubled state of the economies in Europe and elsewhere may present an opportunity for Turkish companies to catch up. However, one has to be careful about what to acquire. Firms that are focused on European markets are not likely to be attractive targets. However, brands and technologies that can be leveraged in developing markets could be profitable acquisitions.
To what degree have Turkish exports recovered since the global economic crisis?
KOÇ: International sales were negatively affected by the contraction in 2008-09, but the economy recovered quickly. On a consolidated basis, foreign sales make up about 25% of our revenues, and we account for almost 10% of Turkey’s total exports.
Europe is the main export market, making up about 60% of international sales. In 2011 we were well above pre-crisis levels, and we expect significant growth on top of this in 2012.
Having a well-balanced portfolio of businesses ensures stability. There are consumer sectors, such as appliances and automotive, that tend to be more sensitive to fluctuations in GDP and interest rates.
However, energy and food are more stable. The banking sector, on the other hand, has completely different dynamics. Thus, diversification reduces the exposure of Turkish firms to market fluctuations.
How could the government support additional investment in research and development (R&D)?
KOÇ: Although government R&D incentives have reached a significant level in Turkey, I think we are still behind both the EU and other developing countries, especially in terms of indirect and local support schemes. When you examine R&D incentives, the main focus is usually on the technology and product development phase rather than manufacturing and production. It is important to support and provide incentives for production stages as well, especially to increase the quality of output.
In this light, further incentives could be provided for manufacturing equipment investment and personnel training. As production methods become more complex and sophisticated, automation equipment is used, increasing the need for a highly skilled workforce. This will require additional vocational and educational programmes and greater corporate social responsibility to provide internships for students.
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