Turkey to become EBRD’s 2nd biggest investment site

ISTANBUL- Reuters

Turkey’s Türk Telekom has recently received 100 million euros of loan from EBRD to support broadband infrastructure. Hürriyet photos

The European Bank for Reconstruction and Development (EBRD) expects to invest at least 1 billion euros ($1.3 bln) in Turkey next year and sees growing demand for financing, particularly from the renewable energy and agribusiness sectors.

EBRD President Suma Chakrabarti said Turkey, which has benefited from increased foreign investment flows in recent years, was set to overtake Ukraine and become the bank’s second biggest investment destination by volume after Russia.

“We’re pretty confident we’ll spend at least another billion (euros) here next year ... I’ll be surprised and upset if we didn’t manage that,” Chakrabarti told a roundtable with journalists late on Sept. 11.
“There’s demand beyond a billion a year, the pipeline is strong and growing, but we are only a few years into our relations,” he said, noting it would be partly up to the bank’s shareholders whether to expand the programme further.

The EBRD was set up in 1991 to invest in the ex-Communist states of eastern Europe where it has played an influential role in transforming sectors ranging from banking to telecoms.

It started operations in Turkey in 2009 and has invested around 2 billion euros since then, much of it in small and medium-sized companies in remote regions which struggled to gain access to funding during the financial crisis.

Operations in MENA region

The bank is also starting operations in the Middle East and North Africa (MENA), growing markets for Turkish businesses. It will seek board approval for new investments in Jordan, Morocco and Tunisia next week with Egypt following shortly afterwards, Chakrabarti said.

“Turkish companies have lots of links with the region. Through EBRD, Turkish companies will also look for projects which we could sponsor in that region,” he said.

The Turkish government and private companies have been investing heavily in transport, health services and energy, but are seeking new sources of funding for big-ticket infrastructure projects.
“We see more interest from Japanese banks than previously which is interesting,” said Michael Davey, EBRD’s Turkey director.

Sukuks, an important source

“We see various things start to develop, like infrastructure bonds. These are not in the market yet, but people are starting to look at sources other than banks. I think the use of sukuks in Turkey will be significant for some of these big infrastructure projects,” he said.

Turkey plans to issue its first-ever sovereign sukuk, or Islamic bond, this month, which should give it access to a wider pool of investors via a global sukuk market estimated at more than $100 billion.
It is hoped the issue will set a benchmark for future sukuk issues by Turkish banks and companies.
The EBRD made its first equity investment in Turkey’s corporate sector in July, a $25 million investment in agricultural commodities trader Tiryaki Agro, and further such deals could follow, Davey said.

“We have a few equity investments so far, but we would like more,” he said.