Istanbul Financial Center, encore

The United Kingdom has been working for some time to help the Turkish government’s aspirations to make Istanbul an international financial center.

The U.K. Trade & Investment Office, which operates inside the Istanbul Consulate in Turkey, organized a series of roundtable meetings with government officials last year. On Monday, they held the conference “U.K. and Turkey, Great Partners!” with the participation of the Lord Mayor of the City of London, Alderman Roger Gifford.

One of the panels was titled “Istanbul as a Regional Financial Center,” and Mr. Gifford emphasized their commitment to working with Istanbul in his opening speech. Honestly, I was surprised by his zeal. After all, speakers at earlier Istanbul Financial Center (IFC) conferences argued that becoming a financial center was not an exercise in creation, but one in competition.

Mr. Gifford told me, during my brief interview with him, that he does not agree with that notion. He believes that by helping out Istanbul, they will make the financial pie bigger. Even though London’s share of global finance might decrease at the end of the day, “30 percent of 200 is bigger than 50 percent of 100.”

According to him and the panelists, Turkey’s geopolitical importance is one of Istanbul’s key advantages. This doesn’t mean just geography. Several panelists emphasized that as a moderate Islamic nation, the country’s position in the Muslim world is key. They also highlighted that Turkey is a stable democracy. I do not agree with these descriptions, but I do not want to digress.

Both the panelists and Mr. Gifford emphasized Turkey’s strong regulation, but I would have to agree with the partner of an energy company that regulations are changing constantly. This policy uncertainty is a major setback for not only financiers but the whole economy. She believes the U.K. could help Turkey in this area.

The panelists seemed to agree that infrastructure, the tax code and legal environment were Istanbul’s main challenges. In response to a question on which regulation he would change, the Turkey CEO of a foreign bank noted that the taxman always finds something when he pays a visit to his bank. His lawyers recommended to him to pay up with a 25 percent discount rather than start a legal process that would take five years or more.

This is exactly what I went through a couple of years ago with my family-owned company. The banker was pleased to note that IFC-related matters would soon go to a special arbitration court. Such temporary patches will move Istanbul up in the Global Financial Centers Index prepared by the Z/Yen Group, where it is currently ranked 59th. But they will not improve doing business for the rest of the country.

I was most happy to see a representative from the Ağaoğlu Group, winner of the tender to build the IFC in the Ataşehir district of Istanbul, at one of the panels. After all, I more and more feel the government is most interested in the real estate part of the project as a rent-seeking scheme.