By Tim Reid
Turkey has hung out its ‘for sale’ sign at just the right time to grab the attention of Arab investors who are in the market for new destinations to deploy their record energy revenues.
A new Turkish real-estate law came into effect in May making it easier for Arabs to buy property as it removed the rule of reciprocity under which only citizens of countries allowing Turks to acquire real-estate could enjoy the same privileges in their country. The new legislation also increased more than tenfold the size of land that foreigners could own.
This is the latest in a raft of reforms that has transformed the Turkish economy since 2002 and contributed to attracting more than $100 billion in foreign direct investment over the period.
The country that straddles Europe and Asia has seen its economy triple in size in a decade to almost $800 billion, propelling per capita income above $10,000 and bolstering a youthful middle class budget that has an appetite for leisure and luxury.
Significant improvements in such a short period have registered Turkey on the global scale as an exceptional emerging economy, the 16th largest economy in the world and bigger than any Arab state.
The Turkish government is bustling with confidence after years of successful reforms and may likely subscribe to the thesis that three is a lucky charm, for as of the end of June the country could boast the presence of some 30,333 foreign companies, almost 10 percent of which were from the Gulf States.
It is almost certain that as long as there is economic and political stability a country like Turkey will always be an engine for growth, especially as it is the government’s stated ambition to once again triple the size of the economy by 2023. That will provide a lot of opportunity, and MENA-based companies should look to Turkey with its gains in income and stability as an attractive market of 75 million people.
The Arab leisure industry is one natural sector to lead this next wave of investors with Turkey, having recently displaced Britain as the sixth most popular tourist destination, according to the World Tourism Organization. Almost 30 million international arrivals in 2011 generated revenue of more than $23 billion.
Hotel operators from the Gulf have moved to take advantage of this opportunity with the UAE’s Jumeirah Group and Rotana Hotels, and Saudi Arabia’s My Tuana having announced investment plans earlier this year.
Jumeirah was the first out of the blocks when it signed an agreement with the Turkey-based Demsa Group to take over the management of Istanbul’s historic Pera Palace Hotel, which was built in 1892 to accommodate passengers on the legendary Orient Express train from Europe.
Probably one of the big trends we will see over the next decade is a greater correlation between MENA and Turkey’s trade patterns, especially if Ankara succeeds in securing a free trade agreement with the six member Gulf Cooperation Council (GCC) sooner rather than later.
Turkey has set an ambitious goal of $100 billion of annual trade with the GCC by 2023, which could appear more realistic if Turkey turned to the Arab states to source a much greater share of its $60 billion annual energy imports.
The success that Ankara has had in implementing major structural reforms over the last ten years represents a considerable achievement. As their Arab neighbours continue to open the doors to international trade, the opportunities for deeper economic alignment with Turkey will continue to multiply.
Tim Reid is regional head of commercial banking, HSBC Middle East and North Africa