TURKEY:

A LANDMARK DECADE
Vision 2023

Istanbul International Financial Center © HOK

Published in

SEPTEMBER - OCTOBER 2013

www.foreignaffairs.com/Turkey2013
TURKEY:
A Landmark Decade
Vision 2023
p.1 A Landmark Decade - Vision 2023
p.3 Infrastructure Drives Growth
p.7 Aviation Takes Wing
p.9 Fast-Growing Energy Market
p.11 A Hub for Finance and Banking
Istanbul International Financial Center © HOK

p.15 Entering the Turkish Market

p.16 The Attraction of Islamic Banking
p.17 Defense and Aerospace Bring Added Value
p.18 Excellence in Shipbuilding
 SPONSORED SECTION | TURKEY - 1
Istanbul International Financial Center © HOK
TURKEY: A
LANDMARK DECADE

Vision
2023
www.foreignaffairs.com/Turkey2013

These days, Turkey is often regarded with envy. Its economic success and growth easily
outshines its neighbors in Europe and the Middle East. During the European economic crisis, it
managed to sustain growth rates second only to China. Rigorous reforms and a program of
stabilization have secured Turkey’s place as the world’s 16th-largest economy by gross domestic
product (GDP). But its ambitions reach further, and with a clear vision for growth and development,
Turkey steadily asserts itself as a global economic power.

the potential to be one of the greatest powers of its

region and the world. We will continue to advance
toward our 2023 targets and build Turkey’s future hand
in hand with our nation.”
Lofty as these targets may seem at first, they are
not at all unattainable. “All the signs and estimates,
particularly OECD forecasts, show that in the next decade
Turkey will continue to grow with an approximate rate
of 5 percent annually,” explains Ahmet Unal Cevikoz,
Ambassador of Turkey in the United Kingdom. “Turkey
Recep Tayyip Erdogan, Prime Minister of Turkey
is going to achieve its targets by 2023.”
The stellar rise of Turkey as a global economy To be sure, challenges remain, in meeting the
stands in stark contrast to the country that was in the country’s growing energy needs, effecting change
grips of a deep recession in 2001. Since coming to toward high-added-value production, and creating
power in the 2002 elections, the current government greater internal cohesion, specifically by working the
has overseen the transition of Turkey into a modern underdeveloped areas of east and south-east Turkey
and booming economy. In the course of just ten years, into the fold. “There is still a lot to be done during the
the country’s output has tripled, with GDP rising to $800 next ten years,” acknowledges Ali Babacan, Deputy
billion. The government’s lasting legacy will be political Prime Minister for Economic and Financial Affairs.
stability and a shift away from labor-intensive, low “It will be important for us to see structural changes
technology industries to a technology-driven and export- in the economy, changes in which we improve in
oriented economy. Now, riding a wave of rapidly growing research and development, innovation, and higher
industrialization and a new-found entrepreneurial spirit, technology production.” The government pursues
the government is driving a bold vision for 2023, the year a string of measures to address these challenges,
Turkey will celebrate the Republic’s centenary. ranging from reforms in the judicial and educational
Vision 2023, as it is known, sets ambitious targets. systems to investments in key industries and the
By 2023, Turkey expects to be counted among the country’s infrastructure.
world’s ten strongest economies, with a GDP of $2 Crucial investment projects to support and
trillion and exports of $500 billion. “We have a bright facilitate further growth are currently under way,
future,” says Prime Minister Recep Tayyip Erdogan, particularly in the domains of transportation, energy,
emphatically endorsing this vision. “Our country has and communication. Where possible, the government
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prefers to share responsibility and involve the private “We are in the middle of a productive area in terms of
sector in these projects, for more than monetary trade, energy, agriculture, and transportation.” This
reasons. “Major projects are implemented in the benefits regional investors as much as it does Turkey’s
form of public-private partnerships (PPPs) such business community, Hisarciklioglu points out. “Turkey
as build-operate-transfer (BOT) agreements,” says is a three-hour flight away from most countries between
Babacan. “It gets the private sector involved and Italy and China, and our entrepreneurs dot every part of
makes projects more efficient.” this $10 trillion region.”
The door, therefore, is wide open to investors, Turkish business sails in the shadow of a state that
foreign and domestic. More than $120 billion of foreign is committed to opening trade routes virtually anywhere
direct investment (FDI) has flown into Turkey this in the world. No other country these days opens
past decade alone. UNCTAD’s 2012 World Investment new embassies and foreign trade representations
Report registers a sharp increase in inflows, making with quite the same speed as Turkey. “In 2002, we
Turkey an exception to regional trends and confirming had 93 embassies and 58 consulates. Now we have
its position as the West Asia region’s largest FDI 129 embassies and 78 consulates,” confirms Minister
recipient. Investors are naturally drawn to Turkey, with of Foreign Affairs Ahmet Davutoglu. Few countries
its dynamic growth and outlook, which appears a safe entertain such a presence, which underlines a new
haven compared to crisis-stricken Europe. “During the orientation in Turkey’s foreign relations. A member of
past three to four years of crisis, every single rating NATO since 1952 and in accession negotiations with
agency upgraded Turkey one or two notches despite the European Union (EU), Turkey is firmly aligned with
the global crisis,” Babacan points out. “And looking at the West. The ambition of becoming a full member
the risk premium of Turkey, historically we are now of the EU has been a principal driver for the adoption
going through the lowest figures ever.” of western standards. “Implementing EU norms and
As Turkey shifts its FDI promotion policy to a more increasing the living standards of our own people to
sector-specific approach, aimed at high-value-added, the level of the European Union are going to be very
high-tech, and export-oriented projects, investors important, and will make it much easier for us to reach
are likely to find new opportunities in industries our goals for 2023,” affirms Egemen Bagis, Minister
ranging from the automotive and petrochemical for EU Affairs and Chief Negotiator. But Turkey also
sectors to information and communications and reaches out to other regions and to multilateral
environmental technologies. At the same time, the organizations worldwide.
government is keen to open the underprivileged “We want more integration with neighboring
regions of Turkey to development. This carries the countries and neighboring regions. Important are also
promise not only of greater domestic cohesion, but balanced and compatible relations between Turkey
also of a unique economic advantage. “There is a and the leading powers, the USA, the EU, Russia, and
huge untapped potential in the east and southeast China,” explains Davutoglu. Free trade agreements,
of the country. There are vast land and human the lifting of visa requirements, and Turkey’s recent
resources, and costs are low,” says Babacan. He partnerships with organizations such as the African
sees these regions becoming Turkey’s “mini China or Union, the Arab League, and the Shanghai Cooperation
India.” This is not far-fetched, because investments Organization are part of this story. With traditional
in transportation have cut the cost of moving goods export markets weakened by the crisis, Turkey develops
across the country. Thus, domestic investors will its potential in other regions, in particular Africa, Latin
be able to establish and utilize low-cost production America, and Asia Pacific. For this, Turkey likes to follow
centers in their own backyards. a comprehensive approach, as Davutoglu illustrates:
Multinationals such as Microsoft and Coca-Cola have “When we made openings in Africa, we encouraged
already made Turkey their regional home. It is easy to our businessmen to do business, we encouraged the
see why. “Turkey is the only country in this region where Turkish International Cooperation and Development
there is political stability and sustainable economic Agency to provide more humanitarian assistance, and we
growth,” notes Rona Yircali, Chairman of the Executive encouraged Turkish Airlines to fly to Africa.” Now trade
Board of the Foreign Economic Relations Board of Turkey with Africa is flourishing, a pattern that Turkey expects
(DEIK). And Turkey occupies important East-West and to repeat around the globe. “Turkey was the country with
North-South axes of trade, offering access to 1.5 billion the second-highest increase in exports last year,” says
customers in Europe, Eurasia, the Middle East, and Zafer Caglayan, Minister of Economy, explaining that
North Africa. “We are quite aware of the opportunities “the reason for this success is our market diversification
that our country’s geopolitical position offers,” says Rifat strategy. There are only two countries left, Micronesia
Hisarciklioglu, President of the Union of Chambers and and Nauru, where we are not trading yet. Apart from
Commodity Exchanges of Turkey (TOBB) and of DEIK. these two, we are exporting to all nations.”
 SPONSORED SECTION | TURKEY - 3
Infrastructure Drives Growth
Investments in public infrastructure are some infrastructure where fifteen major cities will be
of the more visible measures the government is connected with one another.” This investment is
taking to feed Turkey’s burgeoning economy and particularly important for the rail link between the
to ready the country for further growth. “We have country’s commercial and administrative centers,
an ambitious plan for 2023 and have to prepare the Istanbul and Ankara. Where once it required eight
country accordingly,” says Binali Yildirim, Minister hours to travel the distance between the two cities,
of Transport, Maritime Affairs, and Communication. the high-speed connection will reduce that time to
“It means we need more highways, we need more just over three hours.
airports, we need more railroads, we need more In northeast Turkey, in the meantime, the
seaports, and the IT infrastructure needs to be country is reviving old trade routes. The $800
developed everywhere in the country.” The past million Kars-Tbilisi-Baku rail project, financed
ten years have seen an expansion of the road in cooperation with Georgia and Azerbaijan, will
network by 16,500 kilometers of highways, and connect the three countries in one network.
the railway system has been upgraded by the Expected to be operational by 2014, it will travel
construction of 1,000 kilometers of high-speed along stretches of the former silk route and serve
train lines. More serious developments are still to consolidate Turkey’s geostrategic position. “You
just getting under way. “For the next ten years, we might say that we are constructing the railway as
have $250 billion worth of projects in our portfolio,” a commercial ‘silk route’ from Beijing to London,”
estimates Yildirim. emphasizes Y. Metin Tahan, General Manager of the
In particular, the government is planning to General Directorate of Infrastructure Investments,
increase the use of railways in order to reduce describing the strategic connection.
travel times and transportation costs. The length Part of this silk route will be a new railway
of the network is therefore projected to more crossing of the Bosporus, known as the Marmaray
than double, to a total of 26,000 kilometers. Of project, linking the European and Asian parts
this, an estimated 10,000 kilometers will consist of Turkey. Built in Istanbul, it is being hailed
of high-speed lines. “In the next three to four as a major improvement for trans-continental
years,” estimates Yildirim, “one-quarter of the transportation. Crucially, the new crossing will
population will be traveling on a high-speed railway also help the city’s local commuters. Metropolitan
SPONSORED SECTION | TURKEY - 4

transportation is high on the government’s agenda, “Growth is dependent on strong

and it has earmarked $1.5 billion for metro projects
in Istanbul and Ankara in a bid to reduce congestion
infrastructure. We need roads,
from increased road traffic. railways, and seaports that are
Parallel investments are being made in the
country’s seaport facilities. One of Europe’s biggest
compatible with global development.”
harbors is currently being created in Candarli, on Binali Yildirim, Minister of Transport,
Maritime Affairs, and Communication
the Aegean coast north of Izmir. It is planned to
capture a significant part of the region’s container
cargo and to service the container shipping lines for construction of the connection’s new railway
passing through the Mediterranean, making it an tracks on both sides of the strait. The contract
alternative to Greece’s port of Piraeus. Essentially, awarded to OHL includes the building or renewal of
Candarli will be “a hub port, serving as a distribution thirty-seven stations; electrification, signaling and
center,” as Tahan describes the project. Built at a communications systems; and underpasses and
cost of nearly $1.2 billion, the new development will bridges. The project is related to the Istanbul metro
address the limited capacity of the current Izmir project. “We have demolished all the existing
port. With a dock length of 1,200 meters and greater lines,” explains Tataragasigil. “Where there used
water depth, the new port will allow the docking of to be two lines, we are making three new lines, two
multiple third-generation container ships. It will for the commuter line and one for the high-speed
have a handling capacity of four million twenty-foot- rail line. Once we have finished these projects, it
equivalent units (TEU), with the potential to grow will help solve Istanbul’s traffic problem.”
to twenty-five million TEU. With this investment, OHL has contributed to the expansion and
Turkey’s container capacity will increase threefold. upgrading of the country’s railway system since C

Connecting railway and highway links have been first coming to Turkey in 2000. Of Spanish origin,
M

completed and the dock is expected to be finished OHL is a global construction company, ranked 21st
by the end of 2013. among the world’s largest 225 contractors, with Y

Another major development, soon to be projects in thirty-six countries around the world CM

tendered, is the construction of an entirely new sea- and a global turnover of $6.6 billion in 2012. The MY

port at Filyos, in the western Black Sea region. In company has wide sector expertise, not only in
CY

relative proximity to Ankara, it will facilitate cargo railway systems but also turnkey hospitals, ports,
flows not only between Turkey and Russia, but motorways, and bridges. It constructed Turkey’s CMY

also around the wider region. Tahan explains that largest wastewater treatment plant, in Konya, K

it “will serve transfer links between the Black Sea which services a population of one million. Yet
region countries and the Middle Eastern countries,” it was OHL’s experience constructing the high-
thus giving it great strategic importance for north- speed rail lines between Madrid and Seville and
south transport routes, not to mention stimulating Madrid and Barcelona that gave the company its
development in the areas surrounding Filyos. Once first inroad to Turkey. “When we came to Turkey,
operational, the port is expected to have a handling we started the first section of the Ankara-Istanbul
capacity of twenty-five million tons per year, making high-speed rail line, from Ankara to Eskisehir,
it one of the country’s largest. with a budget of €654 million ($839 million).
Gradually, other sections followed, from Inonu
“The Project of the Century” to Kosekoy, Kosekoy to Gebze, Gebze to Halkali,”
Construction has begun on the Marmaray project, says Tataragasigil, describing the company’s ties
the new Bosporus railway crossing. Occasionally with Turkey. “This project is not over yet, as we
called the “project of the century”, the nearly will be reaching Bulgaria and then Europe. We are
$4.5 billion Marmaray endeavor involves the following the ‘Silk Railway.’”
construction of seventy-six kilometers of railway Tataragasigil thus sees a long-term future
lines. Crucially, it will connect Europe and for OHL’s operations in Turkey, underlining that
Asia with a crossing of the Bosporus strait via “OHL is very comfortable to work in Turkey.”
underwater tunnels. “This is one of the major And for Tataragasigil this is naturally a two-
transportation infrastructure projects in the world way relationship, where “we are not bringing
at present, which when completed will provide machinery or workers from Spain. We will be fixing
a modern high-speed rail link between the two these concerns in Turkey, meaning that we are
continents,” says Nurullah Tataragasigil, Regional spending money in Turkey and we are investing in
Director of OHL, the company that is responsible Turkey.”
SPONSORED SECTION | TURKEY - 6

Showcase for advantage.” The expertise of Yapi Merkezi in public

Turkish Engineering infrastructure construction is sought out not only
in Turkey, but also increasingly in the Middle East
In just a kilometer’s distance from the Marmaray and Africa.
construction site, another major project is In construction of the Avrasya tunnel, Yapi
getting under way. The Avrasya tunnel, otherwise Merkezi and SK E&C are using a boring machine
known as the Eurasia tunnel, will provide a to create a tunnel below the sea floor. When
highway crossing of the Bosporus strait. completed, the tunnel will accommodate two levels
Running underneath the seabed, at a length each with two highway lanes, one level for each
of 5.4 kilometers, it will link the European and direction. In a region known for its earthquakes,
Asian sides of Istanbul. This will bring relief for durability of the tunnel is paramount. “It will be
traffic on two existing bridges and substantial made sure that we are matching top standards for
reductions in travel times. On the Asian side, it safety and quality,” asserts Arioglu. The project
will connect with the highway network at Kadikoy. lenders have contracted UK-based consultants
The project is also a showcase for Turkish ARUP to act as technical advisors and monitor
engineering. “We are pushing some boundaries progress on construction. “We have a three-layer
in engineering know-how,” admits Basar Arioglu, quality check on our design and on our construction
Managing Director of Yapi Merkezi. The Turkey- performance,” Arioglu confirms.
based company is handling construction of the Total project costs are calculated at $1.4 billion,
tunnel in co-operation with South Korea’s SK with financing from domestic and international
Engineering & Construction (SK E&C), a global sources, including $150 million from the European
firm with a footprint in three continents. Bank for Reconstruction and Development and a
Technically challenging, the tunnel will be $350 million loan from the European Investment
constructed entirely underground, between 110 Bank. Korea’s Import-Export Bank and the Korea
and 120 meters below sea level at the lowest point. Trade Assurance Corporation also contribute to
Construction will have to overcome immense water financing. The project is being implemented under
pressure and difficult geological conditions. Arioglu a BOT agreement, and Yapi Merkezi and SK E&C
cherishes this challenge. “We like projects that are keen to start operations. “Officially scheduled
include difficult xtunnels
OHL-14.605cm 9.8425cm +or bridges,
0.95250cm can for
where 1we26/06/2013
TURK-AF.pdf completion in 2017, we are trying to finish it by
17:09:59
make a technical difference. This is our competitive 2015,” says Arioglu.

Ankara-Istanbul High-Speed Rail Line. Turkey. CHUM Hospital. Montreal. Canada. Port of Alicante Expansion. Spain.

With more than a decade of experience promoting growth and

progress in the Republic of Turkey, OHL is proud to be part of the
development of strategic infrastructure projects in the country.

The strength of a great international

construction and concessions group
www.ohl.es
 SPONSORED SECTION | TURKEY - 7
Aviation Takes Wing
As the world’s geographic center of gravity for passenger percent of all passengers in Turkey move through
flights moves steadily eastward, from the Atlantic region Istanbul, whose regional importance is set to rise
towards the Middle East, Turkey finds itself at a new further. “Last year, the number of passengers was
center of global aviation. In a three-hour flight radius 70 million,” specifies Orhan Birdal, Chairman of the
from Istanbul it is now possible to reach more than Board and Director General of the State Airports
one hundred metropolitan areas. In Turkey’s booming Authority. “But this number is increasing rapidly, as
economy, the country’s strategic location is a boon Istanbul is becoming a world hub.” Development of the
for the Turkish aviation industry. “Since 2003, the civil city’s new airport was recently assigned to a Turkish
aviation sector in Turkey has seen annual double-digit consortium, led by Limak Holding AS, in a bid worth
growth,” explains Bilal Eksi, Director General of Civil more than $28 billion. When completed, it will be the
Aviation. “In 2003, the sector’s total revenue was $2.2 world’s largest airport. “The airport is going to be built
billion. Today, it has reached $16 billion, an eight-fold in four phases,” explains Ebru Ozdemir, Chairperson
increase.” Passenger numbers have increased from 33 of Limak Investments. “The total capacity of the airport
million to 132 million this past decade and are expected will reach 150 million passengers. It will have six
to reach 350 million by 2023. This success is owed not runways as well as taxiways, aprons, terminals, and an
least to the local airline industry, which in 2003 was airport city with hotels and shopping malls.” Ataturk
released into a liberalized market. “Competition brings Airport will be laid to rest for commercial flights, but
quality, cost reduction, and eventually growth,” says Eksi it will surely play a role in government plans to “make
about a market where the dominant Turkish Airlines Istanbul a maintenance center and a hub for cargo
now has to contend with local competitors such as operations,” as Eksi describes the wider plans which
Pegasus Airlines and Onur Air. have already attracted Chinese interest. Potential
Turkey’s air traffic is currently supported by forty- investors, it seems, are never far off in Turkey.
nine airports nation-wide. To accommodate growing
passenger numbers, new airports are being built or Soaring Growth of Turkish Airlines
reconstructed throughout the country. By far the most Once Istanbul’s new airport becomes operational,
prestigious development is the planned new airport it will naturally become the new home for Turkish
for Istanbul, the third to be constructed in the city; it Airlines, the country’s national flag carrier and market
will replace Ataturk International Airport. Thirty-five leader. Turkish Airlines has reinvented itself this past
SPONSORED SECTION | TURKEY - 8

decade, much in line with Turkey’s new international way, we are contributing to the country’s stabilization
standing and image. The company’s growth has been and to Turkish-Somali relations by creating mutual
extraordinary, turning Turkish Airlines into one of the commercial opportunities for both sides.”
most successful airlines in Europe, with an expected What ultimately drives the success of Turkish
turnover for 2013 of nearly $10 billion. “The growth Airlines is customer focus. As Kotil puts it, “If you want
percentage of the world’s airline business is about to be the biggest airline, you always have to be the best
5 percent. Our growth is about 20 percent,” says Dr. for your passengers. Service is our core business.”
Temel Kotil, President and CEO of Turkish Airlines.
“Today, we have 50 million passengers; by 2020 we Strong Competition in Aviation
will have about 100 million passengers, the biggest Civil aviation in Turkey is no longer synonymous with
number of any airline in Eurasia.” Turkish Airlines Turkish Airlines alone. Other companies, in particular
follows a policy of rapid expansion. “Our business plan Pegasus Airlines and Onur Air, have seized their own
as a European airline is to link Europe with Africa, the opportunities in the new competitive environment.
Middle East, and Asia,” explains Kotil. Pegasus has established itself as the country’s second-
Already, Turkish Airlines maintains a large network largest airline, with positive growth. “Last year we carried
and flies to more than one hundred countries, more 13.6 million passengers, and this year we are expecting
than any other airline in the world. For Turkish business, over 15 million,” explains Sertac Haybat, Chief Executive
the airline has become a trailblazer, opening new of Pegasus Airlines. The company flies to forty-three
connections to markets worldwide. Turkey’s increased destinations internationally, but its stronghold is the
trade relations with Africa are largely supported by domestic market, where it holds a 26 percent market
the airline’s expansion on the continent; in the past six share. Haybat sees the company’s competitive advantage
years, the network has grown to include twenty-four in “on-time take-offs, low fares, and a young fleet,” not
destinations. Turkish Airlines is also not afraid to venture unlike another player in the local market: Onur Air.
into countries that are often shunned by other airlines. Based at Ataturk International Airport, Onur Air is
The flight connection with Mogadishu in Somalia is Turkey’s largest private airline company. It operates
perhaps the best example of where Turkish Airlines mostly domestic scheduled services and a wide range
is “already flying even though it is one of the poorest of charter flights to holiday destinations in Turkey, as
countries,” Kotil explains. “Nobody was flying there. well as to international destinations. In the face of tough
After opening the route from Istanbul to Mogadishu, competition, Cankut Bagana, Chairman and Managing
the Somalian diaspora can now visit their country. In a Director of Onur Air, takes a pragmatic approach: “Our
strategy for Onur Air is not different than Turkey’s for the
last thirty years. If you want to swim, you have to throw
yourself in the ocean. You cannot learn how to swim in
a swimming pool.” The company has also branched out
into providing flights for pilgrims in Saudi Arabia, but
Bagana sees more opportunities in the wider region.
“Our future is the extension of our Istanbul-based
traffic to Southern Russia, the Balkans, Central Asia,
the Caucasus, the Middle East, and North Africa.” The
company places much stock in the new airport, which
he says will mark the “start of serious hub operations”
for Onur Air. “We are expecting the construction of the
new airport to expand our business from domestic to
international destinations of maximum-three-hour flight
distance from Istanbul,” explains Bagana, maintaining
a realistic outlook. “Small airports of the neighboring
countries will be good enough for us because Istanbul
itself is an attraction center.” Bagana also sees great
potential in attracting long-haul passengers by possibly
servicing several regional destinations. “We have to
prepare packages together with our neighbors. We do
not have to sell Turkey alone, but Turkey in combination
with Greece, Egypt, and Cyprus,” he explains. Bagana is
adamant that “Turkish aviation has a very important role
as a leader in the region.”
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Fast-Growing Energy Market
Turkey’s growth is accompanied by a great thirst Turkey is estimated to hold about 1 percent of global
for energy. This past decade, the country’s increase hydroelectric potential.
in demand for electricity and natural gas has Thanks to its strategic location, Turkey already
been second only to China. Gazprom, Russia’s claims a status of regional leadership in energy. Even
natural gas exporter, recently stated that Turkey if the country lacks significant hydrocarbon reserves,
may overtake Germany as its largest customer. as Besim Sisman, CEO of the Turkish Petroleum
Turkey imports more than 98 percent of the natural Corporation (TPAO), readily acknowledges, he sees
gas it consumes. By 2023, the government wants Turkey having an important geographic advantage in
to significantly reduce this dependence. “We aim “the center between energy-producing and energy-
to reduce $12 billion worth of natural gas until consuming countries.”He points to Turkey’s energy-
2023 and replace this with domestic resources,” rich neighbors who cross Turkish territory to reach
says Taner Yildiz, Minister of Energy and Natural their customers. Recent, strategically important
Resources. “Turkey will invest $100 billion in energy projects include the Trans-Anatolian Pipeline Project
within the next ten years.” (TANAP), which will transfer Azerbaijani gas through
Installed capacity of electricity generation is Turkey into Europe, as well as the Baku-Tbilisi-
targeted to increase to 100,000 megawatts (MW) Ceyhan (BTC) main crude oil export pipeline and the
by putting nuclear power plants into operation and Baku-Tbilisi-Erzurum (BTE) gas pipeline project. In
by making use of domestic lignite and hard coal addition, a gas pipeline between Turkey and Greece
reserves. In addition, the government is planning has been completed and export has started.
to harness the country’s rich renewable energy In face of these developments, foreign direct
resources. Power generated from geothermal, solar, investment in the Turkish energy sector is on
wind, and hydroelectric energy is on the rise. “By the rise; in 2011 alone it came to $4.2 billion.
2023, we aim to increase the portion of renewables Minister Yildiz is optimistic. “With the energy sector
in the energy mix to 30 percent,” says Yildiz. “We aim becoming a significant factor in the expansion
to have installed capacity of 20,000 MW from wind of the Turkish economy, domestic and foreign
energy, 3,000 MW from solar energy, and 600 MW investors’ interest in this sector is growing, which
from geothermal energy.” This will come in addition is a reflection of Turkey’s political and economic
to existing and planned hydroelectric installations. stability in the energy sector.”
SPONSORED SECTION | TURKEY - 10

Meeting the Demand Challenge include old generation facilities. “Revisions and
In Turkey’s drive to generate more power - increasingly rehabilitations have been made in these plants.
from domestic sources - a central role falls to the Thus, capacity utilization rates, system efficiency
state-owned Electricity Generation Company (EUAS). and availability of the plants have been increased,”
As the country’s largest company of its kind, with says Alis. The long-term competitiveness of
an estimated turnover for 2013 of about $6.8 billion, EUAS should be assured. Lignite, of which EUAS
EUAS manages a full 43 percent of Turkey’s total holds about two-thirds of the country’s reserves,
installed capacity and 38 percent of total electricity remains an important source of domestic energy
generation as of the end of 2012. EUAS oversees the for the company. And as the government plans to
majority of the country’s coal-fired thermal power establish new nuclear power plants, the first to
plants and hydroelectric installations. be operational by 2023, Alis expects EUAS to play
In light of government targets to almost double a greater role in nuclear power generation. At the
total installed capacity in ten years’ time, energy same time, holding 66 percent of the country’s
generation must grow accordingly to cope with hydroelectric power, at low generation costs,
growing demand. “New energy investments are gives EUAS a permanent competitive edge over
required to meet the demand of 467 billion kilowatt other companies in the sector.
hours (kWh) in 2021,” says Halil Alis, General
Manager and Head of the Board of Directors of Meeting the Grid Challenge
EUAS, specifying that “three to four thousand MW As part of the same restructuring process that
of new capacity and an investment of seven to eight also created EUAS in 2001, the Turkish Electricity
billion dollars are needed annually.” Transmission Company (TEIAS) was born to take
This requires greater diversification of the over the country’s transmission facilities and to
sector, but also greater efficiency. Alis believes carry out the planning of load dispatch and operation
that “investments in nuclear and renewable services. With a transmission electricity network
energy sources as well as the exploitation of grid length of 50,000 km, TEIAS manages one of the
domestic lignite and hydropower should be made longest networks in Europe. With a consumption
rapidly.” He also points to the beginnings of capacity of 241 billion kWh, the Turkish network
a process of privatization of existing energy currently falls fifth in Europe, just after Spain. “We
plants. For its part, EUAS is increasing the are expecting 500 billion kWh by 2023,” says Kemal
efficiency of its existing installations, which Yildir, Chairman of the Board and General Manager
of TEIAS, pointing to the coming challenges.
As new power plants come to life in order
to meet government targets of a total installed
capacity of 100,000 MW by 2023, they need to be
integrated into the electricity transmission network.
Crucially, this includes the connection of renewable
power resources from wind, hydro, and geothermal
plants in various locations. “In northeast Turkey, in
the Black Sea region, we have many hydropower
river plants, which will soon bring an extra capacity
of 5,000 MW,” says Yildir, citing one example.
“This means that a big transmission line will be
constructed in the next two to three years.” TEIAS
needs to stay abreast and move ahead of any such
developments, in order to provide the necessary
transmission facilities. Yildir here sees the need
for greater flexibility. “On the generation side we
have the private sector, and on the consumption
side we have the private sector, but in between
we have the government sector. We must change
mentality and policies and work like a private-sector
company.” Already, TEIAS is investing in improved
control systems, automation, and other smart-grid
techniques that can further support the development
of a modernized electric grid system.
 SPONSORED SECTION | TURKEY - 11
A Hub for Finance and Banking
Buoyed by a booming economy, greater regional A financial center in Turkey - where companies in the
integration, and an inflow of foreign money, Istanbul, region look for these types of opportunities - makes
Turkey’s commercial and business center, is in a bid sense. “There are, naturally, other possible candidates
to become a financial hub. “Our target is to become within the region that consider becoming a financial
a regional financial center over the course of the center,” concedes Turhan, but he believes that “Istanbul
next decade, and at end of the decade, by 2023, to should be a hub because it is by far the largest market in
become a global financial center,” says Vahdettin the region, looking at the average daily liquidity.”
Ertas, Chairman of the Capital Markets Board of A financial center’s worth needs to build upon a
Turkey, voicing the industry’s ambition. “We have a domestic economic base that is strong enough to sustain
very high potential in this regard.” the financial market. In this respect, Turkey is well
Istanbul’s bid is first of all a regional one. The positioned, as Turhan notes. “If you draw a line on Italy
region, to be sure, covers a wide geography, stretching and another on China, then between those two, Turkey
from southeast Europe and North Africa to the Middle is the country with the largest industrial production
East and the Caucasus to Central and West Asia. Turkey capacity and the sixth-largest agricultural economy.”
entertains trade relations
throughout this region, and it
shares historic and cultural ties
that favor its course. “We want
to create a network which will
link the markets of the region
to each other,” explains Dr.
Ibrahim M. Turhan, Chairman
and CEO of Borsa Istanbul, the
entity that this year combined
the Istanbul Stock Exchange, the
Istanbul Gold Exchange, and the
Turkish Derivatives Exchange
under one roof. “Many of the
countries within this region
are at an earlier stage of their
development. It will be very
difficult for stock exchanges in
those countries to survive on
their own, due to the size of the
markets that are not sufficient to
sustain local exchanges against
a competitive environment.”
Turhan believes that local
exchanges have an important
role to play in their home
markets, but companies in
these emerging markets need
stronger stock exchanges that
understand their needs and
enable them to access a global
network of funds. “In emerging
markets, companies are seen
to be relatively riskier, and they
are usually small in size. Hence,
it is very difficult for them to
have access to the facilities of
the global banking sector or of
major global financial centers.”
SPONSORED SECTION | TURKEY - 12

The country’s location generally speaks in its favor, as subsidiary of Isbank, Turkey’s largest commercial bank, it
Turhan points out. “We try to fill an empty time zone. is the country’s leading brokerage and investment house,
Turkey has a unique geographic position, which enables it and it has managed to maintain its position in a competitive
to have overlapping session hours with Asia, Europe, and market. Traded publicly since 2007, IS Investment has
the East Coast of the United States. For example, we have the highest number of investors of any firm of its kind
one hour overlapping with the New York stock exchange.” in Turkey, and it represents more than 26 percent of
In order to facilitate these developments, Borsa the market, with assets under management valued at
Istanbul has been in close contact with countries and $6.8 billion. “IS Investment works as a regional center
exchanges in the region since 2011, and these relations for capital market activities,” says Koc, emphasizing
have resulted in signed memorandums of understanding the company’s strong position. IS Investment no longer
between Borsa Istanbul and those exchanges. A new only relies on traditional brokerage services; it has
capital markets law is now in place, and the Turkish diversified into corporate finance, investment advisory,
government is offering tax advantages for fund managers asset management, and research. In addition, reflecting
to come and settle in Istanbul. Borsa Istanbul, in the Turkey’s growing international orientation, it offers
meantime, is being restructured, and as Turhan says, investors the opportunity to make transactions in more
“It already has very well developed securities markets than thirty stock exchanges around the world. “We deal
for cash equities, derivatives, indices, fixed income, and with high-net individuals. Some of them invest in foreign
Sharia-compliant products.” A significant upgrading of denominated products and not in Turkish lira. For a
the IT infrastructure is also under way. foreign-denominated product, we trade, buy, and sell
The scope for Istanbul’s role as financial center is fixed-income products and equities,” says Koc.
broad, as Vahdettin Ertas of the Capital Markets Board In reaching its customers, IS Investment has a
confirms. “We have to introduce all products that are clear advantage. Not only does it maintain branches
available in our markets, including Islamic ones, and in Turkey and abroad, but IS Investment also relies on
investors will decide on which one to issue and which the historically strong market presence of its mother
one to invest in. The plan is that any financial product company, Isbank. “Isbank has the largest distribution
available in global markets will be available for trade on network in Turkey. The name lends confidence,”
the Turkish market by the end of this year.” acknowledges Koc. “The ‘IS’ in our name is a major
advantage, in addition to a unique distribution channel.”
Toward Sophisticated Banking at Its Best
Capital Markets If foreign banks these days compete for a share in
Changes in the Turkish capital markets industry Turkey’s market, this is partly owed to the cleansing
are already visible. Attracted by a positive business after-effect of a crisis experienced at the turn of the
environment and new government regulations, century. “The Turkish banking sector has achieved a
brokerage and investment firms are contending for significant structural transformation after the crisis
the interest of investors. Market players, including experienced in 2000 and in 2001,” says Mukim Oztekin,
established firms, need to offer more innovative and Chairman of the Banking Regulation and Supervision
better services to stand out from the crowd. “The Agency of Turkey (BRSA). Turkish banking withstood
main challenge is decreasing margins, due to severe subsequent global financial crises relatively unscathed.
competition from almost one hundred brokerage “A series of structural reforms after the 2001 financial
houses,” explains Ilhami Koc, Chairman of IS crisis has transformed the Turkish economy into one
Investment. “Fees are becoming smaller. In order to which was resilient to the global financial crisis of 2008
generate revenues, investment houses try to diversify and the 2011-2012 euro zone debt crisis,” confirms
their businesses with new products.” For domestic and Dr. Erdem Basci, Governor of the Central Bank. “The
foreign investors, this has obvious benefits, as they are strengthening of the Turkish economy the past decade
able to access increasingly sophisticated services in has been based broadly on four pillars: financial
the Turkish market. In turn, Turkey strengthens its bid discipline, prudent financial sector policies, price
as a financial center. “For many years we only traded stability and the structural reforms aimed at raising
equities. The fixed-income market was covered by potential output,” he explains. Turkish banks learned
government bonds,” recalls Koc, describing some of to take fewer risks and operate with a stronger capital
the recent changes. “With the decrease of inflation, we structure. This is now paying dividends. “Nowadays, the
started issuing corporate bonds, and the fixed-income Turkish banking sector has a distinctly good and healthy
market became more sophisticated.” structure,” says Oztekin. “Asset quality and liquidity of
IS Investment has been a pioneer for Turkish capital- the sector is solid, and its funding structure, profitability
market instruments since it was established in 1996. A structure, and capital adequacy are sound.” As a result,
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SPONSORED SECTION | TURKEY - 14

Turkish banking has grown consistently, and it remains fifth for deposit market shares and sixth for loan market
profitable, a particular attraction when compared to shares. Halkbank maintains 850 branches all across
banking in the crisis-ridden euro zone. the country, more so in rural Anatolia than in the high
The number of foreign banks buying shares in streets of Istanbul or Ankara. This gives Halkbank the
Turkish banks has multiplied in recent years, and penetration it needs to reach its niche market, the SME
still others are pushing into the market. Even as the sector. The bank enjoys a head start in this sector, which
sector is relatively concentrated, with the ten biggest offers considerable potential in the growing economy but
banks owning more than 80 percent of the lending which is also still underserved and underpenetrated in
assets, Turkish banking retains strong potential for new terms of financial services products. “We have seventy-
products and more qualified services. “Compared with five years of experience in SME financing and we have a
mature economies, there can be no doubt that Turkey close collaboration with regional cooperative unions as
is still under-banked almost at each segmentation and well as the Turkish treasury in extending loan facilities,
capital market,” says Huseyin Aydin, President of the especially to smaller SMEs,” says Aslan, underlining that
Banking Association of Turkey. “Every newcomer can Halkbank has “an exclusive right in extending subsidized
find possibilities here, because we are behind in some loans to SMEs.”
ratios offering diversified opportunities.” The new focus of Halkbank has paid off. From 2005
onwards, it has been the most profitable bank in Turkey,
Fast Growth From Diversification boasting top values in terms of return on equity and
Turkey’s Halkbank is a case in point of a bank that in the return on assets. In 2007, Halkbank made a first initial
wake of its 2001 restructuring managed to rise to a new public offering, followed by a secondary public offering
status. At the time, Halkbank developed a business model in 2012. “This was a record-breaking event in Turkish
that placed greater emphasis on loans, small and medium capital markets history, and remains to this day the
enterprise (SME) lending, and the commercial and largest-ever public offering in Turkey,” notes Aslan.
corporate segment, rather than government securities, For the future, Aslan is also eying opportunities
which dominated its portfolio. A merger with Pamukbank outside of Turkey. He believes that “in three to five years’
brought the desired diversification. “This was the most time, Turkish banks will be converging towards mature
synergy-creating acquisition in Turkish capital markets economy levels in terms of margins and profitability.”
history,” says Suleyman Aslan, CEO of Halkbank. “After For Halkbank this means a partial extension abroad. In
the merger with Pamukbank, Halkbank’s performance the coming years, representation offices are expected to
increased substantially.” In Turkey, the bank now ranks open in London, the Gulf region, and possibly Asia.
 SPONSORED SECTION | TURKEY - 15
Entering the Turkish Market
The most recent addition to the Turkish banking sec- produce credit cards, which is a major investment and
tor is Odeabank. A subsidiary of Lebanon’s Bank Audi, a sign of confidence in the market,” explains Ozkaya.
it is the first Greenfield bank to be given a license in “We are investing in the long term and in all areas.”
Turkey in the past fifteen years. Bank Audi - capital- This commitment translates into results. “Within eight
izing on increased trade flows between Turkey and the months of opening, we have 11 billion Turkish lira ($5.8
Arab world and changing patterns in Turkish banking billion) in assets, 6.4 billion Turkish lira ($3.3 billion)
- expects Odeabank to become one of its main pillars of in loans, and 8.3 billion Turkish lira ($4.3 billion) in
growth in the coming years. deposits,” says Ozkaya. Since market entry, Odeabank
The decision by Turkey’s Banking Regulation and has climbed to fourteenth position in deposits and
Supervisory Authority (BRSA) in favor of Odeabank may loans among forty-five commercial and retail banks in
well have been motivated by a desire to further stimu- Turkey. This is a clear indication of the market’s poten-
late the country’s low savings environment. Turkish tial. Ozkaya concludes, “We are having tremendous
savings are well below OECD average. Financial
As Mukim Times growth, benefiting largely from Turkey’s 1growth
WPG ilani_11.68x17.15(4.6X6.75inc).pdf and the
17.07.2013 11:05

Oztekin, Chairman of the BRSA, confirms, “The savings demand for banking.”
rate is one of the most impor-
tant challenges of the Turkish
economy and of the financial
sector.” He explains that, owing
to Turkey’s young population,
The beginning of
there is “a tendency towards
high consumption and low lev-
a new banking
els of domestic savings, causing
the deposit growth to lag behind
era in Turkey
the asset growth rate.”
Entering a competitive mar-
ket, Odeabank is quickly build-
ing a presence. “We opened our
first branch in November 2012,”
says Huseyin Ozkaya, CEO of
Odeabank, “reaching $1.7 bil- With strength, expertise and solid backing from
lion in customer deposits in the
C
our main shareholder, the leading bank in the region,
first two months.” Operations M
Lebanon-based Bank Audi, now is the time to provide
new financial dynamism and foster ties between
began with a rapid roll-out of Y
the MENA region and Turkey.
branches in Turkey’s major cit-
CM
ies: Istanbul, Ankara, and Izmir. Our young and energetic team, using cutting-edge
“We opened six branches in MY
technology, is steadfastly determined to make Odeabank
2012 and we have the objectiveCY one of the most admired banks in Turkey.
of reaching thirty-two branches
CMY
Reaching an asset size of $5,8 billion in just 9 months
by the end of 2013,” explains is clear testimony to the high performance and success
K
Ozkaya. Though the focus is cur- of Odeabank, the newest player in the
rently on larger cities, the bank Turkish Banking Sector.
expects to eventually expand
across the country and grow
the number of branches to one
hundred in the next five years.
“We are not a ‘niche’ bank.
Our aim and objective is to
be universal and active in all
fields,” says Ozkaya. Odeabank
offers retail, commercial, and
corporate banking and is cur- Not everyone’s bank but yours.
rently working on its credit card
portfolio. “We have started to
The Attraction
of Islamic Banking
With world-wide interest in Islamic finance on the rise,
Turkey hopes to attract a greater share of this market,
underscoring its bid to become a financial center for
the region. “The government plans to increase the
share of Islamic banks in the financial sector, and
we are trying to increase the share of Islamic capital
markets products as well as the investor base that
invests in those products,” confirms Vahdettin Ertas,
Chairman of the Capital Markets Board. Islamic
finance offers the opportunity of adding products to
Turkey’s financial landscape, which could attract
investments from growth economies with Muslim
populations, particularly in the Gulf region and Asia.

More Participation
Four Islamic banks, or participation banks, as they
are known in Turkey, currently operate in the Turkish
market. Turkiye Finans is one of the market leaders.
With strong backing from its main shareholder, Saudi
Arabia’s National Commercial Bank, Turkiye Finans
hopes to contribute to a wider uptake of Islamic banking
in a growing market, but it remains behind hubs such
as Saudi Arabia or Brunei, where market shares reach
40 percent. “As a participation bank, we operate on
different segments, with a market that is now reaching
5 percent of the total market, compared to 1.9 percent
just a few years ago,” says Derya Gurerk, CEO of Turkiye
Finans. “We are not in a start-up market, and it is hard
for new institutions to grow.” Still, across Turkey, the
bank maintains more than 230 branches, and it has
made significant inroads in some segments. “We now
have a leading position in SME banking,” says Gurerk.
“Our SME market share is around 3 percent, which is
our strength. Most banks are now exploring this SME
segment, but we defend our position.” Turkiye Finans
continues expansion in major cities as well as rural
areas and plans to have 250 branches in operation
before the close of 2013. This is also expected to help
Turkiye Finans capture a greater share of the retail
business, where it sees future potential.
Globally, the bank recently made a splash with the
successful issuing of a $500 million, five-year Islamic
bond - also known as a sukuk- that ranks as Turkey’s
second largest to date. It attracted a 3.8-fold demand
from global investors, mainly from the Middle East, but
also from Europe and East Asia. “The sale of sukuks,
which is continuing increasingly in worldwide markets,
has been consolidating its position among important
financial instruments,“ Gurerk commented earlier this
year. For Turkiye Finans, which issued a sukuk for the
very first time, this success is a clear boost. It is also a
boost for Turkey’s ambitions in Islamic finance.
Defense and Aerospace
Bring Added Value
For the attainment of Turkey’s 2023 targets, the
country’s defense and aerospace industry plays a
very special role. After decades of relying on foreign
imports for military equipment and technology,
the government is committed to developing
domestic expertise. Building on the experience
of co-producing third-party systems, such as the
F-16 aircraft, under license, the country has been
moving gradually toward its own development and
production capabilities. “For the last decade, we have
been pursuing the development of equipment, with
investments in research and development (R&D) and
in technology,” says Murad Bayar, Undersecretary
for Defense Industries. This has led to the successful
development of land systems, naval ships, electronic
systems, and aircrafts, destined for use by the
Turkish armed forces and for international export.
Where possible, the government draws on
existing civil expertise, but frequently it is the
driving force behind the development of new skills
and knowledge. This is where Bayar sees the
defense sector “creating an added value for the
country.” He specifies that investments in the
sector are “not defense spending with no return,
but defense spending with a technological return.”
He goes on to explain that “right now, we are the
largest investors of all sectors in R&D in Turkey. We
create employment and know-how in technology.”
This has led to the emergence of companies that
have the capability of creating the type of high-value-
added products that can earn the country a premium
in exports. Turkish Aerospace Industries Inc. (TAI)
is a prime example. First established in 1984 as a
joint venture with American partners to build F-16
aircrafts and restructured in 2005, TAI has evolved
into an industry leader, ranking among the top one
hundred in the global aerospace and defense sector.
TAI is involved in a number of Turkey’s flagship
defense programs and has business in the design
and development of aerostructures, unmanned
aerial vehicles (UAVs), attack and utility helicopters,
training and fighter aircrafts, and satellites. Since
2005, TAI has achieved a ten-fold increase in annual
revenues, to more than $800 million. “For 2023,
we will be a major partner of our government’s
vision, contributing to national goals as well as
exports,” says Muharrem Dortkasli, President and
CEO of TAI, asserting that “there is huge potential
in Turkey and within our company. We feel very
optimistic for the future.” To compete globally, TAI
has made heavy investments in building a skilled
workforce. “In the past six years, we have doubled
SPONSORED SECTION | TURKEY - 18

the number of employees, from 2,000 to 4,500, of specialty vessels and smaller ships. “What we
mostly with engineers allocated to research and are planning is to build niche products,” says
development,” explains Dortkasli. “We will continue Murat Kiran, President of the Turkish Shipbuilders
to invest in engineering and human resources and Association. “Our main opportunities are in the
we are going to have our own indigenous products, offshore business, in naval vessels, and in luxury
derivatives, and advanced versions.” yachts.” Turkey is already a leader in the construction
Exports to the United States and Europe are of chemical tankers of up to 12,500 deadweight
a significant part of TAI’s business, where it tonnage, and expected drilling in the Black Sea will
has succeeded in becoming a single-source bring demand for offshore supply vessels. Turkish
manufacturer and risk-sharing partner for global shipbuilders have also started producing for the
aerospace companies such as Airbus, EADS, Boeing, navy, including a specialized composite high-speed
Sikorsky, Sprit Aerospace, and Northrop Grumman. patrol boat, produced by the Yonca-Onuk shipyard,
In the future, TAI is likely to target markets in the which has become an item of export.
Middle East and Gulf region, North Africa, Middle In the luxury yacht segment, Turkish shipyards
Asia, Asia Pacific, and South America. But for the are competing at global level. Huseyin Mengi, CEO
time being, Dortkasli is comfortable in what he of Mengi Yay, expects the crisis to end in 2013 and
calls “the backyard of the European aerospace strong growth to resume from 2015 onward. “I hope
industry.” This is where he sees TAI’s and Turkey’s for 30 percent growth compared to the previous year
advantage. “Defense and aerospace is an industry and that we reach a $10 million turnover in 2013.
relying on long-term partnerships. Our business By 2015, we will raise this to $20 million.” From a
needs a certain level of qualification, education, work small producer of three-meter boats, Mengi Yay has
ethics, and discipline. In addition we need to provide grown since 1976 into an award-winning shipbuilder
a competitive advantage on the cost of the products for motor and sailing yachts. “We can build five ships
and components. TAI and Turkey fit that description.” simultaneously: two 60-meter boats, two 45-meter
boats, and a 25-meter boat,” explains Mengi, adding
Excellence in Shipbuilding that he will expand into mega-yachts of more than
Turkey’s growing reputation for engineering 60 meters in length if he meets his growth targets.
excellence rests not only on its aerospace and Mengi Yay is representative of a new generation of
burgeoning automotive sector, but also on its Turkish yacht builders that compete at the top end
diverse ship-building industry. The country has of the industry. The company sells to customers
more than seventy operational shipyards, located in Israel, Russia, Germany, France, and the United
mostly in Tuzla Bay in Istanbul and in Yalova in the States, but it is also looking to new clients in the Gulf
Black Sea. As much as anywhere else, the sector region, China, and Japan. Boats are made to order,
is affected by a global downturn in the market and but at a much lower cost than those produced by
low-cost competition from East Asia. But Turkish industry leaders elsewhere. “We have lower prices
ship-building is staying afloat with the production than Germany and Italy,” says Mengi. “A boat of
the same quality will cost half the money.” Mengi
thus expects to win more customers from abroad,
but he also sees potential in the domestic market.
“We do not have a lot of boat owners in Turkey.
People believe that ‘the best boat is my friend’s
boat.’ If we change this idea, then we will be able to
reach our market potential also in Turkey.” Turkish
craftsmanship has certainly come into its own.
Vision 2023 has transformed the Turkish economy
across industries and sectors. If Turkey continues
along this path, it is squarely set for a seat at the top
end of the table of the world’s leading economies.

www.foreignaffairs.com/Turkey2013

A Report by:
“We have a bright future. Our country has the potential to be one of the greatest powers of its
region and the world. We will continue to advance toward our 2023 targets and build Turkey’s
future hand in hand with our nation.”
Recep Tayyip Erdogan, Prime Minister of Turkey

“During the past three to four years of crisis, every single rating agency upgraded Turkey one
or two notches despite the global crisis. And looking at the risk premium of Turkey, historically
we are now going through the lowest figures ever.”
Ali Babacan, Deputy Prime Minister for Economic and Financial Affairs

“We want more integration with neighboring countries and neighboring regions. Important are
also balanced and compatible relations between Turkey and the leading powers, the USA, the
EU, Russia, and China.”
Ahmet Davutoglu, Minister of Foreign Affairs

“All the signs and estimates, particularly OECD forecasts, show that in the next decade Turkey
will continue to grow with an approximate rate of 5 percent annually. Turkey is going to achieve
its targets by 2023.”
Ahmet Unal Cevikoz, Ambassador of Turkey in the United Kingdom

“Growth is dependent on strong infrastructure. We need roads, railways, and seaports that are
compatible with global development.”
Binali Yildirim, Minister of Transport, Maritime Affairs, and Communication

“We aim to reduce $12 billion worth of natural gas until 2023 and replace this with domestic resourc-
es. Turkey will invest $100 billion in energy within the next ten years.”
Taner Yildiz, Minister of Energy and Natural Resources

“Implementing EU norms and increasing the living standards of our own people to the level of the EU
is going to be very important, and it will make it much easier for us to reach our goals for 2023.”
Egemen Bagis, Minister for EU Affairs and Chief Negotiator

“Turkey was the country with the second-highest increase in exports last year. The reason for
this success is our market diversification strategy.”
Zafer Caglayan, Minister of Economy

“Right now, we are the largest investors of all sectors in R&D in Turkey. We create employment and
know-how in technology.”
Murad Bayar, Undersecretary for Defense Industries
Eurasia Tunnel Image © YAPI MERKEZI / SK E&C

“The strengthening of the Turkish economy the past decade has been based broadly on four pillars:
financial discipline, prudent financial sector policies, price stability and the structural reforms aimed at
raising potential output.”
Dr. Erdem Basci, Governor of the Central Bank

“Nowadays, the Turkish banking sector has a distinctly good and healthy structure. Asset qual-
ity and liquidity of the sector is solid, and its funding structure, profitability structure, and capital
adequacy are sound.”
Mukim Oztekin, Chairman of the Banking Regulation and Supervision Agency of Turkey (BRSA)
“Our target is to become a regional financial center over the course of the next decade, and at end
of the decade, by 2023, to become a global financial center.”
Vahdettin Ertas, Chairman of the Capital Markets Board of Turkey

“We want to create a network which will link the markets of the region to each other. […] Istanbul should
be a hub because it is by far the largest market in the region, looking at the average daily liquidity.”
Dr. Ibrahim M. Turhan, Chairman and CEO of Borsa Istanbul

“You might say that we are constructing the railway as a commercial ‘silk route’ from Beijing
to London.”
Y. Metin Tahan, General Manager of the General Directorate of Infrastructure Investments

“Since 2003, the civil aviation sector in Turkey has seen annual double-digit growth. In 2003, the sec-
tor’s total revenue was $2.2 billion. Today, it has reached $16 billion, an eight-fold increase.”
Bilal Eksi, Director General of Civil Aviation

“Last year, the number of passengers in Istanbul was 70 million. But this number is increasing rapidly,
as Istanbul is becoming a world hub.”
Orhan Birdal, Chairman and Director General of the State Airports Authority

“Turkey is the only country in this region where there is political stability and sustainable
economic growth.”
Rona Yircali, Chairman of the Executive Board of the Foreign Economic Relations Board of
Turkey (DEIK)

“We are quite aware of the opportunities that our country’s geopolitical position offers. We are in
the middle of a productive area in terms of trade, energy, agriculture, and transportation.”
Rifat Hisarciklioglu, President of the Union of Chambers and Commodity Exchanges of Turkey (TOBB)
and of DEIK

“The Marmaray project is one of the major transportation infrastructure projects in the world at pre-
sent, which when completed will provide a modern high-speed rail link between the two continents.”
Nurullah Tataragasigil, Regional Director of OHL

“We like projects that include difficult tunnels or bridges, where we can make a technical difference.
This is our competitive advantage.”
Basar Arioglu, Managing Director of Yapi Merkezi

“The new Istanbul airport is going to be built in four phases. The total capacity of the airport will
reach 150 million passengers. It will have six runways as well as taxiways, aprons, terminals, and an
airport city with hotels and shopping malls.”
Ebru Ozdemir, Chairperson of Limak Investments

“The growth percentage of the world’s airline business is about 5 percent. Our growth is about 20
percent. Today, we have 50 million passengers; by 2020 we will have about 100 million passengers,
the biggest number of any airline in Eurasia.”
Dr. Temel Kotil, President and CEO of Turkish Airlines

“Last year we carried 13.6 million passengers, and this year we are expecting over 15 million.”
Sertac Haybat, Chief Executive of Pegasus Airlines
“Our future is the extension of our Istanbul-based traffic to Southern Russia, the Balkans, Central Asia,
the Caucasus, the Middle East, and North Africa.”
Cankut Bagana, Chairman and Managing Director of Onur Air

“New energy investments are required to meet the demand of 467 billion kilowatt hours (kWh)
in 2021. Three to four thousand MW of new capacity and an investment of seven to eight billion
dollars are needed annually.”
Halil Alis, General Manager and Head of the Board of Directors of the Electricity Generation Com-
pany (EUAS)

“On the generation side we have the private sector, and on the consumption side we have the
private sector, but in between we have the government sector. We must change mentality and
policies and work like a private-sector company.”
Kemal Yildir, Chairman of the Board and General Manager of the Turkish Electricity Transmission
Company (TEIAS)

“Compared with mature economies, there can be no doubt that Turkey is still under-banked almost at
each segmentation and capital market. Every newcomer can find possibilities here, because we are
behind in some ratios offering diversified opportunities.”
Huseyin Aydin, President of the Banking Association of Turkey and CEO of Ziraat Bank

“The main challenge is decreasing margins, due to severe competition from almost one hundred
brokerage houses. Fees are becoming smaller. In order to generate revenues, investment houses
try to diversify their businesses with new products.”
Ilhami Koc, Chairman of IS Investment

“We have seventy-five years of experience in SME financing and we have a close collaboration with
regional cooperative unions as well as the Turkish treasury in extending loan facilities, especially to
smaller SMEs. We have an exclusive right in extending subsidized loans to SMEs.”

The upcoming Istanbul New Airport (Istanbul’s 3rd Airport) © State Airports Authority of Turkey
Suleyman Aslan, CEO of Halkbank

“We are not a ‘niche’ bank. Our aim and objective is to be universal and active in all fields. We are
investing in the long term and in all areas.”
Huseyin Ozkaya, CEO of Odeabank

“As a participation bank, we operate on different segments, with a market that is now reaching 5
percent of the total market, compared to 1.9 percent just a few years ago.”
Derya Gurerk, CEO of Turkiye Finans

“For 2023, we will be a major partner of our government’s vision, contributing to national
goals as well as exports. There is huge potential in Turkey and within our company. We feel
very optimistic for the future.”
Muharrem Dortkasli, President and CEO of TAI

“What we are planning is to build niche products. Our main opportunities are in the offshore busi-
ness, in naval vessels, and in luxury yachts.”
Murat Kiran, President of the Turkish Shipbuilders Association

“We have lower prices than Germany and Italy. A boat of the same quality will cost half the money.”
Huseyin Mengi, CEO of Mengi Yay
Istanbul International Financial Center © HOK

TURKEY:
A LANDMARK DECADE
VISION 2023
Published in
SEPTEMBER - OCTOBER 2013

www.foreignaffairs.com/Turkey2013