Speaking at the inauguration of the “Turkish-Iraqi Trade Summit” in Istanbul on Tuesday, Abdul-Razzaq said that Iraq allocated $30 billion for new projects in 2011 and this figure would go higher next year.

Iraq is among the 10 countries in the world with most needs for public works. As such, there is a need for investments worth billions of dollars in Iraq.

Iraq presents highly important opportunities for investors, Abdul-Razzaq said. “We can cooperate with Turkish companies in Baghdad in many diverse fields. Turkish companies make quality production at prices lower than those of Europe. We regard Turkish companies closer to us than others. We want to see Turkish companies in infrastructure, tourism and telecommunications fields in Iraq.”

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“Turkey served as the safe haven regarding investments from the Middle East,” said Hussain Alqemzi, Noor’s chief executive officer, speaking to the Hürriyet Daily News yesterday on the sidelines of the Islamic Investment and Finance Forum in Istanbul.
“Certainly we would like to see more stability in the region, which would pave the way of the investment climate,” Alqemzi said, adding that the Noor Islamic Bank has been mandated to arrange and manage more than $1.4 billion Islamic finance capital market deals in Turkey in the last 18 months, making it the most active United Arab Emirate bank in the country.

“Turkey’s economic growth and strength make it an attractive market for Gulf investors,” Alqemzi said.

Turkey contracts

He said the Turkish deals led by Noor have been very well received by the global markets as demonstrated by the participation of over 55 institutions from 15 countries across Europe, Africa, Asia and Middle East.

The latest of the shariah-compliant transactions is a $350 million dual-currency Islamic-structured murabaha syndicated financing facility for Albaraka Türk, a participation bank in Turkey.

“Launched at $150 million, the facility was more than two times oversubscribed to close at $300 million and has in fact become the largest Islamic-structured syndicated financing facility raised by any Turkish financial institution, Alqemzi said.

Noor has an active pipeline of deals for the rest of this year and leading into 2012 regarding Turkey, he said.

“The deals that we are close to concluding will be worth nearly $600 million,” Alqemzi said. “We are setting records, while at the same time pushing the boundaries of existing Islamic banking business in Turkey.”

According to Alqemzi, Turkey currently is the top priority for the bank since Turkey’s interest in Islamic banking is rapidly increasing.

Gulf Cooperation Council (GCC) members Bahrain, Kuwait Oman, Qatar, United Kingdom of Saudi Arabia, United Arab Emirates already reached a total investment of $10 billion in Turkey as of the end of the last year, Alqemzi said.

“Noor is pleased to work with its Turkish partners,” he said, adding that Noor might launch a branch in Turkey.

The total trade volume between Turkey and the six member states of the GCC reached approximately more than $17 billion last year.
source: Hurriyet daily

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The figure announced by the bank yesterday comes after a big campaign of dollar sales that started this week. The Central Bank sold more than $1 billion in total on Oct. 18 in a direct intervention and a daily auction. It sold an additional $750 million of dollars in yesterday’s auction.

The bank has sold $6.45 billion since it started its daily forex auctions on Aug. 5.
Turkey may be forced to raise interest rates “aggressively” like Hungary did in 2008 because the Central Bank cannot sustain its sale of dollar reserves to prop up the lira, according to the European bank Societe Generale.

“Can the Central Bank sustain its intervention policy for a long time? The answer is no,” Benoit Anne, head of emerging-market strategy at Societe Generale in London, wrote in an emailed response to Bloomberg questions.

Overnight lending rate rises

Despite the growing pressure, the bank’s Monetary Policy Committee kept its rate unchanged but raised its overnight lending rate yesterday as it sought to prevent significantly higher inflation hitting the medium-term outlook, in moves that were seen as supporting the lira but hitting bonds.

After a monthly committee meeting, the bank said it widened the interest rate corridor, raising its overnight lending rate to 12.5 percent from 9 percent.

It held its policy rate, the one-week repo rate, unchanged at 5.75 percent, and kept its overnight borrowing rate at 5 percent. Analysts said the changes would make it more expensive to speculate against the lira.

“The decision of the Central Bank shows it will allow interbank rates to settle at a higher level. This will make it more costly to carry short lira positions. The increase of the overnight rates is negative for bonds, but it is positive for the lira,” said Finansbank economist İnan Demir.

The bank raised the interest rate on borrowing facilities provided for primary dealers via repo transactions to 12 from 8 percent. The lending rate for the late liquidity window was raised to 15.5 percent from 12 percent.

“We are still assessing the full impact of this decision, which concretely is monetary tightening, and the possible consequences in terms of future monetary policy mix, but at a first glance, the monetary policy committee resolution seems aimed at deterring short-term local speculators who borrowed on the overnight funds and bought dollars, betting on sustained lira weakness,” said a note by TD Rates and FX Research.

“In this respect, raising the cost of funding could effectively reduce the incentive to shorting the lira against the dollar. At the same time, the bank’s statement contained some innovative elements that suggest more of a long-term drift in their policy stance,” the note said.

The bank said inflation will rise significantly in coming months due to excessive lira depreciation, base effects from unprocessed food prices and hikes in administered prices.

“The committee will not allow these developments to have an adverse impact on medium-term inflation expectations and the inflation outlook,” it said, explaining reasons for hiking the lending rate.

HSBC strategist Fatih Keresteci said the move to widen the interest rate corridor was hawkish.

“The cost of borrowing will increase and those willing to open long speculative positions would have to bear the cost. This is a kind of hidden rate increase. I also think there can be aggressive intervention in the short term,” he said.

The bank’s moves gave a small boost to the lira, which firmed to 1.8580 from 1.8630 beforehand. The currency has lost some 17 percent of its value against the dollar this year.
source: Hurriyet daily news

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The Boston Consulting Group’s Turkey branch and the Foreign Economic Relations Board of Turkey (DEİK) will present today a report on the “Global Advantage of Turkey” at the Turkey Investment Conference in New York, hosted by the American Turkish Society and Goldman Sachs.
Automobiles, textiles, chemicals, steel and food are underlined as export champion industries in the report. It also emphasizes Turkey’s importance technologically and socially, not just the country’s strategic importance.

Turkey’s dynamic population creates an extensive labor pool, the report said, noting that Turkey had the largest working age population – between 15 and 64 – in the European Union and Central and Eastern European countries.

The report also underlines Turkey’s privatization plans for state-run energy generation plants and distribution firms, banks, highways and bridges, ports as well as the country’s sole landline provider, Türk Telekom, and the national lottery company Milli Piyango.

“Explaining ourselves properly is more than important nowadays,” DEİK Secretary General Bahri Can Çalıcıoğlu said.
source: Hurriyet daily news

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The Central Bank has cut interest rates by 75 basis points since December to help slow capital inflows, while increasing reserve requirements to cap growth in loans and contain the current-account deficit. The bank last increased the reserve requirement for one-month deposits to 15 percent from 10 percent on March 23.

“The Central Bank did not design this policy for this year and this policy cannot be successful in three months,” Ümit Leblebici, deputy general manager at TEB, a unit of France’s BNP Paribas, said in an interview Monday in Istanbul. Policy makers will keep the rate at 6.25 percent “for at least 2011” and current reserve requirements “will continue into 2012 and possibly 2013,” he said.

Survey pointing to a hike

The Central Bank will probably raise borrowing costs by a half point to 6.75 percent in the fourth quarter followed by a similar increase in the first three months of next year, according to the average of at least six estimates in a Bloomberg surveys of analysts.

“I take sides with the camp who believe that the Central Bank policy is not bad,” Leblebici said. The verdict on the whether this policy was right depends on inflation remaining contained over the next two months, he said.

Leblebici said he did not expect the Turkish Treasury to sell new Eurobonds this year, after the Treasury raised 180 billion yen ($2.2 billion) in the largest sale of Samurai debt by a sovereign borrower in a decade on March 11.

“Borrowing in the Samurai market was enough and we will see new borrowing in 2012,” he said. The government doesn’t need to sell new debt and it will wait for the right conditions before considering a new sale, he said.

TEB plans to start selling the first tranches of a 900 million liras ($584 million) of bonds in May or June, Leblebici said. The maturity will be between six months and two years, he added.

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Speaking at the Petroleum Istanbul 2011 fair that started Thursday, BP Turkey Fuel Manager Richard Harding said BP offers service quality to its customers with more than 600 filling stations in Turkey.

“We target a strong growth in 2011 in parallel with the fuel oil market. We plan to expand our station network, increase productivity and take 40 more stations in operation,” Harding said. “Being a company that has invested in the Turkish energy sector and economy since 100 years, we will continue investing with our innovative perspective in the upcoming period.”

At the fair, Harding shared his ideas related to BP Turkey’s growth strategy with representatives from the sector. Higher customer satisfaction can only be provided by happy dealers and workers, the BP statement read. It added that BP Turkey implements advanced management standards and programs to increase productivity. “BP Turkey uses all its experience and power to provide a better environment for its dealers,” the statement said.

As well as distributing and marketing fuel, oil and lubricants, BP Turkey’s activities include liquefied petroleum gas, or LPG, commercial and industrial fuels and exploration for petroleum, gas and energy.

Petrol Ofisi share drops

Meanwhile, Bloomberg reported Friday the share of Petrol Ofisi, Turkey’s biggest fuel retailer, in the Turkish fuel retail market fell to 24.7 percent last year from 26.7 percent in 2009, Turkey’s energy regulator said.

Shell & Turcas Petrol, a joint venture between Royal Dutch Shell Plc and Turcas Petrol, raised its market share to 19.1 percent from 18.6 percent and the share of Opet Petrolcülük dropped to 16.6 percent from 17.6 percent, the Ankara-based regulator in an e-mailed statement.
source: hurriyet daily news

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During the first part of his speech, Porter described the major premises of creating strategies and determining and developing a competitive approach and the role of leaders in the competitiveness of a company. He also shared his views on possible strategies that may be adopted during times of economic crisis. He devoted the second part of his speech to discussing Turkey’s economic strategies, including an in-depth analysis of the business world’s role in these strategies.

Porter later announced the results of a study conducted by the Harvard Business School and Turkcell on Turkey’s competitiveness in the global economy. The study found that the Turkish economy has competitive advantages such as a vast labor force, a high level of entrepreneurship, a rich and dynamic internal market, vast land and a favorable geographic location. Easy access to a range of global markets and better established institutions compared to other emerging economies are two other assets that give Turkey an edge, Porter noted.

He proposed that the Turkish private sector take the initiative in establishing national and regional competition councils. This will help the formation of a consensus on the economic strategy of the country as a whole, he argued. Porter also advised supporting efforts to create industrial clusters in different regions since the Turkish economy is already prone to organizing into such clusters. Porter also encouraged developing more sound coordination in economic relations with neighboring countries to fully exploit the potential that Turkey’s geographic location provides.
source: Today’s Zaman

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The İstanbul Stock Exchange shares gained 0.89 percent following the end of the first session. Crude oil fell towards $71 a barrel, pressured by doubts over US demand after industry data showed a surprise build in crude stockpiles. The MSCI world equity index was up 0.2 percent at 291.69 points after rising to 292.08, its highest since early October last year. The FTSEurofirst index of top European shares rose 0.4 percent on the back of stronger financial stocks. The MSCI index has risen 28 percent so far this year.

Investors awaited a decision by the Fed, which is widely expected to hold overnight lending rates at close to zero percent. The Fed is likely to repeat its intention to keep rates exceptionally low for an extended period in a statement at around 1815 GMT, after the US central bank’s two-day policy meeting draws to a close. “We think the Fed is unlikely to communicate any near-term reversal of its exceptionally accommodative monetary policy,” said Geoffrey Kendrick, currency analyst at UBS. The Fed is also expected to take note of an improving economy, while cautioning that high unemployment puts the recovery at risk.
source: Today’s Zaman

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But is the rally sustainable? While analysts in the West appear to be divided, in Turkey there appears to be a general consensus that we remain in a cyclical bull market. Given the relatively lackluster economic signs in the developed world, investors are increasingly beginning to question this.

Autumn is traditionally a time where markets cool. Nonetheless, in Turkey and elsewhere, investors continue moving their investments into riskier stocks and out of such safe haven investments as Turkish government bonds.

“Turkey is under-leveraged,” said Murat Berk, a senior analyst at YapıKredi. “But we can’t say this in the Anglo-Saxon world. The Western world is coming to the end of the credit leverage sector. Turkey is at the beginning,” he said, suggesting that Turkey would likely continue to be affected by dynamics quite different from those in the West.

Indeed, macroeconomic indicators have come in reaffirming the belief that things are improving, leaving room for sustained upward gains in the market. With inflation now standing at an all time annual low of 5.3 percent, last month’s consumer price figures, ringing in at 0.3 month-on-month in August and interest rates now standing at all time lows, the consensus is that when the Central Bank of Turkey meets this week, it will announce further rate cuts. Most economists say the economy bottomed out in the first quarter and has been on a slow march upwards since. Further adding to the view that Turkey’s markets would continue to perform differently from the rest of the world was the belief that the Turkish financial system is amongst the strongest in the world. “After the economy stabilizes, there will be room for credit and loan expansion,” Berk said, adding that this would “trickle down to the consumer.”

Nonetheless the market was in line for a modest correction. “Most of the expectations have been realized,” says Serhat Gürleyen, the director of İş Invest, adding that “we need some sort of a correction. Investors need a new story. Most of the equity funds rose 50-60 percent since the beginning of the year,” noting that most of the positive developments in domestic and international markets have been realized. Despite the limited amount of profit taking in the İMKB thus far, he was of the opinion that there would be an about 10 to 15 percent drop in the markets as investors cashed in on the gains that they had made over the last several months. He did not agree with analysts elsewhere in the world who believe the markets are now witnessing a decrease in risk taking. “Turkish markets sometimes decouple,” he said, pointing out that Turkish equities had largely decoupled from international markets. Indeed, according to recent figures, the total value of stocks traded on the İMKB had risen by 65.09 as of the end of July — up from TL 182.25 billion in total value at the close of last year — to the present total of TL 301 billion totaled on, making the İMKB the sixth-best performing market in the world. The market has continued to rise since then. “It’s a late bear market,” Gürleyen said, but added that “most of the bears are out of the market.”

But a number of domestic events last week have begun weighing in on the İMKB’s performance and leading some to question the future trends of the market. Last week’s announcement of the record high TL 3.8 billion tax fine placed against Doğan Holding also weighted the markets down and pundits are predicting that if a mediated settlement is not reached soon, the case has the potential to threaten to damage the fragile investor climate. If statements such as the one last week by an EU spokesman who suggested the case against Doğan would have an effect on EU negations is correct, then analysts expect further negative effects on the market. Indeed, Ersagün Şimşek, the director of Tera Brokers, said yesterday, referring to last week’s market performance, in a written statement that “Turkish equities came under pressure due to growing uncertainties over the International Monetary Fund [IMF] deal and a record level tax fine imposed on Doğan Yayın Holding,” noting that “this development has caused investor’s confidence to be undermined and will likely lead to a negative reaction from the EU in the next progress report.”
source: Today’s Zaman

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The Bank will lower its overnight borrowing rate by half a percentage point to 7.25 percent on Sept. 17, according to 23 of 24 economists surveyed by Bloomberg. The other analyst forecast a quarter-point reduction.

Another half-point reduction would bring Turkey’s rate cuts in the past 12 months to 9.5 percent, more than any other of 50 central banks tracked by Bloomberg except Moldova. Eleven months after Prime Minister Recep Tayyip Erdogan declared the global crisis would “barely touch” Turkey, the country has lost more output than 30 other economies in a study by DekaBank Deutsche Girozentrale.

“Except for the politicians in Ankara, whoever you talk to — in construction, real estate, manufacturing — there’s a consensus that this has been by far the worst ever,” said Tevfik Aksoy, an economist at Morgan Stanley in London.

Turkey’s gross domestic product, or GDP, shrank an annual 7 percent in the second quarter, after contracting a record 14.3 percent in the previous three months, the statistics office reported on Sept. 10.

Bottom of the pack

Frankfurt-based Dekabank’s study, published last week, compared the output of 31 economies in their strongest quarter before the crisis with the weakest period since the recession started. It found that Turkish GDP slumped 14.2 percent, compared with 11 percent in Russia and 6.9 percent in Germany.

Turkey has specialized in producing household appliances and cars that were the first to see demand slump when the global economy went into recession.

The economy was “too reliant on the industries that got hit the worst,” said Aksoy. “Turkey didn’t maybe have a basket of sectors that it could diversify among.”

The economy also shrank more than most because it was so dependent on foreign capital to fund expansion, said Neil Shearing, an economist at Capital Economics in London.

The 12-month current account deficit peaked at $48.9 billion, or about 7.5 percent of GDP, in August last year, the month before Lehman Brothers Holdings Inc. went bankrupt.

“There was this sudden stop in capital flows, and that’s why growth fell off a cliff,” Shearing said.

Consumer confidence

Turkey is unlikely to pull out of recession as quickly as many other countries. Consumer confidence, which had been buoyed by tax cuts on cars and appliances in April, dropped in July for the first time this year when the tax measures were partly reversed. The August index will be released on Sept. 16.

Explaining its last rate cut a month ago, the Central Bank said that demand remains weak, with little sign of a pick-up in employment, investment by companies, or demand for exports.

As job losses mount, Turks have begun to lampoon Erdoğan’s optimism of last year. A popular song on YouTube laments the economy’s woes in verses that end with the mocking refrain, “Thank the Lord, it barely touched us.”
source: Hurriyet daily news

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Evaluating the record 3.755 billion Turkish Liras ($2.5 billion) tax levy imposed on Doğan Media Group, Chief Financial Officer Soner Gedik said the decision has no legal ground. Gedik’s arguments against the fine, the second against the group this year, were also supported by a prominent tax expert.

Speaking to daily Vatan, Gedik answered questions about the fine, emphasizing that transfer of shares is a practice exempt from value added tax, or VAT, and the share transfer between Doğan Media Group, or DMG, companies, created no extra revenue for the group. Gedik also estimated that in the past four years, share transfers surpassing $128 billion have been conducted in Turkey. “Nearly three-fourths of this amount was conducted as common stock transfer [as was the case in DMG],” he said. “After this [practice] against us, I guess all such sales will be regarded as cloudy. If the interpretation of the Finance Ministry official is correct, all these sales will be inspected.”

The fines rest upon subjective interpretations of tax officials, Gedik also said. “Two-thirds of the fine is related to irregularities involving VAT. The claim is that certificates cannot be counted as shares, thus they are not exempt from tax. This is an extremely unjust interpretation.”

Confidence dented

Meanwhile, investor confidence took a hit after the government ordered DMG to pay 3.75 billion in back-taxes and fines, Tera Brokers said.

“Investor confidence took a hit following the announcement of this tax fine because it seems like many listed and unlisted companies might suffer similar tax fines down the road, based on reasons for the tax penalty and interpretation by the tax authorities,” Bloomberg quoted a Tera Brokers note to clients Wednesday.

The tax report submitted to DMG on Monday evening “unprecedentedly demands 18 percent in VAT over the transferred shares three times,” Gedik explained. “But as openly stated in the VAT Act, share transfers are exempt from VAT. Also, according to the Turkish Trade Act, there is no difference between shares and certificates.”

Replying to another claim in the tax report that share transfers within the same group should be regarded as “ordinary sales” as the management of the group does not change and thus be subject to tax, Gedik said the Corporate Tax Act has no mention of such practice. “The articles regarding fines do not discriminate between group companies and non-group companies,” he said. “Thus, such claims have no legal basis. The officials, acting upon such a baseless interpretation, have resorted to calculating corporate tax relying on the value during the share sale to Axel Springer Group in Jan. 2, 2007. But during share transfers, the value of transferred shares is calculated by courts and the registered value.”

Seeking correction

In the past, no VAT was imposed on share transactions, in accordance with the law, Gedik said. “We will apply to the Finance Ministry for a re-evaluation of these reports and for a correction. We have full belief and confidence that the law will function in accordance with the main points we have emphasized.”

The share transfers between DMG companies was conducted as part of a restructuring effort and resulted in no extra cash for the group. “Such transfers are done to make sure companies operate more efficiently,” Gedik said. “Our transfers, which became the subject of these fines, involve no transfer of goods or services. We neither sold any goods nor received extra cash. Tax stems from revenue. There is no economic activity here and the group’s assets have not increased due to these transfers, but [now] they are demanding tax. We have spoken to many lawyers and tax experts. Not even one told us we were unfair.”

Professor Şükrü Kızılot, the head of the finance department at Ankara’s Gazi University, also said the transfer of certificates, which are regarded as “securities issued in place of shares by corporations” by law, are exempt from VAT.

“With its first objection, DMG may be able to lift part of the total levy,” said Kızılot, also a daily Hürriyet columnist. “The other part of the levy, consisting of imposed taxes, may be lifted in court.”

In another development, Abdülhamit Yıldız, a spokesman for the tax authority, said DMG applied to the tax office on Wednesday to “negotiate a settlement” for the levy. Alpay Güler, head of investor relations at DMG, confirmed the application with Bloomberg. DMG will take legal action to overturn the fine if an agreement is not reached, he said, adding that the tax office may ask for collateral on the fine.
source: Hurriyet daily news

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Doğan Yayın Holding, the Doğan Group’s publication wing, which runs newspapers such as Hürriyet and Milliyet, numerous magazines and TV stations, was hit by a TL 3.76 billion ($2.53 billion) fine on Tuesday. The Finance Ministry said they levied the fine on the company for evading taxes during a time period covering 2005, 2006 and 2007.

It was the second major fine this year for Doğan Yayın, which controls more than half of the non-state media market. The sum, which Doğan said it would appeal against, is just under the $2.67 billion combined market value of the firm and its parent company, raising concerns about the impact on the group’s finances. Doğan Yayın will need to raise collateral during the long appeal process, something it found difficult when it appealed a separate $500 million fine in February.

When asked about the tax fine on Doğan, Foreign Minister Ahmet Davutoğlu said on Wednesday in Ankara that this was a routine legal process, declining to make further comments. Earlier this year, Erdoğan rejected accusations that he influenced a tax probe into Doğan.

“Billions of dollars in fines cannot be explained with any tax law. It is very clear that this is aimed at intimidating Doğan,” Deniz Baykal, leader of the main opposition Republican People’s Party (CHP), told a news conference in Ankara on Wednesday.

“The uncertainty will continue for Doğan Group shares as the legal process will last for many months. In the short term, the key event to watch is whether the tax office will request further collateral,” Ekspres Invest said in a research note. An analyst at a major Turkish investment bank who declined to be named said Doğan will be able to overcome this latest challenge but will have difficulty raising collateral if the ministry demands a full payment.
source: Today’s Zaman

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