Middle East poised to invest in Turkey

Published August 18th, 2008 - 06:43 GMT

Premier international forum to examine prospects for Islamic finance as Turkey recovers from legal stand-off over religion and secularism

Renewed interest in Turkey by Islamic investors from the Middle East is expected with the ending of a legal stand-off between the country's ruling party and secular fundamentalists.

"Turkey was plunged into political and economic uncertainty by the court case over an attempt to ban the AK Party over allegations that it had been trying to create an Islamic state by stealth," said Swati Taneja, conference director of the Islamic finance industry’s leading global event, the twice-yearly International Islamic Finance Forum that next takes place in Istanbul from 13 -17 October 2008.

"Turkey, at the crossroads of east and west, is an overwhelmingly Muslim but avowedly secular state," she added. "The 1.5 billion strong Islamic world has been watching closely to see if Turkey has been able to balance accommodating religion and secularism.

"The AK Party narrowly escaped being dissolved by the constitutional court but, had the court accepted the request for a ban, it would have been difficult to have seen a substantial increase in investor confidence from Islamic and Middle East countries, with potentially disastrous effects for the economy."

Levels of Middle East investment in Turkey have been significantly increasing in recent years. The Islamic banking sector in particular has been on the receiving end of large sums but other sectors are starting to attract heavy Middle East interest including insurance, energy and real estate.

"Internationally Sukuk – referred to in Turkey as participation certificates – is one of the fastest growing asset classes in the financial industry," Taneja added. "The Turkish market is in need of such instruments and investor groups from the Arabian Gulf are ready to inject more into the Turkish economy provided the right regulatory regime is put in place."

Banks operating on Islamic principles in Turkey are known as participation banks. They are a small but rapidly expanding segment of the Turkish financial sector.

The participation banks - Albaraka Türk, Bank Asya, Kuveyt Türk and Türkiye Finans - administer about $21.5 billion in assets, representing 5% of the Turkish banking system and the sector aims to double its share within the next 10 years. Public offerings and mergers and acquisitions are already part of the landscape in the sector

Participation bank Albaraka Türk, with Bahrain's Albaraka Banking Group as major shareholder, successfully went public recently and valuations of Turkish participation banks are relatively attractive compared with the valuations of similar banks in the Gulf region.

Earlier this year, Saudi Arabia's National Commercial Bank completed its acquisition of a 60% equity stake in Turkish Islamic bank Türkiye Finans for approximately $1.08 billion.  Türkiye Finans has 124 branches and had assets at the end of last year of $2.9 billion.

Meanwhile, Kuwait Finance House aims to become one of the top bankers in Turkey.  It wants to boost branches of Kuveyt Turk, in which it holds a majority stake, to 113 from about 100 now by year-end and become one of the top ten lenders by organic growth. Kuveyt Turk, which had assets worth $3.18 billion at the end of 2007, is the third-largest Islamic bank in Turkey by assets, according to the Turkish Participation Banks Association.

The underlying Turkish economy remains strong, Taneja added. "According to government figures, the economy grew by 6.6% in the first quarter of 2008 and performed better than expected despite the uncertainties both global and local and could reach a 4.5% target by the end of the year," she said.

A special session on Turkey at the crossroads will take place at the Istanbul forum which will also examine the status of Turkey's attempts to become a member of the European Union.  The session will be moderated by Dr Adnan Büyükdeniz, General Manager of Albaraka Türk Participation Bank, with panelists including Piraye Antika, Chief Executive Officer and Group General Manager of HSBC Bank, Turkey, and Michael Baldwin, Managing Director of D’Arblay Ltd., Turkey.

The results of a study on the impact of politics on the underdevelopment of Islamic finance in Turkey will also be presented by Dr Mehmet Asutay, Lecturer in Political Economy at the School of Government and International Affairs, Durham University, UK.

The forum will also identify new markets for Islamic finance as well as examine Sukuk structures and capital markets; emerging Takaful development; Islamic jurisprudence; alternative asset classes including private equity and real estate; and sustainability with the greening of Islamic finance.

For more details about the 2008 International Islamic Finance Forum in Istanbul, please visit: www.iiff.com

About the International Islamic Finance Forum

Established in Dubai eight years ago by the IIR Middle East, the International Islamic Finance Forum is considered the premier event in the Islamic finance event calendar with many imitators but no equals. The International Islamic Finance Forum taking place from 13-17 October 2008 at the Çirağan Palace Kempinski Hotel, Istanbul, will be the forum's 15th edition.

The International Islamic Finance Forum is a truly global event attended by companies, organisations and individuals from across the world.
Pioneering international Islamic finance practitioners and the world’s leading Islamic finance scholars will meet at the Istanbul forum for the most important networking event in the Islamic finance industry calendar.


 


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