The Chairman of the Istanbul Chamber of Commerce (ICOC)Murat Yalçıntaş 

“SMEs want an exchange of their own” 

Murat Yalçıntaş hopes Istanbul will become a regional financial center. Yalçıntaş thinks SMEs (Small&Medium Size Enterprises) Exchange project gains ever more importance in the process of EU membership. 

New financial centers are born out of developing countries in quick succession. However, it is known that these cities have undergone a difficult process. How do you see Istanbul’s chance in this regard?

 In order for it to become a regional center with international recognition, we should meet some conditions. It must be admitted that there are some common characteristics of cities which have become financial centers owing to their traditional status or have turned to be such centers with the help of the initiatives they have taken. Infrastructure and macro conditions are among these characteristics. When considered within this framework, Istanbul has a considerable potential and advantage in becoming a regional financial center with its geographic, geo-strategic and geo-economic position together with its increasing integration with the world. The primary condition for becoming a regional financial center is to belong to a country which has a strong economy. Turkey has a quite large and dynamic economy with both its gross national income and its population. If the high growth rates of the recent periods are maintained, it is fairly possible for Turkey to become one of the ten largest economies in the world.

 Much effort has been spent for years to found the SME Exchange. Can we learn your views about the matter? 

The fierce competition precipitated by globalization forces every developing country in the world to take similar steps in business life. In this respect, SME Exchange project assumes ever growing importance in Turkey’s EU membership process. Every institution and organization in the country has to undertake duties and responsibilities in the development. The government’s securing stability in macro economic indicators and controlling the informal economy are the primary conditions not only for the SME Exchange project but also for every project designed to increase national income. 

What are the benefits of a stable SME Exchange for Turkish economy? Will SMEs become more interested in going public than other companies? 

SME exchanges are an important means of making domestic finance potential able to meet the domestic demand. Additionally, large amounts of resource will be devoted to SMEs through the SME Exchange and with these resources SMEs will be able to compete with their foreign rivals having similar financial backing. The SME Exchange is not a bank that lends credit to SMEs. But it is a well-designed structure with the ability to make SMEs acquire enough strength to borrow from any bank as much credit as they may want. Founding the SME Exchange will increase the competition between finance markets and the increase in competition means a parallel increase in service quality. A financial market where transparency and sound control are secured can divert resources into the most feasible investment areas. As a result, it will contribute to the development of main sectors. According to a research that was carried upon our request, 98.2% of the SME owners or managers participated in the survey wanted the establishment of a SME Exchange. However, since Turkish SMEs are mostly family businesses and since they do not know much about venture capital, they do not have a liberal approach toward going public. On the other hand, when the informal economy in Turkey is considered there will be difficulties in the participation of SMEs into the SME Exchange. 

How do you evaluate the outlook of Turkish economy in your capacity as the chairman of Istanbul Chamber of Commerce?  

Judging by its general outlook, Turkish economy is currently in a position on which both negative and positive conditions have effects at the same time. It is possible that there will be a decrease in foreign direct investments in Turkey which have reached 20 billion dollars after quickly increasing in previous years. In parallel with this, the interest of foreign investors in privatization bids may also decrease. This situation will also bring about greater dependence on external borrowing in order to finance Turkey’s current account deficit. The non-financial sector which has chosen to fill its need for finance mostly from foreign loans in recent years assumes a significant risk now because of the rise in exchange rates. This may create dangers to our banking system which is in a position to give guaranty in credit relations. Besides, there is a huge increase in energy and food prices in the world. Unfortunately, agriculture in our country has been losing ground in recent years with the effect also of negative climate conditions. In electricity production, however, there may be inadequate supply by 2009 since delays occurred in building necessary power plants. Depreciation of Turkish lira against foreign currencies in the first months of 2008; increases in energy and food prices in addition to the prices of some industrial raw materials are to cause inflation to be over 10%. Despite these alarming expectations, we have also some advantages that inspire hope. 

Can we talk about these advantages?

 The increase in energy prices has brought a considerable increase in the national incomes of countries such as Russia, Azerbaijan, Iran, Iraq, Saudi Arabia which are in Turkey’s near surroundings and with which Turkey has advantageous trade relations. In these countries, an important growth potential in consumption and investment trends has appeared. Turkish exporters and contracting firms are in a position to exploit these opportunities in a favorable way. The investment potential accumulated in the above mentioned countries can also be diverted to Turkey with according policies. Our tourism sector which has been quickly developing still has a significant potential for growth and it is possible to reach higher levels in this field in a relatively short time. Although it has decreased a little, the rate of economic growth is still very high in Turkey comparing to developed countries.

As long as growth trend is maintained, Turkey may become an increasingly attractive target for foreign investors who search for new and advantageous investment opportunities due to the recession and the lack of confidence in developed markets.  Turkey can benefit from the international financial crisis in terms of attracting foreign capital. For this to happen, political stability must be maintained, confidence and operability must be sustained in money and currency markets, and economic growth trend and export increase must be maintained at sufficient levels.