Arab Petrodollars Move into Istanbul
To applause another trade agreement between Turkey and Arab countries is signed in Istanbul. The agreement seeks to remove trade barriers and encourage joint investment in the region. It is just another small step in what is a remarkable business story. Over the last decade, trade between Turkey and the Middle East has grown from three billion dollars to over 17 billion, and today the vast majority of it is non-oil business. One of the signatories of this latest trade agreement is Hamdi Tabaar, chairman of the Arab Business Confederation. He says this explosive growth in trade is just the beginning.
"We have a lot of common things in history and culture," Tabaar says. "When you have a market for 300 million people as in the Arab region, and 72 million as in Turkey, it means any industry could flourish. We Arabs and Turks have to come together and start joint ventures and new projects."
Last month's fighting in Lebanon is providing further impetus to this process of deepening Middle Eastern trade ties, according to Mehmet Habaab. He is the chairman of both the Turkish-Middle Eastern and the Turkish-Lebanese Business Council.
Turkey's economic and political stability
"Lebanon was expecting one and half million tourists this year they will end up with less than 500,000. A lot of these tourists had to change plans and came to Turkey. Lebanon was on the way to becoming stable again, but unfortunately, it has been destabilized and everybody now looks to Turkey as a very stable country. And this has improved the image of Turkey in the Middle East. So I think Turkey is an up-and-coming market. But Lebanon with its liberal open economy will in time come up again."
Turkey being an applicant to join the European Union further enhances its credentials as a stable investment opportunity. Sait Akat is CEO of Turkish construction company AvrAsya; he has worked in the region for over 20 years. Akat says the conflict in Lebanon has underlined the attractiveness of Turkey to Middle Eastern investors.
No country and no investor likes risk, Akat explains, "and now Arab oil money comes to Turkey instead of to Lebanon."
Construction on the Mashattan project in Istanbul is well underway. The billion-dollar project is the jewel in the crown of a series of luxury construction projects funded by Arab oil money. One of the city's largest shopping plazas was sold last month for 700 million dollars to another Arab investment company.
Arab oil money is the main driving force behind Istanbul's construction boom. Omer Aydinler is CEO of Aydin Construction Company. He primarily works with Arab partners and doesn't think Middle Eastern investors will abandon the Lebanon.
"A Western-Eastern-type problem"
His company is already looking for a slice of the expected multi billion-dollar Lebanese reconstruction cake. With oil prices still at dizzyingly high levels and expected to remain so for the foreseeable future – the coffers of the Middle Eastern investors are more than adequate to satisfy both Turkey and Lebanon and much more.
"At the end of 2005 there were 250 billion dollars of free cash available," Mehmet Habaab explains the situation of Arab investment money. "And in 2006 it is expected to hit 400 billion dollar, so that money has to go somewhere. So they are looking to go into emerging markets, into more stable markets. Especially after 9/11, they have sort of pulled back from the US dollar, there is a Western-Eastern-type problem, and so they pulled back. So you see a lot Arab money being invested in countries like Turkey, Indonesia, Malaysia and Singapore. Turkey can't absorb that kind of money, but it will probably take a large amount, 20 or 25 billion. So I think Turkey is an up-and-coming market."
At the present rate of growth, Middle Eastern countries are set to overtake Europe as the main investors in Turkey by the end of the decade. The Turkish Prime Minister Recep Tayyip Erdogan is talking about the creation of a regional free trade zone. The repercussions for Turkey of the conflict in the Lebanon will, it seems, add only further impetus to this new economic love affair.
Dorian Jones
© Deutsche Welle 2006
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