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Cash-strapped Turkey depends on Qatari investments

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Dec 2, 2020

Scrambling to attract overseas buyers to ease Turkey’s arduous foreign money crunch, President Recep Tayyip Erdogan’s authorities has as soon as once more turned to its closest ally, Qatar. The two sides introduced a raft of agreements final week, together with contemporary Qatari acquisitions, with Ankara wanting to convey a semblance of renewed overseas capital flows to its crisis-hit economic system. Government opponents, who cost that Ankara’s financial bonds with the Gulf monarchy are politically motivated and lack transparency, nevertheless, meet Qatar’s investments with suspicion.

The newest offers, introduced throughout Emir Sheikh Tamim bin Hamad Al Thani’s Nov. 26 go to to Ankara, embrace Qatar’s purchases of a stake in Istinye Park, considered one of Turkey’s largest purchasing malls, and a 10% share within the Istanbul inventory change. The European Bank for Reconstruction and Development had beforehand purchased the 10% Borsa Istanbul AS stake, however divested it final 12 months, irked by Ankara’s appointment of Hakan Atilla — a Turkish banker who served jail time within the United States for serving to Iran evade US sanctions — because the CEO of Borsa Istanbul.

Turkey’s commerce quantity with tiny Qatar is not more than $1.5 billion, however Erdogan’s authorities has been eager to attract chunks from the rich emirate’s capital surplus to Turkey. The new agreements, which adopted some controversial offers in earlier years, triggered political wrangling at home, as opposition events blasted Ankara for mismanaging the economic system after which “selling off everything to Qatar.” Is it so? What is the precise scale of Qatari investments in Turkey?

Although Qatar’s territory and inhabitants quantity to just one.5% and three.5% of these of Turkey, respectively, the emirate boasts greater than $80,000 in gross home product per capita, in comparison with solely about $9,000 in Turkey. Typically, Turkey posts a present account deficit of $25 billion to $30 billion a 12 months, whereas gas- and oil-rich Qatar enjoys a present account surplus of as much as $25 billion, which permits it to speculate copiously overseas, primarily by way of the Qatar Investment Authority.

The overseas direct funding (FDI) inventory in Turkey stands at about $150 billion as of final 12 months, with the majority — $101 billion — belonging to European buyers, in line with Central Bank information. The Netherlands is the chief with about $33 billion, adopted by Qatar with some $22 billion.

Intriguingly, nevertheless, the Dutch investments — represented by giants comparable to Unilever, Shell, Philips and ING Bank — date again to the 1940s, whereas the Qatari ones have amassed previously 5 years of the Justice and Development Party’s 18-year rule. The stated interval has seen a rising rapprochement between Ankara and Doha, together with the deployment of Turkish troops in Qatar earlier than and after the blockade that Gulf neighbors imposed on the emirate in 2017. With greater than seven many years of funding historical past, the Dutch corporations’ share within the FDI inventory in Turkey quantities to 22%, whereas the Qatari one has reached nearly 15% in solely 5 years and is more likely to swell additional, given the ample collaboration urge for food of each Ankara and Doha.

Still, Turkey just isn’t the highest vacation spot of Qatari overseas investments. According to Qatar’s Planning and Statistics Authority, the Qatari direct, portfolio and credit score funding inventory overseas totaled nearly 410 billion Qatari riyals (some $117 billion) within the first quarter of 2019. Direct investments amounted to $44 billion, or 38% of the whole. The Turkish Central Bank places Qatari direct investments in Turkey at $22 billion, which means that Turkey is the recipient of roughly half of Qatar’s direct investments overseas. Yet the report of the Qatari authorities says that 34% of Qatari direct investments are in European Union nations, 24% in Gulf nations and 14% in different Arab nations. This discrepancy stays an enormous query mark.

Another puzzling side is the sharp uptick in Qatar’s direct investments in Turkey. In 2015, they totaled lower than $1 billion earlier than growing to nearly $5 billion in 2016, nearly $6 billion in 2017 and $6.2 billion in 2018. How they jumped to $22 billion in 2019 is difficult to fathom. One attainable clarification is the extraordinary enhance out there worth of the Qatari-owned QNB Finansbank. While lower than 1% of the financial institution’s shares are publicly traded, its market capitalization has exceeded $40 billion, outstripping by some $10 billion the mixed worth of Turkey’s six largest non-public lenders and reaching some 20% of the whole worth of the Istanbul inventory change. Such excessive surges are deemed unhealthy by market watchers.

Other main Qatari acquisitions in Turkey embrace ABank and Digiturk, the nation’s largest pay-TV operator. The Qataris have put cash additionally in armored car maker BMC, the ATV-Sabah media group, poultry producer Banvit, retailer Boyner and motels within the resort city of Marmaris. The most controversial handover was that of Turkey’s high tank manufacturing unit final 12 months. The 25-year operational rights of the manufacturing unit within the northwestern province of Sakarya have been transferred by a presidential decree to BMC, a three way partnership between the Qatar Armed Forces Industry Committee and a Turkish businessman near Erdogan.

The Qatari direct investments contain additionally purchases of actual property, together with posh mansions on the banks of the Bosporus in addition to land bought by the emir’s mom, Sheikha Moza bint Nasser, on the route of Canal Istanbul, a deliberate synthetic waterway to hyperlink the Black and Marmara seas.

Besides direct investments, Qataris have put cash additionally in inventory shares and authorities bonds in Turkey, however no statistics can be found on these sums.

More importantly, Qatar has rushed to assist Turkey’s Central Bank, providing a foreign money swap line to bolster the financial institution’s depleted overseas reserves and assist stabilize the nosediving Turkish lira. In May, Qatar tripled the restrict of the swap deal to the equal of $15 billion. Though the association just isn’t an enduring treatment, it has offered the Central Bank with a peg leg for some time.

Ultimately, Qatar’s willingness to be Turkey’s Johnny-on-the-spot has to do with its want for army assist in a hostile neighborhood led by Saudi Arabia. By granting Turkey a army base on its soil, the emirate has successfully obtained Ankara’s phrase of safety. Its investments in and monetary help to Turkey are largely seen as quid professional quo.

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