David O'Byrne in Istanbul -
It's a little known fact that the Turkish language is particularly rich in proverbs. And arguably none more aptly describes the 15-year relationship between the man known worldwide as "the guru of emerging markets," Mark Mobius, and the Turkish economy than "Patience is the key to paradise."
Less optimistic fund managers than Mobius, who currently oversees over $41bn in closed-end and open-end funds for Franklin Templeton out of offices in Hong Kong, might have pulled the plug if subjected to a similar experience to Mobius' first venture into the Turkish market. Having bought a sizeable minority stake in a newly privatized power company back in the early 1990s, the company fell victim to Turkey's notorious Uzan business dynasty, a process that Mobius later described in his book "Passport to Profits" as a form of commercial "rape."
Despite such an early setback, Mobius kept Templeton in Turkey and remains distinctly bullish on the country's prospects, citing the record of the governing AKP of Prime Minister Tayip Erdogan as key to Turkey's progress - and not just for the hard line the government took against the Uzans, three of whom are fugitives, subject to Interpol arrest warrants. "The AK Party have been very pro-active in pushing though reforms and pushing ahead with privatization, and now with the court case out of the way, I'm sure they'll be able to continue with that," he says, praising the government's impressive economic record and its widely praised clean-up of the banking sector. "We'd like to see more privatization and reform of the tax system. Simplification and reduction are the watchwords - reducing taxes encourages more people to pay."
But at the same time, he cautions that the AKP has still to win the full trust of the international business community, particularly with reference to corporate governance and Turkey's never-ending struggle with corruption, which he sees as major stumbling blocks to the country's development. "The AK Party has been accused of putting its own people into various positions and pressuring the media, but it's important for them to show that they are fair and not targeting people that oppose them."
According to Mobius, winning that trust will necessitate the AKP avoiding spats with Turkey's archly secular establishment, such as its attempted legal change aimed at allowing women to wear headscarves at university, which resulted in a court case alleging the party threatened Turkey's secular constitution - a case in which the AKP narrowly avoided being closed down. "It'd be better if they concentrated on the economy and secular issues, and made reforms gradually," he suggests. "Pushing such issues at this stage is confrontational."
The value of Turkey
Despite the recent political confrontations, Mobius is still very optimistic about the prospects for the Turkish economy. Although he accepts that recent Templeton predictions of Turkish growth averaging 6% over the year may be a little optimistic, he's still keen to praise what he sees as Turkey's clear advantages. "They're aggressive exporters, and even though there could be a slowdown in exports to Europe, they also trade strongly with Russia, and the domestic Turkish market is growing quickly," he points out.
That combination of factors is enough to convince Mobius that Turkey offers the best value of the seven main markets he invests in - ahead even of Russia and Brazil, which currently account for the bulk of Templeton funds, and South Africa, which he also singles out as offering particularly good value. "Turkish companies look very cheap, you could almost throw a dart at the market and hit something worth investing in," he says, adding that in addition to price, Turkey's big advantage comes in the depth and quality of its skill base.
"There's a lot of really excellent managers who are doing a terrific job in managing their companies," he says singling out several of Turkey's biggest conglomerates: Sabanci Holding, Koc Holding and Anadolu Holding - best known as the owner of Turkey's biggest brewer Efes - for particular praise. "Efes we like a lot, it's a very strong company with big investments in Russia," he says, in a nod to the advantage of being present in markets unaffected by the current downturn in the west.
That economic downturn notwithstanding, Mobius is adamant it's to the West that Turkey must continue to look, not just in pursuit of accession to the EU, but more importantly to attain the same level of development. "The actual joining of the EU is not the issue, the important point is that they are working to meet the criteria that's required of joining the EU," says Mobius. "That said, I just hope Europes look back and realises the important role that Turkey has played, and will continue to play."
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