Istanbul's financial centre dreams

By bne IntelliNews April 14, 2011

Justin Vela in Istanbul -

A new financial district is planned for Atasehir, a booming municipality on the Anatolian side of Istanbul, as part of a goal by the government to turn the city into a new global financial centre similar to New York or Shanghai. Domestic politics and practicalities threaten to intrude, however.

The $1bn development in Atasehir, which is expected to serve 20,000 people, will include 1,500 residential units, parks, a five-star hotel, and offices and conference facilities. Planned wind turbine technology and rainwater collection sites will make Atasehir one of the largest green developments in Turkey.

Numerous banks have bought land and are preparing to move their headquarters there, hoping to benefit from the new financial district through an effect known as clustering. "If you have all the big banks in one area, you will have all the professional services. Despite technology, somehow people still like to be located together," says Mark Yeandle of British consulting firm Z/Yen, which produces a survey of global financial centres every six months.

Turkey's Banking Regulation and Supervision Agency, Capital Markets Board, and the Turkish Banks Association are also expected to move to Atasehir, along with the Istanbul Stock Exchange. The Islamist-rooted ruling Justice and Development Party (AKP) has even introduced a motion in parliament to amend a law stipulating the central bank be headquartered in Ankara, paving the way for its move to Istanbul.

Plans for the new financial district date back to 2006. The global economic crisis intervened, but with the economy now booming, the AKP is seeking ways to expand Turkey's importance as an economic powerhouse, claiming it will be among the top-10 economies in the world by 2023.

Istanbul's growth appears unstoppable, driven by a rapidly growing, young population and directed by the Housing Development Administration (TOKI), which is directly connected to the prime minister's office. "In the last seven years, TOKI began building 483,287 dwelling units, 350,000 were completed, and the prime minister ordered TOKI construct 500,000 more dwelling units by 2023, the 100th anniversary of the establishment of the Turkish Republic," says Tahire Erman, a professor of urban development and political science at Ankara's Bilkent University.

Many are enthusiastic about the plans for Istanbul, yet some urban development experts such as Erman say the new financial district will overburden Istanbul. "It is already overgrown, and there are already many problems in the provision of infrastructure and municipal services to the city," she says.

There is certainly still much work to be done. Z/Yen's latest survey of global financial ranks Istanbul at just 71 out of 75 global financial centres. Yeandle explains the city is currently a "local diversified" financial centre, or one that serves nearby countries such as those in the Balkans, Middle East and Central Asia, as supposed to a truly global centre such as London or New York. "The infrastructure is not bad; access to the international market is not too bad; the availability of people - all those factors are good," he says. "[But] Istanbul needs to improve its business environment, the ease of doing business, and operational risk and corruption perception."

Talk of Istanbul elevating its status as a global financial centre and other sublime goals usually linked to the country's heady GDP growth also mask a fragile economic situation. The AKP might have won plaudits for the eight years of relative political stability and economic growth it has brought to Turkey, yet observers aren't convinced that enough has been done to counter the country's traditional boom-and-bust cycles. "Turkey's position as Emerging Europe's star performer is looking increasingly precarious," warns Neil Shearing of Capital Economics.

Empire dreams

Stoking a growing polarisation in the country, the AKP's opponents are trying to undermine the idea of moving the central bank from Ankara with conspirational criticisms, such as alleging it would allow government supporters to be appointed to key financial positions. "In ideological terms, the AKP wants Istanbul, which was the capital of the Ottoman Empire, to increase its domination and power over Ankara, which is the capital of the secular Turkish Republic," argues Bilkent University's Erman.

The Turkish daily Milliyet reported in November 2010 that draft legislation currently in parliament has the central bank moving within two years. However, Turkish opposition leader Kemal Kilicdaroglu of the People's Republican Party tells bne that this is unlikely, with the proposal moving slowly through parliament and modern technology making such a move unnecessary anyway. "There is no logic to the move," says Kilicdaroglu.

Unfortunately, logic, some would argue, is hardly equal to ideology for a government that is increasingly being accused of silencing critical voices and attacking press freedom. While still the market favourite, the AKP is dismaying some supporters with its increasingly autocratic signals, especially considering the party's intention to rewrite the constitution following the June 12 parliamentary elections that it's set to win by a wide margin.

Turkey returning to its Ottoman-era prominence, when Istanbul was a critical international hub, is a top priority for the AKP. Yet no one misses the absolutism of the Sultanate.

Istanbul's financial centre dreams

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