Having invested in Turkey for many years, European Bank for Reconstruction and Development (EBRD) has caught the attention for its large investments in 2015. The bank's plans for the upcoming period for Turkey are as big as the previous year... European Bank for Reconstruction and Development (EBRD) created a great added value in Turkey with a total investment of nearly 1,9 billion dollars in 2015 alone and announced its plans to invest another 1,8 billion euros in 2016. Stating that Turkey’s dynamism, potantial and opportunities rising from the way of doing business in the country has been a huge factor behind these investment decisions, EBRD Turkey Director Jean-Patrick Marquet says they will focus on the industries of energy and infrastructure in 2016. Turkey is subject to the bank’s most important investment goals and you say that there are miscellaneous investment plans for Turkey. To begin with, can you explain why Turkey is prioritized in regard of investments and please elaborate what you mean by miscellaneous investments? Turkey has become the largest country of operations for the bank 2 years ago. Last year we had a record investment of almost 1.9 billion euros in the country. It is a sounding success for the bank. The reason of this success is that Turkey is the perfect environment for our mission which is to primarily invest in private sector across the economical spectrum that includes banking, industry, infrastructure and energy. Turkey is a very advanced country in terms of private sector development. It privatized many of its assets and undertaken many PPPs in infrastructure. It also has a very dynamic corporate sector in industry. The dynamic and flexible environment makes Turkey a perfect fit for our business model and a very fertile ground for our activities. Turkey received 20 percent of the total 9, 4 billion Euros investment made into 36 countries by EBRD. What do you think is behind this success? I think it is a combination of 2 factors. First, the needs of our clients. As I said before, we see a lot of dynamism and entrepreneurship in Turkey. So we get a lot of demand from the market for innovative financing, long term loans, equity and capital market products. The second one is more is more internal. We are geared up to develop innovative products to be quickly responsive to our clients. We have almost 90 people on the ground dedicated to Turkey. It is very important to communicate with our clients and to be there for them when they have a specific need. The demand combined with our capabilities formed the recipe of our success in Turkey. You declared that you plan to invest a total of 1.8 billion Euros this year. Is there a schedule regarding these investments? Can you provide information on the distribution of this investment by sectors? We do not have a strict schedule but we have an investment target which is between 1.7 and 1,8 billion Euros for this year. As of today I can say that 1/3 of the total investment will go to financial institutions, ¼ to corporate sector and ¼ to energy and infrastructure. My expectation for this year is that energy and infrastructure will top the list and they will be followed by finance and finally corporate sectors. We don’t have a favorite sector, we are very agnostic in terms of where our money should go, simply because we are driven by demand. We want to respond to the needs of the country and our clients. We will do more or less on a specific sector depending on the year and on the basis of the demand from our clients. For example last year we did a lot with financial institutions. We bought equity in Fibabanka and Borsa Istanbul. We invested a lot for credit lines for Turkish banks, SMEs, energy efficiency and women in business. For 2016, I expect the demand to be on infrastructure and energy. We see a lot of projects for PPPs like hospitals, for energy and re-financing of institutions or financing new assets. The largest portion of our investments this year will be on energy and infrastructure. We are driven by demand and we want to be responsive to our clients. How do you evaluate the process of doing business in Turkey in regards of bureaucracy, human resources and business models? For this, I can give you a personal example. In my previous duty in EBRD, I was in charge of all of the urban infrastructure market across the whole bank. I worked in many countries across EBRD region. Turkey is very unique in terms of the dynamism, the human resources quality, the business flexibility but also of the government’s ability to finalize activities therefore create opportunities for private sector investments. For instance the contracts of the hospital PPP program we have been working on for the last 3 years were not very bankable. We told the government if the contracts were not going to be adjusted, we therefore the market could not finance the project. We have found very pragmatic people in the government who listened to us and agreed to change the contracts and even more, they enacted new laws to enable those changes. Ultimately, we ended up with a contract that has very internationalized standards and attracted a lot of financing for the hospitals. To this day we have financed 3 hospitals. A total of 6 hospitals were financed across the market. This year, we are very encouraged to finance new projects. It is a very concrete example of the open-mindedness of government and the dynamism of private sector delivering results for Turkey. We always develop new projects, that is our mission, we are not happy with only what is there, we try to raise the bar, open new areas and I think we have been very successful to deliver innovative products in Turkey thanks to the entrepreneurial spirit of Turkish people and Turkish government’s pragmatism. How do you evaluate the potential in Turkey in regards of its 2023 goals? I see Turkey being at a crossroads today. In the one hand you have negative factors such geopolitics, security issues, the tightening of monetary policy by the FED. All of these effect Turkish economy in a negative way. On the other hand there are some positive elements, it is mostly due to the fact of the new government’s reform driven agenda for 2016. They have even set a timetable for the delivery for these reforms. My hope is that when they are put into action, these reforms will lift the growth potential in Turkey. Today we estimate the growth of Turkey to be around 3 percent for 2016. We believe it will be significantly higher, around 4.5 percent if the reforms are implemented. I am quite hopeful, for the government to be able to implement these reforms and boost Turkish economy during the upcoming 4 year election free period. By 2023 the government expects to implement certain plans especially for energy. There is a renewable energy plan which was adopted last year by the government and this year there will also be a national energy efficiency plan. As the EBRD, we contribute to both plans by mobilizing some technical assistance and appoint consultants to help the government develop those plans. Following the implementation, by 2023 there will be more renewable energy, more security of supply that will reduce the energy intensity of the economy. All of these are very positive for Turkey since it will reduce the dependency to imported resources and make the economy more competitive. We hope that by 2023 there will be some major changes happening in the economy. You have investments in Turkey especially in energy and infrastructure sectors. Lastly you have invested in Akfen’s renewable energy operations. What are the criteria you consider when investing in energy. Why did you choose Akfen? This was an equity investment. It is the riskier part of our investment. When we make an equity investment in a company we look at two things, track record and vision. Track record because we want to make sure we will invest into people who know what they are doing, who have had the experience of developing successful businesses before, who have created value in the past and who know when to go in and out of an investment. Akfen has a very well track record in water, airport, real estate and energy. We also need a vision. We do not invest in the recognition of a past, we invest in the hope there will be more development, new ideas and more value in the future. So Akfen was able to articulate a robust vision for the development of their renewable energy portfolio including hydro, wind and solar energy. Therefore we believed that there was an interesting story and there will be value created in the future by the Akfen energy team. For these two reasons we believed it would be a good investment and therefore we bought 20 percent of the company. What are your comments on the expectations for Istanbul to become a regional and international finance hub? What do you think are steps to be followed in order to achieve this and how can EBRD contribute to this goal? Financial hub means both equity and debt. On the equity side, I just explained what I believe needs to happen. The market needs to grow, governing standards need to be enhanced, stock exchange needs to be able tie partnerships with other exchanges in the region, so effectively the infrastructure and the size of the market need to be increased. For the debt side, there is a similar picture in the bond market. Today, the bond market in Turkey is sufficient for banks but it’s is very small for corporates or the industry. The challenge is to increase the size to attract international investors to the Turkish market. For that to happen, issuers’ ratings need to be improved and the transparency of the market needs to be enhanced. Considerably, the interest rate that is been used for bonds in Turkey needs to be reformed because today only domestic investors can invest on the Turkish market. For the growing of the market, we need international investors to become players. All those key elements are priorities for us and we hope once the equity and debt undergo these improvements, the market will be large enough for Istanbul to become a financial hub for Turkey and the region.