Investment Relations Of Türkiye-Uae

Country Advisor Rahim Albayrak talked about Turkey- UAE investment relations and the role of the participation finance sector to Katılım Finans.

CAN YOU TELL US ABOUT THE RECENT AGREEMENTS BETWEEN TURKEY AND THE UAE?

UAE Crown Prince Mohammed Bin Zayed Al Nahyan paid
a visit to Turkey in November 2021. This visit is of great importance for the diplomacy of the countries in the region and the two countries' economic relations. Subsequently, we expect a return visit of our President in February. With this visit, mutual cooperation agreements in different fields were signed. The subject of the agreement is the exchange of financial information to prevent money laundering and financing of terrorism. The agreement in this area, which was difficult to obtain information before, would be beneficial.

Turkey Wealth Fund signed a cooperation agreement with Abu Dhabi Ports and ADQ, the favoured fund of the last period in Abu Dhabi. Immediately after these agreements, the Turkish Wealth Fund and ADQ announced their decision to establish a joint technology fund worth 250 million dollars. A cooperation agreement was also signed between the most prominent institutions in developing
 

bilateral relations, ADQ and Investment Office of the Presidency of the Republic of Türkiye. A mutual cooperation agreement was also signed between the Central Banks of the two countries. A swap limits agreement between the Central Banks of the two countries has been made recently. A mutual cooperation memorandum of understanding was also signed between the Abu Dhabi Stock Exchange and Borsa Istanbul. Apart from these, mutual cooperation agreements were also signed in the fields of customs, environment and energy. We expect a free trade agreement between the two countries in the next period. While there was only an agreement to prevent double taxation before, the free trade agreement will increase the trade volume between the two countries.

IS THERE AN EXISTING INVESTMENT PARTNERSHIP BETWEEN THE TWO COUNTRIES? WHAT ARE THE POTENTIAL INVESTMENT PARTNERSHIPS IN THE FUTURE?

So far, there has been no significant investment
partnership between the two countries. However, UAE funds or companies have made significant investments in Turkey, and we expect that this will increasingly continue.

The prominent investments of the UAE are:
•    DP World port management established a modern port operation on the allocated land in Yarımca.
•    Emirates NBD made a strong entry into our country by purchasing SberBank shares in Denizbank.
•    Mutual funds ADQ and Mubadala in Abu Dhabi have recently invested around $700 million in Getir and Trendyol companies.
•    Abu Dhabi Investment Authority has been operating the Çırağan Kempinski hotel as an investor for many years.
•    The Emaar group realised a big project on the Anatolian part of Istanbul, consisting of shopping malls, commercial areas and residential areas. The Emaar group also made the Tuscan Valley investment before.

These mainly consist of the transactions of companies that are subsidiaries of the state. Apart from this, private companies in the UAE also have medium-sized investments. We observe that venture capital companies in the field of technology have a high interest in Turkey, and their investments are increasing. When we look at the investments made by the UAE around the world, we observe that the investments made in our country are quite diminutive. It is estimated that ADIA alone manages an asset size of between $700 billion and $1 trillion. From this perspective, we think that the potential for cooperation and investment is relatively high.

We consider potential investment partnerships in the next period, especially between the two countries' wealth funds. Currently, the decision to establish a $250 million technology fund between the Turkey Wealth Fund and ADQ has been announced to the public. As far as we know, this fund will act as a "fund of funds" and will invest in existing venture capital funds in the technology climate. This is a momentous step. Considering that the technology fund established by Mubadala, another Abu Dhabi fund with French BpiFrance, has reached the level of 4 billion dollars, we attach great importance to this initiative. Another potential area is the establishment of a joint public infrastructure fund. Especially for the last 20 years,
 

Turkey has been one of the countries that have invested the most in infrastructure in Europe, and there are still many megaprojects on the agenda. Instead of funding these infrastructure projects with the credit mechanism method, which would increase the public debt, it would be healthier to design them with the public infrastructure fund model and bringing net foreign direct investment (FDI) to the country. A fund to be created in this way can be structured not only to be limited to UAE funds but also to include government funds from both Qatar and Kuwait. We observe this in countries like India, Indonesia, South Africa, and Colombia, which are developing countries like us and need infrastructure investments.

WHAT ROLE DOES THE TURKISH PARTICIPATION BANKING MODEL PLAY/CAN PLAY IN OUR COUNTRY'S INTERNATIONAL INVESTMENT NETWORK?
Participation banking in our country already undertakes
a function such as guiding investors from the Gulf Region, providing banking services and providing loans when necessary. There is an investor profile with Islamic perceptive in the region. We have personally observed that many holdings we visited take these principles into account in their investment decisions. Another observation is that investors from the region prefer to act with the banks whose own country bank invests in our country. However, these services are mainly on the scale of providing banking services and partially providing consultancy services. Capital market instruments can be used effectively to attract more investments from the Gulf countries.

There have been many problems encountered by Gulf investors while investing in our country, which we have observed in recent years, and we have encountered situations that disrupt the perception of the country's investment environment. Here, I think it is essential to develop instruments such as real estate investment funds, technology funds, venture capital funds as soon as possible. In addition, another area we see lacking is the absence of institutions providing Islamic investment bank services in our country. These organisations perform a ubiquitous and vital function in the Gulf. As you know, 

international banks also have Islamic investment banking departments in the Gulf, and they provide this service to their customers. The initiatives to be made in this field will have an essential function in attracting investments to Turkey from the Gulf.

WHAT IS THE REGION'S PERSPECTIVE ON TURKEY'S FINANCIAL SECTOR?
Turkey is an important player in the region with its
economic size and the largest economy in the region. However, its share in Islamic banking is unfortunately far below the desired level. Unfortunately, its share in total sukuk issuance in 2020 is around 8%. Malaysia takes 32% and Saudi Arabia 28%. We expect an economy of our scale to be close to these. The share we receive from the worldwide Islamic funds is not even 1%.

Currently, financial institutions prioritise accumulating a share from Turkey's import/export transactions. There has been significant consolidation in the field of Islamic banking in the UAE in recent years. The number of Islamic banks, which was 8 before, decreased to 5 with mergers. Dubai Islamic Bank (DIB) has had a representative office in Turkey for many years, but it has not reached the scale of a fully operating bank.