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Turkey Food and Drink Report Q1 2009
Business Monitor International, Jan 2009, Pages: 56
The Turkey Food and Drink Report provides independent forecasts and competitive intelligence on Turkey's food and drink industry.
The Turkish government has been working hard to attract more foreign direct investment (FDI) into the country, hoping to bolster domestic consumption as well as capital investments over the long term and, as discussed in the body of this report, the food and drink sector has been central to these efforts. Recent months have witnessed two major international investors announcing their intentions of investing heavily in the Turkish economy, with the agriculture and food and drink sectors the focus of these investments. In November 2008, the European Bank for Reconstruction and Development (EBRD), which has been instrumental in developing small and medium sized businesses in emerging economies, announced the historic move to start funding projects in Turkey, a country that had previously been outside of its area of operations.
This decision to start investing in Turkey represents the EBRD’s first move outside of the countries of the former Soviet bloc, as shareholders were convinced that it was time to shift the bank’s focus further east, with Turkey’s strong trade links with countries in the Balkans, the Caucasus and Central Asia a key factor in convincing shareholders to start Turkish funding. Turkey has been a shareholder in the EBRD since the bank was founded in 1991 and had requested a change of status to become a country of operations earlier on in 2008. Initially, the request was resisted by both the US and EU shareholders, before they eventually came around to the idea.
Of the EUR5.95bn (US$7.67bn) that the bank plans to invest in 2009, EUR150mn (US$193.3mn) has been earmarked for Turkey, mainly to be invested in municipalities, small businesses and agribusiness, which would rise to EUR300mn in 2010, with further increases in subsequent years, making Turkey one of the EBRD's largest countries of operation. The funding could have a transformative effect on small- and medium-sized food and drink producers, as well as for the agricultural sector.
This was followed by an announcement by a Gulf investment vehicle consisting of the Bahrain-based Ithmaar Bank and Gulf Finance House and the UAE's Abu Dhabi Investment House stating its plans to invest at least US$150mn in Turkey's agricultural sector in 2009. Operating under a strategic alliance called Vision3, the deal has opened the way for almost US$9bn worth of investment opportunities, particularly in Turkey's agricultural sector. The Turkish government was keen to portray the investment as a vote of confidence in the country's economy and a reflection of the strength of the agricultural sector. Indeed, such investments in the Turkish economy are sorely needed, particularly given the country's large current-account deficit and the current financial climate. With the government coming under increasing pressure to reduce its agricultural subsidies, it has been looking to support the sector through other means, such as infrastructure and irrigation projects. Turkish government representatives have recently said that they have decided to make substantial infrastructure investments in agriculture in order to make investment in the real economy more desirable for potential investors, with these investments by the EBRD and Vision3 precisely the type of FDI that it has been hoping to attract.
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