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Istanbul: Where East meets West

Turkey's biggest city is seeing a renaissance as the nation's economy grows, and international business taps in to its strategic location

00:00 EDT Tuesday, May 03, 2011

Agronart Corp.'s Alper Kilic has just sent a container load of canary seed from Montreal to the bustling port of Istanbul. Landing at almost the same time as the cargo ship will be his business partner, en route to a client meeting in Iran via his company's Istanbul office.

The Mideast is one of many regional markets that the Oakville, Ont.-based grain exporter can access from Turkey's historic city.

"That is why Istanbul is so good, you can reach everywhere from Istanbul," gushes Mr. Kilic. "Istanbul is becoming a kind of hub for the region."

Mr. Kilic's big agribusiness rivals have already set up operations in Istanbul, from Cargill to Louis Dreyfus Commodities.

But companies in sectors other than the traditional ones of commodities, energy and mining - including Microsoft and Coca-Cola - have also opened offices in Istanbul in recent years. The rush to this traditional crossroads of Europe and Asia will only increase as Turkey invests heavily to transform this cosmopolitan city into a growing global centre for commerce and finance.

Multinational giants are turning to Istanbul because they need a stable, well-positioned pivot point from which to access emerging markets in the region - from Iraq and Iran to the Balkans - without the political headaches and strife-ridden urban landscapes of some other strategically placed cities in the region.

Indeed, since Turkey's debilitating financial collapse in the early 2000s, the country has undergone an incredible renaissance, with Istanbul at its centre.

A decade of majority governments helmed by reform-minded politicians has reduced unemployment, while maintaining a secular, business-friendly society that has attracted global businesses while allowing domestic companies to thrive. There has also been a concerted effort to turn Istanbul into a financial hub: The national government in the capital, Ankara, has made an astounding effort to move not only the central bank's main office, but the headquarters of other state-owned banks, the 350 kilometres northwest to Istanbul.

Those economic initiatives have paid off: Turkey's real GDP has grown at an average pace of 4.8 per cent over the past eight years; further, it's forecast to lead the Organization for Economic Co-operation and Development member states with an average annual GDP growth of 6.7 per cent until 2017.

"All of this is elevating the importance of Istanbul in international circles," says Burak Aktas, the co-ordinator for Export Development Canada's new trade office in Istanbul. "It's at the crossroads of almost everything - the Black Sea, Europe, Asia, Russia in the north, the Balkans. Geopolitically, it is a very important city."

It doesn't hurt, of course, that Istanbul is also an incredible place to live - nestled along the wide-flowing Bosporus, it boasts world-famous cuisine, fashion, film festivals and a growing number of international economic and cultural meetings and conferences.

"If you want to do business in Afghanistan and/or Iraq, you can have your headquarters in Istanbul and travel back and forth," says Omur Sezerman, president and CEO of Oz Optics, a fibre optics manufacturer based in Ottawa that has a sales office in Istanbul and a factory in Izmir. "You're living in a city with thousands of years of history with all the modern things."

There are lingering concerns about how the country deals with its minority Kurdish population, with some pro-Kurdish politicians banned in the lead-up to June elections, but observers doubt the elections will change Turkey's economic course. And there has been none of the dramatic unrest seen in countries such as Libya.

Compared to other cities in the region - particularly Dubai, which is vying with Hong Kong to be Asia's financial capital - many business people speak of Istanbul not only as a place they have to be, in order to tap Turkey's well-trained work force and growing domestic market, but a place they want to be, given the city's long history and vibrant culture.

"Dubai is not a real city. Istanbul is a real city - it has history, culture, people. It has everything that Dubai doesn't, except maybe tall buildings," says Henri Barkey, a visiting scholar at the Carnegie Endowment for International Peace. "Barring any political crisis [involving the Kurdish population], I'd say the trajectory is for Istanbul to assume a larger and larger role in global business."

Mr. Kilic, the president of Agronart, is also pro-Istanbul. "Ankara is just a city for contractors and governmental business. I lived there ... it's a boring capital."

But even if Ankara's institutions and politicians are less interesting - or less adventurous - than those in financial centres such as New York and London, they has served the country extremely well. Like Canada, Turkey has emerged from the global financial crisis with nary a bank failure.

Indeed, even as countries around it - such as Greece - collapse in financial ruin, Turkey is gearing up for more growth. Recently, the Brookings Institution and the London School of Economics Cities Programme placed Istanbul at the No. 1 spot in its survey of 150 metropolitan economies "in the wake of the great recession." Throughout 2009 and 2010, the report notes, Istanbul's employment grew by 7 per cent, even as employment dipped 7 per cent in more-renowned financial and commerce hubs such as Shanghai and Guangzhou, and fell 8 per cent in Dubai.

Using solid and stable economic growth as a springboard, Turkey's politicians have re-imagined the country's role in the region, asserting itself as a natural ally of countries on both sides of the Bosporus. Instead of blindly chasing membership in the euro zone, Turkey has solidified relationships with other nations in the region, inserting itself between Israel and Iran and attempting to win friends - and contracts for its companies - in high places.

"The leadership, plus the personalities of both Prime Minister Recep Tayyip Erdogan and the President, Abdullah Gul, are also part of the drivers of Turkish ascendancy in international relations," says Ron Denom, president of SNC-Lavalin International, an arm of the engineering giant based in Montreal. "And that's another good reason to be there, because obviously if you are working with Turkish companies and those companies are making headway into Iraq [and] countries like that there is the opportunity to take advantage of that, to go along with them, working with these markets."

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FAST FACTS: TURKEY

Population: 78.7 million

Population of Istanbul: 10.4 million

GDP real growth rate in 2010: 7.3 per cent

Unemployment rate: 12.4 per cent

Exports in 2010: $117.4-billion (U.S.)

Median age: 28

Labour force: 24.7 million

Economy

Average annual real GDP growth rate for the past eight years: 4.8 per cent

16th-largest economy in the world in 2010.

Domestic market 35 million Internet users in 2010, up from 4 million in 2002.

62 million GSM cellphone users in 2010, up from 23 million in 2002.

46 million credit card users in 2010, up from 16 million in 2002.

Taxes

Corporate income tax: 20 per cent.

Individual income tax: Between 15 per cent to 35 per cent.

Iain Marlow










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