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Rise of the Anatolian Tigers

27 August 2014


A group of small family businesses centres have become major international players that now present an opportunity for investors, finds Nicholas Clayton

Read more: Anatolian Tigers Turkey SME

Over the past three decades, Turkey has watched the Anatolian Tigers grow from small and medium-sized enterprise (SME) entrepreneurs in the Turkish interior to conglomerates on the country's top company lists.

Although these business leaders have traditionally been cool to the idea of foreign partnerships, analysts say the new generation of Anatolian Tigers has global ambitions that present lucrative opportunities for investors.

The term Anatolian Tiger first emerged in the 1980s as entrepreneurs from Turkey's conservative and underdeveloped heartland began taking advantage of the country's liberalisation agenda to expand their businesses aggressively into companies with thousands of employees.

"Today the profile of an Anatolian Tiger company is a hard-working, family-based manufacturing firm," says Istanbul-based business intelligence specialist Gokay Turanlioglu.

During the first half of the 20th century, much of the industrial activity in central Anatolia was focused on textiles, but, as globalisation drove up competition in the sector, the industrial activity shifted to consumer goods and secondary products feeding other Turkish industries.

However, some signature Anatolian Tiger companies remained in textiles, with Taha Textile being one of the sector's most notable successes. Founded by three families in 1988, it signed a lucrative agreement to supply fabric to French clothing company LC Waikiki that same year. It grew so rapidly in the years that followed that it bought out LC Waikiki in 1997, thus making it a completely Turkish brand.

Islamic Calvinists
In 2005, the European Stability Initiative released a report describing the Anatolian Tigers as "Islamic Calvinists" which had succeeded based on a mentality of selfreliance, thrift and reinvestment of profits. However, these qualities have made Anatolian Tiger companies traditionally less accessible to foreign investors.

Mehmet Gun, founding partner of Istanbul-based law firm Mehmet Gun & Partners, says foreign investors looking to partner Anatolian Tiger companies should be aware that cultural differences will present a number of challenges when negotiating a deal.

To begin with, the family-run enterprises that typify the Anatolian Tiger model tend not to be interested in selling stakes to strategic investors, but are open to the idea of joint ventures with foreign companies, according to Gun. But, given that many of these companies continue to be led by the entrepreneurs that built them from the ground up, they also tend to require significantly more persuasion concerning how a foreign partner can help move things forward, he says.

Nonetheless, after prospering under a booming Turkish economy in the 2000s, the Anatolian Tigers have acquired global ambitions that require close cooperation with foreign companies.

This is also in part due to a generational shift. Whereas families in central Turkey faced a lack of educational opportunities when the Tiger movement began, many of the children of the first Anatolian Tiger entrepreneurs have now studied at elite business schools across the western world.

As they have returned to take up the reins on the boards of their family companies, Turanlioglu says they have brought global vision and western business practices with them.

Gun says they are now increasingly looking for opportunities for global expansion, and provide unique opportunities for foreign firms seeking a partner to help them penetrate difficult markets in the former Soviet Commonwealth of Independent States (CIS), the Middle East and Africa, Gun said.

Regional ambitions
Since the mid-2000s, the Turkish government has pushed hard for local companies to expand their trade and investment ties with non-EU neighbouring markets both as a means of ameliorating the country's high current account deficit and also to position the country as a regional economic centre.

Turkey has steadily made in-roads into the CIS and Middle East and north Africa markets by expanding exports and providing know-how in the construction and manufacturing sectors, but Turkish companies have only recently penetrated sub-Saharan Africa.
The Confederation of Businessmen and Industrialists of Turkey (Tuskon) announced in 2011 that it had prioritised the establishment of stronger business ties in new African markets, and some progress has been made.

Turkey had just 12 embassies in Africa in 2003, but has since expanded that to 34, with new posts for commercial councillors created in 17 sub-Saharan states.

Turkey's bilateral trade volume with Africa has surged from $16bn in 2010 to $23.4bn last year, and Turkish Airlines now flies to 39 destinations in Africa, adding its latest - Cotonou, Benin - in June. Turkey formally joined the African Development Bank last December and Turkish companies have launched a series of ventures in Africa over the past few years, although many of them remain at the early stages of development.

In Uganda, for instance, a consortium of 11 Turkish companies called the Turko Group announced earlier this year that it had earmarked $20m for a series of ventures in agriculture, healthcare and construction.

Into Africa
The Turkish government has also signalled its interest in establishing a foothold in even the riskiest of African markets. In 2011, Turkish Prime Minister Recep Tayyip Erdogan became the first non-African head of state to visit the Somali capital Mogadishu since the country descended into conflict in 1991.

Turkey has since given hundreds of millions of dollars of aid to Somalia, and has followed its humanitarian entry with private investment. Last September, Turkish company Favori, a part of the familyowned Kozuva conglomerate, took over the management of Mogadishu's Aden Adde International Airport and pledged to invest in a $10m expansion. Turkish construction firms have also been reportedly linked to a series of infrastructure and retail projects under development in Somalia.

Analysts say Turkish banks have been slow to follow the country's trailblazing construction and manufacturing companies entering the African market. With little presence on the continent, Turkish lenders have been reticent to grant companies project finance or export credit for investments there. This has created a potential opening for liquid foreign investors seeking partnerships with Anatolian Tigers on African ventures.

Gun says he is bullish on the opportunities that now exist for foreign firms seeking to ride Anatolian Tigers' aggressive globalisation, but added that misunderstandings in negotiations are common. "You really have to try to understand the culture that is unique to the environment," he says.

He adds that foreign investors should be aware that many of these companies conduct their business in a way that is similar to handling a family's personal finances, and "not all business transactions will be reflected in the books". Although such discoveries can be disconcerting from a western corporate point of view, they do not necessarily indicate mismanagement, he adds.

Likewise, family-run Turkish businesses tend to be put off by western dispute resolution methods, and Gun says those portions of any proposed agreement should be brought to the agenda very carefully. "Culturally, when a [Turkish] family has ambitions, it dreams big. We do not like to talk about the negatives of the dream," he says.


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