ICI Chairman Bahçıvan: “The disharmony in the Society Triggers Economic Risks”

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The Istanbul Chamber of Industry’s July ordinary Assembly meeting was held in Odakule under the leadership of Hasan Büyükdede, the Deputy President of the ICI Assembly, to address the topic of “The Potential and the Opportunities Presented by the Stock Exchange and Capital Markets to Strengthen our Economy and Industry”.  

During the Assembly meeting where Tuncay Dinç, the CEO of Istanbul Stock Exchange (BIST) was the guest speaker, the ICI Chairman Erdal Bahçıvan told that due to lack of knowledge on capital markets capital markets cannot be deepened adequately and that deposit owners prefer to invest in deposits rather than securities. For this reason, he continued, financial education and policy implementation to protect financial consumers are critical.

Hasan Büyükdede, the Deputy President of the ICI Assembly, started his inauguration speech in July’s ordinary meeting by condemning the recent terror attacks. He continued his speech as follows:

“32 young people have lost their lives on July 20 in Şanlıurfa Suruç where 104 more were injured. During the armed conflict in Adıyaman we lost one soldier. We all feel deeply sorry for these incidents. On my behalf and on behalf of our Assembly, I condemn this blood thirsty attack organized against an armless group, regardless of their beliefs or faith. We need to unite in the face of terrorist organizations who want to turn our country into Iraq or Yemen”.   

ICI AssemblyDeputy President
Hasan Büyükdede

Büyükdede, pinpointing to the fact that our country’s defense industry must be developed further because of these terror attacks, said: “A country can be economically advanced, if and only if there is peace and stability in that country. Turkey is a country that manages to keep its democracy alive despite all this war and chaos. We want all related parties to immediately unite, to form a coalition and sustain the stability.”

Büyükdede was followed by the ICI Chairman Erdal Bahçıvan who also spoke about the tough period we’re going through and how the circumstances in Turkey are forcing everyone to act responsibly. His following remarks were marked by a warning: “There is a deep gap between the country’s economic infrastructure and intellectual superstructure. The disharmony in the society triggers economic risks.” He also said: “The ineffective coalitions of the past that we don’t recall with much appreciation were built on weak macro-economic balances. However, today we stand on strong indicators including the public finances. Had the Turkish capital markets developed further, the private sector funding would be backed by a higher rate of domestic savings and in such a case we would not be facing such high-level FX risk that we’re currently facing”.

Bahçıvan, in his speech on the current agenda, also expressed his condolences to the families of those who have lost their lives in the recent terror attacks and stated that he wholeheartedly believed that we will leave all atrocious attacks behind us in a mood of unity and solidarity and that we need to act with caution and common sense at the moment.

Bahçıvan, furthermore, told that we should not let pessimism take over us because this is exactly what the terrorists desire. He went on saying that we can overcome these painful and difficult times only by joining forces and by blocking those powers who try to feed terrorism.

ICI Chairman Bahçıvan reminded that we are going through a period where the production based new economic approach is being heavily debated and that if we want to strengthen the Turkish economy it is very critical for the industrialists to defeat the obstacle of limited financial resources. Bahçıvan, pointing out the fact that it is more direct and less costly to turn savings into investments in capital markets rather than in banks, said: “Many researches reveal that active and healthy functioning capital markets is one of the most crucial drivers of long-term sustainable growth. The main reasons for this are: diversification of funding in the economy, risk mitigation and most importantly the multiplying effect of savings. And that is why we, the industrialists, need to be in close contact with capital market institutions”.

Bahçıvan remarked that the inefficient debate that has been long going on in Turkey exhausted everyone and that the antidote of this exhaustion and energy loss in the society is reconciliation. He went on saying that the ineffective coalitions of the past that we don’t recall with much appreciation were built on weak macro-economic balances; however, today Turkey stands on strong indicators including the public finances.

He continued his speech as follows: “All political parties should do what the entire nation expects them to do, and that is to arrive at a consensus with patience and an approach that looks at the half full glass. Turkey’s GNP is $800 billion, foreign trade volume $400 billion. There is a serious problem that this success brings along. There is a huge gap between the economic infrastructure and the intellectual superstructure. That is also the cause of Ankara-related problems. The realities in Turkey and in the world force us to act responsibly. The disharmony in the society increases the economic risks. We will continue to believe that all political parties will act responsibly based on the preference the national will manifested”.  

Bahçıvan, indicating that the industrialists should stay open to opportunities presented by stock exchange and capital markets, continued: “The first thing that comes to mind is access to long-term and low-cost funding…The domestic savings ratio which stand around 13% in Turkey is way too low. From the perspective of private sector’s debt, capital markets failed to grow as fast as the economy in general.  Real sector funding is mostly based on foreign funding sourced from overseas through banks. That is why the private sector is heavily indebted, around $285 billion.  If Turkish capital markets had deepened further, private sector funding would be backed by higher rates of domestic savings and that would in turn decrease the FX rate risk we are currently facing. The funding problem of our industrialists should be solved if we wish to return to production based economy”.

Bahçıvan, underlying the very low ratio of number of companies traded in the stock exchange to GDP, told that: “There is a strong potential waiting to be utilized. For our companies to benefit from this potential and to fund their capital needs through long-term/low-cost funding instruments, they should gain more knowledge and experience on stock exchange and capital markets. It’s more than natural that our companies act quite reluctant in meeting their funding needs through IPOs. It’s not that easy to take such giant step that requires a comprehensive transformation in the company’s structure. Istanbul Stock Exchange will play an important role in terms of increasing the confidence of the companies.

On another front, Bahçıvan mentioned some positive developments such as the agreement between Greece and the EU on Greece’s debt issue, and the consensus between Iran and the United Nations Security Council members 5+1 on the nuclear negotiations. He said: “Our bilateral trade relations with Iran will accelerate. Iran, with its high population and sizeable market, will present enormous opportunities for different Turkish industries. Thanks to this agreement global energy prices will follow a stable and positive trend. Speaking of the importance of border trade, our border trade with Iran will pick up in the coming months and this will positively contribute to the lives of local people living in regions covering Turkey’s eastern borders”. With regards to the Cyprus issue, Bahçıvan stated that positive news continue coming from the island and if a permanent agreement is reached it will no doubt positively affect the Turkish-EU relations.

Tuncay Dinç, CEO of the Istanbul
Stock Exchange (BIST)

In his speech, Tuncay Dinç, the CEO of Istanbul Stock Exchange expressed the following: “Looking around Turkey, we see instability in Iraq and Syria, conflict between Azerbaijan and Armenia in Caucasia, war in Ukraine and economic crisis in Greece; whereas Turkey stands as an isle of stability in the region. BIST is an example of this stability. 10% of the BIST will soon be offered to public and that foreign companies are already knocking on our door to become partners to BIST right after the elections”. Dinç also commented that foreigners see the potential of Turkey much better from outside and partially this is because Turkey has completed all her financial homework during its EU membership process.

BIST CEO Dinç reminded that Istanbul’s election as a finance center was a state policy and that when this goal is accomplished all related parties will vastly benefit from it. In the meantime, he continued, BIST is renewing itself technology-wise and in the new period to come number of orders per second will rise from 2.500 to 100 thousand.

Dinç, calling upon the industrialists, stated that the gap between bank deposits and capital markets have significantly expanded at the start of 2000s. He later on invited the Turkish industrialists who would like to become more corporate to take their places in capital markets, mentioning that Turkey’s monetary economy has risen up to 114% of the GDP.

Dinç, calling out to industrialists, stated how deep the gap has expanded between bank deposits and capital markets since the beginning of 2000s. CEO Dinç, after mentioning that the Turkish monetary economy to GDP is as high as 114%, invited all industrialists who would like to become corporate to take their places in capital markets. Dinç underlined that this would be an easy-to-use platform through which they can find financial resources and that the recently enacted law and legislation facilitates cash capital injections for companies. Dinç concluded his remarks by saying that they, as BIST, was ready to help whenever the industrialists decide to go public.

ICI Chairman of the Board of Directors, Erdal Bahçıvan's Speech Text Attach