Page 3 - bne IntelliNews weekly newspaper – Russians lose showdown at EBRD AM

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May 12, 2017 www.intellinews.com I Page 3
More than half of the EBRD’s Russia portfolio is made up of debt, with the remainder comprising public and private equity investments. About 83% is invested in the private sector, with just 17% in state- controlled entities, few of them on the sanctions list.
As bne IntelliNews reported at the start of this week, the EBRD is slowly winding up its Russian portfolio, as its share in the bank’s profitability falls. Russia now makes up 10% of the bank’s port- folio and will continue to lose ground as the EBRD
Foreign investors fear reform will take back seat after referendum
cause inflation may just be bizarre, but the purge he unleashed against many business people sus- pected of being connected to the Gulenists he claims were responsible for last year’s failed coup – more than 800 Turkish firms, worth some $10bn, have been seized – is simply too scary to contem- plate. Even the stock exchange has been targeted among the at least 40,000 people arrested over alleged links to the coup plotters, with warrants is- sued for a total of 102 sacked employees.
But Erdogan is no fool. He owes much of his suc- cess in politics to strong economic growth, while Turkey remains exposed to external financing – gross external financing needs are around 25% of GDP – and around half of Turkish exports are bought by EU consumers.
He is also not a statist. There is no indication he wants to build a large government sector to domi- nate the economy. Quite the reverse: Erdogan believes private businesses must be the driving force. Whatever his bluster, many analysts expect him to tread carefully from now on.
Turkey has already received some gentle warnings from foreign partners. On May 8, Turkish Economy
ups investment in its other countries of operation, including Ukraine, which has become a major re- cipient of new EBRD money in the last two years.
However, the EBRD’s Russia portfolio remains the second largest after Turkey, even after shrinking by 30% to €5.35bn a year ago, according to data available on the lender’s website. The bank is still involved in 788 projects but the run-off in the port- folio is clearly accelerating, as assets had been worth €6.3bn in mid-2015.
Minister Nihat Zeybekci was in Berlin meeting his German counterpart Brigitte Zypries. The Ger- mans, like the Dutch, have remained conciliatory despite Erdogan’s nationalist jibes against the EU during the referendum campaign, which reached such a point he exclaimed that Europe had be- come a “rotting continent” that is “the centre of oppression, violence and Nazism”.
Zypries pointed out how Germany needs “clear assurances about legal securities”, adding: “The rule of law is a central requirement for the Ger- man government and German industry. Compa- nies need reliable framework conditions to make investment decisions.”
Encouragingly for those investing, or minded to invest, in Turkey, the post-coup purge has not been widened to include foreign companies or the country’s largest business conglomerates, such as Koc Holding and Sabanci Holding, both of which are seen as symbols of the integration of the Turkish economy with global capitalism.
Even the biggest businesses in Turkey felt some- what stranded on the referendum battlefield dur- ing the fraught build-up to the vote, and the busi- ness climate has become thoroughly politicised, but tellingly, there was no targeting of members of the staunchly pro-EU business group, Turkish Industry and Business Association (Tusiad), long seen as the representative organisation of Tur- key’s secular business elite.