Global Capital, Local Banking Sector and Alienation

Dear Colleagues

Yesterday evening, I attended a Panel in ODTU alumni Club Visnelik premises conference hall.

Panel subject was "Global Capital, Local Banking Sector and her Alienation"

Panelists were

Dr. Ergin YILDIZOGLU - Cumhuriyet Daily newspaper
"Financial capital at its last stage of Globalization and evolution of the financial sector"

Prof. Dr. Oktar TUREL, ODTU (Retired) Academic
"Restructuring in Turkish banking Sector after 1980 and -Re-regulation"

Hakan OZYILDIZ , Deputy Undersecretary of Treasury (R), Consultant in TEB Bank
"Capital accumulation in Turkey, financial restructuring and foreign Capital"

Panel Moderator: Seçkin GÜLTAN (MAN’86)

Let me try to summarize my notes taken during Panel

Turkey has a very fragile financial structure and also very fragile economy. People insist on keeping their saving in foreign money - USD or Euro- in local banks despite of low interest return. Due to tough international competition in international markets, Turkish companies cannot generate enough money to finance themselves, they have profit squeeze, so they look for external financing. Private company savings are not much. Private companies can not generate enough profit for self financing. In the history we had always the same experience in capital generation and financing the projects. We always look for restructuring of dept, not restructuring the companies in financial difficulty. Contrary to the general practice in the past we need to concentrate on restructuring the companies in dept, we should let them to bankrupt if needed.

In future, if we shall face a devaluation of local money against foreign currencies - which is expected in 2007- local companies with high dept will face financial difficulty, and hence their ownership may be changed, and banks may get their ownership, that may not be avoidable, nor should be to change the natural consequence.

In the international financial markets, foreign banks had certain saturation in their local banking instruments, they cannot generate more income. However, Turkish local market still has opportunities since it is not much utilized. That is why international financial institutions are coming into Turkish banking sector. It is roughly estimated that they now have almost 1/3 of Turkish banking sector.

In future if USD gets appreciated high, and we face devaluation in the local money, transfer of company ownership will accelerate, and most of the local companies will be owned by financial institutions, frankly speaking into foreign ownership.

Nowadays, the financial figures as released by Turkish Central Bank, and her "expectation public surveys" are not optimistic. We questioned that we ask ourselves "are we approaching a very well foreseen financial crisis in early 2007 ?" What can be done?

We need to erase our foreign dept as much as possible, we need to reduce our expenses, we need to save foreign currency as much as possible. We need to be in "liquid" financial position. You cannot sell your real estate in financial crises, but you can purchase many.

While driving home, I listen to NTV Radio, Can Dundar's "Why?" program. Tarhan Erdem, a reputable and reliable pollster, said " Turkey will experience RTE as the new President in 2007. There is no escape from this result. There is no alternative in the opposition. There will be no military coup. "

Today Ege Cansel says in his Hurriyet daily article "We can only pass the financial crises with the foreign savings of private citizens. This foreign savings will be the buffer to compensate financial crises."

Both political as well as financial crises as expected in early 2007 in the local market, will create a difficult time for the people in Turkey in the short run. We cannot estimate how the management in power will manage these difficult times. I would estimate that we shall force our tolerance limits to live in harmony in our democracy. Your comments are always welcome