OBG talks to Ali Sabanci, Chairman, Pegasus Airlines

 Interview: Ali Sabanci

How can Turkey develop a culture and a legal system that encourages entrepreneurship while reducing the cost of business failure?

ALI SABANCI: Entrepreneurs require a healthy ecosystem which includes the proper market conditions and regulatory framework, as well access to low-interest finance and a supportive culture. Regulations that pertain to taxation, auditing standards and bankruptcy procedures are of particular importance. In Turkey, the legal system is somewhat weak in these areas; however, things are gradually improving. For example, the reduction in the corporate income tax rate in 2007 from 30% to 20% made life much easier for businesses.

Still, some aspects of our regulatory environment continue to stifle new business and product development. In a recent World Economic Forum Global Competitiveness Index, Turkey ranked 86th among 144 countries for intellectual property protection, with a score of 3.29 (out of 7). This is well behind world leaders such as Finland (6.28), Singapore (6.09), New Zealand (6.07), Switzerland (6.04) and the Netherlands (5.91).

Employment laws in Turkey, which were designed for the 20th-century industrial era and not the modern start-up economy, need to be modernised. One of the most severe legal problems is the lack of limited responsibility for any public debt that companies incur. An entrepreneur who starts a company, employs one person and then closes the start-up a year later becomes personally responsible for its social security payments. Even if an investor comes into the company and takes 10% equity, the investor still has the same responsibility. This discourages the development of a vibrant entrepreneurial community.

Moreover, Turkish culture has not traditionally encouraged risk-taking, teamwork, or decision-making in uncertain conditions; these attitudes do not foster entrepreneurship. Although changing these deeply ingrained habits in Turkish society will prove difficult in the coming years, we can start by reforming our outdated educational system. Entrepreneurial traits should be instilled in students at the elementary school level, and then gradually developed in high schools and higher education institutions. Among other things, accomplishing this feat will require a curriculum and a classroom environment that rewards creativity, problem solving, and analytical thinking skills.

Other institutions, such as compulsory military service, can also play a positive role in bringing about this socioeconomic transformation. Take Israel’s military, for instance, which has played a huge role in encouraging all kinds of entrepreneurial traits in individuals and making Israel a start-up nation.

Finally, to become an entrepreneurial society, Turkey needs to publicly celebrate its many business success stories. Media events, highly publicised award ceremonies and even speeches by famous individuals praising entrepreneurship can all have a positive impact and help to change attitudes.

What role has the domestic aviation sector played in Turkey’s robust growth over the past decade?

SABANCI: Turkey’s economic expansion has been a story of emerging markets, as demonstrated by the rapid rise of economies throughout Eastern Europe, the Middle East and Asia over the past two decades. As the advanced markets sputter, these new actors are driving global growth.

Within this context, the aviation business has played a key role in the global redistribution of power and wealth. As the aviation sector develops in any particular country, it creates new trade and investment linkages. This is what we have observed in Turkey.

Continued progress in this direction will require cooperation between governments and carriers in emerging markets. In Turkey, our carriers have steadily expanded their international flights and frequencies as domestic authorities have progressively relaxed visa requirements for many nations. This liberalisation of travel regulations must continue apace. Here, Turkey stands out as an example for other countries to follow.