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Now ranked the world’s 17th biggest economy with a GDP of nearly $790bn, Turkey, the prime minister claims, will become the 10th largest in 10 years’ time. To fuel that kind of growth, the country needs energy. Situated between the hydrocarbons-rich Middle East and energy-hungry Europe, but with negligible reserves of its own, Turkey has long been viewed as a transit state. While that continues to be part of its strategy, the nation is also hunting for resources to power its own economy, whether it is domestic supplies like coal or renewable energy, oil and gas extracted in foreign fields or new pipeline agreements to ship in fuel. It is also investing in hydroelectric plants, and plans to have eight nuclear reactors on-line by 2022. This chapter contains interviews with Hasan Köktaş, President, Energy Market Regulatory Authority; Rövnag Abdullayev, President, SOCAR; Gülsüm Azerı, CEO, OMV Turkey; and Alexander Medvedev, Director-General of Gazprom Export.

The Turkish insurance sector is dominated by 25 multinational insurance companies, which held some 52% of the market in 2012. Gross insurance premiums grew 15.5% in nominal lira terms, or 8.8% in real terms, in 2012, and subscriber growth reached 18% that year. Protecting non-vehicular property accounted for 22% of the insurance market in 2012, with the largest segments fire (9%) and earthquake (4%) coverage, which are typically marketed together in “housing packages”. While in previous years the sector had largely followed the fortunes of the wider economy, in 2012 it maintained comparatively high growth rates, even as the overall economy slowed. The pensions segment even accelerated its growth, thanks to the strong performance of the capital markets and a new government incentive to match payments. This chapter contains an interview with Mehmet Bostan, Chairman, Pension Monitoring Centre.

Following the 2012 enactment of the new capital markets law, the Istanbul Stock exchange was merged with the Istanbul Gold Exchange and renamed Borsa Istanbul. Following a dismal performance in 2011, equity markets staged a dramatic recovery in 2012, with the dollar-based version of the Borsa Istanbul’s broadest index, the BIST 100, coming within 4% of its record high in January 2013. The government’s commitment to promoting capital markets and its generally practical approach bode well for the sector’s development. Although its ambition to develop Istanbul into one of the world’s top financial centres is lofty, the project is proving to be a positive catalyst for down-to-earth reforms that will be useful in the near term to strengthen markets. This chapter contains interviews with Vahdettin Ertaş, Chairman, Capital Markets Board (CMB); Ibrahim Turhan, Chairman and CEO, Borsa Istanbul; and Özgür Günerı, CEO, Finansinvest.

The Turkish banking sector has suffered from a pattern of booms and lulls in the past, and, as a result, a number of policy reforms have been instituted to improve regulation. The sector looked to be starting a process of maturation in 2013 as it continued to record solid growth without overheating, with lending growing at an annualised rate of 16% in the first two months of 2013. The efforts being made by bankers and regulators to take the long-term view, when markets are putting little pressure on them to do so, bode well. Lower inflation, higher domestic savings, focus on SME lending and longer-term foreign financing will make Turkish banks more resilient and able to fund larger projects. But, as the country enters a middle-income stage of development when economic growth usually becomes harder, banks will need to pay close attention to loan quality. This chapter contains an interview with Erdem Başçı, Governor, Central Bank of the Republic of Turkey, as well as a banking dialogue with Hakan Ateş, CEO, Denizbank and Süleyman Asla, CEO of Halkbank.

Turkey has had an impressive decade of expansion that saw GDP rise from $196bn in 2001 to $787bn in 2012, or about $10,400 per capita. Since 2001, real growth has averaged more than 5% per year, an extraordinary rate for a middle-income country that imports most of its raw materials. A young and mobile population provides a natural tailwind to growth, while a high level of diversification in terms of products and markets has helped the Turkish economy bounce back strongly from recent global and regional crises. Despite a decline in growth in 2012, Turkey’s performance was regarded as impressive, given that much of emerging Europe fell into recession. However, it needs to be wary of falling into the “middle-income trap”, although there is no good evidence that countries in its income bracket are especially prone to severe slowdowns. Turkey’s open economic model might miss some short-term gains by eschewing such tactics as export subsidies and import restrictions, but that restraint has also made it into one of the more competitive emerging markets, demonstrated by its high average growth rates and relatively high incomes. This chapter contains interviews with Nicole Bricq, French Minister for Foreign Trade; Ahmet Aksu, President, Turkish Privatisation Administration; Ali Sabancı, Chairman, Pegasus Airlines; and Mark Lewis, Senior Resident Representative in Turkey, IMF.