Saudi billionaire Prince Al Waleed is the emerging world’s Warren Buffet. He’s as comfortable investing in the United Bank of Africa as he is investing in Citibank. So, it was worth taking notice when the Turkish daily, Sabah, reported last week that Al Waleed intends to invest up to $5 billion in Turkey.
He isn’t the first. Arab investors have poured over $6 billion into Turkey during the past five years. Only European investors have outspent them dollar for dollar.
I can see the attraction. Turkey has a similar sized population to Egypt, the region’s other giant. But it’s twice as wealthy. The country’s annual output is worth $13,000 per person. In Egypt, it’s a far lower $6,000. Turkey also has road, rail, and air links to Europe. All of this makes for a compelling sales pitch.
I see four major changes as a result as a result of this type of intra-East investment.
First, the flow of investment is helping to create a new economic bloc in the East. It won’t rival the West for decades, if ever. But it will mean that wealthy tourists won’t be the only Arabs flying business class between Riyadh and Istanbul.
Second, the number of the world’s commercial capitals is starting to multiply. London, New York, and Frankfurt will be joined by a host of smaller competitors, such as Dubai and Istanbul. The world’s old “hub-and-spoke” economy will fade.
Third, is the rise of what I call an “Islamic Corridor”. This is more contentious. But I’ve noticed a growing trend whereby Muslim investors are investing in other Muslim countries. I’ve earlier written about this in “The New Silk Road”.
What is the “Islamic Corridor”? It stretches from West Africa to East Asia. It lies roughly along the route that Ibn Battuta, the Arab world’s Marco Polo, travelled centuries ago as he visited most of the world’s Islamic communities.
Today, it includes some of the fastest growing economies, all with plenty of mosques and Halal restaurants. “We’re investing in our own backyard”, a private equity investor in Dubai once said to me. “We’ve making use of our home-turf advantage”.
This is what makes Turkey’s case so interesting. It has a signed a customs agreement with the European Union. It has a signed a military agreement with Israel. And, now, it is a major recipient of Arab investment.
Turkey is part of the “Islamic Corridor” but it is also a bridge to “Christian Europe” and “Jewish Israel”. Now, I don’t want to overstate the importance of religion. Most of the time religious differences don’t matter. But occasionally they do.
The hope is that Turkey is creating something special, and showing that a “clash of civilizations” isn’t inevitable.
Fourth, and perhaps most exciting, is that Turkey is the last piece of the Silk Road puzzle to fall into place. The economic links between Beijing, Hong Kong, Singapore, and Dubai have been strengthening in the past few years. But the region’s commercial gravity starts to lose its force after travelling westwards from Dubai.
It hasn’t helped that economic links between the Arab world and Turkey have so far been surprisingly weak. This owes in part to the fact Turkey has been focused on integrating with Europe. But the country is looking eastwards again as the economic crisis takes its toll and the prospects of entry into the European Union fade.
Arab investors are clearly excited by the change. So are Arab officials. In fact, Turkey and the Gulf countries held their first joint-ministerial meeting last week. It was called the “Turkey-Gulf Cooperation Council High-Level Strategic Dialogue”. Encouragingly, the two sides are even trying to sign a free trade agreement.
It’s still early days, but the opening of a Riyadh-Dubai-Istanbul stage in the Silk Road is a key development.
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