SWF to be initial investor in Istanbul Finance Center

Published 29.08.2019 00:06

Turkey's Sovereign Wealth Fund (SWF) backs the acceleration of the Istanbul Finance Center (IFC) project and is set to be the initial financial investor in the IFC's structure, according to the general manager of the fund.

"We aim to complete the project at the end of 2021 or at the beginning of 2022," Zafer Sönmez told Anadolu Agency (AA).

"We want to see not only finance companies but also firms with totally overseas-oriented business," Sönmez added.

The IFC project, which started in 2009 and is currently being developed in Istanbul's Ataşehir district, has been designed to be one of the world's major financial centers. This landmark government project aims to build a larger financial center than existing ones in New York, London and Dubai and make Istanbul the center of finance internationally.

"We seek to bring dynamism to the Istanbul Finance Center project, which is of strategic importance for Turkey, not only in real estate, but also in making legislation and regulations and establishing the ecosystem. We need to show the geopolitical and financial importance of Istanbul in the global arena again," Sönmez stressed.

Global examples in

strategic projects

The Istanbul Finance Center is a project to contribute to Turkey's strategic and visionary projects, he said, adding that the project supports efforts to help make Turkey and Istanbul a finance leader in the region. Emphasizing that their contribution to the project is about being an investor in this project and giving it momentum, he added, "Our goal here is to be able to finalize the project in late 2021 or early 2022 and make it operational."

Established in 2016, the Sovereign Wealth Fund holds the total or part of shares in several Turkish companies such as national flag carrier Turkish Airlines (THY), telecommunications giant Türk Telekom, private lenders Ziraat and Halk, as well as Turkish Petroleum and the Borsa Istanbul Stock Exchange (BIST).

Since what distinguishes the fund from other institutions is its involvement in the project as an investor, Sönmez said that similar wealth funds in the world also invest in strategic real estate projects. He noted that Malaysian wealth fund Khazanah contributes to the $30 billion Alexander Malaysia project in the south of that country.

Giving more examples, Sönmez said that the Investment Corporation of Dubai (ICD) invested in Burj Khalifa, Dubai Mall and Dubai World Trade Center projects, while Saudi Arabia's Public Investment Fund (PIF) has supported a joint-stock company named NEOM. Moreover, he said, Russian Direct Investment Fund (RDIF) and Kazakhstan's Joint Stock Company Sovereign Wealth Fund Samruk-Kazyna invest in strategic and visionary projects in their countries.

"Since the Istanbul Finance Center is a project that we are very excited about and that envisaging creating value by adding value to the vision of our state and accelerating the project. First of all, it will be a structure that we will be an investor in. We will make a cash contribution and become a shareholder. We have our own liquidity. When we increase the value here later, we can see foreign investors or other investors here," Sönmez said.

The IFC project will create a center designed to be the heart of the world financial sector and serve 24/7 as a public hub. When completed, the project should employ about 30,000 people. Constructed on an area of 2.5 million square meters, the IFC will have 560,000 square meters of office space, 90,000 square meters of shopping space, 70,000 square meters of hotel, 60,000 square meters of residential space and a culture and congress center with a capacity of 2,000.

Earlier this year, Istanbul gained nine places in the ranking of global financial centers, jumping to 59 up from 68, according to the 25th edition of the Global Financial Centers Index (GFCI) published by London's leading commercial think tank, Z/Yen Group. In the ranking, Istanbul rose 30 points to 620 points compared to the period of September 2018. In terms of its position in Eastern Europe and Central Asia, Istanbul jumped from fourth to second place. The city saw its best ranking in September 2014 when it ranked 42nd.

The SWF general manager added that banks have a very dominant structure in the Turkish financial sector. He emphasized that this is not a criticism of banks, but an indicator showing the smallness of non-bank financial institutions, adding: "In fact, the Istanbul Finance Center will make a great contribution to this formation. We want not only financial companies, but also companies that do business abroad to be involved."

Stressing that the weight of Islamic finance in Turkey is at 5% currently, Sönmez noted that this rate could rise to 20%-25%, and that a similar example of success exists in Malaysia.

Since it is necessary to create an ecosystem at the Istanbul Finance Center that can be set up, progress and expand quickly, Sönmez said: "There are three dimensions here. The first is construction. We do not see this as a real estate project. It is a strategic project for Turkey. There is the real estate side, but what matters is how to establish a finance ecosystem. For this purpose, the first layer of the project is construction, the second layer is legislation and regulation and the third layer is the creation of ecosystem."

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