The second edition of the Turkish-Arab Capital Markets Forum (TAF-CM), organized by Al-Iktissad Wal-Aamal Group (AIWA) in cooperation with the Capital Markets Board of Turkey and hosted by Borsa İstanbul, was held at Four Seasons Bosphorus Hotel on September 20, 2013.
Minister of Finance H.E. Mehmet Şimşek, Capital Markets Board Chairman Dr. Vahdettin Ertaş, Borsa İstanbul Chairman & CEO Dr. İbrahim M. Turhan, Al-Iktissad Wal-Aamal Deputy CEO Faysal Abou Zaki, and Union of the Arab Securities Authorities Secretary General Jalil Tarif participated in the Forum.
Borsa İstanbul Chairman & CEO Dr. İbrahim M. Turhan said that this era will be that of emerging markets, and added, “Capital markets may significantly contribute to the sustainability of the financial system”.
Capital Markets Board of Turkey (CMB) Chairman Dr. Vahdettin Ertaş said CMB has been re-shaping the corporate infrastructure of the Turkish capital markets based on the new Capital Markets Law since early 2013, and added, “We believe that our brother Arab countries with high savings will show interest in Islamic financial products. We recommend them to monitor both portfolio and direct investment opportunities in Turkey more closely”.
(Left to right): Dr. M. İbrahim Turhan, Jalil Tarif, Dr. Vahdettin Ertaş, Faysal Abou Zaki, Abdul Aziz Al Hanaie, Murat Efe
Dr. Vahdettin Ertaş said that CMB is striving to establish a developed capital markets for both investors and companies, and added that these efforts are aimed at making İstanbul first a regional, and then a global financial center by 2023.
“A Legal Infrastructure of High Standards for a Healthy Financial System”
Dr. Vahdettin Ertaş emphasized that the inevitable prerequisite for a healthy financial system is a legal infrastructure of high standards, and added:
“The new Capital Markets Law enacted by the Grand National Assembly of Turkey has come into force. We have been re-shaping the corporate infrastructure of the Turkish capital markets based on the new Capital Markets Law since early 2013. Within this framework, we merged İMKB, İstanbul Gold Exchange and the Turkish Derivatives Exchange under the roof of Borsa İstanbul last April. We renewed our legal arrangements regarding the brokerage sector and portfolio management, harmonizing them with the EU acquis.
Islamic Financial Products
We developed new instruments and institutions towards making Turkey a global leading center of Islamic financial center, which is one of the targets of İstanbul Financial Center project. Sukuk, which is called “lease certificate” in Turkey, is one of the main products of Islamic finance. We issued 5 internationally accepted arrangements on sukuk on June 7. Turkish Treasury’s sukuk issues have exceeded US$ 5 billion, and those of the private sector companies have exceeded US$ 2 billion. The new legal arrangements we have done during the year have already produced positive results. We approved the issue of sukuks worth of US$ 600 million last week. The arrangement on pension funds we made last March allows individual pension fund portfolios to be made up of entirely Islamic financial products. Currently, the number of investors in such funds is well over 400,000, and the total amount of such funds has exceeded US$ 175 million. With the new investment fund arrangement we enacted last June, we introduced a new investment fund type under the name “participation fund”, which will invest in Islamic financial products only.
In consideration of Turkey’s needs, we made new arrangements on numerous fields, including real estate certificates, infrastructure real estate investment trusts, and collective investment companies.
I believe that along with the new arrangements we will complete by the end of this year, Turkish capital markets will attain a much more institutional structure starting from 2014, enter a fast development process, and we will experience the same success that the banking sector registered in the last decade”.
Recommendation for Arab Countries Investors
Dr. Vahdettin Ertaş emphasized that Borsa İstanbul is a market that attracts foreign investors, and pointing out to the recent arrangements on sukuk and similar Islamic products, said, “We believe that our brother Arab countries with high savings will show interest in Islamic financial products. We recommend them to monitor both portfolio and direct investment opportunities in Turkey more closely”.
In his speech, Borsa İstanbul Chairman & CEO Dr. İbrahim M. Turhan said that he believes that the Turkish-Arab Capital Markets Forum (TAF-CM) will contribute to creating a wealthier environment in the region.
"This era will be that of emerging markets. Capital markets may significantly contribute to the sustainability of the financial system”.
Dr. İbrahim M. Turhan, Borsa İstanbul Chairman & CEO
Dr. Turhan said that this era will be that of emerging markets despite FED’s recent decision and the fluctuations in the region’s markets, and that capital markets may play a key role in this era. Dr. Turhan continued to say,
“In Turkey, 85% of the financial transactions are still in the hands of commercial banks. Of course, I am proud of the banking sector’s success. Yet, if we want a healthier, more reliable system, we need to diversify financial assets. It is not short-term success that we are after. Although guerilla marketing is highly preferred nowadays, we do not adopt this approach. We are not here for a single game, and therefore, sustainability is very important for us… Capital markets may highly contribute to the sustainability of the financial system”.
Rules to follow in the Capital Markets
Dr. İbrahim M. Turhan said that certain rules must be followed in using the capital markets, and added, “As a matter of fact, these are very easy rules; namely, transparency, accountability, and institutionalization. These three rules form the basis of corporate governance. They are not difficult to find if we go back to our history, to those days of gold”.
Developments in the Turkish Capital Markets
Dr. İbrahim M. Turhan reminded the audience that a new capital markets law has been recently enacted, and said, “This orders us to be fully compatible with international norms and standards. We privatized our exchange. It is now a joint stock company, with the Turkish Treasury holding 49%. We included all of the market actors in this structure. Although we are not a publicly traded company yet, we strive to comply with corporate governance principles”.
Dr. İbrahim M. Turhan also talked about the agreement they signed with NASDAQ OMX, the leading player of the global markets, indicating that this agreement will provide significant added value to Borsa İstanbul.
Dr. İbrahim M. Turhan said that they are working on Islamic financial products, adding that the first center for Islamic finance research outside the US will be established in İstanbul, hosted by Borsa İstanbul.
Intermarket integration, mutual investment opportunities and sukuk
2nd Turkish-Arab Capital Markets Forum 2013 hosted the top executives of securities exchanges, settlement and custody institutions, and regulatory bodies of OIC member states including Turkey, Arab countries, Azerbaijan, Iran, Kazakhstan and Pakistan, and representatives of investment, asset management, venture capital companies, financial institutions and private sector companies.
Cooperation opportunities between the Turkish and Arab countries capital markets were evaluated in the Forum. The main themes were integration & harmonization between securities markets; accelerating regulatory convergence; prospects of mutual investments and markets outlook; developing debt and capital markets instruments, and sukuk.
Following the keynote speeches, four comprehensive panels were held under the titles: Integration & Harmonization between Securities Markets, Accelerating Regulatory Convergence, Prospects of Mutual Investments and Markets outlook, and Developing Debt and Capital Markets Instruments.