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Africa, Middle East and Central Asia
Turkey‘s
economy
A new champion?
EGYPT
INVESTING
AFTER MUBARAK
issue 1/2011 euro 4,00

PROFIL
Niedersachsen’s economic strengths
Logistics
• Nine seaports, plus JadeWeser
Port – Germany’s only deepwater
port – from 2012
• Comprehensive network of
logistics hubs: an excellent
infrastructure for intermodal
transport
2 BusinessReport 1/2010
Energy
• A broad energy mix: natural
gas and crude oil, biomass,
wind power, offshore and
solar energy
• A leader in all sectors of
renewable energies: intensive
use and development of the
technologies of the future
– Trade & Invest
Automotive
• Volkswagen Group is one of
the world’s biggest car manufacturers
• Some 700 businesses in supply
industry
• High degree of research in the
automotive sector
For more – visit www.nglobal.com
Niedersachsen.
German for Business
Niedersachsen, the logistics state, connects the world by sea,
air, road and rail through its central location, where the continent´s
north-south and east-west transportation routes intersect.
It is the home of Volkswagen, Airbus, Salzgitter Stahl,
Meyer Werft Shipyard, Continental and TUI, to name a few.
Hannover is known of the world’s biggest trade fairs as CeBIT
and Hannover Messe.
• 8 millions inhabitants
• Hannover, state capital,
516,000 inhabitans.
• centered airport in Hannover
Food industry
• Niedersachsens food industry
chain: crops, livestock farming,
food safety, and food processing
• One in two chickens, one in two
potatoes, one in five litres of milk
produced in Germany come from
Niedersachsen
Niedersachsen Global, NGlobal, is the foreign trade and inward investment agency of the State of Niedersachsen. The organization advises foreign companies
looking to expand their business activities in the German market. It provides information on foreign trade to Niedersachsen companies that seek to
enter into foreign markets. For more information visit us online and get in touch with us at: www.nglobal.com
Turkey and Germany – Two countries with persistently good economic relations. The Federal State of Niedersachsen with its capital Hannover
is one of the leading regions in Germany. To support further growth between Turkey and Germany, we founded the Türk-Alman
Business Center (taBC). Our mission is to support German-Turkish business relations. Here we offer “one-stop-shopping” for Turkish companies that wish
to expand their business activities to Europe. For further details please visit: www.tabc-niedersachsen.com
Save the date and meet us at: 8th Foreign Trade Day, Hannover
5 th
German for Business.
Life Sciences
• Niedersachsen is home of
around 250 life science companies
• More than 11,000 healthcare
professionals, over 200 highgrade
hospitals, clinics, rehabilitation
facilities
The Conference will focus on Turkey and will take place during HANNOVER MESSE (4 - 8. April 2011) on Tuesday,
5th April at the NORD/LB Forum.

Foto: dge
EDITORIAL
»I see boom times ahead of us«, wrote Ahmed Sedky to zenith BusinessReport on 5
February 2011 from his Blackberry in Cairo. Sedky, the entrepreneur son of a German
mother and former Egyptian premier Atef Sedky, who served for nearly ten
years under ex-President Hosni Mubarak, added that the process of moving towards a
democracy would inject unprecedented power into the economy. When he wrote those
lines, Mubarak was a long way from conceding defeat. Western media were worried
about the Islamic threat – with many fearing the army would let their weapons do the
talking. So where was Sedky’s optimism coming from?
The revolutionary uprisings within the Arab world initially unnerved European investors,
but they do offer opportunities. After all, in the corrupt dictatorial systems, only
those who knew the right functionaries could achieve anything – and that principle applied
equally to local entrepreneurs and foreign companies. Major conglomerates managed
just fine on that basis, but small to medium-sized enterprises often had to wait at the
back of the queue before entering any markets, despite their desired expertise. Organisations
and business facilitators sold their »exclusive access« to dictators – and sometimes
that was their only source of income.
In the societies of the Arab world, there are partners who want to go achieve something
and young, educated workers. They have long seen themselves as the losers of the globalisation
trend – and that is all about to change. Rainer Herret, head of the German-Arab
Chamber of Industry and Commerce in Cairo, joined the demonstrators in Tahrir Square
and then wrote a column about it for zenith BusinessReport (page 10).
For about five years, Qatar had clearly been working on rising to the rank of smallest
world power of all time – as the diplomatic go-between, major investor and now host of
the Football World Cup 2022. zenith reporter Nils Metzger investigated the strategies of
the »Qatar Investment Authority«. In her interview, Qatar expert Carla Everhardt presents
a checklist for entrepreneurs wanting to venture into the Qatar market.
But the cover story of this issue is about Turkey, the economic power now flexing its
muscles not only in Europe but also in the Middle East. For decades, the economic performance
of this country has not kept pace with its political aspirations. Turkey had been
accumulating debt and earning a reputation as a country of emigrants. But 50 years after
the signing of the German labour recruitment agreement for Turkish guest workers, many
German-Turks are thinking about returning – and not out of homesickness, but for
economic reasons.
BusinessReport 1/2011 03

PubLIShED by
Deutscher Levante Verlag GmbH
Linienstrasse 106
D-10115 Berlin
EDITOR-IN-CHIEF:
Daniel Gerlach
MANAGING EDITOR:
Marcus Mohr
EDITORS:
Moritz Behrendt, Robert Chatterjee,
Nils Metzger
AUTHORS:
Alexander von Hahn, Rainer Herret,
Kamila Klepacki, Simona Pfister,
Helen Staude, Özgür Uludag
ART DIRECTOR:
Lesprenger, Berlin
PRINTED BY:
GCC GmbH & Co. KG
ADVERTISEMENT AND DISTRIBUTION:
info@levante-verlag.de
ADVERTISEMEN RATES:
No 1, 1 August 2010
COPYRIGHT:
All rights reserved. Neither this
publication nor any part of it may
be reproduced or transmitted in any
form or by any means without prior
permission. Named articles present
their author‘s views, not necessarily
the editors‘ opinion.
04 BusinessReport 1/2011
CONTENTS
PROFILE
06 banker and saviour
Anvar Saidenov sails Kazakhstan‘s largest
credit bank through the crisis
uPDATES
08 Billionaires and safaris
MONEy AND POwER
10 when performance really pays off
Why Egypt‘s revolution is good for German
business
12 Pharao‘s last legacy
A technology park lures IT giants nilewards
TuRkEy
14 Turkey wants to know
Is the new economic power merely a
challenger having a tilt at the title?
16 Great Game in Anatolia
The future of the Nabucco project
18 underwater artery
Istanbul digs deep for its traffic
20 »Capital inflow is good,
but dangerous«
An interview with Sumru Altug
about the rich man of the Bosporus
22 Not yet on Cloud Seven
At CeBIT Turkey‘s IT industry shows
it heads into the right direction
24 business lunch with a bosporus view
Don‘t stay too short in Istanbul

picture: dge
GCC REPORT
26 Club of visionaries
Qatar‘s Investment Authority silently
went into ever bigger deals
30 »Staying put is what Qataris want«
Barrister Carla Everhardt about market entries
in the soccer emirate
32 Short news
Kuwait, UAE and Saudi-Arabia
PERSONAL ASSISTANT
33 Diary entries and latest news
from the cigars‘ bar
BusinessReport 2/2011 05

PROFILE
Banker and saviour
When the Soviet Union collapsed,
Kazakhstan appeared on the world stage
and became a global resource supplier –
until the 2008 financial crisis. Anvar Saidenov
was called to rescue the country‘s biggest
credit bank. Successfully, it seems so far
by Alexander von Hahn
In 2009, in the wake of the world financial
crisis, Anvar Saidenov was appointed
CEO of the BTA Bank, Kazakhstan’s
biggest private banking institution, which
collapsed under the USD 12.2 billion debt
burden. The bank’s subsequent nationalization
and successful debt restructuring –
the biggest yet seen in emerging markets –
makes Saidenov a rising star of international
finance and one of the key figures of the
Kazakh political elite.
He is one of the youngest, yet most experienced
of Kazakh bankers. Born in 1960 in
Moscow and a Moscow State University
graduate Saidenov earned his MSE in London
at the School of Oriental and African
Studies. Deputy Governor of the National
Bank of Kazakhstan since 1996 he was appointed
head of the National Investment
Agency in 1998 and, in 2004, became
Governor of the National Bank of Kazakhstan.
There, he has been in charge of
overseeing national monetary policy of one
of the dynamic emerging markets of the
former Soviet Union.
»Our country has one of the richest and
most diverse deposits of mineral resources
in the world. It is also an important transport
corridor. But we entered the 20th cen-
06 BusinessReport 1/2011
tury as agricultural region, with practically
no industrial sector worth talking about,«
observes Saidenov, who grew up in a family
of Kazakh intelligentsia. The Soviet period
in Kazakh history was a time of spectacular
social and economic transformation.
»90 years ago Kazakhstan had little in
common with what it is today,« says Saidenov.
»We have an extensive mining industry,
a modern oil and gas exploration sector,
developed infrastructure and booming telecommunications.«
Saidenov’s grandparents still remember
the endless expanse of virgin steppe. A few
decades of industrial development have
transformed our millennia old landscape.
Compare 4.1 million hectares of agricultural
land in 1914 with more than 21 million in
2009 and you understand what an impact
technological progress has had on traditional
lifestyle. »Costs are enormous,« reminds Saidenov,
»we have serious problems with industrial
pollution, poisoned rivers. The dying
Aral Sea – one of the most graphic examples
of a man maid ecological disaster. Also, the
human cost: Kazakhs of the early 20th century
were nomads. Now the majority lives in
urban centres,« says Saidenov, reluctantly
admitting horse riding is not his forte.
Major industrial centres cluster around gigantic
mining and processing complexes.
Monuments of uncompromising drive to
modernity, these were often built by hundreds
of thousands of GULAG prisoners.
One of the Soviet biggest concentration
camps, »KARLAG«, with a territory of more
than two million hectares and almost
70,000 prisoners was established in 1930
and operated continuously for almost thirty
years. It laid the foundation of Kazakhstan’s
mining industry by developing one
of the world largest coal and copper deposits:
Karaganda coal mines, as well as Jezkazgan
and Lake Balkhash copper mines.
Mineral extraction and mining account for
almost 60 percent of this nation’s industrial
output.
Stalin‘s prisoners
founded Kazakhstan
wealth
With a territory of almost three million
square kilometres Kazakhstan is the ninth
largest country in the world. However, with
only 16.5 million inhabitants, the labour
force shortage rapidly becomes its main
problem. »Statistically, we have just six people
per square kilometre. Compared to
Russia’s eight it doesn’t look too bad, but if
you look at neighbouring Uzbekistan with
its 61 you realize the seriousness of the situation,«
says Saidenov. A massive exodus in
the early 1990s fuelled by economic shortages
and radical Kazakh nationalism deprived
the country of its most educated and
skilled workforce. With the population declining
– down 17 million in 1993 to 14.8 million
2002 – the only way forward was to attract
the migrants from the neighbouring
countries. But this policy doesn’t come cheap:
when in 2009 President Nazarbayev proposed
to lease one million hectares of Kazakh
land to Chinese farmers to cultivate
soya and rape pro-western Kazakh politicians
protested strongly. »Then 15 million
people would be immigrating from China.

picture: BTA Bank
A child of the communist era Anvar Saidenov had to study again at the age of thirty.
Twenty years later he is Kazakhstan‘s most prominent banker.
If one of those 15 people were to give birth
each year ... in 50 years, there would be 50
million Chinese in Kazakhstan,« declared
Bolat Abilov of the opposition United Social
Democratic Party. The idea was quietly
abandoned in favour of less drastic »gradual
increase of immigration quotas form neighbouring
CIS countries«.
Another major problem is the shortage of
water – not only for irrigation, but also for
communal use. »Most of the water we need
for the South Kazakhstan province, where
60 percent of the population is concentrated,
is received from our neighbours – from
rivers, flowing out of the glaciers of Kyrgyzstan,
Uzbekistan, and China. That dependence
is not always mutually beneficial,«
says Saidenov, referring to the failed negotiations
between China and Kazakhstan over
the preservation of the third largest freshwater
lake on earth – Lake Balkhash. China,
determined to develop the agricultural sector
of its easternmost Xinjiang region, spurned
Kazakhstan’s offer of heavily subsidized
food for ten years in exchange for a commitment
to allow an unimpeded flow of river
water into the lake. »Regional cooperation is
not only desirable, but vital for our future,«
describes Saidenov, »short-term political
gains wouldn’t change the underlying reality
of our geographical location and climate.
Isolationism may be an easy choice, but not
necessarily the right one.«
Kazakhstan has its own story of a delicate
fabric of trade and economic cooperation
being destroyed by politics. The collapse of
the communist centralized planning system
in the early 1990s brought galloping
inflation, mass unemployment, and social
unrest. »We had very difficult times: peoples
fighting to survive, prove their independence,
asserting their existence by all means
available. We quickly realized, however, that
the only way forward was a strict stabilization
programme and structural economic
reforms. Our aim was to create a new stability
based on new rules«, says Saidenov. Favourable
international commodity prices
and world economic growth of the early
2000s allowed Kazakhstan to improve its
balance of payments and accumulate substantial
capital reserves.
Fuelled by expansionary monetary policies
and rising domestic demand, Kazakh
PROFILE
economy was hit hard by the global financial
crisis, which also caused significant difficulties
in the banking system. »We still have problems,«
says Saidenov, who, after resigning
his position as a chairman of the National
Bank became a COB of the BTA Bank,
Kazakhstan’s biggest lender, nationalized in
February 2009. »I am convinced, we couldn’t
afford to allow the bank go bankrupt. That
would’ve been destructive for our economy,
as well as our creditworthiness. These efforts
were welcomed by the international financial
community, which accepted the bank’s debt
restructuring package worth USD 4.2 billion,
proposed in September 2010.«
Due to »ample resources and low public
debt, the authorities were able to respond
swiftly to the crisis and helped stabilize
banks with a large-scale policy package,«
stated the recent IMF country report, praising
Kazakhstan’s government response to
the worsening economic situation, as well as
its willingness to save the troubled private
sector. »We take our standing with our creditors
very seriously. You see, banks can be
bought and sold. But trust is priceless,« says
Saidenov with a broad smile.
BusinessReport 1/2011 07

uPDATES
Millionaire rascal
With American contacts, plenty of money and street smarts,
entrepreneur Bashar al-Masri is playing politics for Palestine.
His latest project is the Siraj investment fund
Sooner rather than later, anyone looking
for economic growth in Palestine
will come across the name Masri.
The family patriarch and philanthropist
Munib al-Masri is head of the PADICO investment
company and Paltel telecommunications
group, amongst other things, and
his nephew Bashar al-Masri appears to be
no less of a go-getter. In early February the
owner and CEO of the Massar construction
group announced the establishment of
the first investment fund in West Jordan.
The »Siraj Fund Management Company«,
according to its own figures, hit the ground
running on 3 February 2011 with over USD
60 million.
Siraj is a private equity fund. Investors
are primarily being driven by a certain political
agenda. George Soros, with his »Soros
Development Fund« and »Overseas
Private Investment Corporation« (OPIC),
a US development agency, put up the majority
of the capital. Masri hopes that private
investors are to stump up another USD 20
million for the Sirjai fund, which was his
brainchild. The aim is to support small
companies in Palestine with the funds. »Siraj«
means »oil lamp«, which in Masri’s
words »will light our way into the future«.
It is intended to create a broader basis for
the Palestinian economy, where the boom
in cities like Ramallah has so far been
based on mega-projects and foreign help.
At 15 percent, Siraj offers a comparatively
low, but certainly not bad, return on capital
– given the inherent security risks of the
Palestinian economy.
08 BusinessReport 1/2011
Bashar al-Masri, 50 is making waves
in the Israeli property market by giving
Palestinian start-ups a helping hand.
George Soros,
the Qataris and a
friend of Sharon
»We are no charity organisation,« stressed
Masri in the financial journal Globes, »but
we do seek a balance between social responsibility
and the prospective returns for
our investors.« A few days before the launch
of Siraj, Israeli Prime Minister Benjamin
Netanyahu claimed that he wanted to support
the Palestinian economy, which was
described by a spokesman of the autonomous
government as a diversionary tactic
to draw attention away from the settlement
debate. Irrespective of that, the intention is
for Siraj to create growth markets in Palestine.
In the first year, 30 percent of investments
will be devoted to hi-tech companies.
A location for this is currently being
developed by Masri’s construction company
Massar near Ramallah, where a purpose-built
city known as »Rawabi« is being
financed with money from Qatar. Arab
media criticised Masri for accepting a
rather symbolic donation of 3,000 tree
seedlings from the Jewish National Fund.
Others see Masri as a fox who is playing
politics for Palestine with his millions. A
few weeks ago, Masri tried to take over the
properties and debts of bankrupt Israeli
property developer Digal via his Cyprusregistered
Techsal company – the projects
also included a Jewish settlement in the
Arab quarter of East Jerusalem. The prospective
creditors declined when they discovered
a Palestinian was behind the deal.
The lawyer submitting the take-over offer
on behalf of Techsal was Dov Weisglass,
a former friend and advisor of Israel’s ex-
Prime Minister Ariel Sharon. Whether
Weisglass knew who was behind his client
is uncertain, and it is equally unclear whether
Masri put the offer forward purely as a
ruse, before allowing details of it to leak out
to put the heat on the Israeli government
and the settlement lobby. chat
picture: Siraj

picture: UNEP
South Sudan
Safari
The world‘s youngest nation is
looking for alternative tourism
expertise
With almost no fully-formed roads, and
just a few hotels, tourism infrastructure is
as good as non-existent in South Sudan.
Yet tourism is meant to be an economic
pillar of the country that, to all intents and
purposes, seems likely to declare its independence
this July. The most important
source of income for the region now and in
the future is oil extraction – although there
are ongoing disputes with the North
about fair distribution of the proceeds. It
is another good reason for wanting to expand
tourism. In the first instance, this
means promoting the National Parks.
According to the government in Juba,
around USD 140 million will be required
over the next five years to achieve this –
with South Sudan looking for support
from abroad, and from private investors in
particular. According to experts from the
US Wildlife Conservation Society that is
active in South Sudan, the country’s wildlife
can certainly compete with that of the
National Parks of Tanzania and Kenya.
However, land mines, militia and poachers
have severely decimated the animal
population. While there were over 100,000
elephants in South Sudan in the 1960s, only
about 5,000 to 15,000 remain there today.
Due to the lack of infrastructure,
mass tourism in South Sudan is unlikely
to happen anytime soon. But that is precisely
what might make it appeal to individual
travellers.
Hold those jets,
we’re hungry
Full bellies more important
to Iraqis than protecting their
airspace
Since the 2003 war, Iraq no longer has
any fighter planes to speak of and cannot
safeguard its airspace without outside
help. For this reason, the Iraqi air
force chief Anwar Ahmed is hoping to
acquire 96 of the American Lockheed
F-16 jets known as »Fighting Falcons«
by 2020. If he has his way, in just under
two years, the first Iraqi pilots will be
patrolling their own airspace with 18
such aircraft – which is also the prerequisite
for all US troops actually pulling
out of the country.
In September 2010, the Pentagon approved
the delivery of the first batch of 18 jets,
Battle over
underwear
The Tunisian revolution
reaches all the way to
the lingerie sector
Morocco and Tunisia, both well-known
for their high-quality textiles, are competing
for the contracts of European underwear
manufacturers. The Moroccan textile
association wants to create around
20,000 new jobs. Production sites in the
Mediterranean have it over their competition
in China, with shorter delivery routes
and freight times to Europe, and also
more flexibility over the number of items
supplied.
Tunisian manufacturers, meanwhile,
fear European companies will punish
them for the political courage of their
compatriots and increasingly turn to
Morocco as a result of the unrest. »Clients
won’t be pulling out of Tunisia but
they are diversifying their sources of
uPDATES
including maintenance and training facilities,
at an estimated cost of up to USD 4.2
billion. After months of delays in the protracted
process of forming a government
in Baghdad in the wake of the last elections,
Prime Minister Nouri al-Maliki, in
his second role as Minister of Defence, received
the approval of his cabinet on 26
January to negotiate with the Americans
over an initial instalment for the purchase.
But on 14 February, the Iraqi government
suddenly announced it would be
postponing its purchase of the F-16s.
Instead it planned to use the budgeted
purchase price of USD 900 million to increase
the subsidies on food rations for the
population. Al-Maliki’s cabinet was forced
to bow to street pressure. Ever since late
January, mounting discontent with the
lack of government action and lack of basic
food supplies was voiced in demonstrations
inspired by the recent protests in Tunisia
and Egypt.
supply«, was the Moroccan textile
association’s attempt at reassurance.
After all, Tunisia had now earned itself
a certain »sympathy capital«. The Tunisian
export agency CEPEX plans to leverage
this capital. It has announced a
special programme in Milan and Bologna
at the end of March to showcase the
strengths of Tunisian lingerie and
swimwear fashion. Around 30 percent
of Tunisia’s textile exports go to Italy.
European underwear brands have been
having their garments produced in Tunisia
for years now, by such manufacturers
as Mahdco in the harbour city of Mahdia.
The company is particularly proud of its
measures to counter youth unemployment.
The average age of its 250 employees
is just 26. The luxury brand Aubade, part
of the Calida label, also outsources its production
to Tunisia. In 2010, according to
the latest Swiss sharemarket reports, Calida
posted its best year since it went public
in 2007, thanks to the success of the
Aubade brand.
BusinessReport 1/2011 09

MONEy AND POwER
When real performance
pays off
Few Egyptians benefited from the upswing of the past few years.
In their desperation, most of them did not feel responsible for
their country. Mubarak‘s downfall offers some new chances –
for German entrepreneurs too
by Rainer Herret
They demonstrated for 18 days.
Hundreds of them were brutally
killed, run over or shot to death.
Now there is hope of a new, democratic
Egypt. The army has agreed to make this
wish come true. The young Facebook revolutionaries
want far more than the resignation
of their President. They are calling
for a new system, an end to the old-boys
network that stood for corruption and misuse
of power, and an economic policy that
ensures humane working conditions and
appropriate remuneration. That list of demands
earned the young protestors the
support of the middle classes and eventually
that of the working class and [peasant]
farmers. Whoever governs on the Nile in
future will have to face up to the challenges
the old regime failed to address.
Egypt was praised by the World Bank as
the most reform-hungry land in the world.
Entrepreneurial expertise within the government
and a bold policy of liberalisation triggered
growth rates of seven percent and attracted
direct foreign investment. The reforms
were designed to stimulate competition.
The social goal of combining economic performance
with social progress, however, was
quite simply – or perhaps deliberately – forgotten.
What emerged was predatory capitalism
instead of a social market economy. The
fruits of the reforms were reaped by a few
entrepreneurs and politicians.
Inflation of 14 percent is now decimating
the purchasing power of the population. Over
80 percent of the around two million unemployed
are under 29 years of age and the number
of people working under miserable condi-
10 BusinessReport 1/2011
tions has steadily increased over the past few
years. So it comes as no surprise that nobody
felt responsible for the country. Dirt and decay
dominated the streetscape. Now young
people are beginning to clean up Tahrir
Square. It was already apparent that rubbish
was being collected during the demonstra-
tions. The people have won back their country.
Doing away with corruption and rewarding
people for effort will strengthen democratic
conditions, productivity and efficiency.
Motivated young entrepreneurs now have the
chance to prove themselves under fair market
conditions.
The agricultural industry in particular
needs to be completely restructured and modernised.
That would benefit some 40 percent
of the population who have to survive on two
dollars a day or less, and can be achieved wit-
hout undue effort. Better cultivation methods
to boost crop yields and modernisation of the
hydraulic infrastructure offer a host of potential
areas for German companies to become
involved.
Apart from stemming the mass migration
to the cities, this strategy would also lower the
current need for subsidies on imported foodstuffs
of around USD 1.6 billion. Modernisation
of industrial production facilities will
generate an increased demand for energy-
efficient technologies.
If the outcome of the elections in September
is a moderate, religiously tolerant government,
the state of the economy will improve
considerably from the fourth quarter of the
year onward, because there is still plenty of
growth potential. Mechanical engineering,
the automotive sector, medical technology,
ICT, the chemical industry, the electrical en-
Dr. Rainer Herret
is CEO of the German-Arab Chamber of Industry and Commerce in Cairo and
witnessed the revolution that took place in Egypt in the month of February. Here
seen standing left of a tank after joining the demonstrators in Tahrir Square.
gineering and electronics industry as well as
environmental technology are the growth
sectors of the country. The position of the
German government during the revolution
was welcomed by the people of Egypt, and
German companies can now benefit from
that goodwill. Visitors to the country over the
next few months can not only count on increased
interest from their Egyptian business
partners and customers – they can also demonstrate
a sense of solidarity in this new
beginning.
picture: private

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BusinessReport 1/2011 11

MONEy AND POwER
Pharaoh‘s
legacy
Mubarak promoted the
very IT sector that
ultimately proved his
undoing. The Smart
Village in Gizeh was all
part of the master plan:
plenty of IT specialists, a
good location and low
wage costs. Only now are
we about to find out if it
really works by Simona Pfister
The Intifada on the Nile would have
struggled to cope without internet
platforms to rally support. And the
fact that the country – particularly in the
Northern cities – now has a relatively high
level of connectivity is something for
which the old government only has itself
to blame. While it paid next to no attention
to the needs of the poor, it spent all
the more time focusing on the local branch
of the information and telecommunications
industry (ICT). One thing is clear
12 BusinessReport 1/2011
about the »Smart Village«, the first fully
equipped technology park in Egypt, that
both international and local firms have
found it to be a prime location.
Just a few metres past the turn-off to the
pyramids of Gizeh is the entranceway to the
business park. The dirty concrete deserts
and din of Cairo, along with the demonstrations
and political uncertainties, are soon
forgotten here. You feel as though you are in
a high-tech biotope reminiscent more of
Dubai or Abu Dhabi than Egypt. While the
Smart Village Company – the operator of
the park – put up extra security guards during
the weeks of protest, on the surface at
least, it looked as though the company was
not overly concerned by it.
In the past few years, Egypt has managed
to post steady economic growth – despite
the world financial crisis – of 5.9 per cent in
the first half of 2010. One dynamic branch of
industry is the ICT and outsourcing sector,
which has set up camp in the Smart Village.
According to the government’s own figures,
the sector grew over the past year by 12 percent
and the number of ICT firms rose by an
impressive 16 percent. Today the sector only
contributes a comparatively modest 4 percent
to gross domestic product – putting it
well behind leading nations like India. The
Mubarak government had planned to expand
its share of the economy on a grand
scale; but it is not yet clear how things will
pan out. The aim was for the annual profit of
the industry to climb from USD 1.1 billion to
USD 10 billion by 2020, as Tarek Kamel, who
was Minister of Information Technology
and Telecommunications at the time, announced
in the spring of 2010.
International observers have also become
more aware of Egypt since it won the coveted
European award of »Offshoring Destination
of the Year« in July last year. Cairo was
ranked seventh in 2008 on the list of outsourcing
cities compiled by consultancy
firm Tholons. In July 2010 the London School
of Economics found Egypt to be the most
promising offshore candidate after Brazil,
China, Russia and India.
When you look around the Smart Village,
it soon becomes apparent that international
companies have become convinced of this
too. »After Microsoft acquired a business
premises in a prominent position, the other
companies wanted to follow suit«, explains
the PR spokeswomen for the Smart Village.
pictures: dge

Ericsson, Hewlett Packard and IBM were all
quick to open their own offices. Local ICT
companies, frequently offering business
process outsourcing (BPO) services, also
moved into the Smart Village. One example
of the trend would be Xceed, the Call Centre
arm of Telecom Egypt.
But what exactly drove the company to
outsource its business processes to Egypt?
»For one thing, Egypt is located in a favourable
time zone, which is particularly useful
for Call Centre services«, explains Rabah
Khoury of Xceed, »We can serve the needs
of European customers in one shift and
American or Asian customers in the other.
Another bonus is that it is only a quick flight
away from many different locations.« The
fibre-optic cables connecting Africa, Europe,
Asia and even Australia, also run
through Egypt.
The Mubarak government invested heavily
in the industry following the launch of
its master plan for telecommunications in
the year 2000, with the result that it is now
based on fibre-optic cables that can be connected
to the international ones. It was an
investment that came back to haunt the regime.
Egypt’s high-quality connectivity was
what helped the protest movement grow, so
in desperation the government then put a
stranglehold on almost all internet traffic.
Apart from the assurance of the Smart
Village owners that they can guarantee
normal operating conditions under any
circumstances, the low running costs make
Egypt an attractive business location.
According to a study by the World Economic
Forum, this outsourcing destination
with average operating costs of USD 14,700
per year is cheaper than either the Philippines
or India.
In 2004 the »Information Technology Industry
Development Agency« was created
within the Ministry for Telecommunications.
This agency not only ensured that ICT
companies benefited from discounted land
prices and tax breaks, but also initiated some
new laws, including the »e-signature
law«, making transactions possible with just
electronic signatures.
One of the things that drove the young people
onto the streets is also of huge benefit to
the ICT business – the fact that highly qualified
employees are cheap to employ here
due to the oversupply of trained IT specialists.
More than half of the Egyptian population
is under 25 years of age. Every year
some 330,000 young students graduate
from its universities – including over 90,000
majoring in subjects relevant to the ICT sector.
The official unemployment rate is 9.4
percent.
A programmer earns an average of USD
157,000 a year, which makes Egypt more
cost-effective than all of the Eastern European
ICT destinations; only India is cheaper,
and the same principle applies to Call
Centre services.
The president‘s son
played big business
Many young Egyptians have strong ties to
Europe and learn various European languages
from an early age. While in India many
people can only speak English as their
foreign language, Egyptians often have a
working knowledge of Spanish, French,
Italian or German. Furthermore, Egyptian
Arabic is the dominant language of films,
music and television in the entire Arab region
and is therefore understood everywhere.
Xceed sends its Call Centre agents
on special training courses to ensure they
speak European languages with no foreign
accent. »Customers in Europe should not
be able to tell they are talking to an Egyptian«,
is the company policy.
After numerous national and international
banks acquired office space in the Smart
Village, a small financial district has emerged
within a garden landscape. »There are
green spaces and lakes here that can also be
used as water reservoirs to put out any fires«,
explains the woman giving investors a guided
tour of the village. »You forget the fact
that the entire complex is basically located
in the middle of the desert, with all this
MONEy AND POwER
green around you.« Although the Smart
Village Company claims it wants to demonstrate
its care of the environment, visitors
cannot see much evidence of that yet.
The overthrown Mubarak and his son Gamal,
who stood for the big business policies
of Egypt, also used to enjoy taking visitors
on guided tours of the complex.
The government wanted to ensure even
more local firms thrived in the ICT domain,
by offering them special incentive programmes.
It had signed agreements with international
ICT firms like Nortel, Atos Origin and
Siemens to transfer their technologies to
Egypt and, in return, benefit from modern
infrastructure at a discounted price. The
long-term goal behind this was to diversify
the country’s sources of foreign exchange.
The other measures taken to promote the
ICT sector can also be seen in this context.
Egypt has a negative balance of trade, and
a large proportion of its foreign exchange
comes from the volatile business of oil and
gas. And the main sources of income for
foreign currencies so far – tourism and the
Suez Canal – are highly susceptible to global
fluctuations.
The economy under Mubarak was to be
liberalised within the framework of a fiveyear
plan, which included the removal of
various taxes and customs duties. It was
hoped this would encourage direct foreign
investment and more exports. Apparently
the government saw the ICT sector as a
particularly profitable branch of industry,
for the subsidies certainly flowed freely.
But it was only the already privileged Egyptians
who profited from the boom: the
small upper class, opportunistic businessmen
and the apologists of the regime. Many
of the companies represented in the
Smart Village, who also invested in it, belong
in whole or in part to Gamal Mubarak
himself, or to his relatives and close friends
or entourage – including Gamal Sadat, the
son of Murabak’s predecessor Anwar al-
Sadat, who was murdered in 1981. What
will become of those shares in companies
located in the Smart Village is still a long
way from being decided.
BusinessReport 1/2011 13

TüRkEI
EcoNoMIc STAMINA
Turkey
wants to
know
Is the new economic power
already a champion?
Or merely a challenger
having a tilt at the title?
by Daniel Gerlach
Sometimes it seems as if the Turkish
economy is so muscle-bound it can
hardly walk. Analysts are predicting it
to have the fastest growth worldwide over
the next few years. Its national debt of less
than 50 percent has reached a level many
European countries can only dream of. Yet
Turkish economists can well remember a
time when their country regularly went cap
in hand to the International Monetary
Fund (IMF). Ali Babacan, Deputy Prime
Minister will gladly tell you now that not
one of the IMF programmes for restructuring
the budget has ever been fully implemented.
Self-control has proved its worth.
14 BusinessReport 1/2011
National debt, inflation, dependence on
borrowing and imports have been the recurrent
nightmares of Turkish financial
policy since the dying days of the Ottoman
Empire. Historians have traced the origins
of this decline to the year 1838, when the
vizier signed a free trade agreement with
the British – by way of thanks for military
assistance. Products from the newly industrialised
United Kingdom forced Turkish
craftsmen to engage in a fatal price war,
and European steamship travel fundamentally
ruined the Asian trade of the Ottomans
– while the sultans spent millions
buying weapons and trains from Europe.
The French and English were happy to extend
the necessary credit and promptly
keep half of the outstanding amount in interest.
There would be no further benefit to looking
back on the 19th and early 20th centuries,
if Turkish economists could not see
the parallels with current trends in their
country: »If we ask ourselves why states
like the German Empire or the USA caught
up with the UK as an industrial nation in
the early 20th century while Turkey came
nowhere close to it, we cannot help but
notice it was only the state putting up the
growth capital«. This is the conclusion

illustration: Lesprenger
reached by Sumru Altug, an economist at
Koc University in Istanbul.
The Turkish republic also suffered for a
long time from the discrepancy between its
political aspirations and economic performance.
Now the tables are turning – the
Turkish industry is producing household
and kitchen appliances for export. Turkey
has long been the world leader in bathroom
ceramics, but now Turkish televisions are
turning up in German electronics stores –
and at the recent CeBIT computer show in
Hanover, Turkey tried to steal some limelight.
Laptops are even being produced in
the Izmir region these days. Even though
they are yet to find their way into the offices
of German companies, they are proving
popular in the Middle East and Central
Asia – where the price means more than
the brand name.
For a long time, the world East of Gaziantep
was merely a dark smudge on the
consumer map. Even the economic policy
makers of Turkey, most of whom had
studied economics in Europe and America,
looked to the European market for
inspiration.
This focus went hand-in-hand with the
political desire to become a strategic partner
of the USA and an equally valued member
of the European Union. Europe still
takes over 40 percent of Turkey’s exports
– at least on a balance-sheet basis. Yet exports
to Armenia, long considered to be the
arch-enemy of Turkey, rose in 2010 to
around USD 211 million.
The volume of trade between Turkey and
Iran is currently worth USD 10 billion.
This figure is naturally attributable to its
natural gas imports from Iran, but one
glance at the reservation lists of mid-range
hotels in Istanbul is enough to confirm that
Iranian businesspeople, who can enter
Turkey without a visa, are certainly regular
visitors to the country. The cost of flights
from Teheran to Istanbul is quite stiff – yet
the planes are often booked out. For that
reason alone, it is small wonder that Turkey
has no time for sanctions against Iran. And
many Turks wonder how well they would
be doing if they had already gained entry
into the EU. Its lucrative business with Iran
would be threatened, and in the end they
would be helping to prop up the debt umbrella
over Greece.
Exactly where Turkish companies had
their fingers in the pie became clear in the
recent Libyan crisis. Some 25,000 Turkish
citizens, most of whom were stationed in
Gaddafi’s oil empire as employees of construction
companies, had to be flown out of
the country. The mass exodus of »ex-pats«
might serve as a reminder that the Turks
did not flinch during Libya’s first liberation
struggle against Italy in 1911, but stayed to
fight with the rebels. Kemal Pascha, later
known by the name of Atatürk, stood his
ground there as a young officer of the military
secret service.
Where to with so
much cash?
However, Turkish foreign trade is not limited
to the former provinces of the Ottoman
Empire. Between Turkey and Angola, the
El Dorado of South-west Africa, turnover
of around USD 200 million was generated
in 2010, in the mining and energy industry
in particular. Steel production helped
Turkey’s trade with Chile rise by almost 65
percent year-on-year in 2010. USD 393
million convinced both governments of
the merits of a free trade agreement – this
time to the benefit of the Turks.
Such success stories make it seem almost
surprising that, in 2010, Turkey posted a
deficit of 5.9 percent in its current account
– which was twice as high as in 2009. But
importing energy and raw materials to service
a growing economy always means
spending some foreign currency. The weak
euro over the past few months has made the
lira, and consequently Turkish products,
expensive for Europe. The central bank has
had to devalue the currency, while simultaneously
guarding against the risk of fuelling
the inherent inflation tendencies.
»The behaviour of the central bank here
sometimes seems contradictory to outsiders,«
says Marc Landau, CEO of the German-Turkish
Chamber of Industry and
Commerce in Istanbul. Turkish econo-
TuRkEy
mists talk of »unconventional methods« in
the country’s monetary policy. On the one
hand, key interest rates fell as a means of
weakening the lira, while minimum reserve
ratios rose in early 2010 from 6 to 10 percent.
As a result, the commercial banks had
to store money with the central bank,
which reduced their liquidity. At the same
time, the rate of the European Central
Bank was about 2 percent.
The flow of foreign capital onto the Turkish
market made monetary authorities
nervous. Where to with the capital that was
coming partly from funds and partly from
being loaned in Europe at low interest rates?
Between January and November 2010,
around USD 4.1 billion worth of investment
money flowed onto the Turkish market
– as opposed to 6.2 billion of foreign
direct investment (FDI).
The major stock corporations are currently
paying respectable dividends. Over
the past five years, the Turkcell mobile phone
company has distributed a total of EUR
3.7 billion to shareholders. Petrogiant
Tüpras paid out EUR 2.9 billion and Akbank
some EUR 2.4 billion. But not all sectors
are booming by any means. High-end
department stores and the imported sedans
that are the vehicle of choice in the
major metropolitan centres, are also a reminder
of the flip side of development.
When an economy imports more than it
exports, it has to borrow to pay the bills.
The regional differences in the trend are
typical of fast-emerging nations like Turkey
– and they tend to be extreme in nature.
The average income in the greater Istanbul
region is four times as high as in the East
Anatolian province of Van, and not just because
several hundred millionaires on the
Bosporus tend to distort the statistics. The
greater Istanbul area is followed by the Kocaeli
Province in the Marmara region.
Kayseri in Central Turkey likes to think
of itself as the »Anatolian Tiger« but even it
has only half the purchasing power of Istanbul.
Prime Minister Erdogan comes
from Istanbul; Kayseri is the birth place of
President Gül and is seen as the Islamic
conservative stronghold of the ruling party,
AKP.
BusinessReport 1/2011 15
>>

picture: dge
TuRkEy
Critics accuse the AKP leadership of favouritism
towards its own cities. But the political
map is not always synonymous with
the economic one. Izmir, the traditional
stronghold of the socialist, secular Kemalist
party CHP, is punching above its
weight. Renewables and other hi-tech sectors
are creating growth there.
Risky media market
The car and commercial vehicle sector is
on a real growth spurt. The French Megane
model of Renault is almost entirely
manufactured in Anatolian production
plants these days. Erdogan, driven by political
ambition, wanted a Turkish car
brand that would be famous all over the
world, and asked the Koc Holding to get
in behind the idea. Koc refused to be
swayed by such patriotism and gave Erdogan
the cold shoulder.
Renault also has its electric vehicles manufactured
in a factory near Bursa now.
Politicians are currently debating how
such environmentally friendly products
should be taxed.
These sectors are predestined for German
direct investment. But another type of
16 BusinessReport 1/2011
business is currently whetting the appetite
of major German conglomerates. »The insurance
industry is particularly appealing
at the moment«, says Orkan Falay, who advises
German investors in Turkey on behalf
of the Ernst & Young Group. »Turkey
has a very young population, and many
private customers still don’t have any insurance
at all.«
The Turks are 28 years old, statistically
speaking. The new economic power has by
no means managed to curb youth unemployment.
But young people are renown for
being keen consumers and very receptive
to advertising messages. Analysts are predicting
annual growth in advertising revenue
of up to 23 percent by 2014. This is
mouth-watering news to European media
groups and publishing companies currently
disappointed with their earnings in Eastern
Europe.
For months, a rumour has been doing
the rounds that the German Axel Springer
AG wants to take over the media arm
of Dogan Holding. The high-circulation
daily newspaper Hürriyet is also part of
the Dogan stables. Time Warner is currently
showing interest in the TV division
of media group Dogan Yayin, which includes
news channel CNN Türk amongst
other things. Since 2010, foreign companies
have been allowed to hold majority
shares in Turkish television companies.
Whether anything will come of the deal
is still unclear. Earlier in the year, it
looked as though Dogan would have to
divest itself of the otherwise profitable
division, when the authorities imposed a
tax penalty on the Group that ran into
billions of liras. Media market observers
saw it as an attempt by the AKP leadership
to punish the Dogan media for their
critical to aggressive attitude. The Supreme
Court allowed an appeal by Dogan
against the penalty. But this might well be
viewed as a warning to foreign investors
– in a country known not only for its
growth but also for its litigious politicians
and certain gaps in areas like freedom
of the press, media business may well
come with good returns but also with certain
risks.
RESoURcES
Great Game
in Anatolia
Nabucco is supposed to
remove Europe’s dependency
on Russian gas.
But negotiations have been
stalled for months now
Before its inaugural meeting in October
2002 in Vienna, the founders of the
European gas pipeline project »Nabucco«
listened to Verdi’s opera by the same
name. Since then, plans have taken on more
Wagnerian proportions.
Three ventures are competing in this
»great game« between giants. The »Trans-
Adria Pipeline« (TAP), the »Interconnection
of Turkey, Greece and Italy« (ITGI)
and Nabucco have all set themselves the
goal of diversifying Europe’s energy supply
and all have their sights on the gas fields of
Azerbaijan, Turkmenistan and Iraq. They
would have liked to have included the Iranians
as well, but ever since the European
Council imposed sanctions on Iran in October
2010, that option has been a no-go
area. »Iran may later come back into question
as a supplier«, says Gabriele Egartner
from the Nabucco planning office in Vienna,
adding that 2015 is still the target year
for commissioning the pipeline. But more
and more doubt is arising about that very
prospect. Even EU Energy Commissioner
Günther Oettinger, one of the most proactive
supporters of Nabucco, now predicts
the pipeline will be commissioned »by 2018
at the earliest«. The governments concerned
have still not managed to reach agreement
with the gas producers. Everyone
wants a piece of the pie. Russia is putting
constant pressure on its neighbours in an
effort to make its own »South Stream« project
seem more attractive. Even when exploiting
the Azerbaijan gas field, Shah Deniz
II, the EU was afraid it would fall behind
China and Russia. In the future, up to 80

illion cubic metres annually will be sourced
from the Caspian Sea by each of those
two nations, points out Central Asian researcher
and energy expert, Roland Götz.
That would mean the Europeans will be left
with »just 10 to 20 billion cubic metres« –
yet the plan was for ITGI, TAP and Nabucco
to have a total capacity of around 62
billion cubic metres. That will now have to
come from other sources. Another partnership
is also proving more difficult than
expected. In late November, when Iran
opened up a new supply route, it doubled its
gas imports from Turkmenistan. Like Turkey,
Iran is trying to expand its pipeline
network, despite the on-going sanctions,
and promote itself as an attractive transit
nation.
»Turkmenistan is still a key partner for
the EU«, says Nicole Bockstaller, spokeswoman
for the Energy Commissioner’s
Office in Brussels, in an attempt at reassurance,
adding that they fully expect to get
that supply. But criticism is already being
YOUR KEY
TO BAVARIA
aired. Bulgaria’s Minister of Economics,
Traicho Traikov, told the Viennese Standard
that Nabucco would fail if the Commission
did not do more to support it.
Botas wants to be
another Gazprom
It is a bonus for the politicians that all of
these pipeline projects will be operated by
private enterprises. If one operator does
not manage to secure the necessary contracts,
the relevant line will be relinquished.
The first such indications started coming
last September from the operator of
the ITGI, the Italian electricity giant Edison.
They were not ruling out the idea of a
tie-in with the Turkish section of Nabucco,
as it would »make economic sense,« according
to one company representative. Nabucco
headquarters denied ever having
such discussions with the competition
when questioned by zenith, although »eco-
EASY ACCESS TO ECONOMIC PARTNERS IN BAVARIA
TuRkEy
nomic factors will ultimately define the
route of the pipeline network«, according
to Gabriele Egartner. The EU Commission
claims to support all three ventures equally.
The Turkish state-owned enterprise Botas,
which wants to invest billions in both Nabucco
and ITGI, is at the heart of the negotiations,
in Roland Götz’s view. »Botas will
probably not be content with being a natural
gas transporter, as it would rather play
the role of gas distributor.« In the past, Turkey
has shown an interest in having up to
15 percent of the pipeline gas – an option
firmly rejected by Europe to date. »The Nabucco
Consortium has been unable to make
the Turks an acceptable offer,« according
to Götz. But he thinks a »southern gas
transmission corridor« in the form of a
pipeline network via Turkey would be a
possibility. In that case, Botas would play a
central role in the supply of gas and be able
to show the door to the Russian Gazprom
group, from which Europe has long been
wanting to extricate itself. metz
Exclusively available at Bayern International, the publication „Key Technologies in Bavaria“ comes free of charge and offers valuable insights into
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Visit www.key-technologies-in-bavaria.com to obtain the regularly updated information of all 20 industries online and make use of the various
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BusinessReport 1/2011 17
WWW.BAYERN-INTERNATIONAL.COM
>>

TuRkEy
18 BusinessReport 1/2011
INFRASTRUcTURE
Underwater artery
To ward off fatal congestion, Istanbul is building an
underground traffic network. The risk of earthquakes,
fast-moving currents, legal disputes, and archaeological
discoveries are all delaying the project – but in May a
decision will be made on a new tender process
by Özgür Uludag
The two Bosporus bridges were actually supposed
to resolve the problem but ultimately
only made it worse, because the people of Istanbul
have become far too used to driving into the
city by car – from Asia to Europe or vice versa. A
shortage of car parks, chronic congestion and considerable
environmental pollution all stem from that
huge volume of traffic. The first bridge was opened
in 1973 and the second in 1988. By the year 2014 a
project should be completed that will really change
things – and make the technical feats of the bridge
builders pale into insignificance. A tunnel system
known as the »Marmaray Project« has been a source
of admiration for months now but also the subject of
major debate.
The new traffic artery will run 76.3 kilometres parallel
to the coast of the Marmara Sea and cross
through it at the bottleneck in the city centre of Istanbul.
Between Üsküdar on the Asiatic side and Sirkeci
on the European side, a 1,300-metre-long tunnel has

pictures: Özgür Uludag
already been submerged. This is not without its
risks, as Istanbul is only 20 kilometres away from
the North Anatolian faultline. For this reason, the
tunnel has been designed to withstand an earthquake
measuring 7.5 on the Richter Scale, explains
the Chief Project Manager, Hüseyin Belkaya: »If an
earthquake happens in Istanbul, the tunnel will be
the safest place to be.« To make doubly sure, some
seismic measuring stations are being installed inside
the tunnel itself to alert the authorities or hospitals
to any imminent earthquake. This would allow
the gas pipelines to be shut down in time. There
is no risk of any inrush of water, says Belkaya.
The worst that could happen would be »that the
railway tracks buckle a bit.« You see, this tunnel
will only be used by trains, for the idea is that commuters
will leave their cars at home.
Back in 1860, the Sultan of the Ottoman Empire at
that time, Abdülmecid, wanted to have a tunnel built
in the same place as this one. Sultan Abdülhamid II
revived the plan in 1902 – before abandoning it again.
Apart from passenger transport, freight trains will
also roll beneath the Bosporus by night. If a fire
should occur down there, thermal energy of up to 100
megawatts could be generated. To ensure the concrete
does not crack in such an event, researchers at the
Istanbul Technical University worked with chemical
giant BASF to develop a special building compound.
If a passenger train should catch fire, there will be
escape routes every 200 metres in the drilling tunnel
and every 100 metres in the submerged tunnel.
But the challenges are not just of a technical nature.
Three years ago the AMD consortium, comprising
the French company Alstom, the Japanese Group
Marubeni and the Turkish construction company
Dogan won the tender for the project. The job included
laying, renewing and expanding the rail network
along with 37 above-ground and three underground
stations, as well as the computer-controlled signal
systems. Alstom planned to bring its transport experience
to bear on the project, while Marubeni would
develop the rail network. But in 2007 the consortium
fell apart, when a Byzantium harbour was discovered
near Üsküdar and old graves were uncovered on the
European side near Yenikapi. In order to secure these
archaeological treasures, construction work was suspended
until 35 wooden boats from the 7th and 10th
centuries, and skeletons thought to be about 8,000
years old could be safely removed from the site. The
finds extended Istanbul’s settlement history by about
6,000 years, but apparently also led to a cost blow-out
of more than EUR 500 million and a delay of five ye-
ars. AMD retreated. Hüseyin Baykal is critical of the
behaviour of AMD: »They had been there for about
three years, but hadn’t built anything and obviously
didn’t want to either«.
In May 2011, a new tender will be awarded so that
a new consortium can pick up the work again in July.
Peter Hettich from Kalsruhe is simply continuing
working there until then. He is responsible for the
design and planning of the electromechanical systems.
»Somehow the work has to go ahead, or we will
lose even more time, and I am of the opinion that we
can now meet the deadline« says a confident Hettich.
The TGN consortium, made up of the
Japanese construction company Taisei
and Turkish companies GAMA and Nurol,
is responsible for the drilling tunnel.
In the Turkish city of Sakarya, the South
Korean firm Hyundai Rotem is making
440 rail vehicles. The 135-metre-long
submerged elements of the tunnel were
produced at a dry dock near Ismit, submerged
by a computer control system to
a depth of 58 metres in Bosporus and welded under
water. As the Bosporus is one of the busiest waterways
of the world, construction work of this kind is
not without its dangers. Constant ferry traffic is also
an obstacle to the »Ecem Sultan«, the special ship
transporting and submerging the tunnel parts. In
addition, there are opposing cross-currents in the
Bosporus Strait that make submerging the components
more difficult.
Drilling on the mainland, however, led to damage
to buildings above the tunnel. So far, Taisei has
had to pay USD 330,000 by way of compensation.
Construction of the tunnel – initially budgeted to
cost EUR 3 billion and wind up in 2009 – is becoming
more and more expensive and taking longer
and longer to complete. Now the Japan Bank for
International Cooperation and European Investment
Bank, who are putting up the capital for it,
estimate it will cost more than EUR 4 billion and be
ready in three years at the earliest. But that price is
probably not too high it means fatal traffic congestion
can be averted. Up to 150,000 people per hour
could commute between Asia and Europe thanks
to the Marmaray Project. Another mammoth and
long-famous building project in the metropolis of
Istanbul offers a glimmer of hope. Sceptics also
shook their heads over building plans for the Hagia
Sophia dome – until the church was finally consecrated
on Christmas Eve in the year 562 following a
30-year construction period.
TuRkEy
»If there is an
earthquake, down
here will be the
safe place to be!«
BusinessReport 1/2011 19

TuRkEy
FINANcE
»Capital inflow is good,
but dangerous«
Economics professor Sumru Altug about
Turkey‘s business miracle, consumption
by credit and South East Asian role models
zenith: Professor Altug, how sustainable
is Turkey‘s rise to world‘s leading economic
powers?
Sumru Altug: I don‘t want to appear a
sceptic. Turkey could really take its place
among the economic giants in the wold. Or
at least alongside the so called BRIC states
– the emerging economic powers Brazil,
Russia, India and China. But Turkey has
not completed its structural transformation
– in part it still is a rural country.
Isn‘t Turkey‘s successs story mainly a result
of good PR?
I think there is a lot of good PR involved, but
Turkish companies really perform well and
expand into other markets. A major factor
in this business boom is the inflow of foreign
capital into Turkey.
Where is all the money coming from?
It is difficult to trace back the flow of capital
because a lot of it may go through financial
markets like London or New York. But I
think a lot is coming from the Gulf states
and Arabian sovereign funds. But there is
some FDI from the Middle East in Turkey,
too. Due to the wave of privatisation. Turkish
Telecom, for example, was bought by
the Lebanese investor Hariri.
Can‘t the inflow of cash be a risk as well?
Yes, and the Turkish Central Bank seems to
be aware of the fact that this inflow can
create market bubbles. Capital inflow is
good, but it is also dangerous, mostly because
of the inflation risk. I am not sure if
20 BusinessReport 1/2011
the banks really pay enough attention on
whether the loans can be paid back.
Do Turkish consumers buy too much
on credit?
Everybody can get a credit card now, which
was unthinkable some 10 or 15 years ago.
And people use their credit cards – even if
most pay their bills wisely by the end of the
month, there will be credit defaults. Another
problem is the rise of credit card and
cheque delinquency.
A lot of attention is now focused on
the so called Anatolian tiger cities
becoming richer and more visible businesswise.
Is Turkey still an economically
divided country with a wealthy West
and a poor East?
Very much so. Even if some growth has arrived
to parts of South Eastern Anatolia,
the division between East and West is quite
evident. There are still severe problems:
The economy is not creating the right jobs,
even if branches like the construction or
the import business are booming. The current
transformation is not enough technology
oriented, and a growing automotive
industry is not getting us there. If you look
at South East Asia, you see that there is a lot
of FDI in hightech branches. Turkey needs
more of that. Episodes of high growth
which Turkey has experienced are fine, but
the target, which is wealth, is a moving target.
You have to re-adjust your strategies as
everybody else grows with you.
Sumru Guler Altug studied economics in
Pittsburgh. Since 2002 she teaches at the
College for Economy and Management of
Istanbul‘s Koc University.
Is Turkey redirecting its trade focus away
from Europe and towards the Middle East?
Let‘s not dream about this. Europe is still
the biggest market for Turkey – half of
Turkey’s exports still go to the EU while the
share of exports to the Middle Eastern
neighbours is less than a quarter. The
Middle Eastern societies have huge problems
and a very low purchasing power.
The average wages in Eastern Anatolia
are very low, too ...
True, Turkey has been unable to attract
FDI to most of Eastern Anatolia. The cost
of labour there is low, but there are infrastructure
problems and high costs of
transportation, it is also not easy to find
skilled employees.
So what needs to be done in rural areas
to improve the social situation?
Education is extremely important, not only
academic but also vocational education. There
are private initiatives to train unskilled
people from the countryside who come to a
big city like Istanbul. Moreover, Kemal
Kılıçdaroğlu, leader of the main opposition
party CHP has proposed a program to create
a minimal safety net and wants to pay, for example,
a minimum of 600 Turkish Lira to
each woman running a household.
Can Turkey afford this? Or would this
mean increasing taxes?
Turkey can. We simply have to cut our defense
budget: Greece, Armenia, and Russia
are no longer our enemies.
picture: private

XXXXXX
BusinessReport 1/2011 21

TuRkEy
Not yet on Cloud Seven
As this year’s CeBIT Partner Country, Turkey wanted to showcase itself
as the IT land of the future. The innovations were not convincing in every
sector, but the country is heading in the right direction
by Nils Metzger
22 BusinessReport 1/2011
picture: Deutsche Messe Hannover

Not innovative enough, not open
enough, not specific enough, not
sensational enough – CeBIT attracts
a critical public, spoilt by the rapid
technological progress of recent years into
smiling somewhat condescendingly at
Turkey’s efforts to promote itself. The announcement
by Turkish Prime Minister
Erdogan that »in a very short time« one
fifth of its exports will come from the IT
sector, was not enough to make many
trade visitors drop their mask of nerdy,
professional coolness and lethargy.
Yet the Turkish stand did offer some
surprises and plenty of evidence of the
country’s impressive rise up the ranks as
an IT nation. A total of 81 Turkish companies
presented an enormously diverse
image of the local electronics industry.
Exhibitors at the 4,300-square-metre
stand showed that worthwhile differences
lie in the detail. For instance, the East of
Turkey does not have a very good network
of specialist electronics stores – a disadvantage
that the region is counteracting
by achieving enormous growth in the ecommerce
sector, according to Efe Aras,
manager of Istanbul applications developer
Visilabs. »A large number of online
sales platforms for second-hand goods
supply these outlying areas.« Turkish portals
like hepsiburada.com and sahibinden.com
are opting, like global player
Amazon, for personalised advertising and
deals tailored to individual customers.
The software for this is being developed in
Turkey – with companies like Visilabs only
now starting to forge contacts with foreign
companies. »Particularly in Central
Asia, we are hoping for some enormous
growth rates«, reports Aras.
KocSistem, the technology arm of industrial
giant Koc, showcased some RFID
systems that simplify the process of tracing
individual freight deliveries in the
major trade centres of the world. Company
representative Resat Helvaci sees the
Middle East as having plenty of catching
up to do in terms of technology. »Dispatch
processes for freight containers in many
areas are still not effective enough compared
to those in Europe. RFID technology
prevents goods from being lost and speeds
up the loading and unloading process.«
The planned privatisation of Turkish
ports in the second half of 2011 is being
seen as a good marketing opportunity: »It
will attract investors to the country and
increase our volume of trade with Western
Europe.«
Building a bridge
to Germany
If you were expecting the Turkish stands
to have some their own developments on
this year’s keynote theme of »Cloud Computing«
(access to data and programs via
an internet server without having to store
it all locally), you would have come away
empty-handed. Both Turkey and the
Middle East are still developing countries
in this regard. »We have our hands full
distributing the technology in Germany. I
am not aware of any enquiries from the
Islamic region«, says Mark Clark of Siemens
Communications – a surprising situation,
given that Turkey, unlike many of
its neighbouring countries, already has a
well-developed broadband network.
While this technology is already successfully
cutting costs in IT departments
all over Europe IT, its use in Turkey is still
limited to insider get-togethers like the
CloudCamp held in September 2010 for
the first time in Istanbul, which attracted
some 160 participants. But there were no
business people congregating there – only
TuRkEy
representatives from an avant-garde network.
When asked about their experience
with Turkey, CeBIT press spokespeople
from IBM and Microsoft to Cisco, who were
all focusing on Cloud technologies, reacted
as though they had been caught short:
»Please leave us your contact details and we
will get in touch with you in the next few
days«, was the standard response.
There was positive evidence, however,
of some close interaction between German
and Turkish companies. Mobile phone
company Turkcell is opening its European
group headquarters in Cologne in
April. The company wants to secure millions
of customers by offering them particularly
good connections to Turkey. However,
none of the Turkcell staff could tell
zenith how much growth they were targeting
in the first few months, nor provide
any information about how they planned
to differentiate themselves from established
competitors in the market.
Turkey undoubtedly has a long way to
go as an IT nation before it can live up to
the expectations of its Prime Minister. But
developments are certainly happening
and in Germany too attempts are being
made to set the right course and help German
companies tap into the market. Albeit
on a small scale, the »Türk-Alman
Business Center«, the brainchild of Lower
Saxony promotional organisations, NGlobal
and Hannoverimpuls, is the first port
of call for German business people wanting
to make contact with the Turkish IT
scene. The North German state is attempting
to target Turkish companies and promote
itself as an attractive investment location
– the only such initiative in Germany
so far. It will also be accompanying the
up-coming Lower Saxony Foreign Trade
Forum in April 2011 – with Turkey once
again in the spotlight as the Partner
Country for this event.
BusinessReport 1/2011 23

TuRkEy
Hakan Aldogan
»I left Istanbul shortly after I finished
university – heading first to Denmark,
then Australia and France. I feel at
home here, but somehow also like a visitor,
and always curious to have another look at
the city. A good weekend and a business
meeting with foreign visitors would not be
complete without a midday meal in the Turkish
Restaurant ›Pandeli‹. If you come from
the direction of the Eminönü jetty, look for
the entrance as you come into the ›Egyptian
Bazaar‹. The door is right there on your left
and easy to miss. Then you go from there up
to the first floor. I know you think Turkish
desserts are too sweet and overly rich – but
forget all that. You have never tried any of
these things. One of them is made from chicken
meat! Various presidents and prime
ministers have dined at Pandeli on the pub-
24 BusinessReport 1/2011
MY ISTANBUl
Business lunch
with Bosporus view
Do you have a business appointment or a trade fair to
attend in Istanbul? Does your company plan to book you
into a soul-destroying hotel bunker on the outskirts
of town? To prevent this happening, take the following
recommendations to heart – and stay a little longer
Hakan Aldogan,
architect with Ateliers Jean Nouvel.
lic purse, which you would never know to
look at the prices. Cafés and restaurants have
all become expensive in the city anyway.
Luxury hotels always have been of course.
But if you want to experience a taste of the
Ottoman Empire, and your company is
paying for the trip anyway, stay at the ›Ciragan
Kempinski‹. Sultan Abdülaziz had the
palace built in the 1860s right on the Bosporus
Strait. After a major fire, the site was deserted,
and for decades it was just a place for
footballers of Besiktas to kick a ball around.
There is hardly anything left of that these
days. If you would rather stay on the historic
peninsula in the Sultanahmet Quarter, I recommend
the Four Seasons. If your business
takes you to Taksim or Beyoglu, stay at
the ›Pera Palace‹. It is one of the oldest and
best European hotels in Turkey.«
pandeli.com.tr
kempinski.com/istanbul
fourseasons.com/de/istanbul
perapalace.com

picutures: dge, private
Marc Landau,
CEO of the German-Turkish Chamber of
Industry and Commerce in Istanbul
Marc Landau
»When I have business friends and acquaintances
over from Germany I can
always take them to see the Hagia Sophia.
But occasionally I prefer to show
them something different, so I take my visitors
to a shopping mall like the ›Kanyon‹
in the financial district of Levant. I believe
many Germans don’t realise the variety
and quality of products available in Turkey.
You won’t find anything like it back home,
that’s for sure. You can also learn something
about the Turkish economy there
– many German business people still have a
clichéd image of the Middle East from their
reading of Karl May novels. For a business
meal, I recommend the restaurant ›Mikla‹,
located on the Penthouse level of the ‘Marmara
Pera’ hotel. The chef describes his
creations as authentic ›Turkish-Scandinavian
cuisine‹. You can really eat well there
and still hold a discrete business conversation
at the same time. In the Besiktas part
of town, I recommend the ›Vogue‹. Just
north of the big Bosporus bridge, which is
not far from us and the offices of the German-Turkish
Chamber of Industry and
Commerce, is the Ulus Park, where you
will find the ›Sunset Grill & Bar‹ high up on
the hill – with a panoramic view of the Bosporus,
which makes it a particularly nice
place to be in the summer. As far as accommodation
options for business people go, it
much depends on which part of town you
will be spending the most time. I could of
course mention the big luxury palaces, but
for small to medium-sized enterprises
wanting good value for money, I recommend
the ›Richmond Hotel‹, right in the
centre of Beyoglu in the Istiklal shopping
mile. If your diary is not too full, or you feel
like spending a few extra days of R & R and
enjoy a certain amount of comfort, I would
naturally recommend the ›Splendid‹ on the
Princes’ Island of Büyükada. There are no
cars allowed on the island – only pushbikes
and historic, horse-drawn carriages.«
kanyon.com.tr
miklarestaurant.com
voguerestaurant.com
sunsetgrillbar.com
richmondhotels.com.tr
splendidhotel.net
Özlem Bekiroglu
»Of course it’s not easy to recommend
a hotel in Istanbul when you live in
the city yourself. But for visitors I recommend
the ›Pera Rose‹, a boutique hotel
in Pera – not far from Taksim Square,
with a view of the Golden Horn. If you
want to stay in the city a bit longer and
feel slightly more at home, the best thing
to do is rent an apartment at ›Manzara Istanbul‹.
They have nicely furnished, spacious
apartments in several central locations
around the city. For business meals,
I like peace and quiet and a good view of
Özlem Bekiroglu,
PR manager for the agency Grup7
the Bosporus, so I would recommend the
Restaurant Müzedechanga. It is located
in the Sakip Sabanci Museum in Emirgan,
the name of one of the oldest settlements
on the Bosporus. The ›Müzedechanga‹
serves traditional Turkish cuisine
but it is presented in such a
contemporary and original way that you
can hardly tell. After the meal you can
stroll through the art collection of the
museum. The same combination of food
and culture is something offered by another
great place in the inner city precinct:
the ›X Restaurant‹ on the top floor of the
Istanbul Foundation for Culture and
Arts. Otherwise I would recommend a
classic eating house called ›Topaz‹, also
with a view of the Bosporus. They have
Mediterranean and Turkish cuisine there
– and it’s very good, if a little bit pricey.«
changa-istanbul.com
iksv.org
topazistanbul.com
perarose.com
manzara-istanbul.com
TuRkEy
BusinessReport 1/2011 25

GCC REPORT
26 BusinessReport 1/2011
INVESTMENT
Club of visionaries
Without much fanfare, the Qatari Investment Authority
is becoming one of the world’s most influential investment
companies. In Europe it is actively promoting the image
of the country – the big money is going elsewhere
by Nils Metzger
Qatar could be held up as a business simulation
game for economics students. Take an
insignificant state by world political standards,
in a part of the world that has no real industry
to speak of, give it USD 100 billion and the goal of
becoming »the leading economy in the region«.
Since the »Qatar Investment Authority« (QIA) was
founded in 2005, the Gulf state of Qatar has been rapidly
promoting the global distribution of its foreign
currency. Its founder and CEO Sheikh Hamad bin
Jassim Al Thani – who has now moved up the ranks
to Prime Minister – is the top economist of the country.
Via the wide-ranging network of the Al Thani
family – where numerous relatives administer the
sub-funds of the QIA – Sheikh Hamad bin Jassim
controls the earnings from the oil and gas business
that still makes up around 85 percent of the country’s
export business and 70 percent of the national budget.
The Emirate buys up shares in companies all
over the world via various funds and subsidiary
companies.
The QIA puts its faith in established market players
and – unlike the United Arab Emirates, which has
long been famous for it worldwide – it has not yet
made the headlines due to the failure of any highly
speculative prestige projects. The motto of the Qataris
is to avoid major risks, which is why names like the
Swiss bank Crédit Suisse and German carmakers
Porsche and VW have piqued the aspirations of the
fuel billionaires. Ever since the QIA supported the
construction company Hochtief in late 2010, when it
was threatened by a hostile takeover, it has attracted
wider public attention. Because the Qatar Holding, a
wholly-owned subsidiary of the QIA, boosted its

designs: Albert Speer & Partner / visualization: HH Vision
share of Hochtief to 9.1 percent – not as a foreign locust
but more as a ‘white knight’ and at the Germans’
own request – its first public appearance in Germany
met with a positive response. The Dubai port operator
DP World 2006 learnt the hard way how important
a company’s public image can be, when its attempt
to take over several US ports failed due to opposition
from the Bush government. For months, media
commentators had argued against the idea of letting
such strategic lifelines fall into Arab hands. Spanish
construction group ACS could still win the takeover
battle – and Qatar has so far shown no signs of wanting
to boost its share of 9.1 to over 25 percent of
Hochtief, in order to become a minority shareholder
and stymie the Spaniard’s chances of any takeover.
However, Florentino Perez, the CEO of ACS, will
be in for some frequent stoushes with the Qataris
over the next few months, for very different reasons.
Perez is President of the now second-ranked football
club, Real Madrid, while Qatar entered the fray in
December by becoming the jersey sponsor of top-ofthe-table
FC Barcelona. The Qatar Foundation, nominally
independent of the QIA but closely allied to
it nevertheless, will be paying EUR 170 million for
the privilege. On 14 March QIA announced to invest
EUR 2.2 billion into Spanish energy supplier Iberdrola.
Major shareholder ACS‘s stake was accordingly
reduced by this transaction. In doing so the Qataris
tried to boost their Latin American business: in October
2010 they already bought 5 per cent share of
Brazilian Banco Santander.
It would appear that the emirate likes to conceal
subtle message in its investments. USD five billion for
the stricken Greek economy indicate that Qatar is a
reliable friend of the Europeans, even – or especially
– when the euro is under fire. And in the entertainment
domain as well, the Qataris want to show that
they are not as inhibited as is often presumed, and in
fact enjoy watching films by Quentin Tarantino and
the Coen brothers.
In December 2010 a sub-fund of the QIA, in a joint
venture with the Weinstein brothers, bought film
production company Miramax for the equivalent of
around EUR 500 million – the Disney Group that
Miramax belonged to at the time was planning to
close the studios down. This means that even Katie
Holmes, who features in the horror re-
make »Don‘t be afraid of the dark« currently
being produced by Miramax, is
now working for the Qataris. Globally
speaking, these deals made by the QIA
fund with first division clubs and Hollywood
studios are good for their image,
but peanuts in the overall scheme of
things. The majority of the almost USD
22 billion that Qatar invested abroad in
2010 went to emerging countries. For instance,
the QIA supported the somewhat
sluggish IPO of the Agricultural Bank of China to the
tune of USD 6 billion. The over 300 million private
clients of the state-owned enterprise are allowing Qatar
to participate long-term in the economic rise of
the Chinese – or so the logic goes. »We are planning
to invest more and more in Asia over the next few
years. Compared to our activities in Europe, we have
neglected this economic region for far too long«,
Kenneth Shen, who is responsible at QIA for strategic
planning, tells zenith.
The small number of in-house personnel has so far
restricted it to investing in companies that can be re-
2.8 billion euros
for a bank in
China: Hochtief
and Hollywood
are peanuts
>>
GCC REPORT
BusinessReport 1/2011 27

GCC REPORT
lied upon to prosper without cons-
A mere 110 tant monitoring from Doha, says
financial experts Shen. At the moment only 110 finance
experts are employed by
allocate the QIA to manage the distribution of
its billions.
billions – and Observers following the invest-
speculation is ment policies of Qatar see the Emirate
and China as having even more
frowned upon common interests – including investment
in Africa. Qatar Airways
now offers flights via Doha between
many Chinese and African cities. In December 2010,
Air China announced it would be expanding the
Doha hub in a joint venture with Qatar Airways. The
QIA‘S INVESTMENTS SINcE 2010
28 BusinessReport 1/2011
planned investment, which includes a new terminal
exclusively reserved for Chinese airlines, is said to
run to about USD 1 billion. In the Sudan, according
to market observers, Chinese oil firms are also relying
heavily on the help of the Qataris, who have considerable
political influence in Khartoum and often
act as the intermediaries between former civil war
factions.
The QIA is also toying with the idea of becoming
more involved in Germany over the next few years,
Finance Minister Youssef Hussein Kamal recently
told the Financial Times Deutschland. Baden-based
software developer SAP was currently top of its wishlist.
They were interested in sectors that »would also
have a direct impact on the Qatar economy«. This
indirectly included Hochtief. After Qatari’s successful
bid to host the Football World Cup 2022, the
government in Doha is now looking for strategic
partners to build several stadiums and other major
projects in an effort to prepare the country for the
influx of tens of thousands of football fans. Ahmed
Mohammed al-Sayed, CEO of Qatar Holding, would
like to involve Hochtief as a »key partner« in the 2022
World Cup. The games venues are nothing more than
computer-generated sand castles at the moment – in
the case of the 86,000-capacity stadium for the finals,
the actual city hosting the venue is yet to be built.
Named after the historic term for the region north of
Doha, »Lusail« is set to become the home of 200,000
people, if the Qatari government has its way. The developer
of this purpose-built city is once again the
QIA via its subsidiary company, Qatari Diar Real
DATE coMPANY coUNTRY BRANcHE SHARE IN PER cENT VolUME IN BIllIoN USD
March 2010 Bulgarian Qatar Company Bulgaria investment 100 0,4
May 2010 Qatar Holding Indonesia Indonesia investment 85 1,0
May 2010 Malaysia Development Board Malaysia investment 80 5,0
May 2010 Harrods United Kingdom retail 100 2,3
August 2010 Agricultural Bank of China China finance n.a. 6,0
September 2010 Qatar Holding Greece Greece investment 100 5,0
October 2010 Banco Santander Brasil Brasil finance 5 2,7
December 2010 Hochtief Germany construction 9 0,4
December 2010 Filmyard Holdings USA movie production n.a. < 0,7
February 2011 Credit Suisse Switzerland finance enlarged to 9 > 6,0
sources: QIA, Reuters, taighde.com

Estate. Hochtief has played a key role in the billion
dollar project from the very beginning. Ever since
2008, the Germans have been involved in the planning.
»The first sections of the city will be completed
in the course of 2011«, reports Magdy Youssef, the
project manager responsible for the work. Overall,
however, construction work will proceed until 2020.
In Frankfurt-Sachsenhausen, meanwhile, journalists
are already sharpening their pencils. The architectural
practice of Albert Speer & Partner will
design eight of the twelve planned World Cup stadiums
– but the »Lusail Iconic Stadium«, has nonetheless
managed to land the design services of its highprofile
competitor, Norman Foster. The property
fund Qatari Diar, as the project principal and owner,
will also be involved in building new stadiums, accommodation
and training facilities for 2022, in conjunction
with the Qatari Football Association. Despite
all of this, Lusail does offer billions worth of
business for German companies. The QIA is already
promoting itself as having ICE fast trains in its glossy
brochures – Lusail will one day be linked to the EUR
17 billion railway network that German Rail (Deut-
The Global Charter Broker
Your wish is our passion
www.lhcharter.com
GCC REPORT
sche Bahn) has been commissioned to Katie Holmes
build on behalf of Qatari Diar.
Unlike the prestige project of Masdar now acts
City in Abu Dhabi, however, Qatar is not
angling for world press coverage of its for the Qataris
promised innovations. Though the aim is
for Lusail to rely on an energy mix with a
certain proportion of renewables, there are no exact
figures for this yet. So far the energy concept seems
much less green and ambitious than in the case of
Masdar. And should something go wrong with the
master plan of the QIA through to 2022, the Emirate
still has Al Jazeera in its back pocket. The media mogul
in Doha is also picking up market share outside the
Arab world – with its English language service. The
reporting principle is the same as ever: free and critical
– with the exception of issues that affect Qatar. Whether
these internal rules also apply to QIA projects is
not yet clear. One thing is certain, however, that the
funds company is not involved in the Qatar Media
Corporation run by Al Jazeera. But Hamad bin Thamer
al-Thani, CEO of the corporation, is not only the
namesake of the Emir but also his blood relative.
“Any time you need,
we fly it.”
������������������������������������������������ �������������������

GCC REPORT
TAx lAw
»Staying put is
what Qataris want«
Carla Everhardt, lawyer and Gulf States expert, offers
her take on Qatar as an investment land, the problems
encountered by German companies with tenders
and the question of whether an unmarried couple can
live in Doha
zenith: Ms Everhardt, can Germans
soon expect a double taxation agreement
with Qatar?
Carla Everhardt: Avoiding double taxation
is always a big issue. But no agreement has
yet been reached and negotiations have
only been conducted in a very sporadic way
to this point. You see, the German government
is always very wary of tax-free and
low-tax countries – we saw that in negotiations
over the DTA with the United Arab
Emirates. That was a real thriller.
What is at stake here?
For German investors in Qatar, there is quite
a bit at stake – for instance, when it comes to
income tax. Managers working in Qatar for a
German company, who still have a family and
a home in Germany, have to declare their Qatar
income in Germany. Though they could
get a rebate for any income tax paid in Qatar,
since Qatar doesn’t tax the income of salaried
employees, that would be a zero percent rebate.
So it is hard for German companies to post
good employees to Qatar, or rather they have
to top up their salaries accordingly.
Over the past few years, private individuals
and companies have invested in the
Emirates property market and lost a lot
of money during the financial crisis.
What is the state of the property market
in Qatar?
30 BusinessReport 1/2011
It is currently far too expensive to be attractive
to »consumers« as an investment. Qataris
themselves are buying offices and living
space and then renting them out. The
good thing is that there will probably be no
bubble there that bursts sometime in the
future.
2022 is predicted to be the big year for
German companies in Qatar.
Will those companies stay there after
that or take off again?
Naturally staying put is what the Qataris
and the Germans both want. Entry into any
market, we are inclined to say, takes on average
two to three years. In the case of the
Gulf States, I would tend to add a further
two years to that figure. The costs are not
exactly low, so people need to think long
term. What’s more, the Qataris do not do
business with companies or phone numbers,
but only with people – and personal
trust counts.
Can I set up my own company in Qatar
as an entrepreneur, or do I still need a
partner?
As a general rule, 51 per cent of every company
in Qatar must belong to a local, but
since last year there have been sectors where
foreigners are allowed to be the sole
shareholder – for instance IT, logistics, entertainment
and sport. In addition, special
investment projects considered vital to the
Qatari economy may be given approval for
complete foreign ownership in exceptional
cases. However, it should be noted that any
profits or profit share of Qatari companies
that is payable to foreign interests incurs a
10 percent corporation tax; Qataris do not
have to pay that.
Sports – that sounds as if the Qataris are
looking ahead to the World Cup.
Well, the Qataris have missed the boat in
recent years, as far as positioning themselves
is concerned. Somehow Qatar was seen
as neither fish nor fowl. Bahrain stands for
finance, and the Emirates for trade, media
and air traffic. So now sport has become the
quest of the Qataris.
What other sectors are currently showing
the most interest in Qatar? Only cement,
steel, bricks and mortar?
Qatar is of course very attractive to construction
companies and everything to do
with that industry. But service providers
and consultants are also active in the market
now: IT, pricing policy, market strategy
and specialists in project management.
Naturally many companies want to get
their hands on public contracts. How
transparent are the tenders issued by
Qatari authorities for such projects?
Actually the process is clear and works well.
There is a long tradition of this in Qatar – the
so-called »Tender Law« first came in force
back in 1976, and was last revised in 1990.
You can have the documents sent to you – for
a cost – and prior registration is required for
complex projects. When submitting a tender,
it is also a requirement to include a »tender
bond«, usually in the form of a bank
guarantee. Any problems tend to lie less
with the Qataris and more with the German
companies who do not take the regulations
seriously enough and think they can always
submit one or other of the required documents
at a later date.
And what about the practice of private
companies awarding contracts?
picture: private

carla Everhardt is a lawyer who has been
working with Rödl & Partner since 2006,
specialising in the Gulf States. She
completed her legal studies in various
cities, including Passau, Würzburg,
Cologne, Dubai and Abu Dhabi. In
addition, she is co-author of the latest
German »Qatar Business Guide«
published by Ghorfa, the German-Arab
Chamber of Commerce and Industry.
Sometimes what happens is that private
companies »call for tenders« in line with the
conditions imposed by public authorities,
which is not the correct procedure and often
far too complicated. When problems arise
during the working relationship, it is often
not the legislation that is at fault but poorly
worded contracts. And Qatari legal firms
are not infrequently out of their depth when
they attempt to resolve such uncertainties.
There are still too few court rulings to be
able to plug any gaps in legal or contractual
arrangements. We notice that English and
American companies are better able to cope
with the legal culture in Qatar, because they
tend to formulate very detailed contracts
that cover every eventuality of a working
relationship. Our legal culture is quite different
in that respect. Should any problem
arise where the method of resolution is not
explicitly mentioned in the contract, Germans
tend to rely on laws and court rulings.
But it is precisely that attitude that causes
problems in the comparatively young and
less experienced legal culture of Qatar.
Supposing I come to Qatar as an employee,
in which case my residence permit
would depend on my employer or
so-called sponsor. I have to wait for 2
years before I can change jobs and can
only do that if my employer does not go
to the authorities and oppose the move.
Do you think that will ever change?
The only country in the Gulf that has abolished
that system so far is Bahrain. In Qatar
the subject keeps coming up for discussion
but I get the impression that things are
not about to change.
Many managers working abroad are
unmarried and want to bring their
partners with them. Would an unmarried
couple be able find an apartment to rent
in Qatar?
I personally would not go into the matter of
whether the person helping me look for an
apartment is my »husband« or my »boyfriend«.
Qatar is not as conservative as it
may first appear, but it does still feel obliged
to maintain Muslim rules of decorum. Incidentally
it can even happen in the otherwise
liberal Dubai, that the police will burst
into a flat and ask to see the marriage certificates
of any flatmates. Generally speaking,
there is a willingness to turn a blind
eye to ex-pats, but you cannot insist on special
treatment – and an amendment to the
law is not about to happen. People going to
Qatar for the long haul, who also see a future
in their relationship, should probably
think about getting married.
And what about booking a double room
during the Football World Cup?
Get married first?
I think the practice of tolerance to foreigners
will probably increase during the
World Cup. The same could also apply to
beer consumption, by the way, which is
only allowed in hotels at the moment. Although
Qataris can be quite pragmatic
about such things, the Football World Cup
in Qatar is unlikely to turn into the kind of
beer-fuelled frenzy we tend to associate
with other host countries.
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KUwAIT, UAE AND SAUDI-ARABIA
Gulfinvest on its knees?
The Kuwait shareholding company Gulfinvest
International has a tough time ahead of
it. In late February, the Kuwait government
ordered the company to make arrangements
to service its debt, including liquidating
some of its assets. Gulfinvest, which
launched funds like the Islamic Al-Huda
fund, was badly hit by the impact of the financial
crisis on the Gulf region – in 2008
alone, the value of Al-Huda shares temporarily
plummeted by 50 percent. The
Defence heads home
A trend was revealed at the defence exhibition
IDEX 2011 in Abu Dhabi in February.
Thanks to some international collaboration,
the UAE is spending a growing proportion
of its current defence budget of around
USD 15.5 billion in its own country. A contract
worth USD 242 million was awarded
to C4 Advanced Solutions in Abu Dhabi to
expand the communications infrastructure
of the armed forces. The company is a
joint venture between the European EADS
Group and Emirates Advanced Investments.
At the same trade fair, agreement was also
Riad‘s atomic planet
The intriguing acronym KA-CARE stands for
the Saudi urban development project: »King
Abdullah City for Atomic and Renewable
Energy«. Plans for this settlement in the desert,
devoted to the production and exploration of
non-fossil-fuel energy sources, are starting to
take shape. The design and planning firms, including
SOM, Norman Foster and Snohetta
from Oslo, all submitted their proposals in November
2010. Snohetta, which received the nod
for the »King Abdullah Center for Knowledge
and Culture« in the East Saudi city of Dhahran
back in 2007, is one of the more promising candidates.
Budget estimates so far put the cost of
the urban development at around EUR 30 bil-
GCC REPORT
Abu Dhabi Commercial Bank granted credit
to the fund management company,
which has primarily invested in the Gulf
states, to the tune of about EUR 40 million.
So far Gulfinvest has been unable to pay
it back, although the loan fell due in 2010.
As recently as early February, Kuwait’s financial
supervision officials had given the
nod to the company’s restructuring plan.
But now the authorities are demanding a
special meeting of investors to decide on
the liquidation of assets. Otherwise the
matter will go before the court.
reached on collaboration between EADS
subsidiary Cassidian with the »Khalifa
University of Science, Technology and Research«
in the field of cyber security. That
contract has a price tag of USD 550 million.
The Emirates are also expanding their
naval shipbuilding. While the first corvette
of the new »Baynunah« class was launched
in France last year, the next five vessels
through to 2015 will all be finished in Abu
Dhabi. This was reason enough for the organisers
of the IDEX exhibition to start
planning an inaugural naval trade fair this
year to run parallel with the biennial defence
show.
lion. KA-CARE is being developed about half
an hour’s drive away from Riad. Saudi-Arabia
is anticipating a three-fold increase in electricity
demand by 2032. The country’s precious
oil, which is currently bringing in around USD
120 a barrel on the global market, will not be
wasted on the project. In late February, Hashim
Yamani, the Chief Planner for KA-
CARE, signed a collaborative agreement with
France. The French nuclear power company
Areva is planning a joint venture with the Saudi
Binladin Group to build the reactors. How
serious these urban planners are about renewables
is not yet clear. The city is to be built at
the foot of a steep rock formation – and the
shadows thrown by the cliff face will reportedly
help with air conditioning in KA-CARE.
PROFIL
BusinessReport 1/2011 33

PERSONAL ASSISTANT
central Asia Business Forum
24 March, Hanover Chamber
of Commerce
The on-going commodity boom in the
republics of Central Asia is pouring
billions into the state coffers of these
developing countries. The Hanover
Chamber of Commerce aims to steer
intrepid German entrepreneurs safely
through the corruption minefield.
A delegation is also planning a trip to
Kazakhstan and Uzbekistan in June
2011.
www.hannover.ihk.de
8th lower Saxony Foreign Trade
Forum with Turkey as the special
guest
5 April, Hanover Fair, Nord/LB Forum
After huge criticism in the past few
months by Turkish business associations
outraged at the German visa policy,
the leader of Lower Saxony, David
McAllister, is more than likely to strike a
conciliatory note in Hanover. The Türk-
Alman Business Center project will also
be launched at the fair. The centre is designed
to encourage Turkish companies
to choose the northern German state
as the exclusive location of their German
branch offices.
www.nglobal.de
34 BusinessReport 1/2011
DAG delegation to the Gulf
7 to 13 April
»The times are long gone when Gulf
business heavyweights saw Europe
through English eyes only«, writes Harald
M. Bock, General Secretary of the
German-Arab Association (DAG) in his
invitation to German businesses to join
the delegation. The trip will include Qatar
and the UAE. One of the key issues
for the group will be education exports.
For, contrary to popular misconceptions
about the children of oil sheikhs,
young Emiratis now have to stand on
their own two feet in the labour market.
www.d-a-g.org
International building show,
Turkeybuild in Istanbul 2011
27 April to 1 May in Istanbul
With more than 800 exhibitors and over
100,000 visitors, Turkeybuild is the leading
construction trade fair in the region.
One Austrian company is attempting to
tap into the market, not by landing major
14th German-Arab Business Forum
11 to 13 May, Ritz Carlton in Berlin
As always, the annual get-together of
the German-Arab Chamber of Industry
and Commerce Ghorfa will be a magnet
for hundreds of high-ranking representatives
of the German-Arab business
world. This year Lebanon has been
selected as the Partner Country
– which is not a bad decision, given
the rapid growth of the Beirut property
industry. But, a word to the wise – analysts
are already warning of a speculation
bubble. Will the boom last until the
15th forum?
www.ghorfa.de
Numov – First Near and
Middle East Ports conference
15 June in Hamburg
In actual fact, the Near and Middle
East Association (Numov) turned its
back on the City of Hamburg long ago
– and, so say informed sources, not
much importance is attached to Hanseatic
customs these days, either. But
Numov plans to use the occasion of
the international »Ports Conference«,
to report on the latest port projects in
the Near East. Weatherproof clothing
recommended.
www.numov.org
SToP PRESS
The taste of success
Exciting times for the largest pan-Arab television station
– while Western media regret having progressively
pruned their network of foreign correspondents
over the past few years, the satellite broadcaster Al
Jazeera from Qatar has 24/7 access to local experts.
Many journalists had no choice during the protests in
North Africa but to turn on the live stream of the Al
Jazeera English-language programme. Downloads
via the online stream have increased since the start of
the demonstrations by more than 2,500 percent. Particularly
in the USA, there appears to be a huge demand
for such news– almost 60 percent of its viewers
came from the land of Uncle Sam.
picture: Al nassma
in our upcoming issue
Camelicious
Security first
government contracts but through its
German and Austrian chocola-
DIY stores. The bauMax building supply
te expertise and fine, slightly
Billion-dollar deals with danger chain will be opening six branches there
salty camel milk are the secret
by 2012 – although, according to CEO
Martin Essel, the Turkish DIY tradition
to the success of Al nassma. The
leaves a lot to be desired.
Dubai company has recently started selling its chocola-
AGENDA
www.yapifuari.com.tr
te camel milk in Japan and the USA too. The company
has been selling its products in selected stores all over
the Emirates region for two years now. So far, European
gourmets can only get these pralines, chocolate camels
and blocks of chocolate in »Date« or spicy »Arab« flavour
by placing a special order. Such treats naturally
come at a price: a block of milk chocolate costs the equivalent
of EUR 5 and a camel caravan in an elegant wooden
slipcase around EUR 32.
How to park a billion?
Analysts are warning of an oil price shock, and
governments on the Gulf are watching the protests in
their neighbourhood with growing unease. Business
people tend to prefer peace as a rule too, but the dictator
domino effect is not worrying everyone – especially
not the property sector in the UAE. While Europe
is busy freezing the accounts of the Ben Alis and
Mubaraks, the Emirates remains an attractive place
to park capital. »The exiled elite will simply take their
money to Dubai and buy property with it there,« say
insiders. Apparently it will do the sector good after
the hammering it took from the financial crisis.
While the authorities are supposed to check the origins
of large sums of money, in practice, »almost
anything goes«.
picture: Nicolas Salcido/US Army

PROFIL
BusinessReport 1/2011 35