Turkey’s inconclusive election, the votes for which were counted yesterday, has left the country in political limbo. The Justice and Development Party (AKP), led by president Recep Tayyip Erdogan, has lost its parliamentary majority and will seek a coalition to bolster its 41% share of seats.
Erdogan has shown an increasingly autocratic and Islamist hand in recent years, cracking down on protests and banning social media. But among the blackouts, the ‘Sultan’, as he is not always fondly-known, has pushed to make Turkey one of the world’s leaders in technology. And despite concerns the election could slow down sales, all signs point to a connected and marketable force that straddles two continents.
Turkey is the world’s 17th-largest economy, and second-largest in the Middle East. GDP growth is steady, while slow, at 3.25%. And while some commentators have warned about a “time-bomb” debt bubble, investment is still maintaining its strength.
Half of Turkey’s population is aged below 30, and 84% of Turks own a mobile device. Another 11 million – 14.6% of the country’s 75 million population – are expected to purchase their first smartphone this year. That connected citizenry are thought to be the world’s most active consumers of e-commerce, QR code scanning and mobile banking. In terms of average time spent online, Turkey places sixth in the world. It had an Internet penetration rate of 53.8% in 2014, up from 49% in 2013.
A long-awaited 4G tender, deadlined for May 26 with a minimum value of $2.5 billion, was put back by three months, amid calls by Erdogan to skip the technology and move straight to 5G. “We would waste time with 4G technology and should move to 5G in two years, or else Turkey becomes a garbage dump for 4G technology,” said the president at a recent Turk Telekom event.
“The ‘skipping 4G comment’ was made only by President Erdogan,” says Michael Sercan Daventry, editor of JamesInTurkey.com. “He was talking about Turkey trying to accelerate the take-up of tech in the country but he ignores the fact that adopting 5G isn’t about installing infrastructure but ensuring consumers and companies have equipment to use it with. 5G isn’t widespread anywhere in the world yet, but plenty of Turks own the latest iPhone or Android device that is capable of using 4G today.”
Erdogan stepped down as AKP party leader after winning Turkey’s presidential election last year. His populist rule has found a hefty voter base, but concerns surrounding press and web freedoms, the suppression of protests and a lean towards a more Islamist society have alienated large swathes of Turkey’s young, urban population.
The government has displayed a growingly blunt hand in its approach to social media, which was used to mobilize anti-state protesters in huge 2013 demonstrations. But major wins for Kurds, liberals and secular Turks at the polls should inspire a kickback against these restrictions. “This is where the parties divide,” adds Daventry. “The government has not held back from imposing media blackouts on major news stories or from wholly banning social media outlets when they do not remove material it considers objectionable.
“I see two main effects on the tech industry,” he adds. “First, you can’t be in any doubt that social media companies know what material Turkey objects to and how far it is prepared to go to have its voice heard. Facebook, Twitter and Google all react far quicker to Turkish court orders than they would have done five years ago because they don’t want another blanket ban on their services.
“Second, Turkish consumers – particularly younger users – have become far more tech savvy as a result. Everyone knows they can use a virtual private network to circumvent a banned page and “VPN” has entered the local vernacular.”
A country which literally bridges Europe and Asia, Turkey is becoming a coveted entry point for European and American firms into the Middle East. Earlier this month Delivery Hero purchased Istanbul-based Yemeksepeti, which operates in Greece, Saudi Arabia, Jordan the UAE and Qatar, for an “unheard-of” $589 million. Amazon and eBay both bought into Turkish firms in 2011, and earlier this term Dubai private equity firm The Abraaj Group purchased a minority stake in Hepsiburada, Turkey’s largest e-commerce outfit, which is valued at around $400 million.
Turkey’s government has for several years been making big overtures towards tech cash. 59 Technology Development Zones (TDZs), of which 44 are operational and 15 are under construction, offer companies attractive tax and social security rates. The biggest of these, Teknopark Istanbul, opened recently and houses 85 companies and. When completed, in 2023, the park will be 950,000sqm, employ 30,000 people and generate $10 billion income yearly.
In its report on the 2014 merger and acquisition market in Turkey, analyst Deloitte wrote that “despite many challenges in the political and economic environment…investors maintained their confidence in the Turkish market.” Charged by “big-ticket privatizations and lively middle market activity,” 236 deals were completed at a value of around $21 billion, similar to previous years. State-owned gas grids, insurers and power plants are among a continued privatization drive in Turkey.
Deloitte, however, warned that yesterday’s election could signal a “difficult period” for Turkish M&A. Jonathan Friedman, a London-based risk manager, recently told Bloomberg that the poll may “signal a turnover among power brokers” whose replacements “are more cautious than ever in granting approvals.”
Cem Sertoglu, a partner at Istanbul-based Earlybird Ventures, disagrees. The AKP’s decline “may be a healthy thing for checks and balances,” he says. “Privatizations will continue as before. I think the post-election stability is going to be a positive factor.”
Yesterday’s turnout of 86% was hailed by Erdogan as evidence of Turkey’s “determination for democracy,” said Erdogan. It rather appears a rebuke against his rule. But whomever rules the country will take on considerable tech ambitions.