At the beginning of the year, markets had serious doubts as to whether M&A and privatisation activities would actually pick up momentum in 2005 upon Turkey's receipt of a date from the EU on Dec 17 to start accession talks. However, EU anchor, coupled with drastic declines in inflation and indebtedness through IMF & WB-supported macroeconomic policies have catalysed a major shift in sentiment and boosted privatisation and M&A activities in 2005. With the EU negotiation process launched on Oct 3, henceforth we expect M&A activity and privatisations to continue unabated. The Turk Telekom tender concluded successfully on Jul 1, 2005 with US$6.55 bn proceeds for the state telecom monopoly, has served as a milestone for Turkey's privatisation endeavours. The share transfer agreement was signed on Monday this week, following a protracted legal process, after various lawsuits filed to halt the tender were eventually dismissed by the higher court. There are further privatisations and asset sales in the pipeline, including Basak Insurance, Basak Life Insurance, Telsim (local GSM operator) and Adabank sales by the SDIF, scheduled for completion by the end of this year. We expect privatisations to the tune of US$2.8 bn to be completed during the remainder of 2005. The boom in privatisation activities in 2005 has been a product of political stability sustained in the last couple of years, the success of the disinflation program, the start of accession negotiations with the EU, and the improvement in investment environment owing to strong economic growth. We expect Turkey to remain an attractive investment story through further amelioration in economic fundamentals and EU convergence. |