On the face of it, investing in Turkey would seem to be risky business right now.
Autocratic President Recep Tayyip Erdogan is waging wars of words with US President Donald Trump and Chancellor Angela Merkel. The Turkish lira has been in free fall, losing 40 percent against the euro and dollar this year on concerns over the diplomatic dispute with Washington and doubts over the independence of the Turkish central bank.
Foreign Minister Heiko Maas, speaking ahead of Mr. Erdogan’s arrival in Germany on Thursday, warned that German firms are holding off investing in Turkey. They regard it as too risky due to concern that local employees may fall foul of Turkey’s justice system. “That doesn’t enhance the willingness to invest,” Mr. Maas told weekly Die Zeit.
German businesses in Turkey are hanging on. Ties run deep; Germany is Turkey’s biggest trading partner. Turks are the biggest ethnic group in Germany.
Companies are committed, such as Aunde. The German auto-components supplier makes €350 million ($411 million) of its €2.6 billion global revenue in Turkey. “All our proceeds in Turkey are reinvested there and that has paid off,” said boss Rolf Königs.
The Aunde Group has 119 plants in 29 countries; back in 1982, it had just one plant and €18 million of debt. Mr. Königs said his fortunes changed when he invested in Turkey where Aunde now makes car seats and auto interiors, has just built a wind farm, owns two holiday resorts and will soon open a cement plant.
Some 7,000 firms in Turkey have German money invested in them. Their managers take a sanguine view of the political storm, taking the long view.
“We Turks are masters at overcoming crises,” said Attila Özkul, head of German shoe retailer Deichmann’s business in Turkey. The current troubles should not be exaggerated; Turkey remains a country of long-term economic growth, he added. Deichmann entered the Turkish market in 2006 and has 125 outlets there now, employs 1,000 people and generates €100 million in sales.
That growth will continue, not only thanks to Turkey’s large population of 80 million but because 40 million solvent tourists join them each year.
Mr. Özkul said the US tariffs imposed in a row over Turkey detaining American evangelical pastor Andrew Brunson on terrorism charges was a “huge shock.” But it led to a steep increase in the volume of textiles being produced in Turkey, showing the economy’s agility.
The slide in the lira has been a problem for Deichmann’s Turkish operations because its costs in terms of product imports and rents are factored in dollars or euros, while revenue is in lira. But that will change in October when rental contracts agreed in foreign currencies will be converted to lira, which will create export opportunities for Turkey.
Germany’s Krone, one of Europe’s biggest manufacturers of commercial trailers and agricultural machinery, wouldn’t dream of leaving Turkey, even though the weakness of the lira and political tensions have hit its sales.
Rifat Hisarciklioglu, president of the Turkish employer federation TOBB, said the current crisis was just temporary and that the country had demonstrated its ability to rebound from past crises. “Now is exactly the right time to invest in Turkey,” he said.
Ozan Demircan is based in Istanbul and covers Turkey for Handelsblatt. He has been with the newspaper since 2012. Matthias Brüggmann is the newspaper’s international correspondent. To contact the authors: email@example.com, firstname.lastname@example.org