- Türkiye inaugurates $3.4 billion Istanbul Finance Center
- Critics say the center is merely a real estate development
According to Bloomberg article published on April 17, 2023, President Recep Tayyip Erdogan on Monday opened a financial center in Istanbul, Türkiye’s largest city that’s long been overlooked by the giants of global finance amid the president’s erratic policies.
The Istanbul Finance Center offers 1.4 million square meters of office space and is pitched by Erdogan’s inner circle as a future hub for finance in the region.
To critics, the inauguration is just another campaign stop for the president, who’s trying to boost his popularity ahead of May 14 elections, where he’s seeking a third term.
“IFC will create a new financial ecosystem,” Erdogan said during the opening ceremony. “It will boost our potential to attract investments by facilitating international capital flows.”
The $3.4 billion development is located on the Asian side of Istanbul, just across the waterway that separates it from the city’s older financial district. But even local financial institutions have been wary of moving to the new hub. The central bank, state lenders and some regulators are among the few tenants of the new finance center.
Wall Street banks have been downsizing their Istanbul offices for years and there is little sign of a reversal.
“How can one establish a finance center without macroeconomic and financial stability?” asked Oner Guncavdi, an economist at the Istanbul Technical University. The opening is “just a show intended for elections,” he said.
Troubled Past
The project has had a rocky start since its inception in 2009. Türkiye’s sovereign wealth fund had to take over the project in 2019 after contractors failed to provide reliable financing for the development in the absence of interest from future tenants.
The lackluster interest in the IFC coincides with foreign funds’ outflow from Turkish assets, which gained pace after Erdogan named his son-in-law Berat Albayrak as the Minister Treasury and Finance in 2018.
Under Albayrak, Türkiye has made it more difficult to trade lira assets and hedge against currency moves. Foreign holdings of lira bonds fell to $1.2 billion as of March from a peak of $72 billion in 2013, according to official data. Foreign ownership of stocks fell to 29% during the same period, from a historical average of 61%.
In the meantime, the likes of Morgan Stanley, Citigroup Inc. and JPMorgan Chase & Co. have cut the number of staff in Istanbul or shut down trading or research units altogether.
According to the government, the IFC will attract $250 billion of foreign investments into Türkiye until 2036. The center also will also carry “a clear message to global finance centers” that Türkiye is on the path of “economic independence.”
Unorthodox Policies
Under pressure from Erdogan, Türkiye’s policymakers have been pursuing an increasingly unorthodox economic strategy since the president consolidated all executive power in his hands with the 2018 elections. The biggest outlier has been Türkiye’s monetary policy: the central bank lowered its policy interest rate to 8.5% in February despite runaway inflation, in line with Erdogan’s unorthodox view that lower rates will slow price increases.
Türkiye’s main opposition parties promise a normalization in economic policies if they defeat Erdogan next month. Kemal Kilicdaroglu, the main opposition candidate in the elections who leads Erdogan in many polls, promised to return the central bank headquarters to Ankara, the capital and stop interfering in monetary policy.
