Turkey’s goal of positioning Istanbul as a major global financial center is no secret. The government has long planned to move the Turkish Central Bank there. Now there is talk of the soon to be consolidated exchanges of Istanbul (Bourse Istanbul) to work in some type of partnership with the NASD or the London Stock Exchange. Turkey’s economy has been largely robust in recent years and the country is becoming much more noticed. The question, is, dovetailing on the previous post of Abu Dhabi’s new planned zone, how many new financial nerve centers can the MENA region (and more broadly Asia) handle?

The Dubai International Financial Centre (DIFC), established almost a decade ago, has become a critical piece in the city’s aspiration to become a major banking, tourism, and knowledge hub, parallel to a track Singapore is on (albeit at perhaps a more advanced stage) in East Asia. Abu Dhabi is now seeking to establish its own zone in Al Maryah island. This is not to mention the Qatar Financial Centre (QFC) in Doha. 

To be fair, Istanbul can occupy a very different niche than many of the Gulf countries. Being centrally located between Europe and Asia, it is a gateway not only to the Middle East, but also Central Asia and Eastern Europe. Istanbul is becoming a transport hub in its own right.  It is much closer to western Europe than the GCC hubs (and certainly Singapore) and has an arguably solid industry. Further, Istanbul is one of the world’s largest cities, so it’s more than a financial free zone.

The question is whether Istanbul has the other critical factors necessary to attract international finance the way London, Singapore and even the DIFC have been able to. This requires a few critical traits, such as: 

1. Well-developed laws regulating financial services.  Turkey has done much along the line of legal reform, but it is hard to develop robust financial regulations that allow transactions to take place but at the same time ensure regulation is not overlooked and protections endure. 

2. Well-developed dispute resolution systems and quality judges and arbitrators. Arbitrators do travel, judges generally do not. Does the judicial system of Istanbul and more broadly Turkey have the sophistication to handle major international banking and business disputes?

3. English. While English is generally spoken by many of Istanbul’s smart set, it needs to become more pervasive for it to become a hospitable center for expatriates and foreign investors. Otherwise it will remain in some part regional. 

Many out there will attest to Turkey being a junior “BRIC” (Brazil, Russia, India, China) state, and its economy holds much promise. It will be interesting to see how the development goes forward.