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RESHAPING OF EMERGING MARKETS
What does it imply for leasing industries in
Turkey and other emerging economies
Cüneyt Akpınar
EFG Leasing
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Changing dynamics of the emerging markets &
the potential for their leasing industries
Special Reference: Turkish Leasing Industry
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3
Shifting Balances
Emerging Economies
Population
Land Mass
FX Reserves
Oil Demand
GDP
Exports
Advanced Economies
0
10
20
30
*Emerging Economies as % of total World, 2010; Source: IMF
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40
50
60
70
80
90
100
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Russia
Japan
Emerging
Czech Rep
Poland
Germany
Korea
South Africa
France
UK
China
US
Thailand
Chile
Brazil
Argentina
Indonesia
Turkey
Mexico
Vietnam
India
Malaysia
100%
Egypt
Saudi Arabia
Pakistan
EM: Strong Human Capital
Projected Growth of Working Age Population (Ages 10-65), 2005-2030
80%
60%
Advanced
40%
20%
0%
-20%
-40%
They are growing faster than the
advanced economies
Contribution to Global Growth
Emerging Economies
Advanced Economies
Source: HSBC
GDP Growth
2010
Advanced Economies
Emerging Economies
Source: IMF
6
2011
2012
3.0
2.4
2.6
7.3
6.5
7.0
By 2050…
Relative Size of G7 and E7 Economies
120000
E7 countries, to outperform
growth in US, EU, G7 and
OECD.
100000
80000
E7
G7
60000
E7 to attract the highest levels
of capital inflow and
substantial increase in trade
volumes.
40000
20000
0
2006
2050
*US$ bn at constant 2006 prices
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Source: Goldman Sachs, PriceWaterHouseCoopers
They invest heavily in sectors
where leasing industry is the most
active
Energy Infrastructure
Transportation
Telecommunications
Health
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Share of Formal SMEs in Formal
Manufacturing Employment & GDP, %
Share of SMEs in
GDP growth &
employment is very
high…
70
Developing
Advanced
60
50
40
30
20
10
0Share of Formal SMEs in Formal
Manufacturing Employment
…but their access to
financial services
remains severely
constrained
Share of Formal SMEs
in GDP
Share of Informal SMEs in Labor Force & GDP, %
50
Developing
Advanced
40
30
20
10
9
0
Share of Informal SMEs in
Labor Force
Share of Informal SMEs
in GDP
Key Take Away: Emerging Markets will provide
significant growth prospect for their leasing
industries…
Larger and relatively stronger
Offering significant growth potential
Under-penetrated
Under-capitalized
Under-leveraged
Under-valued
Providing compelling sector/company-specific stories
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…& significant value-added for global players
Margins are higher
Returns are stronger
Penetration levels are low
Strong M&A activity as well as privatizations and
greenfiled investments
Scope for know-how transfer and value add
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…&
..but “High Return” comes with “High Risk”
Bottlenecks in legislative framework ?
Unregistered economy ?
Liquidity ?
Instable financial markets ?
Corruption ?
Cross-border funding?
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Special Reference: Turkish Leasing Industry
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What can Turkey offer different from other
Emerging Markets
Unique Geographical Location…
…at the crossroads between East & West, overlapping Europe & Asia geographically
…occupies an area approximately equivalent to the quarter of the size of the EU
…strategically located on critical energy corridors
…is the leading investor in Caucasian and Central Asian Turkic Republics
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GDP
Fast
growing
economy
Consecutive High Growth Rates
US$bn
1970
US$ 13 bn
2000
US$ 200 bn
%
2011
US$ 776 bn
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Source: TURKSTAT
Declining Budget Deficit
& Net Public Debt
Budget Balance / GDP %
0
-1.1 -0.6 -1.6 -1.8
-2
-4
-1.3
-3.6
-6
-5.2
-8
-10
-5.5
-8.8
-12
-14
-11.9 -11.5
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: TURKSTAT
Net Public Debt / GDP %
70
66.3
61.5
60
55.2
49.1
50
41.7
40
34.0
29.5 28.2 32.5 28.7
2006
2007
30
20
10
16
0
2001
2002
Source: TURKSTAT
2003
2004
2005
2008
2009
2010
Increasing Trade
Volumes
1970
US$ 1.5 bn
2000
US$ 81 bn
2011
US$ 382 bn
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Stronger FDI flows
over
US$20bn per year
in 2005-2008
compared to only
less than US$1bn historically
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Promising for Higher Growth Rates
due to Low Penetration Levels
Energy
Automotive
Per capita consumption (toe)
Car ownership per ‘000
Finance
Loans + Deposits / GDP, %
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Penetration level in the leasing
industry is low even compared to
other emerging economies
Estonia
2.95%
Slovenia
2.59%
Bulgaria
2.00%
Hungary
1.79%
Poland
1.63%
Latvia
1.39%
Slovakia
1.37%
Czech.
1.31%
Serbia
1.14%
Romania
0.98%
Russia
Turkey
Ukraine
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0.72%
0.31%
0.26%
Source: London Financial Group and White Clarke Group - 2011
Turkish Leasing Industry in a Nutshell
Financial Leasing can be applied in the form of domestic lease, cross - border lease. Currently No
operational leasing.
Main medium-long term equipment financing instrument, especially for SME’s.
31 companies of which 26 are member of the association.
First 15 players dominate the market (mainly bank subsidiaries).
4 Participation 11 Investment Banks
Contracts : Almost all full payout - mostly fixed interest rate
Average term: 3 years
Average growth rate: 35% in real terms.
2011 grovth 55% in US$ terms.
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Strong Growth Rates of the Past are expected to Return with
New Legislation and Tax Reform
Sharp decline due to
tax changes coupled
with global
financial turmoil
Strong growth rates:
CAGR: 50.23%
Another growth
phase
6,712
19,373
24,250
1st Phase
June 1985 – June 2003
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28,581
37,239
2nd Phase
July 2003 – Dec 2005
42,963
3rd Phase
51,519
Jan 2006 – Dec 2007
19,878
6,197
10,186
4th Phase
Dec 2007-Jan 2012
11,195
5th Phase
current
Draft Leasing Law
What will Change?
Operating Lease
 Sale and Lease Back
 Sub Leasing
 Software Leasing
Higher
volumes
=============================================
Supporting Changes
New Products
 Improvement in legal cases (i.e. Get equipment quicker, more
severe trade/civil law articles against fraud).
Less
Bureaucracy
 No time restriction
 The voluntary-based Leasing Association will become
obligatory, covering all lessors and strengthening its status.
 Registration of lease contract with the Association will be less
bureaucratic compared to the current Notary Public application
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More
Efficiency
Future Prospects : Happily Ever After?
 Penetration levels to increase
New financial products their growth in volumes.
Improved margins
 Asset management and risk management will be crucial
 Technology investments to create competitive advantages
 Brokership will increase
Learning organizations will be formed
 Specialization/Value Creation/ Innovation will differentiate the
lessors. Benchmarking will be key.
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Thank you…
Further questions
[email protected]
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