Originally appeared on Bosphorus Consulting on 02 May, 2015
Amongst cities vying for top spots as a financial hub, Istanbul dropped two places to 44th in the most recent report from the Global Financial Centers Index (March 2015). In September 2014 Istanbul ranked 42nd, so the 2-point drop is alarming to those involved in the initiative to promote Istanbul as a top-10 world financial capital.
To be sure, Istanbul still has a long way to go to fully develop its potential. Even though it ranks highest among the Eastern European and Central Asian centers, it could be better. Borsa Istanbul is actively working toward its own ambitious targets, but what about Turkish businesses? Are they doing their best in performing to the internationally-recognized standards expected of a truly international finance center? While our discussions with analysts suggest that corporate governance in Turkey has improved over the last decade (see our article in FTSE Global Markets: “Evaluating Corporate Governance in Turkey”, 9 July, 2014), there is still a long way to go until it is where it needs to be.
Furthermore, our own research reveals consistent complaints from analysts and investors that Turkish companies do not do enough to describe how geopolitical events in the region influence decision making and otherwise impact operations. Amongst emerging markets, Turkey is generally regarded as weak (worse than South Africa and Brazil, for example) in open and honest disclosure.
We must also remember that any increase in international transactions will draw even greater attention to Turkish businesses – both listed companies and those seeking to list. Increased attention could expose vulnerabilities and weaknesses, thereby further limiting Istanbul’s impact as a dominant financial capital. With 14th-ranked Riyadh merely a few hours to the east and 2nd-ranked London only a few hours in the other direction, Istanbul has stiff competition which may result in loss of inward investment.