1. April 2011 Prospects for Turkish-Arab Relations are Promising Ibrahim S. Dabdoub Group CEO National Bank of Kuwait 6th Turkish-Arab Economic Forum (TAF'11) Turkish-Arab Relations Are On The Right Path Four Seasons Hotel, Istanbul April 26-27, 2011

2. Overview Turkey and the Arab world enjoy a solid and growing relationship on several fronts Prospects for the future look good for further cooperation and improved ties Still, some difficulties remain

3. Solid relationship on several fronts Share long standing historic and cultural ties – Common history, though not always a positive one – Common religious tradition despite some differences – Shared geo-political and demographic concerns Turkey attractive for Arab investment and trade – Stable economy with an improved macroeconomic management (IMF) – Welcoming political environment – Solid infrastructure – Openness to investment from the Arab world

4. Rising investment and trade flows Over 2,000 Arab companies have $10.6 bn in direct investments in Turkey, most occurring since 2006 Turkish businesses have a growing interest in Arab countries (factories, railroad, contracting, etc.) Trade flows have grown on average by 18% p.a. since 2002 ($24 bn in 2010; 14% of Turkey’s exports are to Arab countries)

5. Trade ties on the rise

6. Exports and imports are geographically diversified

7. Political relations have warmed since 2002 AKP desire to expand ties with the Islamic and Arab world Growing sympathies with the Arab side of the Arab- Israeli dispute Recent support to Bahrain’s government Medical relief to the rebels in Libya; offer to mediate a resolution to the conflict

8. Cultural ties are solid Turkish serials are popular in Arab world Popular destination for Arab tourists – Cultural affinity and geographical proximity – Over 2 million Arab tourists visited Turkey last year.

9. Prospects for the future look good Global financial crisis and the Arab uprisings have created an opportunity for expanded Arab-Turkish engagement. Arab world sees Turkey as a viable economic and political partner. Promising and safe opportunities for GCC investors in Turkey’s agricultural, real estate, tourism, infrastructure, financial services and construction sectors. GCC construction projects present a unique opportunity for Turkish contractors – Planned and underway projects total $1.9 billion – Projects in Kuwait exceed $150 billion

10. Arab uprising impact is temporary Short term drop in exports to Arab world in 2011 is likely to be temporary – In the first two months of 2011, Turkish exports to Egypt, Libya, Syria and Tunisia have all declined compared with the same period last year. – Exports to Egypt fell by 21 percent and to Tunisia by 38 percent Compelling opportunities to keep Arab countries as attractive partners – GCC: stable socio-political structure; available resources to meet needs New fiscal measures (housing, employment, salaries increases, services) Government legitimacy; tribal patriarchal culture; social contract – Long term prospects for Egypt, Syria, Iraq, Tunisia and Libya are positive Egypt’s size (population: 83 million) Syria’s push to open its economy Iraq and Libya’s need to rebuild Tunisia’s well developed economic base

11. Turkey must also tackle challenges High current account deficit heightens fears of inflation and currency instability in the long term. WEF’s Global Competitiveness Report 2010-2011 ranks Turkey as 61, far below the UAE, Saudi Arabia and Kuwait and just above Jordan. Transparency remains a concern. Cost of doing business including high energy prices FDI has not recovered to pre-2008 crisis levels as of yet

12. Thank you

13. Appendix

14. Arab investment has been rising Arab countries accounted for roughly 10% of FDI inflows between 2006 and 2010 ($6.3 bn) Accumulated Arab FDI in Turkey was $10.6 billion at the end of 2010 – > 95% of from the GCC – UAE (59%); KSA (19%); Kuwait (7%) Over 2,000 Arab companies have investments in Turkey in various sectors – UAE: mainly in the tourism and energy sectors. – Kuwait: in retail, hospitals, finance, real estate, automobiles and construction – Qatar: agricultural, healthcare, prospective cooperation in energy and infrastructure.

15. Turkish interest is growing Factories opened in Egypt and Bahrain Railroad reopened between Turkey, Syria and Iraq in early 2010 High level Turkish business delegations have visited several Arab states in the last few years

16. Trade ties are rising Total trade with the Arab world stood at $24 billion in 2010, up 14% from the year before Trade has grown by an annual average of 18% since 2002 vs. 13% p.a. with the EU Growth in trade with the GCC was even more rapid at 21% since 2002 to $9.3 billion About 14% of Turkey’s exports are to Arab countries