* FDI to help generate some $10 bln in new annual funds
* Initial focus at home, global expansion in five years
* To open China office next year, others later -Sonmez (Adds comments on foreign direct investment, Turkcell, petrochem decision)
ISTANBUL, Oct 8 (Reuters) - Turkey’s sovereign investment company aims to generate some $10 billion in funds annually in coming years, initially for investment in domestic petrochemical, mining and insurance industries before looking abroad, its CEO Zafer Sonmez told Reuters.
The Turkey Wealth Fund (TVF), which oversaw $240 billion in assets last year, expects borrowing will generate up to half of those new funds while $1-2 billion will come from foreign direct investment, he said.
Sonmez, who took the fund’s reins two years ago, said the investments aim to help Turkey to overcome long-running structural challenges such as current-account and savings deficits, and also short-term fallout from the coronavirus pandemic.
“We are focusing domestically in our investments in this period. Within a few years, we will also put into effect foreign investments,” he said in an interview.
The TVF aims to have several foreign offices within five years, including in London and Africa, the first of which will open in China in a year, Sonmez added. “We will have maybe 25-30% of our assets under management invested overseas, but not today.”
Two economic contractions in as many years have laid bare Turkey’s reliance on imports and cheap foreign credit, and halted a string of boom years under President Tayyip Erdogan. The lira has lost half its value since the beginning of 2018.
The economy shrank 9.9% in the second quarter as a lockdown brought activity to a near standstill, its worst year-over-year performance in a decade, but has since begun to recover.
The government set up the fund in 2016 to develop the value of Turkey’s strategic assets and provide investment resources.
Its assets include investments in major banks and insurance companies, state energy companies, flag carrier Turkish Airlines , fixed-line operator Turk Telekom and miners.
The TVF’s total holdings in equities amounted to some $33 billion at the end of 2019.
Last week, four sources told Reuters the TVF was is in talks to provide emergency funding to Turkish Airlines, one of the companies hit hardest by the pandemic, which hammered Turkey’s key tourism industry.
Speaking from the TVF’s headquarters in Istanbul, Sonmez said a feasibility study on a petrochemical plant in Ceyhan was nearly complete and a final investment decision will come next year.
The CEO said the fund can solve complicated problems that restrain the broader economy. He cited mobile phone company Turkcell, in which the TVF is taking a 26.2% controlling stake under a deal described as a chance to resolve long-running shareholder disputes.
“Even if the private sector is big in Turkey, unfortunately they have not made some major investments such as in petrochemicals,” he said. “When we make such investments, an eco-system will form around it.” ($1 = 7.8869 liras) (Additional reporting by Daren Butler; Editing by Jane Merriman)
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