Could Konzum potentially get Turkish owners?
The Honorary President of Turkey’s Süzer Group discusses the 20th anniversary of Kent Bank and seven years of doing business in Croatia for the first time for domestic media, for Ana Blaskovic/Poslovni Dnevnik, on the 14th of May, 2018.
Turkey’s Süzer Group stepped onto the Croatian market back in 2011 with the purchase of Kent Bank (formerly Brod Bank). Its portfolio is a vast and impressive one, ranging from the development of real estate projects in Turkey and the USA, to energy, tourism (they own the Ritz-Carlton hotel in Istanbul), construction, and financial services. Their purchase of a Croatian bank was intended to be a platform for the strengthening of the relationship between investors and Croatia, the youngest member of the European Union. With Poslovni Dnevnik, Mustaf Süzer discussed the past seven years of investment experience in Croatia, relations between the two countries, and Turkish investors’ plans.
Süzer Group purchased Kent Bank in 2011 and today it’s celebrating its twentieth anniversary. How much money have you invested, and are you satisfied with the 5.2 million kuna profit and 2 billion kuna in assets in 2017?
Yes, we’re satisfied. We’ve invested more than 50 million dollars. It was difficult for us in the first two or three years, we came to a new country, we didn’t know the people or the customs, we were focused on building the bank’s infrastructure. Today, we know Croatia and we started making profits. It’s not yet up to the level we expected it to be, but we’ve been recovering over the last few years. Our goal is to build a strong financial institution in Croatia in the long run.
How much are you planning to invest in Kent Bank and are you thinking about acquisitions?
First, we have to grow, then we’ll invest as needed. Until now, we’ve retained all the profits in Kent Bank. It’s doing much better now, but there’s still a long way to go. We want to grow in an organic way and achieve a billion euros in assets with sustainable profitability. We were thinking about buying other banks and merging, but so far, we haven’t found a healthy bank that would fit in with our strategy. But, we’re still looking – if there’s a good bank, we’re ready. It’s not easy to grow on the Croatian market, but our goal within the next five years is to become a very powerful universal bank. In the long run, we’ll see the five largest banks in Croatia. The future is in digital and mobile banking, where we’re focused on good IT infrastructure.
How do you look upon the past seven years of business in Croatia? Have you noticed any improvements in the business climate?
We’re a family company, not a venture capital fund that looks at short-term investments in 3-4 years and leaves. Unlike them, we’re long term investors and seven years, in our perspective, isn’t that long. (Here, we’ve seen an example of the state giving such a fund to purchase a bank, that’s very rare, and even very dangerous, and just not a good idea in the banking sector). Looking back, the people and power are changing in the right direction, but very slowly. I think the socialist mentality is still quite present. It will benefit Croatia when people recognise that there are investors of the locomotive economy. Without brave and well-intentioned investors, there’s no successful economy.
Croatia and Turkey are two very different countries, but they share a problem with the administration. How are you fighting this?
Bureaucracy is everywhere. If you’re dealing with a business, solving bureaucratic problems is your everyday life. Whether you’re in Turkey, in Croatia, or in the USA. The government should help investors to overcome obstacles. For example, in Hungary, profit tax is 9 percent. This is fantastic, among the lowest rates in the EU. Last month, I was in Hungary with a group of investors upon invitation by the Hungarian Government. They promised us all the support we needed if we decided to invest. Croatia is a beautiful country, like a paradise, the people are lovely, but it’s sad to see smart young people going off to work in Ireland or other EU member states. When you get off the plane at Dublin Airport, you’ll see crowds of business people – everyone here wants to do business for ease. You have a wonderful new airport in Zagreb that is relatively empty. I think that more friendly investors’ rules could help the Croatian economy grow faster.
What was your best and worst experience of investing in Croatia?
The biggest problem was the Credo Bank case. When it went bankrupt, we lost 10 million kuna. There could have been a better solution, such as the bank being offered state aid. It’s in the benefit of both investors and clients for the state to support financial institutions more strongly. If we look at the best experience, aside from just entering the EU, I’d say that the development of the crisis in Agrokor was a pleasant surprise. The state took good care of that and therefore prevented its further escalation. We were expecting a much worse situation, but for now, things are going well. The bureaucracy is still a major problem, and its resolution would help with new investments, as well as strengthen existing ones.
What has changed for Kent Bank since joining the EU?
There was no dramatic effect in numbers, but by entering the EU, we feel stronger as part of the big market.
More than 25 years have passed since the establishment of diplomatic relations between Turkey and Croatia (Sulejman Demirel was one of only two state presidents who came to the funeral of Franjo Tudjman). We have no open political issues, why are economic relations lagging?
I don’t think economic cooperation is lagging behind. Good political relations have also had economic benefits. A large number of companies invested in Croatia, and the trade between them is increasing. With the support of the country, it will continue to develop. When I talk to my business friends, they always complain about bureaucracy. This is a constant problem, and shoulder to, shoulder, there’s a high tax burden on profits.
You’re a business with a portfolio in a row of branches, where do you see the greatest opportunities for investing in Croatia?
I advise friends to come and invest in tourism and energy (solar, geothermal and wind power plants). In Croatia, tourism is the fastest growing sector, which has better results every year, and is a great branch for investment. One of my closest friends, the owner of MB Holding, has invested in geothermal energy and is on the verge of launching production. Another friend invested in biomass, Uni Viridas beside Babina Greda (village in Vukovar-Srijem). Recently, my friends in the retail business are thinking of buying Konzum, there are two big Turkish companies interested in bidding. In Konzum, they can see the door to the regional market and are waiting for the situation in Agrokor to unfold. I hope they’ll sell it.
Do you plan to expand your portfolio outside finance?
No, we don’t want to spread our business to other sectors. First of all, we want to be very successful in banking.
In 2016, there were more than 90 Turkish businessmen in the Croatian-Turkish Economic Forum in Zagreb accompanied by President Erdogan, how much did that help with new investments?
Political and economic relations between our two countries are well developed and we believe that this will continue. This will bring more Turkish investments into Croatia, but you know that in the last couple of years we’ve had our own problems with our neighbouring countries, which has diverted the focus of the government to other areas.
Russian investors are unofficially complaining that their capital is undesirable in Croatia. Doguš group failed to increase shares in ACI… Did you get the impression that Turkish capital is undesirable here?
No, never. We’ve always been made welcome here. There were some barriers to business, but unrelated to the fact that capital came from Turkey. It was “business as usual”.
Over the last five years, Turkey has experienced a series of shocks (situation with the Kurds, terrorism, the migration crisis, the war in Syria). How did this affect the economy, and did you feel the consequences for your business?
Imagine 2011: 550,000 Syrian tourists came and spent money in Turkey. The next year, there were no tourists, but we fed four million refugees from that country. Süzer Group was also hit by it, it’s hard to tell how much money we’ve lost, perhaps 20-30 million dollars. Turkey is geographically located near Middle Eastern countries. When you’re a neighbour, you can’t live without the situation affecting you. Everyone has their own interests in that area, it’s always been like that. Now things may be a bit more active, but living in that environment, we’re adjusting, we’re flexible, and we’re taking the necessary measures. We’re very experienced in finding solutions.
Is Turkey still feeling the effects of what happened in 2016?
The situation has improved, I’d say by 80 percent. The government immediately took the necessary measures and last year the Turkish economy grew strongly.
Tourism is a significant part of your portfolio in Turkey, you’re the owners of Ritz-Carlton hotels in Istanbul. This year, the best tourist season has been forecast since 2011, but the escalation of the war in Syria seems highly probable…
Yes, that really hit us, but we’ve started to recover. On the Mediterranean and Aegean Sea, the numbers for early booking are very good. We expect this year to be better than the previous one. Tourism in Istanbul is something different and it will take some time for it to recover completely. It also helps to improve our relations with Russia and other countries. Prices are still below 2011 levels, but we expect increases in tourism revenue.