The United Arab Emirates’ $51 billion investment pledge to Türkiye, made two years ago in 2023, is facing significant challenges, as Türkiye’s improving economic situation has led local companies to hold firm on valuations, hindering deal progress according to Bloomberg.
The most recent setback occurred when AD Ports Group, backed by the Abu Dhabi wealth fund ADQ, was unable to finalize the acquisition of operating rights for a port in western Türkiye. Other key deals, such as an acquisition offer for one of Türkiye’s largest banks and an $8.5 billion debt issuance, have also fallen through.
Emerging valuation disagreements
Valuation disagreements have emerged as a primary obstacle, according to sources familiar with the situation. Gulf investors, typically seeking discounted distressed assets, have struggled to align with Turkish sellers, who are hesitant to sell their assets at low valuations,the sources speaking to Bloomberg added, requesting anonymity due to the confidential nature of the discussions.
The $51 billion pledge, announced in July 2023 after Turkish President Recep Tayyip Erdogan’s reelection, was seen as a potential solution to stabilize Türkiye’s struggling economy, support reconstruction efforts following devastating earthquakes and encourage the rapprochement between Türkiye and the UAE following strained relations.
However, since then, Turkish policymakers have managed to avoid a foreign-exchange reserves crisis and stabilize the economy by adhering to orthodox monetary policies. This economic recovery has made the UAE’s financial support less urgent.
“Turkish banks and companies have been able to borrow easily from abroad, and the central bank has built up reserves,” said Haluk Burumcekci to Bloomberg, an Istanbul-based economist and founder of research firm Burumcekci.
In 2023, Türkiye postponed an $8.5 billion sukuk deal due to unfavorable yield demands from the UAE. Discussions between First Abu Dhabi Bank PJSC to acquire a controlling stake in Turkish lender Yapi Kredi Bankasi AS and talks involving renewable energy giant Masdar’s potential investment in Fiba Yenilenebilir Enerji also collapsed over valuation disagreements.
Additionally, units of Abu Dhabi conglomerate International Holding Co., including Multiply Group and Ghitha Holding, failed to close deals for a Turkish waste management company and a cargo airline. Other high-profile transactions, such as the construction of a railway across Istanbul’s Bosphorus Strait and investments in Turkish defense firms, remain pending.
Optimistic outlook
The only successful deal so far has been ADQ’s acquisition of Odeabank, a small Turkish lender.
Despite these setbacks, Türkiye remains optimistic about the future of the economic partnership. Burak Daglioglu, head of Türkiye’s Presidential Investment Office, expressed confidence that bilateral investment flows will continue to grow, especially with the Comprehensive Economic Partnership Agreement between the two countries in place.
Many of the entities seeking Turkish assets, including ADQ, are part of the business empire of Sheikh Tahnoon bin Zayed Al Nahyan, Abu Dhabi’s influential royal. These firms are known for their aggressive dealmaking but also for insisting on favorable terms.
The UAE’s investment strategy now reflects stricter deadlines and higher return expectations, signaling a shift from unconditional investments. According to Serhat Suha Cubukcuoglu, a senior researcher at Trends Research and Advisory, “The era of unconditional investments has ended.”
Source: turkiyetoday