IFC FOCUS ISSUE 8

FEBRUARY 2018

TOP TRENDS
IN
FINANCIAL
SERVICES
INDUSTRY

exclusive interview agenda

ADNAN YILDIRIM, TÜRK EXIMBANK MiFID II: A Regulatory IPOs and Wait is Over: Turkey
GENERAL MANAGER Attempt to Provide Opportunities to Manufacture its
Türk Eximbank Always Supporting Transparency Across in the Turkish First Truly Domestic
Sustainable Growth Europe Market Car
 IFC
content

16:28

IFC FOCUS ISSUE 7

JANUARY 2018

focus
TURKEY’S
INVESTMENT
ENVIRONMENT

TOP 32
TRENDS
IN
exclusive interview AGENDA

FINANCIAL
SERVICES
İLKER AYCI, TURKISH AIRLINES CHAIRMAN Exports in 2017 as Big Data: Insights Real Estate Five Routes
Turkish Airlines, Prevailing Strength in Global Aviation Industry a Growth Dynamic on the Economy Investment Funds of Istanbul

ISSUE 7 JANUARY 2018

INDUSTRY

Exclusive
Interview

Drastic changes in technology, especially over the past few

23 years, is the most creative force that prevents the financial
institutions from continuing to take role, behave and
function in their traditional way.

economy
13 MiFID II: A Regulatory Attempt to Provide
Confidence and Transparency Across
Europe
Türk Eximbank 19 Turkey Grows Without ever Compromising
Always Supporting on Price Stability
Sustainable Growth
Türk Eximbank has been
steadily providing support to
exporters, particularly
SMEs - the backbones of the
19 13
Turkish economy- and takes
part in international projects.

February 2018 IFC FOCUS 01

 CONTENT

life in 56
Istanbul

62 macro
indicators
63 economic
calendar
64 figures
connectivity Istanbul at a Glance
21 IPOs and Opportunities in the Turkish
Market
Initial Public Offerings – IPOs – provide lucrative
opportunities for investors.
44
op-ed 46
44 Wait is Over: Turkey to Manufacture its

IFC
First Truly Domestic Car
President Recep Tayyip Erdoğan announced that FOCUS
the Turkish government is ready to support five
pioneering companies to make Turkey’s dream
of having a car of its own finally come true.
ZE INVEST
46 USE OF CFA IN AFRICA Yayıncılık LTD. ŞTİ.
Issued in Pessac and Chamalieres regions of Saray Mah. Küçüksu Cad.
Antasya Residence No:64/A Blok
France, CFA (French: Franc de la Communaute
K.4/65 Ümraniye
Française d’Afrique) has currently being used
as official currency of 15 African countries.
CFA Franc is one of two colony currencies used
52 info@zeinvest.com.tr
www. zeinvest.com.tr

across the world (the other one is Comor Franc).

This study deals with the history of CFA Franc
as well as the advantages and disadvantages
offered by the use of it. Baskı-Cilt | Printing-Binding
Marmara Reklam ve Pazarlama
sectoral LTD. ŞTİ.
Litros Yolu. 2. Matbaacılar
Sitesi ZC-4 Topkapı-Zeytinburnu
52 Overview of Turkey’s ICT Industry
İstanbul
ICT has a multiplier impact on a country’s T. +90 212 501 31 72
industry and economy, and Turkey is well info@ marmarareklam.net
aware of this. www. marmarareklam.net

02 IFC FOCUS February 2018

 op-ed

USE OF
CFA
IN AFRICA
Issued in Pessac and Chamalieres regions
of France, CFA (French: Franc de la
Communaute Française d’Afrique) has
currently being used as official currency
of 15 African countries. CFA Franc is one
of two colony currencies used across
the world (the other one is Comor
Franc). This study deals with the
history of CFA Franc as well as the
advantages and disadvantages
offered by the use of it.
BY Saadet GÜLMEZ - DEİK
Assistant Coordinator, Turkey-Africa Business Councils

046 IFC FOCUS February 2018

February 2018 IFC FOCUS 047
 OP-ED

C
FA Franc appeared upon the
establishment of the Franc zone
by France to enhance its monetary
control on African Colonies in 1939.
It was created in order to prevent excessive
price increase for convenience goods in the
course of a possible war. France put Franc
of the French Colonies in Africa (French:
Franc des Colonies Françaises d’Afrique) into
circulation in 1945. In 1958, the name of FCA
Franc was changed and became Franc of French
Communities in Africa (French: Franc de la
Communaute Française d’Afrique). Despite
the fact that French colonies in Africa gained
their independence in 1960’s, the use of CFA
Franc has survived until today. It has currently
been used as the currency of such regional
organizations as West African Economic and
Monetary Union (French: UEMOA, English:
WAEMU)1 and Central African Economic and
Monetary Union (French: CEMAC, English:
ECCAS)2.
The power to issue CFA Franc and adjust
the value of this currency is undertaken by the
Central Bank of France. This, in turn, leads to
the research question that why the central bank
of an independent country cannot issue its own
money. Except this, translation of CFA Franc
into a foreign currency has been guaranteed
by French Treasury. However, it is obligatory
to invest 50 percent of the translated foreign
currency reserves into French Treasury. This
results for an independent country in the
inability to use its own money for its economic
and social development. Besides, the majority
of the countries in the region was listed among
Slightly Indebted Poor Countries according
to 2015 report of the International Monetary
Fund (IMF).3 The Togolese Economist Kako
Nubukpo calls this situation as “monetary
slavery”.4 It highlights that such guarantee
offered by French Treasury is regarded as an
insurance system established for preventing
the failure of economic and political lobbies of
France in Africa and that the system in question
does not serve as a trigger for structural
transformations in Africa.
CFA Franc which is indexed to French
Franc has being used in an indexed manner to
Euro since 1999 when France adopted Euro
(1 EUR=655,957 CFA). All money transfers

048 IFC FOCUS February 2018

 within the territory can be performed freely
and without a fee thanks to the shared
currency. This system was intended to ensure
financial balance for the countries in CFA Franc
zone. However, this causes that the value of
currency is subjected to the effect of Euro zone
rather than local realities.
The fact that CFA Franc has been indexed to
EUR results in a stable and powerful currency.
This decreased the competitive power of
CFA Franc zone in export. For instance, local
products cannot compete with the goods of
such countries that have a low currency value
like Chinese Yuan.
When the inflation policy of CFA Franc
zone is reviewed, it can be seen that maximum
2 percent money circulation is possible in
UEMOA Region whereas this ratio has been
identified to be 3 percent in CEMAC countries.
Although this policy has stabilized inflation
rates of such countries, these countries allocate
their resources and time to achieve the given
inflation values.
As is known, credit usage is an inevitable
factor in the development of a country. Because,
bank credits are needed for private companies
or public investments in undeveloped or
developing countries. However, central banks
of CFA Franc zone have limited the credits
given to companies by banks. In any event,
the ratio of credit given to private industry
by Southern Africa constitutes 144.4 percent
of GDP according to 2016 data of the World
Bank.5 Given credit ratios does not exceed 23
percent of the GDP. As a result, comprehensive
infrastructure and superstructure projects
cannot be implemented.
The use of CFA Franc has been disputed
by politicians, economists and Pan-African
activists since the date when it was put into
Despite the circulation. The fact that France cut the
fact that purchasing power of CFA Franc in half by
French colonies means of reducing the value of this currency
in Africa in half in 1994 and the devaluation rumours
gained their coming up in 2010 aggravated the discussion.
independence in For example, İdris Deby Itno criticized
1960’s, the use the enforcement policy of CFA Franc in
of CFA Franc has African countries in his statement made in
survived until International French Radio (RFI) in 2017.
today. He further noted that the mentor system
between France and African countries must be

February 2018 IFC FOCUS 049


eliminated and relationships must be carried
on in accordance with the principle of mutual
benefit. He also pointed out that CFA Franc
is not an African currency due to its indexed
value to EURO and that central banks of African
counties should control their own currencies.6
As can be figured out from this study, the
use of CFA Franc offers various advantageous to
the countries in the region; however, limitation
of the powers of the territorial central
banks indirectly leads to negative effects on
export, growth and potential investments.
This contradicts with the independence and
sovereignty principles of the states engaged in
current international order.
What Future for the CFA Franc?
The future of the CFA franc is the responsibility
of the Africans. It will depend on the political
will of decision-makers and the population’s
desire for emancipation.
In the short term, a revision of the
Monetary Cooperation Agreements with France
is needed, as was the case in 1973 after the
criticisms of Togolese President Gnassingbé
Eyadéma. Those changes transferred the
headquarters of the central banks to Africa
and reduced the role of France in their boards
of directors. Future revisions must eliminate
the aberrations of the system, such as the
non-convertibility of the two CFA francs. They
should shed light on the management, opaque
until now, of the operation accounts held by
the French treasury while facilitating the use of
surplus reserves. Concerning the fixed parity,
an intermediate solution is to anchor the CFA
franc to a basket of currencies. This reduces
the exposure of the countries to a strong
appreciation of one anchor currency and allows
050 IFC FOCUS February 2018
OP-ED
more flexibility in monetary policy.
In the long run, the monetary
future of African countries lies
in monetary integration projects
within the Regional Economic
Communities. The Economic
Community of West African States
(ECOWAS), which includes West
African Economic and Monetary
Union countries, has the most
advanced monetary integration
project on the continent. For the
new regional currencies in Africa,
it will be necessary to avoid
reproducing the same errors as
those of the CFA system. More
precisely, the authorities must
take the necessary measures, in
particular through the development
of the financial sector, to allow
these currencies to fluctuate freely
while remaining convertible.
1
Benin, Burkina Faso, the Ivory
Coast, Guinea Bissau, Mali, Niger,
Senegal, Togo
2
Cameroon, Chad, Republic of
Central Africa, Gabon, Equatorial
Guinea and Congo
3
http://www.imf.org/external/np/
pp/eng/2016/031516.pdf
4
http://www.jeuneafrique.
com/500760/politique/
francophonie-kako-nubukpo-et-le-
franc-cfa-la-goutte-de-trop/
5
https://donnees.banquemondiale.
org/indicateur/FS.AST.PRVT.GD.ZS
6
http://www.seneweb.com/news/
Afrique/franc-cfa-idriss-deby-
estime-qu-rsquo-il_n_220693.html
http://www.worldpolicy.org/
blog/2017/02/28/costs-and-
benefits-cfa-franc
 Turkey-Ecowas
Economic And
Business Forum
22 - 23 February 2018
Hilton Istanbul Bomonti Hotel & Conference Center

Within the concept of Turkey’s Strategy to Enhance
Bilateral Trade and Economic Relations with
West Africa, Turkey will host the Turkey-ECOWAS
Economic and Business Forum in February 22-23,
2018 in Istanbul.
The Forum, hosted by Ministry of Economy of
the Republic of Turkey will be held in cooperation
with the Economic Community of West African States
(ECOWAS), will provide a unique platform for the
business circles of Turkey and West African countries
to create a long-lasting cooperation.
The event is expected to gather Ministers
of Trade/Economy from ECOWAS countries,
Chairpersons of the Chambers of Industry and Trade
and Business Associations as well as members of
the Turkish and African business circles from 15
countries in West Africa representatives of the media
from Turkey and Africa are invited. The 2 day-
program will be enriched with inaugural ceremony,
Ministerial meeting, G2B meetings (country project
presentations) along with B2B meetings and gala
dinner.

February 2018 IFC FOCUS 051