It is with great pleasure that I welcome you to the General Assembly.
The crisis that hit US financial markets in 2008 grew quickly to encompass the entire world. European markets, where we have extensive business, have suffered severely from the crisis. While these markets have improved some since then, they are not yet completely stable.
The upheavals in the US and Europe also impacted other regions around the world. Economic balances of power that had been static for years shifted. The economic growth of developing countries, once seen as the locomotive of the global economy, began to slow with double-digit growth rates falling to single-digits, which weakened optimism. Nevertheless, there are signs of recovery in developed countries, albeit slow, with the most positive of these being the effective management of the US economy.
Unrest in the global arena has yet to die down
Countries’ domestic and foreign policies now play a leading role in determining international balances, having usurped that position from the financial movements or economic ratios of the recent past. The social, economic and political unrest in some Middle Eastern countries have brought changes in government. In addition, fluctuations in domestic and foreign policies have prompted polarizations in the global arena. The importance of the region as a major source for world oil adds to the reasons for concern. This unrest has yet to die down. While there is an emerging source of energy in shale gas, no practical way of substituting it for oil has been found yet. The United States is rich in this resource so it promises to remain an economic and political power for a long time.
Turkey faces more difficulties than other economies
Turkey is faced with even more difficult conditions than other economies due to its location. On the one hand, we are surrounded by many countries with serious problems and with which we have to maintain political and economic relations. On the other hand, we have extensive relations with Europe, which is experiencing major financial upheavals. The ensuing economic developments are impacting our financial system and the real economy. While many of our economic ratios may appear positive at first glance, a lasting solution to the current account deficit, our weakest point, has yet to be found. This is perceived as a risk factor for Turkey. Moreover, the elections scheduled to take place in the near term in Turkey sharpens the perception of risk.
We have full confidence in Turkey’s potential
Koç Holding takes stock of its experience and organizational traditions while carefully analyzing current conditions. We superimpose our data on the present facts to gain insights that can help us in the present and guide us toward the best decisions. However, independent of everything else, is our confidence in Turkey’s great potential, the industriousness and creativity of its young people, and the management skills of its business people.
This not only applies to our holding, but to the private sector as a whole, which has overcome past crises through skilled management. Our banking sector, in particular, is better equipped in terms of capital adequacy and foreign exchange exposure to handle diverse financial risks than those of many other countries.
Recent fluctuations in interest and foreign exchange rates may have a negative impact on balance sheets and ratios. Being sufficiently prepared beforehand and implementing alternative management policies can minimize damage during this period.
Our investments are rapidly materializing
As you know, Koç Holding has continued its investments without interruption during this turbulent period. It has allocated billions of dollars for global and technological projects. We have always made sustainable and profitable growth a priority. These investments will bring in billions of dollars, which will improve Turkey’s foreign exchange balance, open new job opportunities for thousands of our young people, and bring advanced technology to the industries we have invested in.
We give risk management and high returns equal importance
The main principle of our management policy is treating potential returns and risks equally when it comes to correctly assessing and taking necessary precautions. Since 2008, when the crises emerged, in the face of fluctuating interest rates, liquidity and
foreign exchange rates, we have set certain parameters - specific borrowing limits, foreign currency exposures, liquidity ratios and the like - for our companies. By strengthening Koç Holding’s balance sheet, we raised our net cash position to US$ 800 million and our gross cash position to US$ 1.5 billion. In April, Koç Holding was only one of two companies in Turkey to be assigned an investment grade credit rating by both Moody’s and Standard & Poor’s. Because of this, we successfully issued a Eurobond under the most favorable conditions possible at the time.
Our enduring priority: Highest quality products and services
Our priority is to maintain the quality of our companies’ products and services at the highest possible level. You see in the news that many of our companies have received awards for their performance in this area from national and international organizations. However, having superior quality is not sufficient; our products and services must also be competitive under free market conditions. Therefore, we are continuing to push technology development while keeping costs under control and economizing.
The theme for this year’s Traditional Executive Managers Meeting was “Reading the Spirit of the Time.” This theme not only encompasses the work I have mentioned, but it is also more meaningful in the context of today’s economic and political environment. We must be more proactive than ever today, when there is rapid change and transformation in every field.
At home and abroad, we are tirelessly working to increase the market share of our products, to raise our brand values, and to assess emerging commercial and investment opportunities. You will see the positive results of these efforts in the media and in our annual report.
Our social responsibility projects continue to benefit society
We continually add to our social responsibility projects, which we have made a vital part of our business life. Our work in the areas of education, health and culture is undiminished.
At this meeting, just one step closer to our 90th year of business, I would like to extend my sincere thanks to our shareholders, customers, distributors, subcontractors, suppliers, unions, managers, and employees, who are resolute in their belief in the added value we create for Koç Group and for Turkey. I am confident that the current difficult period will pass and stability will return. I hope that we will have the opportunity to be together once again next year.
Rahmi M. Koç