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VIP Interview Dr. Alp Malazgirt Ready at the Beachhead

TBY talks to Dr. Alp Malazgirt, CEO of Yildirim Holding Colombia, on stepping into Latin America, the energy and mining sector, and global expansion prospects. 

THE BUSINESS YEAR Why did Yildirim Holding choose Colombia as its first step into Latin America?

DR. ALP MALAZGIRT BRIC is an acronym invented for the dynamic emerging economies of Brazil, Russia, India, and China, which epitomize economic growth moving from developed to developing countries. However, that was some 10 years ago. The new term being used now is CIVETS, which stands for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. For years, Colombia had been closed to investors, not only because of its heavily regulated economy, but also due to economic instability and an unstable internal security environment. It has now become the world’s fourth biggest exporter of coal, and the country is keen to exploit its mineral resources by giving mining concessions and regulating the industry. Yildirim Holding made its mark initially in the coal trading business, and we are also very active in coke production in that country. Therefore, it is natural for us to direct our attention to Colombia because of its desire to do business with foreign companies, and we feel that we can bring synergistic capabilities that combine mining, coal trading, coal production, port construction, operation, and erecting energy power plants using coal.

What are Colombia’s strengths and challenges as a place to invest and do business?

Some people say that Colombia is the next Brazil, and from the performance over the last fewyears we can see that the country is growing at a fast pace. It is the hidden investment gem inSouth America, opening up to foreign investments and increasing tourism. Much of thegrowth in the Colombian economy can be attributed to the government focusing on creating afavorable business climate. For example, the ease of doing business index in Colombia ishigher than in Brazil. Also, its geographic location on the north-west tip of South America,with ports on both the Caribbean Sea and in the Pacific Ocean, is a major advantage as itprovides easy access for imports and exports. To a large extent, the Colombian economy’sgrowth and development has been powered by infrastructure investment. This is welcomenews to investors such as Yildirim Holding because you need roads to haul the minerals orcoal and bring them down to the ports for export. One other very valuable feature ofColombia is that it has one of the most qualified workforces in Latin America, with an adultliteracy rate of 93%. The labor force is both highly qualified and competitive. However, thelabor market suffers from a rigid employment infrastructure.

Colombia has recently displaced Russia as the largest supplier of thermal coal for powergeneration. What potential does this imply for Yildirim’s import/export activities?

Colombia now ranks as one of the top coal producing countries in the world. We opened our Colombian office back in 2011, and we have been very active in searching for favorable dealswith local Colombian coal companies. Our activity will continue unabated regardless of whathappens in Russia or in China. Our first energy investment will be the 200 MW coal-firedpower plant to be erected next to our Eti Krom ferrochrome production facility in Turkey, andit is most likely that this plant will be using imported coal from Colombia. We have also beenvery active in 2012 with coal trading and coke in Colombia, and have bid for some major coaland coke contracts in Turkey. We will continue to build on this activity, and seek mutuallybeneficial opportunities with Colombian producers in the years to come.

In 2010, Colombia received upward of $3.24 billion in mining investment. What makesColombia a favorable destination for exploration?

About a decade ago, Colombia was not known as a mining destination. However, now it iscrowded with giant mining and exploration companies as well as the smaller junior players,putting the country on track to become an international mining powerhouse. Certainly, theperception that the countryside may not be safe for mining is now changing becauseColombia is safe and politically stable. Of course, at the top of the list is coal miningprimarily for export purposes, which are operated by hundreds of small coal operators. Asidefrom coal, Colombia has gold and nickel deposits, and the largest nickel mine in LatinAmerica. The glitter of gold has attracted more of the junior miners. The Colombiangovernment is also encouraging and giving priority for the exploration of phosphates,potassium and magnesium ores, uranium, and iron. The government is encouraging foreigninvestors to come to Colombia, and the government has set aside close to 3 million hectares ofland for exploration. This is welcome news for mining companies such as Yildirim Holdingbecause we have one of the most established mining records in the world, and we would liketo create joint ventures and partnerships with local Colombian partners to do exploration andmining.

How are Colombia’s new public-private partnership (PPP) laws and increasedinfrastructure spending shaping potential for port investment and development in thecountry?

In order to become the fourth largest coal exporter in the world, Colombia had to figure out away to improve its ports and the country’s overall infrastructure. To a large extent the growthand development of the country in recent years has been primarily powered by investmentsmade in the infrastructure segment, and the funds for these projects have been raised by PPPs.When it comes to the ports, Cartagena and Buenaventura are the most competitive ports forcoking coal. On the other hand, Barranquilla handles more metallurgical coke. There are afew other ports such as Bahía Cupica, Bahía Solano, Golfo de Tribugá, and Bahía Málaga onthe Pacific Coast, which will require further port developments. With the recent acquisitionsof the Port of Gemlik (Gemport) and the Port of Rota (Rotaport) on the Sea of Marmara inTurkey in 2012, Yildirim Holding and its subsidiary, Yilport Holding, are now becomingsubstantial port operators not only locally in Turkey but also globally. It is our intention toexplore port construction, development, and operational opportunities in Colombia becausewe can bring valuable insight and operational expertise as a major up-and-coming global portoperator.

What is your medium-term outlook for the Colombian economy, and what does thissignal for Yildirim’s activities in the country?

What the Colombian government has been able to achieve in recent times has certainly beenremarkable. A large share of the total investments in the country has been allocated to the oiland mining sectors, and in the improvement of the country’s infrastructure, such as highwaysand ports. Advances in terms of business attractiveness have also been supported by a massiveimprovement in the security situation, increased financial market stability, and tax incentives.All these factors make us very optimistic regarding the growth prospects of Colombia in themedium term. In 2013 and beyond, we feel Colombia will be able to grow at a healthy pace of4% to 5% per year, and there will be many opportunities for our company to enlarge ourbusiness in Colombia and extend beyond coal trading and coke production. Our synergisticcapabilities, having been operating in 10 different sectors in Turkey and elsewhere in theworld, furnish us with a unique proposition to bring to Colombia, and that is to provide a“one-stop shop” from mining to logistics, port construction to operations, and coal and cokeproduction to erecting power plants.

What is your vision for Yildirim Holding’s global expansion?

If one reviews the most successful international companies, one can identify five featureswhich also apply to Yildirim Holding, and therein lies its vision for global expansion. First,Yildirim Holding envisioned itself as a global concern from the very beginning as it grew inthe 1990s first by trading coal with Russia, and then with China and later with South Africa,and now Colombia. So, in our global vision, there is a commitment to do business globallyand utilize global sourcing with active market participation by leveraging our global expertiseand partnerships to gain a competitive edge and improve our value-adding market share.Second, is the ability to choose the proper market entry so that you can be profitable andviable very soon. We at Yildirim Holding firmly believe that our technical, legal, tax, andfinancial due diligence process has worked well for choosing the right partner, the rightproject, and the right entry beachhead. Third, the shining international companies are likely tobecome engaged in joint ventures, acquisitions, manufacturing, and operations overseas closerto their markets. Yildirim Holding’s acquisition of Vargön Alloys, a Swedish ferrochromemanufacturer, in 2008 had this primary objective of producing ferrochrome closer to theEuropean and American stainless steel markets. Fourth, Yildirim Holding’s vision is thecommitment to be respectful of local culture and to employ foreign nationals, encouragingmulti-country careers and leadership development. The fifth point is to be able to find a happybalance between global and local organizational structure, promote cross fertilization betweenthe center and the commercial units, encourage interconnectedness, bring in the expertisegained from overseas to further enhance the business practices at home, and lead centers ofexcellence.

This interview will be published in 'The Business Year: Colombia 2013'. To pre-subscribeplease e-mail us at info@thebusinessyear.com

© The Business Year - January 2013