Aptil 12, 2006
Rahmi M.Koc

Rahmi M. Koc, the Honorary Chairman of Koc Holding, which celebrates its 80th birthday this year, has shared with us his company's expanding vision, in addition to his personal passions for the arts and the sea.

Ipek Cem: Hello. Our guest today is Mr.Rahmi Koc, the honorary president of Koc Holding. Welcome to our show.

 

Rahmi M. Koc: Hello. How are you?

 

Ipek Cem: Well, thank you. 2006 is the 80th anniversary of Koc Holding. I'd like to start with that. What does this mean to you and what kind of activities are being prepared?

 

Rahmi M. Koc: Now, this means a lot to us because if you don't take into consideration my father's grocery store, we will be passing the torch to the 3rd generation. There are so few companies in Turkey who have contiuned for three generations, grown for 80 years and became successful while earning a profit. That's why this is a huge thing for us and for Turkey. You know we are 3 years younger than our Republic. That is why as the Koc Group we are very proud that we have lasted 80 years without any loss or erosion.

 

Ipek Cem: You have worked actively in the company since the 60's. Aftewards in 1984 you became the Chairman of the Board. As you put it, you retired in 2003. But as I understand and as far as I can see, such a huge bussiness always needs you and you are involved in the bussiness in one way or another. How involved are you?

 

Rahmi M. Koc: Good question. I started in 1958 in Ankara. I came back form America, completed my military service and started in Ankara. In 1964, I got transfered to Istanbul and was the chairman of the Board for 18 years. In 2003, I decided to get retired. Of course it's not easy to quit cold turkey after you get used to working with people. Now we are on the Board as a family. I am also in charge of our main company which is the biggest partner of Koc Holding. I am still the Chairman of the Board of companies such as Arcelik, Aygaz, Ford-Otosan, Koc-Allianz, Beko Elektronik but the company is run by professionals. I am not at all involved in daily activities, but they consult me when there is a problem and ask for my opinion.

 

Ipek Cem: In 2005 there were important acquisitions and partnerships for Koc Holding. Yapi Kredi, Tansas, Tupras were important transactions in Turkey. With Yapi Kredi you will be able to be more active in the finance sector. How is the integration of the two banks going?

 

Rahmi M. Koc: Now we will combine the two banks. We are collabarating with our partner Unicredito on this. The representative they have sent here is very easy to work with. Our friends are also helping him in every way they can. So we don't have a problem in that regard. We had decided to enter the finance sector 5 years ago. That's why we established KFS, Koc Finanacial Services. That is why we were looking to buy such a bank. Yapi Kredi was available so we bought it. In the past we had bought other banks. We believe with the merger of the two banks, Yapi Kredi will become stronger. As for Tansas, it was a part of the retail sector which we were also involved in. They were our competitors so when they decided to shut down their bussiness, we were one of the groups who offered to purchase it. After negotiations, we acquired Tansas and I believe that with the synergy it has, it will be good for Migros, both in purchasing and organisation. Tupras was already in the energy sector. As you know, as Aygaz we are a group that has the biggest share in that segment in Turkey. We bought Opet, so we are now in the distribution part as well. When it was time for Tupras to be privatized, we looked at it and decided to buy it. We were lucky and we got it. We made these decisions because strategically we want the Koc Group to be one of the Top 100 companies in Europe, the Fortune 500 and to go higher in these lists, of course in the meantime making a profit. This is how we achieved growth.

 

Ipek Cem: Currently the Tupras issue is a problematic one. The decision of the Privatization Commitee is due, but it seems that each commitee is waiting for the other to decide. Big transactions like this have been completed before in Turkey. Foreigners have bought companies. In general we did not see such delays. Is this a administrative problem or a legal problem? What are your observations?

 

Rahmi M. Koc: You know the Petrol-Is labor union have gone to court. They have done this before the privatization.This happened after we put in the new management and the courts ruled like this. You have to respect the court's decision, the Tupras management has to respect it too. We will seek our legal rights when the time is right, but right now we are not a part of this. This is something entirely having to do with the privatization. They have now applied to the Executive Board which is formed of 5 ministers. They will decide the verdict which is I think on the 25th of April. We will wait for that decision. After that we will think about it, so will the government. Of course things like this intimidate foreign investors. We are used to these kinds of things because we live here, but foreigners are not used to them. Therefore I think the verdict from this case may impact, positively or negatively, future privatizations. It may impact future decisions.

 

Ipek Cem: In the past few years we have seen an increase in foreign investments, both in terms of portfolio and direct investments. Do you think this has something to the with the EU process? What can Turkey do to make the process better?

 

Rahmi M. Koc: Foreign investments increased after the negotations with the EU for one. It coincided with the accelaration of privatizations for the harmonization process. So when these two factors coincided, at the same time foreign investment increased. But foreign investment in Turkey is nothing compared to foreign investment in former eastern block countries.

 

Ipek Cem: And they are fairly small countries.

 

Rahmi M. Koc: They are small and you know they were communists, their markets were managed very differently. But still they attracted more foreign investments. I had it calculated the other day, the last 10 members of the EU have attracted a combined 20% more foreign investments than Turkey. We have only received 5% foreign investments compared to them. This is very sad.

 

Ipek Cem: We are a little late.

 

Rahmi M. Koc: That's why we shouldn't be so happy that foreign investment is coming at this pace. We should have had a much bigger share.

 

Ipek Cem: When we talk about foreign ivestments there is a big competition amongst countries and sectors. As Koc Group I see you have an international vision when it comes to marketing, production and sales, on the other hand there is big competition between Turkish products and products from China, India and many others. This is dangerous not just for Turkey but other countries as well and it is expected to become more competitive. What do you think Turkey has to do to protect and improve itself?

 

Rahmi M. Koc: First of all, after our inclusion to the European Customs Union and after Ozal's liberal economy policy, foreign companies in Turkey have come to gain market share from us. We tried to do the same in their countries. As for China and India, they have cheap labour, almost free, and both of them sell their products they have manufactured with foreign technology to the West very cheaply. They have little respect for copyrights and labor rights so I suspect this trend will continue and the danger will continue. This is important not just for us, but for Europe as well. That is why Europeans just established taxes for some sectors they feel are selling products at reduced prices and they are thinking of continuing. Consider the merchandise China has sold to the US, the world's biggest market, it created a big export deficit for America. But the Chinese say they are using the money they earned in America to buy American stocks, so what do you want from me? They estimate that sectors which don't go to China won't survive for very long. So in conclusion, even if they win or lose, the world has to be involved in China one way or another. As per our involvement, we have a panel radiator factory partnership in China.

 

Ipek Cem: For a long time?

 

Rahmi M. Koc: Two or three years. We wish to make a strategic partnership or ‘greenfield' with a company there regarding Arcelik. We even sent front loading washing machines to China to test the market. We will sell them there. We want to gain experience in their market before we proceed. And of course we have a joint partnership with Ford there, we are seriosly looking into it.

 

Ipek Cem: For production?

 

Rahmi M. Koc: For production. We will take out truck technology there. And if possible we will update their transit technology, modify their brands. We are thinking of building more modern vehicles. I am telling you this but the project hasn't fully developed yet. What I mean is we are not sitting around. We are trying to go into markets in Europe, China and the CIS by sales or other channels.

 

Ipek Cem: In some countries, the government is working on developingmore competitiveness by building more competitive tax legislation and through other legislations. Do you think there are areas where the Turkish government can pioneer or act as a mentor?

 

Rahmi M. Koc: Of course there are. First of all, when it comes to tax issues Turkey has one of the highest tax rates in the world. And the reason? The reason is quite clear. According to the statistics, the unregistered economy is higher that accounted economy. So the minister of finance is trying to balance the budget by charging more taxes from firms which are already paying taxes.

 

Ipek Cem: That is not very fair...

 

Rahmi M. Koc: It's not fair at all. The government has to collect taxes from everybody. We see someone who has a boat, a big house, houses in Europe but is not listed in the tax department. He doesn't pay anything.There are people like that in Turkey. He pays minimum tax, or no tax at all. That is not acceptable and it's not fair.

 

Ipek Cem: You are a part of the Turkish industry for many years. For an investment to be successful, it is important to choose the right sector as well as the timing and how you enter the sector. When you look back in your career, are there any sectors that you wish you had entered or investments you wish you had made?

 

Rahmi M. Koc: Of course there are. In the 1960's, I wanted to enter into the shipping business. The board declined by one or two votes. They said ‘what if the boat has an accident in Singapour, how are we going to get there? How are we going to transfer money and we can barely handle things here' so they said no. After that I wanted to enter the banking sector. My father then said ‘ I am doing bussiness with Is Bank, if I establish my own bank I won't get any work or credit from them, I might annoy them' so that didn't happen either. He said ‘I am an industrialist not a banker, every bank is mine.' He later saw that it wasn't the right approach. Afterwards? The mobile communication sector was one sector I was sad we didn't go into. They came to us when they were establishing Telsim. It didn't look very profitable when we did some calculations at that time. There was a clause in the agreement that said a payment of 500 million dollars were to be paid if privatized. Again my father said no one would pay such an amount but we would have to pay it when the time came. We didn't have the funds at the time so we didn't go into the sector. I am still sad about that.

 

Ipek Cem: There are sectors in the world and Turkey that are developing, such as informatics, mobile technology, telecommunication and computers. I know that you are in active in the informatics sector. There are also different technologies like nano technology. As Koc Holding and especially as Arcelik I know you are very active in patents. Are you thinking of new investments in R&D? Or are there new sectors you are thinking of investing regarding R&D?

 

Rahmi M. Koc: We are making investments in R&D. There are 200 engineers that work at Arcelik. They have many patents. The engineers at Otosan are working on new car models, they make models based on three dimensional drawings. Our trucks are manufactured here by our employees. We export the chasis we manufacture here. We produce software at Koc System which we use here and export. But of course we don't spend as much on R&D as America, Germany or France.

 

Ipek Cem: It's a also a function of the budget you have...

 

Rahmi M. Koc: Budget, opportunity and perspective. Some technologies are cheaper to import rather than trying and working to build them. That's why you can't enter a sector and say you are going to do everything yourself.

 

Ipek Cem: Besides being a bussinessman we know you to be a man of art and culture. And an avid fan of the sea. Let's start with your interest in culture, archeology and history. This is also manifested in the RMK museum. How did you find the time for all this given such a busy working schedule? I know that you also frequent flea markets quite often.

 

Rahmi M. Koc: I love it.

 

Ipek Cem: Yes, I have read about it..

 

Rahmi M. Koc: Now I think this happened because of my mother. I have three sisters and I am the only boy, so my mother was very fond of me. She also liked to go to the Grand Bazaar often. She collected most of the artifacts which are now displayed in the Sadberk Hanim museum. Afterwards my dear sister Sevgi collected some. My mother used to hold my hand and take me to the bazaar, I would get bored because everyone would be at the beach on Friday. She used to buy me toys, I guess as a bribe. There was a Japanese market on our way home from the bazaar in Beyoglu and everytime she would buy me a toy.

 

Ipek Cem: As hush money...

 

Rahmi M. Koc: I guess so. Then I got interested in archeology. I lived in Ankara for 6 years afer returning from the United States.We used to go to Alacahoyuk on the weekends.

 

Ipek Cem: To digs?

 

Rahmi M. Koc: Yes... We would go to digs with older gentlemen like Necdet Kent, Fuat Bayramoglu and collected artifacts from the villagers. It was allowed to do so during that time. That's how we started back in 1956-57. I buy something from every place I visit. I am always on the look out. As for the museum, I went to Ford headquarters in 1954-55 when we were establishing Otosan. During this visit, I saw the Henry Ford museum there and was very impressed. He started by exhibiting his own cars and then expanded the museum. At that point, I had the idea of putting our old products in a museum, but the experts said that no one would look at our old fridges. They said I should rethink the concept and do something more interesting. I looked at the Henry Ford museum again and then went to the British Museum and the Deutsches Museum. I found out that they weren't concentrating on one thing, so I expanded the area of the museum I was going to build.

 

Ipek Cem: A museum needs expertise and finance. We have a lot of cultural heritage in Turkey and when we compare our museums to the ones in richer countries ours look very neglected. How can we improve that?

 

Rahmi M. Koc: Let me tell you how because I looked into this matter. First of all you must encourage collectors. After that you need to deduct the tax when you are going to give the collection to the museum. Instead of encouragement, you are punished for both in this country. So forget about a collection, if you have two pieces that are more than a 100 years old, you must register them at the museum, keep books and they will come and check them twice a year. You already know all this. These have discouraged people.So people don't bother with collecting anymore. If this continues there won't be great museums like the ones in Europe or the U.S.

 

Ipek Cem: We talked about regulations and laws regarding museums. Tthere is also the issue of harmonizing our laws with those of the E.U.. Could there be developments on these matters during the E.U. integration process?

 

Rahmi M. Koc: We tell this to every minister in charge. We have told the Cultural Minister that we must harmonize with certain laws and regulations on the subject, but we haven't had any luck yet. I am deeply sad that when it comes to collecting and museums we are way behind. Especially when it comes to state museums, we are behind in exhibiting, lighting and labelling. And as I am told, many artifacts are still waiting to be opened in storage rooms. Therefore you can see the big difference between privately owned museums – the Sabanci Museum for instance- and state museums. The management of museums should be handed over to the private sector.

 

Ipek Cem: You also have an affinity for the sea. And now you are on your 6th expedition with Nazenin 4. You are aiming to finish this by July.

 

Rahmi M. Koc: How come you are so well informed?

 

Ipek Cem: I read it on the internet, you can find everything on the internet. I know you have had long sea voyages in the past and when you were a kid you'd sneak out to go swimming.

 

Rahmi M. Koc: And that's why our mother would grab me by my arm and take me with her. You know we are from Ankara so we longed for the sea. I was born in Kecioren. But we used to come here to the Bosphorus for three months during the summer.

 

Ipek Cem: What does the sea add to you, what are your feelings when you're on your boat?

 

Rahmi M. Koc: That's difficult to explain in just a couple of minutes. You need to live it to feel it. There is the sky and the sea, but in between there are so many nuances, the sky, the wind, the sea- they change constantly. You put up your sails, turn on the engine according to those changes, it rocks, you have oxygen, clear air, you can fish, sunbathe. Now you have the internet, you can follow what's going on around the world, send messages, talk on the phone. And then you have a course, sometimes it needs maintenance... It's difficult to talk about such pleasures...

 

Ipek Cem: I guess you need to experience it first-hand...

 

Rahmi M. Koc: You have to be there and feel it. You really need to feel it deep inside, it's difficult to do so when you're sitting here on the second floor of Koc Holding.

 

Ipek Cem: I'd like to thank you for this interview and hope to see you again.

 

Rahmi M. Koc: Hope to see you soon.

 

Please note that the original interview was conducted in Turkish and this is a translation from the original. You can view the original language interview at
http://www.global-leaders.tv/arsiv/rahmi_koc.asp

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.