Turkish firms are quietly winning scores of big contracts in the former Soviet Union

By NINA PLANCK

ince the fall of communism, investors have swooped on the former Soviet Union, eyeing it as a treasure trove of natural resources and a bargain basement of business opportunities. But many of these adventure capitalists, breezing into town for a quick profit, encounter unforeseen obstacles, and return home empty-handed. Sometimes quieter virtues--like vision, flexibility and a canny patience--win the day.

That's how Turkish firms have scooped up 85% of the foreign construction business in the former Soviet Empire. With a steadiness and a cultural rapport few Westerners possess, 46 contractors have won business worth $14 billion in nine years. Thanks to a reputation for doing good work cheaply, Turks are busily building steel mills, refineries, hospitals, shopping centers and ceramics plants.

Turkey has been laying the groundwork for this success for more than a decade. A 1984 agreement to import 120 billion cu m of natural gas from the Soviet Union over 25 years proved a good wedge when Turkey secured the right to pay for 30% of the gas in contracting services. In 1988, it was one of the first countries to organize a private business council with the Soviet Union; within two weeks of the U.S.S.R.'s collapse, there were similar links with the newly independent republics. It was a useful foothold. When Moscow signed the 1990 treaty reuniting Germany, Bonn agreed to finance housing for 100,000 soldiers returning to Russia. At the insistence of the Russians--and even though German firms had priority--Turks were allowed to bid. To German consternation, Turks won nearly half of the $5 billion project.

Historically well-placed between East and West, Turkey bridges both geographical and cultural gaps. "We Turks understand the Russians," says Ishak Alaton, co-director of Alarko, a construction firm that does 75% of its business--earning $650 million annually--in Russia and Central Asia. "Russians are often reluctant to deal with Americans and Europeans due to an inferiority complex, but they're at ease with us." Alaton says he first looked for Russian business during the Brezhnev era because "we smelled change coming."Since then, the jolly 72-year-old multi-millionaire has learned to accommodate his clients in Russia and Central Asia. For example, deals can take several years to consummate. "Most European and U.S. companies won't wait that long," he says. "You need patience, guile and a sweet nature to do business in this region." Until recently, he did business in Russia without lawyers. "We still do handshake deals, with lawyers doing only the fine-tuning. But Central Asia is still handshake country. In that part of the world, lawyers don't solve problems; they create them."

A willingness to adapt to local culture certainly helps, but Alaton has also gently prodded his business partners in new directions. At first, he says, businessmen in the former Soviet Union didn't know how to finance construction deals, "so we taught them." Now the former communists are savvier, and Alaton is hatching joint ventures with budding Russian construction firms instead of competing with them. Alarko's partner in sprucing up Moscow's skyline is Mayor Yuri Luzhkov. Alarko staffers in Russia were once 99% Turks; now more than half are Russian.

Rich in natural resources and with a decaying infrastructure, the former Soviet states that span 10 time zones are a builder's dream. ENKA--which claims to be Turkey's largest construction company and the biggest foreign owner of property in Russia--is diversifying into specialized projects such as construction of a $1-billion petro-chemical plant and refinery in Kazakstan, a $10-million exploration camp for underwater oil surveys of the Caspian Sea for Shell and a $22-million gold mine 4,200 m high in the remote Tian Shan Mountains on the Chinese and Kyrgyzstan border. In the past nine years, ENKA earned $1.2 billion from projects in Russia, $122 million in Belarus, $55 million in Kyrgyzstan and $30 million in Ukraine.

But perhaps ENKA's most important project--one that indicates its standing in Russia--had nothing to do with exploiting natural resources. After the storming of the Russian Duma in 1991, ENKA and another Turkish firm, GAMA, rather than a Russian builder, won the contract to rebuild the damaged White House, finishing the job on time in only three months. Operating in Turkey provides good practice. Says managing director Mehmet Draz, "We are the grandmasters of circumventing bureaucracy. In Turkey, it takes 276 signatures to build a house."

Turkish construction companies also have an edge when it comes to workers. They are close--within busing distance of most of Central Asia--and adaptable, says Ugur Yurdakul, who's in charge of operations in the former Soviet Union for GAMA. On the White House job, says Yurdakul, "We had 2,500 workers toiling 24 hours a day for three months. It was like a giant battle." Along with patience, Turks have demonstrated a willingness to gamble. European and American firms usually want credit guarantees, says Yurdakul. "We don't insist. To enter the Russian market, we took risks unacceptable to Western companies. This is a volatile region in full transformation," Yurdakul admits. But he also says Turkish firms are there to stay: "We've paid the entrance fee. We are building the future of these countries: their infrastructure."

While their motives are plainly commercial, there is a personal quality to the deals Turks are striking in Russia and Central Asia. "Do you know why we like you?" Moscow Mayor Luzhkov reportedly asked Nihat Gokyigit, the chairman of TEFEN, a construction conglomerate. "You don't bring lawyers. We look into each other's eyes. Then we put the contract on the shelf and never look at it again." The hottest toys in the business world may be palm-top computers and video conferencing, but the oldest tools--handshakes and eye contact--are as essential as ever.

--Reported by James Wilde /Istanbul