Despite economic woes, government sees crisis as an opportunity, writes ARTHUR BEESLEYin Istanbul
GRINDING MUSIC and the flash of stage lights fill a vast auditorium as Turkey’s prime minister Recep Tayyip Erdogan enters to address a meeting of business people. Surrounded by a throng of buff security men, Erdogan’s noisy arrival smacks of a blend of political razzmatazz and celebrity pomp.
Turkey is on the march, he declares. For centuries a meeting point between the eastern and western worlds, he casts his country as a beacon of economic modernity. Although his government is battling a steep rise in unemployment and a big drop in exports, the administration believes world economic disruption brings with it an opportunity to reshuffle the deck of winners and losers in international commerce.
“We believe that if the crisis can be managed well, it can also be managed for benefit in the post-crisis era,” Erdogan says. His aim is to create a trade centre to rival London and Hong Kong – a financial centre to rival New York, Frankfurt and London.
While Turkey’s difficult campaign to join the EU shows no sign of bearing fruit any time soon, the country hedged its bets years ago by targeting neighbouring and non-EU countries, Africa and Latin America in its trade policy.
If this seems like a smart way to operate, it also reflects private views held by many within the apparatus of the Turkish state that the EU’s “Christian club” will never admit a largely Muslim country such as Turkey. In such accounts, Turkey would be better to forge an independent future as a global player – and a regional power in counterweight to the might of Russia and Iran.
Whatever the ultimate outcome of the EU campaign, the changing dynamic within Turkish trade policy can be seen in the fact that Russia has supplanted Germany as the country’s biggest trading partner. The presence in the front row of Erdogan’s audience of former Russian prime minister Yevgeny Primakov says much about that. “Turkey is a great country,” Primakov told the conference. “It does not really matter if it is or is not a member of one of the regional unions.”
The depth and breadth of Turkey’s grand ambition could also be seen in speaking invitations to former Colombian president Ernesto Samper Pizano and Ugandan vice-president Gilbert Bukenya. These men – and a group of trade ministers from Asian and African developing countries – are here to mark a “world trade bridge” conference organised by Tuskon, one of Turkey’s main business lobbies. Some 5,500 delegates are attending: 3,200 from Turkey, the remainder from 135 other countries around the world.
In an airy exhibition centre on the outskirts of this teeming city, hundreds of local business people present their wares. It’s like an old-style bazaar made new. All is for sale, little and large – everything from chocolate bars in bulk to fashion garments, motor vehicles and heavy duty industrial machines.
Here you will hear proud statistics about Turkey’s strength as the 15th-largest world economy, the fourth-largest shipbuilder by unit, the 11th-largest iron and steel producer and the 16th-largest automotive producer.
Officials readily cite figures that point to the extent of the country’s great leap forward after the import substitution policies of the 1980s were set aside, a key moment being the enactment of new laws in 2003 that protected the rights of foreign investors. In the 33 years before that change, foreign investment into Turkey totalled $19 billion (€13.37 billion). In the following six years, it reached $73 billion.
Gross domestic product rose 143 per cent to $742 billion between 2003 and 2008. Exports rose 179 per cent to $132 billion in the same period.
Ireland’s share of this pie is small, and declining. Irish exports to Turkey dropped to €402 million last year from €415 million and imports from the country dropped to €401 million from €534 million.
Still, large Irish companies such as CRH, Kingspan and Quinn Group have operations in the market. Quinn owns a shopping centre in Bahcesehir, about 20km from the centre of Istanbul. Kingspan uses a production hub here as a springboard into Azerbaijan, Egypt, Iran, Iraq and Israel.
The current extent of economic pressure on Turkey can be seen in a 40 per cent drop in exports in the 12 months to May and projections that exports might fall in the full year to around $104 billion.
This illustrates the immediate challenges confronting Erdogan, and the scale of the effort required to bring exports to his target of $500 billion by 2023.
For all the confident talk that spins forth from foreign trade minister Zafar Caglayan, the figures point to acute stress. After economic growth dropped to 1.5 per cent last year, government projections currently point to a likely contraction of 3.3 per cent.
The IMF, to which Turkey may yet have to resort to stabilise its public finances, says the decline could reach 5.1 per cent. The shrinkage is already bearing down on the job market. Unemployment has risen this year to 16 per cent from 12 per cent a year ago.
Young people (those aged 16-26 years) are suffering most, with the rate of unemployment rising from about 20 per cent to 29 per cent.
It is against this backdrop that Erdogan’s administration is negotiating a support package from the IMF which might ultimately reach $50 billion.
The IMF, however, is demanding strict reforms of the public service, reforms which the government has little appetite to concede in the run-up to elections in two years’ time. “Money to come from the IMF is money that we may do without. Turkey can continue on its path without the loan,” says Caglayan.
It’s confident talk, but talk that may be at odds with Turkey’s current position. After all, Erdogan himself said only in April that his country was edging closer to a deal with the IMF.
