InsideTurkey/Lara Marlow:Before he returned to Turkey to become a founding member of the Justice and Development Party (AKP) in 2001, Saban Disli ran the Turkish-owned Dutch bank, DHB.
In July, he was re-elected for a second term as a member of the Turkish parliament. He is deputy chairman of the AKP, in charge of economic affairs.
Asked why the AKP, originally an Islamist party, is so keen on business, Disli said: "Business is very important for Islam. The prophet Muhammad said: 'A human being should seek his living from commerce.'"
The first objective of the government is to raise per capita income to $10,000 (€7,120) by 2013, Disli said. Per capita income has risen from $2,000 in 2000, before prime minister Recep Tayyip Erdogan and the AKP took office, to $5,500 at the end of 2006. It is expected to be $6,000 in 2007.
Turkey underwent a severe financial crisis in 2000, after the International Monetary Fund (IMF) imposed a fixed exchange rate. Thirty-three banks failed and the government's deposit insurance scheme spent $45 billion to bail out banks. Turkey now limits insurance to €20,000 in deposits. Forty-two per cent of the Turkish banking sector is now foreign-owned.
The main target of the IMF's programme for Turkey was to bring inflation down from 30 per cent. It now stands at 6.9 per cent, and the target is to reduce it to 4 per cent.
Fifty-one per cent of Turkey's trade is with the EU. If the US economy slows further, Turkey could suffer a boomerang effect, with diminished sales of white goods, automotive parts, textiles and agricultural products to the EU.
The subprime crisis has already hit Kazakhstan, Russia and Ukraine, which trade with Turkey. "But because of political stability here, confidence in the prime minister and our privatisation programme, and Turkish assets still being cheap, it has not hit us yet," Disli said. Foreign direct investment for 2007 is likely to reach $27 billion by the end of the year.
"Terror is our biggest problem," Disli said, referring to attacks by the separatist Kurdish group, PKK, which killed 14 Turkish soldiers in attacks on Sunday and yesterday. Over the past three decades, the war with the PKK has cost 33,000 Turkish lives and an estimated $100 million.
The second challenge facing Turkey is a current account deficit of $35 billion, or about 7.5 per cent of gross domestic product, Disli said. The tourism sector is flourishing, and is expected to break the previous record of $18 billion this year to reach $20 billion. But energy will cost $29 billion, making it the single biggest expenditure.
The third challenge is the budget. Because of elections this year, Disli said, the government sped up infrastructure investment. In its five years in power, the AKP has built roads, highways and airports, spending $9 billion on infrastructure last year. "It's a little out of control," Disli admitted. "Also, tax collection was slow; you can't lean too much on people in an election year. There will be some correction."
The government is trying to achieve a 6.5 per cent budget surplus, which would be put towards decreasing $100 billion in public debt. "The proportion of debt stock to GNP [ gross national product] was 91 per cent; it's now down to 40 per cent," Disli said.
The opposition has criticised the AKP's privatisation programme, saying it has a duty to maintain public service.
"All public companies were losing money," said Disli. "This economy is not able to save enough money to pay for infrastructure. Therefore we are getting out of service and production. We will be regulators, and leave these activities to the private sector."
